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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-K

|                                            |  |                                                                                          
|------------------------------------------- |  | -----------------------------------------------------------------------------------------
|x                                           |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.    
|                                            |  |                                                                                          
|For the fiscal year ended December 31, 2002
|                                            |  |                                                                                          
|or                                         
|                                            |  |                                                                                          
|o                                           |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

For the transition period from  to

Commission file number 000-30993




PROXIM CORPORATION

(formerly Western Multiplex Corporation)
(Exact name of registrant as specified in its charter)


|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 52-2198231                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

935 Stewart Drive
Sunnyvale, California 94085
(408) 731-2700(Address, including zip code, and telephone number, including area code, of
registrants principal executive offices)



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

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes x No o

Based on the closing sale price of the registrants Class A Common Stock
on the Nasdaq National Market System on June 28, 2002, the last business day of
the registrants most recently completed second fiscal quarter, the aggregate
market value of voting and non-voting Class A Common Stock held by
non-affiliates of the registrant was $259,484,098.

The number of shares outstanding of the registrants Class A common stock
as of March 25, 2003, was approximately 120,335,708.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form 10-K, to the extent not
set forth herein, is incorporated herein by reference to the registrants
definitive proxy statement relating to the annual meeting of stockholders to be
held in 2003, which definitive proxy statement shall be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year to which this Form 10-K relates.





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TABLE OF CONTENTS



|              |                                                                                                         |  |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                                       
|              | Item 2. Properties                                                                                     
|              | Item 3. Legal Proceedings                                                                              
|              | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|              | Item 6. Selected Financial Data                                                                        
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                    
|              | Item 8. Financial Statements and Supplementary Data                                                    
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|Part III     
|              | Item 10. Directors and Executive Officers of the Registrant                                            
|              | Item 11. Executive Compensation                                                                        
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|              | Item 13. Certain Relationships and Related Transactions                                                
|              | Item 14. Controls and Procedures                                                                       
|              | Item 15. Exhibits, Financial Statements and Reports on Form 8-K                                        
|EXHIBIT INDEX
|EXHIBIT 3.2  
|EXHIBIT 4.12 
|EXHIBIT 4.13 
|EXHIBIT 10.41
|EXHIBIT 10.42
|EXHIBIT 10.43
|EXHIBIT 23   
|EXHIBIT 99.1 
|EXHIBIT 99.2 



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TABLE OF CONTENTS

|               |  |                                                                                                |    |  |    |  |     
|-------------- |  | ---------------------------------------------------------------------------------------------- | -- |  | -- |  | ----
|               |  |                                                                                                |    |  |    |  | Page
|               |  |                                                                                                |    |  |    |  |     
|PART I        
|ITEM 1.        |  | BUSINESS                                                                                       |    |  | 3 
|ITEM 2.        |  | PROPERTIES                                                                                     |    |  | 15
|ITEM 3.        |  | LEGAL PROCEEDINGS                                                                              |    |  | 15
|ITEM 4.        |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |    |  | 16
|PART II       
|ITEM 5.        |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS                          |    |  | 16
|ITEM 6.        |  | SELECTED FINANCIAL DATA                                                                        |    |  | 18
|ITEM 7.        |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS          |    |  | 19
|ITEM 7A.       |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK                                     |    |  | 49
|ITEM 8.        |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    |    |  | 51
|ITEM 9.        |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE           |    |  | 86
|PART III      
|ITEM 10.       |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |    |  | 86
|ITEM 11.       |  | EXECUTIVE COMPENSATION                                                                         |    |  | 86
|ITEM 12.       |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS |    |  | 86
|ITEM 13.       |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |    |  | 86
|ITEM 14.       |  | CONTROLS AND PROCEDURES                                                                        |    |  | 86
|PART IV       
|ITEM 15.       |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               |    |  | 87
|SIGNATURES     |  |                                                                                                | 88
|CERTIFICATIONS |  |                                                                                                | 89

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PART I




ITEM 1. BUSINESS

This Annual Report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to the financial condition, results of operations, accounting
judgments, cash flows, litigation, financing plans, business strategies,
operating efficiencies or synergies, budgets, capital and other expenditures,
competitive position, growth opportunities for existing products, benefits from
new technology, plans and objectives of management and other matters.
Statements in this document that are not historical facts are identified as
forward-looking statements for the purpose of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. These forward-looking statements, including statements
relating to future business prospects, revenues, working capital, liquidity,
capital needs, interest costs and income, wherever they occur in this report,
are estimates reflecting the best judgment of the senior management of Proxim.
These forward-looking statements involve a number of risks and uncertainties
that could cause actual results to differ materially from those suggested by
the forward-looking statements. Forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
in this report under the caption Risk Factors and elsewhere in this report.

When we use the words anticipate, estimate, project, intend,
expect, plan, believe, should, likely and similar expressions, we are
making forward-looking statements. These forward-looking statements are found
at various places throughout this report and the other documents we incorporate
by reference in this report. We caution you not to place undue reliance on
these forward-looking statements, which speak only as of the date they were
made. We do not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this report or to reflect the occurrence of unanticipated events. All
subsequent forward-looking statements attributable to Proxim or any person
acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.

Overview

We provide broadband, or high-speed, wireless access products and access
cards both in the United States and internationally. Our products and systems
enable service providers, businesses and other enterprises, consumers and small
businesses to deliver wireless data, voice and video services. We believe our
fixed and mobile wireless systems address the growing need of our customers and
end-users to rapidly and cost effectively deploy high-speed communication
networks. During the past ten years, we have developed technologies that have
enabled us to introduce what we believe are some of the fastest, longest range
and most reliable broadband wireless systems available, including our Tsunami
480, which we believe is currently the industrys fastest license-exempt
point-to-point wireless system. Our wireless local area networking solutions
currently support data transmission speeds up to 100 megabits per second.

We serve the global broadband wireless access market by selling our
systems to service providers, businesses and other enterprises, as well as to
homes and small businesses directly through our sales force and indirectly
through distributors, value-added resellers, products integrators and original
equipment manufacturers.

Recent Developments

On March 17, 2003, we announced a settlement with Intersil Corporation to
resolve all pending patent-related litigation between the two companies. Under
the terms of the agreement, we agreed with Intersil to dismiss all claims
against each other, including lawsuits before the International Trade
Commission and Federal Courts in Delaware and Massachusetts.

As part of the confidential settlement agreement the two companies have
entered into a patent cross-license agreement for their respective patent
portfolios and Intersil will make a one-time payment of $6 million to us. The
two companies have also entered into a product supply agreement defining the
terms under which we will be able to purchase 802.11 products that utilize
Intersils chipsets.

We expect to continue to pursue licensing agreements related to our
wireless local area networking, or WLAN patents and will vigorously defend our intellectual property
rights. We expect to record a charge of approximately $3 million in the first
quarter of 2003 for legal fees and other litigation-related expenses associated
with this settlement and the defense of our intellectual property.

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Recent Significant Business Combinations

On March 26, 2002, the merger between Western Multiplex Corporation and
Proxim, Inc. was completed and the combined company changed its name to Proxim
Corporation. We provide broadband, or high speed, wireless access products to
service providers, businesses and other enterprises as well as high performance
WLAN products based on unlicensed radio frequency technology for
enterprises as well as small offices and the homes.

On
August 5, 2002, we acquired the 802.11 WLAN systems business of
Agere Systems, including the ORiNOCOTM product line, for $65 million in cash.
To finance the acquisition, Warburg Pincus Private Equity VIII, L.P., Broadview
Capital Partners L.P. and affiliated entities agreed to collectively invest $75
million in the Company. The addition of ORiNOCO product line expanded Proxims
position in all major unlicensed wireless infrastructure markets, from 802.11
enterprise WLAN and public wireless access to distributed broadband and
carrier-grade wireless backhaul systems. With this acquisition, Proxim acquired
a broad offering of WLAN products for enterprises, service providers, small
offices and consumers.

The Proxim Solution

We believe that our broadband wireless systems address the growing need
for bandwidth where digital phone lines or fiber optic cable are either too
expensive to deploy in a timely fashion or are unavailable. In addition, our
systems extend the reach of wired enterprise networks by providing extended
range coverage using standards-based WLAN.
Our systems are used in a variety of applications in different markets,
including:



| |  |  | Mobile wireless backhaul.Our systems enable cellular and personal
communication service providers to connect their base stations to other
base stations and to existing wire line networks.                                                                                                                                                                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Fiber redundancy and extension.Our systems enable service providers
and enterprises to back-up the wire line portions of their networks and
to extend the reach of the fiber optic networks with products that
combine the high transmission speeds and the reliability of fiber optic
cable with the flexibility, cost effectiveness and rapid deployment of
wireless technologies.
|
| |  |  | Enterprise/campus networks.Our systems and products enable
enterprises with multiple facilities, including those located in a
campus environment, to connect their facilities to expand or establish
private computer and communications networks. In addition, our WLAN
products extend the reach of wired enterprise networks for mobile and
portable connectivity applications.  
|
| |  |  | Last mile access.Our systems and products connect end-users with a
service providers network backbone and central office, providing
high-speed, last mile Internet access. Our WLAN products provide
fully-featured access products for the emerging public access or hot
spot market.                                                                                             
|
| |  |  | Home and small business networking.Our products provide Internet
gateway and peer-to-peer cordless networking for the home and small
office markets.                                                                                                                                                                                                                                

The key benefits of our solution include:

Rapid deployment.Service providers, businesses and other enterprises can
rapidly deploy our systems to establish new, or expand existing, network
infrastructures. Competing technologies such as digital phone lines and fiber
optic cables generally take longer to deploy than our broadband wireless access
systems. In addition, our license-exempt systems do not require frequency
coordination and regulatory approval. As a result, service providers,
businesses and other enterprises can avoid many of the time consuming processes
typically required in installing licensed wireless technologies.

Telecommunications grade availability of service.We have developed
proprietary error correction algorithms, fault tolerant systems and
comprehensive network management software designed to enable our
LynxTM and
Tsunami point-to-point fixed wireless systems to match or exceed fiber network
availability standards. These wireless systems are designed to provide 99.999%
availability, or less than five minutes of down time per year. As a result, our
systems enable service providers, businesses and other enterprises to provide
end-users with telecommunications grade availability which is equal to or
better than that offered by most alternative broadband access solutions.

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High-speed and long distance connections.We have used our engineering
expertise and proprietary radio frequency and digital signal processing
technologies to design systems that offer an attractive combination of
high-speed transmission rates and long-range coverage. During the past ten
years, we have introduced what we believe are some of the fastest and
longest-range wireless networking systems available, including our Tsunami 480, which we
believe is currently the industrys fastest license-exempt system.

Cost-effective solutions.Because our technologies enable our systems to
transmit over longer distances than competing product designs, service
providers, businesses and other enterprises often require fewer units to cover
a specified area. As a result, they are able to reduce both their initial and
incremental capital expenditures for network deployments.

Fully integrated end-to-end solution.We offer a broad range of systems
that enable service providers, businesses and other enterprises to create
complete broadband wireless networks that connect end-users to network
backbones, for example fiber optic networks. Our point-to-point systems are
primarily used within the backhaul segments of networks and also provide last
mile access to large businesses. Our point-to-multipoint systems provide last
mile access to campus environments, as well as residential users and small
businesses. Our systems use similar radio frequency technology, digital signal
processing and network management software. We believe this design commonality
offers service providers, businesses and other enterprises higher end-to-end
performance, lower equipment costs and lower training and maintenance costs.

Our broadband wireless access systems have various disadvantages and
limitations. For example, the broadband wireless access industry is technology
intensive and requires us to continually develop new products or product
enhancements in order for us to remain competitive. In addition, in contrast to
mobile wireless access solutions, our systems require line-of-sight
installation, which often requires the network service provider or enterprise
network owner to obtain roof rights from third parties. Our systems may also
experience problems due to radio signal interference, which may occur if
multiple wireless systems are operating on the same radio frequencies and in
the same geographic areas as our systems or, in the case of operating
frequencies above 11 GHz, if there is inclement weather. As an increasing
number of unlicensed products are deployed over time, whether Proxim systems or
systems from our competitors, the possibility of interference between systems
that operate in the same frequency increases, and in some cases there may not
be sufficient frequency available in a given geographic location to allow
further expansion of a customers network. Furthermore, our
point-to-multipoint systems started shipping in December 2001 and we may not be
able to successfully penetrate the emerging markets for these systems.

Strategy

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

Capitalize on our technology expertise to rapidly introduce new products.
Over the past ten years, we have developed or acquired several core technologies that form
the basis of our current product lines and which we intend to use in our future
product development. Our dedicated team of engineers has multi-disciplinary
technical capabilities, including radio frequency technology, digital signal
processing and system software development. We believe integrating these
capabilities is highly complex, and we intend to continue to take advantage of
our technology expertise to introduce product enhancements and new products in
a rapid and cost effective manner. For example, we are currently developing a
point-to-point broadband wireless system capable of transmitting data at speeds
in excess of 1 gigabit per second and point-to-multipoint systems which will
easily integrate with our existing point-to-point systems.

Utilize existing customer and partner relationships to expand into new
market segments.In 2002, we sold our systems to more than 170 customers in 45
countries. Our customers and partners include AT&T Wireless Group, Avaya,
Cingular Wireless, Dell Computer, Fujitsu, Hewlett-Packard, Motorola,
Telefonica, Telmex, Verizon Wireless, and VoiceStream Wireless. We intend to
build upon our relationships with current customers and partners as they
continue to expand their networks and enter new market segments, such as fiber
extension, campus and other private networks and last mile access. We believe
that we will be well-positioned to provide our current customers with broadband
wireless access and networking solutions in their new markets.

Increase our presence in international markets.While our products are
currently sold and approved for use in over 50 countries, we intend to
increase our presence in these countries and further expand into new
international markets where broadband wire line access is currently too
expensive or unavailable. In particular, as various governmental authorities
make license-exempt spectrum available, we believe our license-exempt systems
will be well-positioned for rapid deployment in these international markets. We
intend to continue to expand our presence worldwide by expanding our
international sales and marketing efforts, obtaining regulatory approvals for
deploying our systems in new international markets, increasing our total
product offerings in both existing and new international markets and
establishing strategic alliances and partnerships.

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Aggressively market through distributors, value-added resellers and
systems integrators.We have established relationships with key distributors,
value-added resellers and systems integrators such as Avant Telecoms Inc.,
Communications Services International, Inc., Comstor, Digital China, Hutton
Communication, Inc., Ingram Micro, Somera Communications Inc., Tech Data,
Tessco Technologies Incorporated and Westcon Inc. to market and sell our
systems. To further accelerate our growth, we intend to build upon our existing
relationships and establish new relationships with distributors, value-added
resellers and systems integrators that we believe have strong relationships
with potential customers for our Lynx, Tsunami and ORiNOCO products. Our
marketing group continues to develop materials and programs such as training
courses to assist our distributors, value-added resellers and systems
integrators in penetrating these markets.

Expand through strategic transactions.We intend to pursue acquisitions
of complementary businesses, technologies, products or services to expand our
presence in the broadband wireless access market. On March 24, 2000, we
acquired Ubiquity Communication, Inc., a Petaluma, California-based company.
Through the acquisition, we acquired development stage point-to-multipoint
technology that we have integrated with our core technologies to develop our
point-to-multipoint systems. On March 22, 2001, we acquired WirelessHome
Corporation, a Long Beach, California-based company. Through this acquisition,
we acquired point-to-multipoint technology in the Beta phase that we have used
to complete development of our first generation point-to-multipoint systems,
Tsunami MP. On March 26, 2002, we completed a merger with Proxim, Inc., a
Sunnyvale, California-based company which provides wireless local area
networking and building-to-building network products based on radio frequency
or RF technology. On August 5, 2002, we acquired the 802.11 WLAN
systems business of Agere Systems, including the ORiNOCO product line, to
expand our market position for standards-based WLAN products.

Products

We classify our products into two product lines: Wireless Wide Area
Network, or WWAN, product line, and; Wireless Local Area Network, or WLAN,
product line. The WWAN product line includes point-to-point Lynx, Tsunami
products and point-to-multipoint Tsunami products. The WLAN product line
includes 802.11a and ORiNOCO products. We design our products and systems
generally to use common features, components and software.

Our products operate at different transmission speeds, radio frequencies,
with different ranges and support different standard interfaces. The table below summarizes the features of our current products:

|                            |  |                              |  |                     |  |                 |  |                   
|--------------------------- |  | ---------------------------- |  | ------------------- |  | --------------- |  | ------------------
|                            |  | Transmission Speeds          |  | Radio               |  |                 |  |                   
|                            |  | (Kilobits per second (Kbps)) |  | Frequency           |  |                 |  | Standard          
|Product Name                |  | (Megabits per second (Mbps)) |  | (Gigahertz (GHz))   |  | Range           |  | Interface         
|                            |  |                              |  |                     |  |                 |  |                   
|WWAN Products               |  |                              |  |                     |  |                 |  |                   
|                            |  |                              |  |                     |  |                 |  |                   
|Point-to-Point Systems      |  |                              |  |                     |  |                 |  |                   
|                            |  |                              |  | 2.4 GHz and 5.8 GHz |  |                 |  | Fractional, T1, E1
|LYNX                        |  | 56 Kbps to 155 Mbps          |  | (License-exempt)    |  | Beyond 50 miles |  | DS3 and OC3       
|                            |  |                              |  |                     |  |                 |  |                   
|                            |  |                              |  | 2.4 GHz and 5.8 GHz |  |                 |  |                   
|TSUNAMI                     |  | 2 Mbps to 480 Mbps           |  | (License-exempt)    |  | Beyond 40 miles |  | T1, E1            
|                            |  |                              |  |                     |  |                 |  |                   
|                            |  |                              |  | 5.8 GHz             |  |                 |  |                   
|TSUNAMI Quickbridge         |  | 20 Mbps to 60 Mbps           |  | (License-exempt)    |  | Up to 6 miles   |  | T1, E1            
|                            |  |                              |  |                     |  |                 |  |                   
|Point-to-Multipoint Systems |  |                              |  |                     |  |                 |  |                   
|                            |  | 20 Mbps to 60                |  | 5.8 GHz             |  |                 |  |                   
|TSUNAMI Multipoint (MP)     |  | Mbps/sector                  |  | (License-exempt)    |  | Up to 6 miles   |  | 802.3             
|                            |  |                              |  |                     |  |                 |  |                   
|                            |  |                              |  | 2.4 GHz             |  |                 |  |                   
|TSUNAMI MP.11.              |  | 11 Mbps                      |  | (License-exempt)    |  | Up to 16 miles  |  | 802.11b           

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|                          |  |                              |  |                   |  |                 |  |                  
|------------------------- |  | ---------------------------- |  | ----------------- |  | --------------- |  | -----------------
|                          |  | Transmission Speeds          |  | Radio             |  |                 |  |                  
|                          |  | (Kilobits per second (Kbps)) |  | Frequency         |  |                 |  | Standard         
|Product Name              |  | (Megabits per second (Mbps)) |  | (Gigahertz (GHz)) |  | Range           |  | Interface        
|                          |  |                              |  |                   |  |                 |  |                  
|WLAN Products             |  |                              |  |                   |  |                 |  |                  
|                          |  |                              |  |                   |  |                 |  |                  
|                          |  |                              |  | 2.4 GHz and 5 GHz |  |                 |  |                  
|ORiNOCO Access Points     |  | 11 Mbps to 100Mbps           |  | (License-exempt)  |  | Up to 1700 feet |  | 802.11a & 802.11b
|                          |  |                              |  |                   |  |                 |  |                  
|                          |  |                              |  | 2.4 GHz and 5 GHz |  |                 |  |                  
|ORiNOCO Client Cards      |  | 11 Mbps to 100Mbps           |  | (License-exempt)  |  | Up to 1700 feet |  | 802.11a & 802.11b
|                          |  |                              |  |                   |  |                 |  |                  
|                          |  |                              |  | 2.4 GHz           |  |                 |  |                  
|ORiNOCO Broadband Gateway |  | 11 Mbps                      |  | (License-exempt)  |  | Up to 1700 feet |  | 802.11b          
|                          |  |                              |  |                   |  |                 |  |                  
|                          |  |                              |  | 2.4 GHz to 5 GHz  |  |                 |  |                  
|HARMONY product family    |  | 11 Mbps to 100Mbps           |  | (License-exempt)  |  | Up to 1700 feet |  | 802.11a & 802.11b

WWAN Products

Each of our point-to-point systems consists of two pieces of equipment at
separate locations. Each piece of equipment is first connected to an end-users
network by a cable and then connected by an antenna cable to an antenna, which
is usually mounted on a rooftop or tower. The two antennae are then aimed at
one another to create a wireless connection between the two end-user locations.
By using multiple systems, end-users can connect more than two locations to
form a more extensive network. Our point-to-multipoint system consists of a
base station connected to a wire line network which communicates with a
multitude of subscriber units that connect remote local area computer networks
to the main wire line network.

Lynx products.Our point-to-point Lynx products are primarily used by
wireless operators to connect their base stations to other base stations and to
existing wire line networks. These connections comprise the backhaul segments
of their networks. In addition, these products are also used to establish
campus and private networks and to provide fiber extension and last mile
access. Our Lynx products are offered in a variety of frequencies, ranging from
2.4 GHz to 5.8 GHz, which operate in license-exempt spectrum, with a variety of
data transmission speeds, ranging from 56 Kbps per second to 155 Mbps per
second. Our Lynx products can transmit and receive the maximum data capacity in
both directions simultaneously, a feature commonly known as full duplex. Our
products have a compact, fully-integrated design and a built-in network
management system. They can be linked together within a network and managed
with simple network management protocol, or SNMP, software. SNMP is an industry
standard set of rules that governs network management and monitors network
devices and their functions. Our Lynx products also include a separate control
and diagnostic channel which remotely monitors the systems status and
performance without reducing its carrying capacity.

Tsunami products.Our point-to-point Tsunami products primarily enable
service providers, businesses and other enterprises to expand or establish
private networks by bridging Internet traffic among multiple facilities. In
addition, these products are also used to provide fiber extension and last mile
access. Tsunami products are currently offered in frequencies ranging from 2.4
GHz to 5.8 GHz, with a variety of data transmission speeds ranging from 2 Mbps
per second to 480 Mbps per second. Like our Lynx products, our Tsunami products
offer features including full duplex transmission, fully-integrated design and
a separate control and diagnostic channel. In addition, our higher capacity
Tsunami systems include one or more additional T1 or E1 connections without
reducing the carrying capacity of the system. The additional T1 or E1
connection is a standard telecommunications interface that is not based on
Internet Protocol and is typically used for voice and/or video.

Point-to-Multipoint Products.In December 2001, we began shipping our
point-to-multipoint systems to enable service providers, businesses and other
enterprises to cost-effectively connect end-users to a central hub. Businesses
and other enterprises may also use these systems to cost-effectively connect
multiple facilities within their private networks.

Our point-to-multipoint systems are deployed in a hub and spoke
configuration consisting of a single central hub and equipment located at each
end-users premises. The central hub wirelessly connects to the remote customer
premises equipment, prioritizing transmissions and allocating slots of time to
each end-user based on a system called time division duplexing. We believe our
time division duplexing technology provides a more efficient use of capacity
compared to most alternative technologies to accommodate the peaks and lows of
traffic between each end-user and the central hub. Central hubs operate in a
variety of frequencies, in various geographic configurations and are capable of
supporting hundreds of units of customer premises equipment. The hub unit can
also

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connect to the central office of a service provider using our
point-to-point technology. The customer premises equipment transmits and
receives data between the end-user and the central hub at various transmission
speeds and frequencies.

WLAN Products

ORiNOCO Access Point.Our ORiNOCO access points offer solutions for
enterprises and public access enabling corporate user access and creation of
hot spots in small, medium and large venues. Our ORiNOCO access point is a
full featured wireless bridge that extends the range of wired Ethernet networks
and enables migration from 802.11b 2.4 GHz WLANs to 802.11a 5 GHz WLANs. With a
dual slot architecture, the ORiNOCO AP-2000 access point provides configuration
flexibility and increased network capacity through the use of two Network
Interface Cards. The ORiNOCO AP-5000 access point is a combination network
access point and a broadband gateway. Our ORiNOCO access points also provide
high level security including IEEE 802.1x which is a part of the Windows XP
operating system. The Wireless Distribution System support enables
wireless connection of multiple PCs, providing for a variety of wireless
infrastructure configurations. Web enabled and SNMP network management allow
for simple configuration and remote management of each ORiNOCO network. With a
high performance 11 Mbps data rate at 2.4 GHz and 54 Mbps at 5 GHz, and a wide
coverage range, we believe that the Wi-Fi compliant ORiNOCO access point is an
ideal WLAN solution for the enterprise.

ORiNOCO Client Cards.Our ORiNOCO client cards deliver mobile convenience,
easy installation and a configuration utility that allows users to connect
quickly and simply. ORiNOCO client cards for notebooks and desktops work
together with all ORiNOCO infrastructure products including access points,
residential gateways, and access servers. ORiNOCO client cards deliver
multiple security levels with various levels of encryption including up to
152-bit WEP, 802.1x security, delivering enterprise-class security. Packaged
client adapters include the following form factors: USB, ISA and PCI adapter
for desktop computers, cordless ORiNOCO 802.11a/b ComboCard and 802.11 b
ORiNOCO PC Card for notebook computers and Ethernet and Serial external
adapters.

ORiNOCO Broadband Gateway.Our ORiNOCO Broadband Gateway Wi-Fi (802.11b)
WLAN Access Point and Cable/DSL Internet gateway offering dual Ethernet
ports, for simultaneously supporting an Internet connection and a wired
Ethernet network for the home and small business. Our ORiNOCO Broadband Gateway
enables sharing of files and peripherals such as printers. Advanced features
include 128-bit RC4 encryption, access control, built-in firewall with
IP/Packet filtering, and remote management tools. Industry-leading radio
receiver sensitivity and unique Microwave Interference Robustness (MIR) deliver
performance against ambient interference, providing a coverage range of up to
1700 feet in home and small office environments.

Harmony Products. Harmony was the first wireless networking solution to
support multiple WLAN standards, including OpenAir, IEEE 802.11b, IEEE
802.11a, and IEEE 802.11g, in a single, homogeneous architecture. The Harmony
product family includes network infrastructure products and client adapter
products. Network infrastructure products include Access Point Controllers
which centralize communication, configuration, management and security
services, Access Points which deliver low-cost radio coverage and may be placed
anywhere within the network, and Power Systems that deliver power over Ethernet
to Access Points. The Access Point products provide the wireless connectivity
used by WLAN standards-based client adapters.

Technology

Over the past ten years, we have developed a number of core technologies
that form the basis of our current product offerings and which we expect to use
in our future product development. Our primary areas of technology expertise
are radio frequency technology, digital signal processing and system software
development.

Radio frequency technology.Microwave and millimeter-wave technology are
the technologies used to wirelessly transmit data, voice and video. Microwave
technology uses radio frequencies ranging from 1 GHz up to 20 GHz, and
millimeter-wave technology uses frequencies above 20 GHz. We believe we are one
of the few wireless equipment manufacturers in the industry that has internally
developed integrated microwave circuit board designs. We believe having these
design capabilities provides us with higher performance, lower production
costs, shorter development cycles and the ability to customize our products so
that they can more easily be integrated with our existing products and with the
networks of our various customers and end-users.

Digital signal processing technology.Our products use proprietary
digital signal processing technologies and designs that we developed
specifically for use in wireless systems. We believe these technologies have
enabled us to introduce a number of high-speed wireless products that we may
not have been able to produce with generic digital signal processing chip sets.
Because our development cycles are not dependent on an external supplier, we
believe we can develop flexible, innovative products more quickly than those
competitors who do not have similar capabilities. We are currently using our
technological expertise in digital signal processing to develop next
generation, high-speed wireless systems designed to operate at speeds over 720
megabits per second.

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System software.Our systems use SNMP-based software that enables remote
monitoring and control and facilitates the integration and compatibility of our
products with larger communications networks. In addition, we have patented
software for bandwidth allocation, which we believe will allow our
point-to-multipoint products to use bandwidth more efficiently and to operate
at higher speeds than other point-to-multipoint systems.

Sales and Marketing

We sell our products worldwide to service providers, businesses and other
enterprises, and original equipment manufacturers directly through our sales
force and indirectly through distributors and value-added resellers. We focus
our marketing efforts on supporting our direct sales force, distributors,
value-added resellers and systems integrators. We also seek to stimulate market
demand by increasing brand awareness and educating potential customers about
the advantages of using our products.

In the United States and Canada, our sales force focuses on key strategic
accounts such as service providers, businesses and other enterprises and also
develops relationships with end-users that purchase through distributors and
value-added resellers. Outside the United States and Canada, sales are
generally made through distributors or value-added resellers and original
equipment manufacturers. Our sales force, however, develops direct
relationships with end-users either independently, in which case the sales
representative then brings in the distributor or value-added reseller to
complete the sale, or together with the distributors or value-added resellers.

We have established relationships with large national and international
distributors, local and specialized distributors and value-added resellers. The
distributors sell our products, and the value-added resellers not only sell our
products, but also assist their customers in network design, installation and
testing. In some cases, both distributors and value-added resellers also assist
their customers with financing, maintenance and the purchase of ancillary
equipment necessary for installation of a wireless network.

Historically, we have not operated with a significant order backlog and a
substantial portion of our revenues in any quarter were derived from orders
booked and shipped in that quarter. Accordingly, a significant component of
our revenue expectations will be based almost entirely on internal estimates of
future demand and not on firm customer orders. Planned operating expense
levels are relatively fixed in the short term and are based in large part on
these estimates. If orders and revenue do not meet expectations, our operating
results could be materially adversely affected. In this regard, we did not
achieve our revenue targets in the third quarter of 2002, and we incurred a net
loss of $35.1 million in that quarter.

Customer Service

We are committed to providing our customers with high levels of service
and support. We provide training, technical assistance and customer support on
the installation, management, use and testing of our products. We also provide
warranties for our products consistent with industry practices in the WLAN and
WWAN markets, and we offer both in-warranty and out-of-warranty repair
services. Our repair center is staffed with technicians who work directly with
our quality assurance team to identify potential problems and repair equipment.
In addition, we have a number of flexible hardware and software maintenance and
support programs available for our products.

Customers

We have a globally diversified base of customers and end-users consisting
of service providers, businesses and other enterprises. In 2002, we sold our
products to approximately 170 customers in 45 countries.

The following table summarizes each customer which accounted for more than
10% of the Companys total revenue each year:

|                                              |  |                         |    |      |  |      |    |   |  |  |    |  
|--------------------------------------------- |  | ----------------------- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                              |  | Year ended December 31,
|                                              |  |                        
|Geographical region                           |  | 2002                    |    | 2001 |  | 2000
|                                              |  |                         |    |      |  |     
|Comstor                                       |  |                         | 23 | %    |  |      | 29 | % |  |  |   |  
|Somera                                        |  |                         |   |      |  |      | 11 | % |  |  | 21 | %
|Tessco Technologies, Inc.                     |  |                         |   |      |  |      | 11 | % |  |  |   |  
|Avant Telecoms, Inc. (a
value-added reseller) |  |                         |   |      |  |      |   |   |  |  | 11 | %

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During the year ended ending December 31, 2002, international sales
accounted for approximately 38% of our total sales. Revenue from shipments by
Western Multiplex to customers outside of the United States, principally to a
limited number of distributors, represented 24% and 33% of total revenue during
the calendar years 2001 and 2000, respectively. Revenue from shipments by
Proxim, Inc. to customers outside the United States, principally to a limited
number of distributors and OEM customers, represented 33% and 18% of total
revenue during the calendar years 2001 and 2000, respectively. Ageres sales
of its ORiNOCO products included sales to a number of international customers,
and we expect that we will continue to sell these products to a significant
percentage of international customers. We expect that our revenue from
shipments to international customers will vary as a percentage of total
revenue.

Research and Development

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

     developing our point-to-multipoint systems;

     adapting our products to additional frequencies and interfaces;

     developing higher speed products;

     increasing the performance of our digital signal processing technology; and

     designing our products for low-cost, outsourced manufacturing, assembly and testing.

We are currently developing additional Lynx products, some of which should
be capable of operating at speeds exceeding 625 Mbps. In addition, we are
currently developing additional Tsunami products that should be capable of
operating at speeds exceeding 720 Mbps. These products under development will
be additional solutions for fiber extension, last mile access and campus and
private networks.

We devote a substantial portion of our resources to developing new
products, enhancing existing products, expanding and improving our core
wireless technologies and strengthening our technological expertise. Over the
past ten years, we have made and expect to continue to make significant
investments in research and development. We invested approximately $29.2
million, $19.1 million and $12.4 million in research and development activities
in 2002, 2001, and 2000, respectively.

Manufacturing

Our ISO 9001 certified manufacturing operation, based in our Sunnyvale,
California facility, consists primarily of pilot production, product assembly
and product testing. Our strategy is to outsource manufacturing and procurement
of component parts to manufacturers with the expertise and ability to achieve
the cost reductions associated with volume manufacturing and to respond quickly
to orders, while maintaining our quality standards. This allows us to focus our
internal resources on developing new products. For our current generation of
Lynx and Tsunami products, we rely on two contract manufacturers to produce our
printed circuit boards and one contract manufacturer for limited printed
circuit board testing. We complete the final assembly and testing of these
products at our Sunnyvale facility. We manufacture our ORiNOCO, Tsunami
Multipoint, Tsunami outdoor routers and Harmony products through off-shore
turnkey contract manufacturers. We intend to have our next generation of Lynx
and Tsunami products manufactured by off-shore turnkey contract manufacturers
beginning in 2003.

We depend on single or limited source suppliers for several key components
used in our products. Proxim, Inc. and Ageres WLAN division depended
on single sources for proprietary application specific integrated circuits, or
ASICs, and assembled circuit boards. Any disruptions in the supply of these
components or assemblies could delay or decrease our revenues. In addition,
even for components with multiple sources, there have been, and may continue to
be, shortages due to capacity constraints caused by high demand. In connection
with our acquisition of Ageres 802.11 WLAN systems business, we have
entered into a three-year strategic supply agreement with Agere, pursuant to
which Agere will provide us with 802.11 chips, modules and cards. Other than
this agreement, we do not have any long-term arrangements with our suppliers.
If, for any reason, a supplier fails to meet our quantity or quality
requirements, or stops selling components to us or our contract manufacturers
at commercially reasonable prices, we could

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experience significant production delays and cost increases, as well as
higher warranty expenses and product reputation problems. Because the key
components and assemblies of our products are complex, difficult to manufacture
and require long lead times, we may have difficulty finding alternative
suppliers to produce our components and assemblies on a timely basis. We have
experienced shortages of some of these components in the past, which delayed
related revenue, and we may experience shortages in the future. In addition,
because the majority of our products have a short sales cycle of between 30 and
90 days, we may have difficulty in making accurate and reliable forecasts of
product needs. As a result, we could experience shortages in supply, which
could delay or decrease revenue because our customers may cancel their orders
or choose a competitor for their future needs.

We have limited manufacturing capability and limited experience in large
scale or foreign manufacturing. There can be no assurance that we will be able
to develop or contract for additional manufacturing capacity on acceptable
terms on a timely basis. In addition, in order to compete successfully, we
will need to achieve significant product cost reductions. Although we intend
to achieve cost reductions through engineering improvements, production
economies, and manufacturing at lower cost locations including outside the
United States, there can be no assurance that we will be able to do so. In
order to remain competitive, we must continue to introduce new products and
processes into our manufacturing environment, and there can be no assurance
that any such new products will not create obsolete inventories related to
older products. For example, as a part of our restructuring activities in the
first quarter of 2002, we increased our provision for obsolete and excess
inventory, including purchase commitments, totaling $12.7 million, of which
$7.7 million related to excess inventory and $5.0 million related to purchase
commitments. We subsequently reclassified this provision to cost of revenue
for the first quarter of 2002. The provision related to a decrease in demand
for certain products as well as our strategy to discontinue certain products in
order to concentrate on selling next generation products.

Proxim, Inc. produced its 802.11a products for a limited amount of time
and Western Multiplex had just begun production of its Tsunami
point-to-multipoint product prior to the merger. Agere also had a limited
operating history with its 802.11 WLAN products. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in developing industries, particularly companies in
relatively new and rapidly evolving markets. These risks include:



| |  |  | an evolving and unpredictable business model;     
| | - |  | --------------------------------------------------
|
| |  |  | uncertain acceptance of new products and services;
|
| |  |  | competition; and                                  
|
| |  |  | challenges in managing growth.                    

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

Competition

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

We could be at a disadvantage to competitors, particularly Alcatel,
Business Networks AB, Cisco Systems, D-Link, Intel Corporation and LinkSys
(which announced an agreement to be acquired by Cisco Systems on March 20,
2003, subject to regulatory approvals), which have broader distribution
channels, brand recognition, extensive patent portfolios and more diversified
product lines. We have several competitors in our commercial wireless
business, including without limitation, Alvarion (the merger of Breezecom and
Floware), Ceragon Networks, Cisco Systems, DMC Stratex Networks, Enterasys
Networks, Harris Corporation, Intel Corporation, Intersil Corporation, Nokia
Corporation, Symbol Technologies and 3Com Corporation.

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We also face competition from a variety of companies that offer different
technologies in the emerging home networking market, including several
companies developing competing wireless networking products. Additionally,
numerous companies have announced their intention to develop competing products
in both the commercial wireless and home networking markets, including several
Asia-based companies offering low-price IEEE 802.11b products. We could also
face future competition from companies that offer products which replace
network adapters or offer alternative communications solutions, or from large
computer companies, PC peripheral companies, as well as other large networking
equipment companies. Furthermore, we could face competition from certain of
our OEM customers, which have, or could acquire, wireless engineering and
product development capabilities, or might elect to offer competing
technologies. We can offer no assurance that we will be able to compete
successfully against these competitors or those competitive pressures we face
will not adversely affect our business or operating results.

Many of our present and potential competitors have substantially greater
financial, marketing, technical and other resources with which to pursue
engineering, manufacturing, marketing, and distribution of their products.
These competitors may succeed in establishing technology standards or strategic
alliances in the WLAN and building-to-building markets, obtain more
rapid market acceptance for their products, or otherwise gain a competitive
advantage. We can offer no assurance that we will succeed in developing
products or technologies that are more effective than those developed by our
competitors. Furthermore, we compete with companies that have high volume
manufacturing and extensive marketing and distribution capabilities, areas in
which we have only limited experience. We can offer no assurance that we will
be able to compete successfully against existing and new competitors as
wireless markets evolve and the level of competition increases.

Intellectual Property

We rely on a combination of patents, trademarks, non-disclosure
agreements, invention assignment agreements and other security measures in
order to establish and protect our proprietary rights. We have been issued
eighteen U.S. patents that are important to our current business, and we have
several patent applications pending in the U.S. that relate to our core
technologies and product designs. We can offer no assurance that patents will
issue from any of these pending applications or, if patents do issue, that the
claims allowed will be sufficiently broad to protect our technology. In
addition, we can offer no assurance that any patents issued to us will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will adequately protect us. Since U.S. patent applications are maintained in
secrecy until patents issue, and since publication of inventions in the
technical or patent literature tends to lag behind such inventions by several
months, we cannot be certain that we first created the inventions covered by
our issued patents or pending patent applications or that we were the first to
file patent applications for such inventions or that we are not infringing on
the patents of others. In addition, we have filed, or reserved our rights to
file, a number of patent applications internationally. We can offer no
assurance that any international patent application will issue or that the laws
of foreign jurisdictions will protect our proprietary rights to the same extent
as the laws of the United States.

In addition to our registered intellectual property, we also use
proprietary technology in our business. This technology includes internally
developed proprietary error correction algorithms, fault tolerant systems and
comprehensive network management software. A significant portion of this
technology consists of specialized knowledge and technical expertise that has
been developed over time by our employees. In order to maintain the
confidential nature of this technology, we have chosen to protect it by
generally limiting access to it, treating portions of it as trade secrets and
obtaining confidentiality or non-disclosure agreements from persons who are
given access to it. All of our employees have signed our standard
confidentiality agreement, which prohibits them from disclosing our
confidential information, technology developments and business practices, as
well as any confidential information entrusted to us by other parties.
Similarly, all of the consultants who have been given access to our
confidential information or proprietary technology have signed an agreement
prohibiting them from disclosing that information and technology to others.

We also have an intellectual property license agreement with Glenayre
which we entered into on November 1, 1999. Under the agreement, Glenayre
granted us a royalty-free license to use some of its intellectual property,
including patents, patent applications, copyrights, software, technology and
proprietary information. In addition, Glenayre granted us a license to use its
name. Under the agreement, we granted Glenayre a royalty-free license to two
patent applications and to use any trademarks we own that relate to inventory
held by Glenayre on the date of the license.

Although we intend to protect our proprietary rights vigorously, there can
be no assurance that the measures we have taken or may take to protect our
proprietary rights will be successful. We expect that litigation may
continue to be
necessary to enforce our patents, trademarks or other intellectual property
rights, to protect our trade secrets, to determine the validity and scope of
the proprietary rights of others, to establish the validity of any technology
licenses offered to patent infringers, to prevent the importation of infringing
products into the United States, or to defend against claims of infringement.
Litigation has resulted in and could further continue to result, in
substantial costs and diversion of resources and, if determined
adversely to us,
could materially and adversely affect our business and operating results.
Moreover, we can offer no assurance that in the future these rights
will be upheld. There can be no assurance that the measures we have
taken or may take in the future will prevent misappropriation of our
technology or that others will not independently develop similar
products, design around our proprietary or patented technology or
duplicate our products. For more
information regarding our pending patent litigation, see Item 3, Legal
Proceedings set forth herein.

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The results of any litigation matter are inherently uncertain. In the
event of any adverse decision in the described legal actions or any other
related litigation with third parties that could arise in the future with
respect to patents or other intellectual property rights relevant to our
products, we could be required to pay damages and other expenses, to cease the
manufacture, use and sale of infringing products, to expend significant
resources to develop non-infringing technology, or to obtain licenses to the
infringing technology. These matters are in the early stages of litigation
and, accordingly, we cannot make any assurance that these matters will not
materially and adversely affect our business, financial condition, operating
results or cash flows.

Government Regulation

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

In the United States, we are subject to various Federal Communications
Commission, or FCC, rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio spectrum.
Our spread spectrum wireless products are certified for unlicensed operation in
the 902  928 MHz, 2.4  2.4835 GHz, 5.15  5.35 GHz and 5.725  5.825 GHz
frequency bands. Operation in these frequency bands is governed by rules set
forth in Part 15 of the FCC regulations. The Part 15 rules are designed to
minimize the probability of interference to other users of the spectrum and,
thus, accord Part 15 systems secondary status in the frequency. In the event
that there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of our products experience excessive
interference from primary users, market acceptance of our products could be
adversely affected, which could materially and adversely affect our business
and operating results. The FCC, however, has established certain standards
that create an irrefutable presumption of noninterference for Part 15 users and
we believe that our products comply with such requirements. There can be no
assurance that the occurrence of regulatory changes, including changes in the
allocation of available frequency spectrum, changes in the use of allocated
frequency spectrum, or modification to the standards establishing an
irrefutable presumption for unlicensed Part 15 users, would not significantly
affect our operations by rendering current products obsolete, restricting the
applications and markets served by our products or increasing the opportunity
for additional competition.

The FCC
is coordinating discussions between the United States military and
the commercial wireless industry regarding the operation and
potential interference from unlicensed 5 GHz systems. These
discussions are intended to resolve the potential interference issues
without a rule change to the operation of unlicensed 5 GHz
systems. If a solution cannot be agreed upon by the parties, the FCC
could change the regulations related to the operation of unlicensed
5 GHz products. Such a change could have a material adverse
affect upon the sale of our unlicensed 5 GHz products.

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

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



| |  |  | decrease the growth of the broadband wireless industry;
| | - |  | -------------------------------------------------------
|
| |  |  | hinder our ability to conduct business internationally;

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| |  |  | reduce our revenues;                           
| | - |  | -----------------------------------------------
|
| |  |  | increase the costs and pricing of our products;
|
| |  |  | increase our operating expenses; and           
|
| |  |  | expose us to significant liabilities.          

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

Employees

As of December 31, 2002, we had 433 employees, including 64 in
manufacturing, 165 in research and development, 161 in sales, marketing and
customer service and 43 in finance and administration. We are not a party to
any collective bargaining agreement in the United States. We are
subject to collective bargaining with 22 employees, based in the
Netherlands. We believe that relations with our
employees are good.

Executive Officers

The following information as of March 27, 2003, is provided with respect
to each of our executive officers.

|                  |  |     |    |                            |  |                                                                
|----------------- |  | --- | -- | -------------------------- |  | ---------------------------------------------------------------
|Name              |  | Age |    | Current Title and Position
|                  |  |     |    |                           
|Jonathan N. Zakin |  |     | 54 |                            |  | Chief Executive Officer and Chairman of the
Board of Directors 
|Keith E. Glover   |  |     | 46 |                            |  | Executive Vice President, Chief Financial
Officer and Secretary
|David C. King     |  |     | 44 |                            |  | Vice-Chairman of the Board of Directors                        
|Amir Zoufonoun    |  |     | 43 |                            |  | Executive Vice
President, WAN Strategy and Business Development

Jonathan N. Zakinhas served as our Chief Executive Officer and Chairman
of the Board of Directors since November 1, 1999. Mr. Zakin is also currently
President of Leeward Technology Partners and Leeward Management Inc.,
affiliates of Ripplewood Holdings, L.L.C., and he is the Manager of Seaview
Holdings, L.L.C. Prior to founding Leeward Technology Partners in 1997, he was
Executive Vice President of Business Development and Corporate Strategy of U.S.
Robotics, a communications equipment company, from 1995 to 1997, Executive Vice
President of Sales and Marketing of U.S. Robotics from 1989 to 1995 and Vice
President of Sales from 1987 to 1989. Mr. Zakin was elected a director of U.S.
Robotics in 1988. He has also held various executive and management positions,
both domestically and internationally, with Winterhalter, Inc., Cosma
International, Brisk and Kindle and J. Henry Schroder Corp. Mr. Zakin received
an M.B.A. degree from Harvard Business School and a B.A. degree from New York
University.

Keith E. Gloverhas served as the Vice President of Finance and
Administration and Chief Financial Officer since he joined Proxim in September
1993. Upon the closing of the merger between Proxim, Inc. and Western
Multiplex Corporation in March 2002, Mr. Glover was appointed
Executive Vice President, Chief Financial Officer and Corporate
Secretary of Proxim Corporation. From March 1986 to June 1993, Mr. Glover worked for Vitalink
Communications Corporation, a LAN internetworking subsidiary of Network Systems
Corporation, where he held several financial management positions, most
recently as Vice President of Finance.

David C. Kingjoined Proxim in December 1992 as Vice President of
Marketing and acting Chief Financial Officer, in July 1993 was appointed
President, Chief Executive Officer and Director, and in January 1996 was named
Chairman of the Board of Directors and in December 2002 was named Vice-Chairman
of the Board of Directors. From December 1990 to November 1992, Mr. King served
in various executive capacities at Vitalink, most recently as Vice President of
Marketing and Customer Services. From 1985 to 1990, Mr. King was Senior Manager
in the San Francisco office of McKinsey & Company, Inc., an international
management consulting firm, where he was a member of the firms high technology
and health care practices.

Amir
Zoufonounhas served as our Executive Vice
President, WAN Strategy and Business Development since March 2002. Prior to the merger with
Proxim, Inc. he served as our President and Chief Operating Officer
and a member of the Board of Directors since November 1, 1999. He was
also our General Manager from 1998 to 1999. Since Mr. Zoufonoun
joined Western Multiplex in 1989, he served in various management
positions of increasing responsibility, including Vice President of
Engineering. From 1979 to 1989, he held various engineering and
technical management positions with Harris Corporation. Mr. Zoufonoun
received a M.S. degree in electrical engineering from Santa Clara
University and a B.S. degree in Electrical Engineering from San Jose
State University.

Available Information

Proxim makes available free of charge on the Proxim website the Companys
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
after Proxim files such material with, or furnishes it to, the Securities and
Exchange Commission. The address of the Proxim website is www.proxim.com.

14



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Item 2.Properties

Our corporate headquarters, primary research and development and
manufacturing operations, are located in approximately 139,000 square feet in
Sunnyvale, California under leases that expire on August 31, 2009. In addition,
we maintain 40,554 square feet of office space in Duluth, Georgia under a lease
and sublease that expires September 30, 2009, 40,000 square feet of office
space in Mountain View, California under a lease and sublease that expires
March 31, 2006, 37,333 square foot facility in Sunnyvale, California under
lease that expires in November 2010, 16,000 square feet in Austin, Texas under
a lease that expires on March 31, 2005, 11,000 square feet of warehouse space
in Santa Clara, California under a lease that expires on September 30, 2005,
10,637 square foot facility in Long Beach, California under lease expires in
July 2005, 8,000 square feet of office space in Wakefield, Massachusetts
under a lease that expires on May 30, 2004 and 6,930 square feet of office
space in Herndon, Virginia under a lease that expires on December 31, 2006.
Management considers the above facilities suitable and adequate to meet our
current requirements. We also lease sales offices in Atlanta, Georgia; Paris,
France; and Tokyo, Japan and a design center in India.




Item 3.Legal Proceedings

Since March 2001, we have been involved in patent and International Trade
Commission litigation with respect to alleged infringement of certain of our
United States patent rights related to direct sequence wireless local area
networking technology. This litigation has resulted in, and could in the future
continue to result in, substantial costs and diversion of management resources.
In addition, this litigation, if determined adversely to us, could result in
the payment of substantial damages and/or royalties or prohibitions against
utilization of essential technologies, and could materially and adversely
affect our business, financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9,
2001, Proxim, Inc. filed to remove Compex from the ITC complaint as Compex
entered into an agreement with Proxim, Inc. to license these patents. Intersil
and Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc.
sought declaratory judgment for non-infringement, invalidity and
unenforceability of certain Agere patents, as well as damages for violation of
the antitrust laws of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a

15



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##### Table of Contents



permanent injunction against Proxim, Inc. based on alleged patent
infringement counterclaims. On December 18, 2001, Proxim, Inc. filed an answer
and counterclaims seeking declaratory judgments for non-infringement,
invalidity and unenforceability of the four asserted Symbol patents, injunctive
and monetary relief for Symbols infringement of a Proxim, Inc. patent,
monetary relief for Symbols false patent marking, and injunctive and monetary
relief for Symbols unfair competition under the Lanham Act, common law unfair
competition and tortious interference.

On August 5, 2002, in connection with our acquisition of the 802.11 WLAN
systems business from Agere, we announced that we had entered into a
cross-license agreement with Agere whereby, in part, Agere agreed to settle the
pending patent-related litigation between the two companies.

On
March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies, as well as Intersils customers. Under the terms of the agreement,
the Company and Intersil have agreed to dismiss all claims against each other,
including lawsuits before the International Trade Commission and Delaware and
Massachusetts Federal Courts.




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

A special meeting of our stockholders was held on October 8, 2002 for the
purpose of considering and voting upon a proposal to approve the conversion of
$34 million in outstanding principal amount of our indebtedness into shares of
our Series A Preferred Stock, with an initial $34 million liquidation
preference, and the issuance of warrants to purchase approximately 5.6
million shares of our Common Stock. Of the total outstanding shares
of Common Stock of the Company present in person or by proxy and
entitled to vote on the matter, 84,161,582 shares, or
approximately 98%, voted in favor of the proposal. A total of
1,423,644 shares of Common Stock of the Company voted against
the proposal and 88,040 shares of Common Stock of the Company
abstained.

To
finance our acquisition of Ageres 802.11 WLAN systems
business, we entered into a Securities Purchase Agreement with Warburg Pincus
Private Equity VIII, L.P., Broadview Capital Partners L.P. and affiliated
entities, who agreed to collectively invest $75 million in Proxim. These
investors received 1,640,000 shares of redeemable convertible Series A
Preferred Stock in the amount of approximately $41 million, with a conversion
price of approximately $3.06 per share, and warrants to purchase approximately
6.7 million shares of our Common Stock valued at $12.3 million. The remaining
$34 million of the investment was in the form of convertible notes. Pursuant to
the Securities Purchase Agreement, we also agreed to hold a special meeting of
our stockholders to approve the conversion of the notes and the issuance to the
investors of warrants to purchase shares of our Common Stock. Upon receipt of
approval of our stockholders at the special meeting, we converted the notes
issued to these investors into 1,360,000 shares of our Series A Preferred Stock
and we granted to the investors additional warrants to purchase approximately
5.6 million shares of our Common Stock. In total, these investors were
granted warrants to acquire 12,271,345 shares of Common Stock for approximately
$3.06 per share.




PART II




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

(a) Market Information

The following table shows the high and low bid prices of the Companys
common stock for the fiscal years ended December 31, 2001 and 2002 as reported
on the Nasdaq National Market:

|                                |  |      |       |     |  |   |      | 
|------------------------------- |  | ---- | ----- | --- |  | - | ---- | 
|                                |  | High |       | Low
|                                |  |      |       |    
|First Quarter (ended 3/30/01)   |  | $    | 17.00 |     |  | $ | 6.63 | 
|Second Quarter (ended 6/29/01)  |  | $    | 8.20  |     |  | $ | 2.50 | 
|Third Quarter (ended 9/28/01)   |  | $    | 5.60  |     |  | $ | 2.82 | 
|Fourth Quarter (ended 12/31/01) |  | $    | 5.85  |     |  | $ | 3.25 | 
|First Quarter (ended 3/29/02)   |  | $    | 5.97  |     |  | $ | 1.82 | 
|Second Quarter (ended 6/28/02)  |  | $    | 3.70  |     |  | $ | 2.90 | 
|Third Quarter (ended 9/27/02)   |  | $    | 3.21  |     |  | $ | 1.70 | 
|Fourth Quarter (ended 12/31/02) |  | $    | 1.89  |     |  | $ | 0.40 | 

The closing price of the Companys common stock on the Nasdaq National
Market on January 16, 2003 was $1.24.

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(b) Holders

Proxim Corporation common stock is quoted on the Nasdaq National Market
under the symbol PROX. The Company had 428 stockholders of record as of
March 25, 2003.

(c) Dividends

The Company presently intends to retain its future earnings, if any, to
fund the development and growth of its business and, therefore, does not
anticipate paying any cash dividends in the foreseeable future. From August
2005 through August 2007, shares of the Companys Series A Preferred Stock will
be entitled to dividends equal to 8% of their liquidation preference per year,
payable, at the Companys election, in cash or shares of the Companys Common
Stock valued at the then-market price.

(d) Equity Plan Information

The
disclosure required by Item 201(d) of Regulation S-K is set forth in
the 2003 Proxy Statement under the section Equity Plan
Information and is incorporated herein by reference.

17



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##### Table of Contents






Item 6.Selected Financial Data

You should read the selected consolidated financial data set forth below
in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and Proxim Corporations consolidated
financial statements and the related notes included elsewhere in this Annual
Report on Form 10-K. The consolidated statements of operations data for the
years ended December 31, 2002, 2001 and 2000 and the consolidated balance sheet
data as of December 31, 2002 and 2001 are derived from, and are qualified by
reference to, the audited consolidated financial statements and related notes
appearing elsewhere in this Annual Report on Form 10-K. The statement of
operations data for the year ended December 31, 1999 and 1998 and the balance
sheet data as of December 31, 2000, 1999 and 1998 are derived from audited
financial statements not appearing elsewhere in this Annual Report on Form
10-K. Historical results are not necessarily indicative of results that may be
expected for any future period.

|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |       |        | 
|---------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------- | -------- | --------------------------------- | -------- | ---- | ------- | ------ | ------- | ---- | ------- | ------ | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                                                 |                                                |                                         |          | Year Ended December 31,          
|                                                                 |                                                |                                         |          |                                  
|                                                                 |                                                |                                         |          | 2002                              |          | 2001 |         | 2000   |         | 1999 |         | 1998  
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |       
|                                                                 |                                                |                                         |          | (In thousands, except share data)
|Statement of operations data:                                    |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Revenue, net                                                     |                                                | $                                       | 144,660  |                                   |          | $    | 105,730 |        |         | $    | 105,508 |        |        | $ | 44,750 |       |        | $ | 32,903 |      
|Cost of revenue                                                  |                                                |                                         | 83,685   |                                   |          |      | 55,887  |        |         |      | 50,466  |        |        |   | 22,470 |       |        |   | 17,703 |      
|Provision for excess and obsolete inventory                      |                                                |                                         | 12,659   |                                   |          |      |        |        |         |      |        |        |        |   |       |       |        |   |       |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Gross Profit                            |          |                                   | 48,316   |      |         |        | 49,843  |      |         |        | 55,042 |   |        |       | 22,280 |   |        |       | 15,200 | 
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Operating expenses:                                              |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 | Research and development                       |                                         |          | 29,159                            |          |      |         | 19,114 |         |      |         | 12,379 |        |   |        | 5,925 |        |   |        | 4,866 |       
|                                                                 | Selling, general and administrative            |                                         |          | 49,491                            |          |      |         | 38,603 |         |      |         | 22,531 |        |   |        | 8,192 |        |   |        | 6,599 |       
|                                                                 | Amortization of goodwill and intangible assets |                                         |          | 12,467                            |          |      |         | 5,440  |         |      |         | 2,382  |        |   |        | 737   |        |   |        | 731   |       
|                                                                 | Amortization of deferred stock compensation    |                                         |          | 855                               |          |      |         | 5,196  |         |      |         | 4,161  |        |   |        |      |        |   |        |      |       
|                                                                 | Recapitalization costs                         |                                         |          |                                  |          |      |         |       |         |      |         |       |        |   |        | 3,050 |        |   |        |      |       
|                                                                 | Impairment of goodwill and intangible assets   |                                         |          | 129,108                           |          |      |         | 4,331  |         |      |         |       |        |   |        |      |        |   |        |      |       
|                                                                 | Impairment of loan to officer                  |                                         |          | 4,500                             |          |      |         |       |         |      |         |       |        |   |        |      |        |   |        |      |       
|                                                                 | Restructuring charges                          |                                         |          | 43,177                            |          |      |         | 1,816  |         |      |         |       |        |   |        |      |        |   |        |      |       
|                                                                 | In-process research and development            |                                         |          | 16,100                            |          |      |         | 6,400  |         |      |         |       |        |   |        |      |        |   |        |      |       
|                                                                 | Merger costs                                   |                                         |          |                                  |          |      |         | 30     |         |      |         | 185    |        |   |        |      |        |   |        |      |       
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Total operating expenses                |          |                                   | 284,857  |      |         |        | 80,930  |      |         |        | 41,638 |   |        |       | 17,904 |   |        |       | 12,196 | 
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Income (loss) from operations           |          |                                   | (236,541 | )    |         |        | (31,087 | )    |         |        | 13,404 |   |        |       | 4,376  |   |        |       | 3,004  | 
|Interest income (expense), net                                   |                                                |                                         | (85      | )                                 |          |      | 1,393   |        |         |      | 85      |        |        |   | (368   | )     |        |   | (24    | )    
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Income (loss) before income taxes       |          |                                   | (236,626 | )    |         |        | (29,694 | )    |         |        | 13,489 |   |        |       | 4,008  |   |        |       | 2,980  | 
|Income tax provision (benefit)                                   |                                                |                                         | 3,224    |                                   |          |      | (4,096  | )      |         |      | 6,800   |        |        |   | 2,831  |       |        |   | 1,145  |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Income (loss) before extraordinary item |          |                                   | (239,850 | )    |         |        | (25,598 | )    |         |        | 6,689  |   |        |       | 1,177  |   |        |       | 1,835  | 
|Loss on early extinguishment of debt, net of tax benefit of $241 |                                                |                                         |         |                                   |          |      |        |        |         |      | (394    | )      |        |   |       |       |        |   |       |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|                                                                 |                                                | Net income (loss)                       |          |                                   | (239,850 | )    |         |        | (25,598 | )    |         |        | 6,295  |   |        |       | 1,177  |   |        |       | 1,835  | 
|Deemed Series A Preferred Stock dividend                         |                                                |                                         | (2,740   | )                                 |          |      |        |        |         |      |        |        |        |   |       |       |        |   |       |      
|Accretion
of Series A Preferred Stock redemption obligations     |                                                |                                         | (1,890   | )                                 |          |      |        |        |         |      |        |        |        |   |       |       |        |   |       |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) attributable to common stockholders            |                                                | $                                       | (244,480 | )                                 |          | $    | (25,598 | )      |         | $    | 6,295   |        |        | $ | 1,177  |       |        | $ | 1,835  |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Basic earnings (loss) per share                                  |                                                | $                                       | (2.33    | )                                 |          | $    | (0.44   | )      |         | $    | 0.13    |        |        | $ | 0.02   |       |        | $ | 0.02   |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Diluted earnings (loss) per share                                |                                                | $                                       | (2.33    | )                                 |          | $    | (0.44   | )      |         | $    | 0.12    |        |        | $ | 0.02   |       |        | $ | 0.02   |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Shares used to compute basic earnings (loss) per share           |                                                |                                         | 105,119  |                                   |          |      | 57,559  |        |         |      | 47,045  |        |        |   | 73,000 |       |        |   | 80,000 |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      
|Shares used to compute diluted earnings (loss) per share         |                                                |                                         | 105,119  |                                   |          |      | 57,559  |        |         |      | 52,081  |        |        |   | 73,000 |       |        |   | 80,000 |      
|                                                                 |                                                |                                         |          |                                   |          |      |         |        |         |      |         |        |        |   |        |       |        |   |        |      

|                                                 |  |              |         |      |  |      |         |      |  |      |         |  |  |   |        |  |  |   |        | 
|------------------------------------------------ |  | ------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                                 |  | December 31,
|                                                 |  |             
|                                                 |  | 2002         |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                 |  |              |         |      |  |      |         |      |  |     
|Balance Sheet Data:                              |  |              |         |      |  |      |         |      |  |      |         |  |  |   |        |  |  |   |        | 
|Cash and short-term investments                  |  | $            | 17,048  |      |  | $    | 23,290  |      |  | $    | 51,727  |  |  | $ | 1,913  |  |  | $ | 1,377  | 
|Working capital                                  |  |              | 53,975  |      |  |      | 65,083  |      |  |      | 84,686  |  |  |   | 4,481  |  |  |   | 9,835  | 
|Total assets                                     |  |              | 177,423 |      |  |      | 134,398 |      |  |      | 140,877 |  |  |   | 43,322 |  |  |   | 35,146 | 
|Restructuring accruals and long term debt        |  |              | 26,680  |      |  |      |        |      |  |      | 28      |  |  |   | 19,153 |  |  |   |       | 
|Mandatory redeemable convertible preferred stock |  |              | 64,412  |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|Total stockholders equity                       |  | $            | 51,267  |      |  | $    | 118,252 |      |  | $    | 122,024 |  |  | $ | 11,006 |  |  | $ | 30,719 | 

18



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

Except for any historical information contained herein, the matters
discussed in this Annual Report on Form 10-K contain certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to the Companys financial condition, results of
operations, cash flows, revenues, financing plans, business strategies and
market acceptance of its products. The words anticipate, believe,
estimate, expect, plan, intend, and similar expressions, are intended
to identify these forward-looking statements. These forward-looking statements
are found at various places throughout thisAnnual Report. We caution you not
to place undue reliance on these forward-looking statements, which speak only
as of the date they were made. We do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Annual Report or to reflect the occurrence
of unanticipated events. Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to those discussed below under Risk
Factors and elsewhere in this Report.

The following discussion should be read together with our financial
statements and the related notes contained elsewhere in this Annual Report on
Form 10-K.

Overview

Proxim Corporation is the company created by the March 26, 2002 merger of
Proxim, Inc. and Western Multiplex Corporation. The
results for 2002 include the financial results of Western Multiplex
for the period from January 1, 2002 to December 31, 2002, the results of the
former Proxim, Inc. for the period from March 27, 2002 to December 31, 2002,
and the results of the 802.11 WLAN systems business of Agere for the period
from August 6, 2002 to December 31, 2002, in accordance with generally accepted
accounting principles for accounting for business combinations. Western
Multiplex was founded in 1979 in Sunnyvale, California as a vendor of radio
components and related services. In 1992, Western Multiplex changed its
strategy, becoming a designer and manufacturer of broadband wireless systems
and launched our Lynx broadband wireless products. These point-to-point systems
are primarily used by wireless operators to connect their base stations to
other base stations and to existing wire line networks. In 1999, Western
Multiplex introduced its Tsunami point-to-point broadband wireless systems,
which primarily enable service providers, businesses and other enterprises to
expand or establish private networks by bridging Internet traffic among
multiple facilities. Based on Western Multiplexs core technologies and the
technology acquired through its purchase of WirelessHome Corporation in March
2001, Western Multiplex has developed point-to-multipoint systems that enable
service providers, businesses and other enterprises to connect multiple
facilities within a geographic area to a central hub. Western Multiplex began
shipping its first generation of these products at the end of the fourth
quarter of 2001. In March 2002, Western Multiplex merged with Proxim, Inc.
located in Sunnyvale, California which designs, manufactures and markets high
performance WLAN and building-to-building network products based on RF
technology and changed the Western Multiplex name to Proxim Corporation. In
April 2002, we acquired nBand Communications Inc., a start-up developer of next
generation advanced application specific integrated circuits, or ASICs
technology.

On August 5, 2002, we completed our acquisition of the 802.11 WLAN systems
business of Agere Systems, including its ORiNOCO product line, for $65 million
in cash. To finance the acquisition, Warburg Pincus Private Equity VIII, L.P.,
Broadview Capital Partners L.P. and affiliated entities agreed to collectively
invest $75 million in the Company. These investors received 1,640,000 shares of
redeemable convertible Series A preferred stock (Preferred Stock) in the
amount of approximately $41 million, with a conversion price of approximately
$3.06 per share, and warrants to purchase approximately 6.7 million shares of
common stock valued at $12.3 million. The value of the warrants was recorded as
a reduction of the Preferred Stock carrying value and recorded as additional
paid-in capital. A deemed preferred stock dividend representing the beneficial
conversion feature of the Preferred Stock of $2.7 million was reflected in the
determination of the loss attributable to common stockholders. The investors
were also issued $34 million of convertible notes. Upon the
receipt of approval of our stockholders at a special meeting held on October 8,
2002, the notes issued to these investors were converted into 1,360,000 shares
of Preferred Stock and warrants to purchase approximately 5.6 million shares of
common stock valued at $1.6 million. The warrants were recorded as a reduction
of the Preferred Stock carrying value and recorded as additional paid-in
capital in the quarter ended December 31, 2002. In total, the investors were
granted warrants to acquire 12,271,345 shares of common stock for approximately
$3.06 per share valued at $14.0 million. The Preferred Stock and warrants
issued to the investors represent approximately 25% of our outstanding common
stock on an as-converted and as-exercised basis including dividends. In
addition, in connection with the transaction, we entered into a patent
cross-license agreement and settled all outstanding patent-related litigation
with Agere, and have entered into a three-year strategic supply agreement,
pursuant to which Agere will provide 802.11 chips, modules and cards to us at
specified prices.

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The financial statements include the results of acquired subsidiaries from
their respective dates of acquisition.

Revenue.We generate revenue primarily from the sale of our Lynx and
Tsunami systems for our WWAN product line, and the sale of 802.11a standards
based products, acquired in the Proxim, Inc. acquisition, and ORiNOCO products
acquired from Agere, for our WLAN product line. We introduced the Tsunami
products during the fourth quarter of 1999. While our Tsunami products and Lynx
products have similar pricing for comparable models, our Lynx product line
contributes the largest part of our revenue. We began selling our Tsunami
point-to-multipoint systems in 2001. We also generate a small percentage of our
revenue from the sale of services and parts and rentals of our systems. We sell
worldwide to service providers, businesses and other enterprises directly
through our sales force and indirectly through distributors, value-added
resellers and system integrators. Shipments to certain distributors are made
under terms allowing certain rights of return, protection against subsequent
price declines on our products held by our distributors and co-op marketing
programs.

Effective June 29, 2002, we began to recognize sales of our WWAN products
to distributors with rights of return upon shipment by the distributors to the
end user customer. Formerly, we recognized revenue for sales of WWAN products
to distributors with rights of return upon shipment to the distributor and
provided reserves for the estimated amount of product returns. The combination
of the changes resulting from the acquisition of the Agere Systems
802.11 WLAN business and the
adoption of one uniform method is consistent with our plans to sell bundled and
integrated WLAN and WWAN products. This change in accounting methodology was
treated as a change in estimate, and was made on a prospective basis starting
in the third quarter of 2002. Revenue from services, such as pre-installation
diagnostic testing and product repair services, is recognized over the period
for which the services are performed, which is typically less than one month.
Revenue from product rentals is recognized over the period of the rental.

Revenue consists of product revenues, reduced by estimated sales returns
and allowances. Provisions for estimated sales returns and allowances, which
are based on historical trends, contractual terms and other available
information, are recorded at the time revenue is recognized.

Our sales force focuses on key strategic accounts and also develops
relationships with end users that purchase through distributors and value-added
resellers. Distributors sell our products to end users, and value-added
resellers not only sell our products to end users, but also assist end users in
network design, installation and testing. We market our products through
strategic relationships we have with systems integrators, which design and
install networks that incorporate our systems. Additionally, we sell directly
to OEM customers. We sell both design-in products for integration into their
wireless computing platforms and branded products as private label models. Any
significant decline in direct sales to end users or in sales to our
distributors or value-added resellers, or the loss of any of our distributors,
value-added resellers or OEM customers, could materially adversely affect our
revenue.

During 2002, we sold our products to approximately 170 customers in 45
countries. In 2002, international sales accounted for approximately 38% of our
total revenue. We expect international sales to vary but remain significant as
a percentage of overall sales in the future. Currently, all of our sales are
denominated in U.S. dollars. Accordingly, we are not directly exposed to
currency exchange risks other than the risk that exchange rate fluctuations may
make our products more expensive for customers outside the United States and,
as a result, could decrease international sales. In addition, we face risks
inherent in conducting global business. These risks, which are more fully
described herein, include extended collection time for receivables, reduced
ability to enforce obligations and reduced protection for our intellectual
property.

As we have increased sales through our distributors and value-added
resellers, we have experienced a decline in the average selling prices of our
products. This is because the prices of the products that we sell indirectly
through distributors and value-added resellers are typically lower than the
prices of the products we sell directly through our sales force to end users.
We have also lowered our prices for older products as we introduce additional
products that provide faster data rates. These newer products have higher
prices than our older products. Our international sales also have lower average
selling prices when compared to our United States and Canadian selling prices.
This is primarily due to our higher reliance on distributors and value-added
resellers for international sales, and also because our lower speed products,
with significantly lower prices, are being sold in larger quantities
internationally than domestically. If indirect sales and sales in our
international markets increase, we would expect that our average selling prices
to further decline.

Cost of revenue.Cost of revenue consists primarily of outsourced
manufacturing costs, component costs, labor and overhead costs, costs of
acquiring finished parts from original equipment manufacturers and original
design manufacturers, customer service and warranty costs. We currently
outsource the majority of our manufacturing and supply chain management to a
limited number of independent contract manufacturers, who obtain components for
our products from suppliers. Accordingly, a significant portion of our cost of
revenue consists of payments to these contract manufacturers and component
suppliers. The remainder of our cost of revenue

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is related to our in-house manufacturing operations, which consist
primarily of quality control, final assembly, testing and product integration.
We expect to realize lower per unit product costs as we continue to outsource
more of our in-house manufacturing as well as have our products produced at
lower cost off-shore locations. However, we cannot assure you when or if cost
reductions will occur. The failure to achieve these cost reductions could
materially adversely affect our gross margins and operating results.

Gross profit.Our gross profit is affected by both the average selling
prices of our systems and our cost of revenue. Historically, decreases in our
average selling prices have generally been offset by reductions in our per unit
product cost. We cannot assure you, however, that we will achieve any
reductions in per unit product cost in the future or that any reductions will
offset a reduction in our average selling prices. Gross profit will be affected
by a variety of factors, including manufacturing efficiencies, the degree to
which our manufacturing is outsourced, the location of manufacturing, cost
reduced product designs, future manufacturing licenses of our products, product
mix, competitive pricing pressures, the degree of customization of individual
products required by OEM customers and component and assembly costs.

Research and development.Research and development expenses consist
primarily of salaries and related personnel expenses, prototype development
expenses, consultant fees and allocated overhead related to the design,
development, testing and enhancement of our products and underlying
technologies. We expense all research and development expenses as incurred. We
expect to decrease our research and development expenses as a percentage of
revenue during the next two quarters in order to reduce our breakeven point.

Selling, general and administrative.Selling, general and administrative
expenses consist primarily of salaries, commissions, product marketing, sales
support functions, advertising, trade show and other promotional expenses and
allocated overhead. We intend to decrease our selling, general and
administrative expenditures as a percentage of revenue during the next two
quarters in order to reduce our breakeven point.

Stock option programs.We have implemented stock option programs for
employees and members of our board of directors to attract and retain highly
skilled and qualified business and technical personnel. Prior to our initial
public offering, we recorded deferred stock compensation on certain options for
the difference between the exercise price and the deemed fair value of our
common stock on the date the stock options were granted. This amount is
included as a reduction of stockholders equity and is being amortized by
charges to operations over the vesting period. The amortization expense relates
to options awarded to employees in all operating expense categories. As of
December 31, 2002, all deferred stock compensation was amortized.

Critical Accounting Policies, Judgments and Estimates

Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to customer programs and incentives, product returns, bad debts,
inventories, equity investments, goodwill, intangible assets, income taxes,
financing operations, warranty obligations, excess component order cancellation
costs, restructuring, long-term service contracts, pensions and other
post-retirement benefits, and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements.

Revenue Recognition

Effective June 29, 2002, we began to recognize sales of our WWAN products
to distributors with rights of return upon shipment by the distributors to the
end user customer. Formerly, we recognized revenue for sales of WWAN products
to distributors with rights of return upon shipment to the distributor and
provide reserves for the estimated amount of product returns. The combination
of the changes resulting from the then proposed acquisition of the
Agere Systems 802.11 WLAN business and the adoption of one uniform method was consistent with our plans
to sell bundled and integrated WLAN and WWAN products. This change in
accounting methodology was treated as a change in estimate, and was made on a
prospective basis starting in the third quarter of 2002. Deferred gross profit
on these distributors sales at December 31, 2002 was $5.9 million. In addition
to the deferral of product revenue identified below, we

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reported accounts receivable net of deferred revenue and carried the value
of the related products as consigned inventory. As of December 31, 2002,
accounts receivable was reduced by $14.7 million to $30.5 million and we
recorded consigned inventory of $8.8 million which increased total inventory to
$36.8 million.

Allowance for Doubtful Accounts, Returns and Discounts

We record estimated reductions to revenue for sales return, customer
programs and incentive offerings including special pricing agreements, price
protection and promotions. If market conditions were to decline, we may take
actions to increase customer incentive offerings possibly resulting in an
incremental reduction of revenue at the time the incentive is offered.

We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

Warranty Provision

We provide for the estimated cost of product warranties at the time
revenue is recognized. 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 and material usage and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage or service
delivery costs differ from our estimates, revisions to the estimated warranty
liability would be required.

Valuation of Inventories

We write down our inventory for estimated excess and obsolete or
unmarketable inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs, including adverse
purchase order commitments, may be required.

Valuation of Minority Interest Investments

We hold minority interests in companies having operations or technology in
areas within our strategic focus, one of which is publicly traded and has
highly volatile share prices. We record an investment impairment charge when we
believe an investment has experienced a decline in value that is other than
temporary. Future adverse changes in market conditions or poor operating
results of underlying investments could result in losses or an inability to
recover the carrying value of the investments that may not be reflected in an
investments current carrying value, thereby possibly requiring an impairment
charge in the future.

Valuation of Deferred Tax Assets

We record a valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While we have considered
future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event we were to
determine that we would be able to realize our deferred tax assets in the
future in excess

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of our recorded amount, an adjustment to the deferred tax asset would
increase income in the period such determination was made. Likewise, should we
determine that we would not be able to realize all or part of our net deferred
tax asset in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.

Restructuring Costs and Impairment of Goodwill and Intangible Assets

In response to changes in industry and market conditions, we may be
required to strategically realign our resources and consider restructuring,
disposing of, or otherwise, exiting businesses. Any decision to limit
investment in or to dispose of or otherwise, exit businesses may result in the
recording of special charges, such as inventory and technology related
write-offs and workforce reduction costs, charges relating to consolidation of
excess facilities, or claims from third parties who were resellers or users of
discontinued products. Estimates relating to the liabilities for excess
facilities are affected by changes in real estate market conditions. Estimates
with respect to the useful life or ultimate recoverability of our carrying
basis of assets, including purchased intangible assets, could change as a
result of such assessments and decisions. Additionally, we are required to
perform goodwill impairment tests on an annual basis and between annual tests
in certain circumstances. There can be no assurance that future goodwill
impairment tests will not result in a charge to earnings.

Patent Litigation and Infringement Costs

We have
been involved in litigation in the normal course of business. The
results of any litigation matter are inherently uncertain. In the event of any
adverse decision in litigation with third parties that was pending as of
December 31, 2002 and those that could arise in the future with respect to patents,
other intellectual property rights relevant to our products and defective
products, we could be required to pay damages and other expenses, to cease the
manufacture, use and sale of infringing products, to expand significant
resources to develop non-infringing technology, or to obtain licenses to the
infringing technology. These charges may occur in any particular quarter
resulting in variability in our operating results.

Results of Operations

The following table provides operations data as a percentage of revenue
for the periods presented:

|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |      |     |      | 
|-------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------- | ------------------------ | ---- | ----------------------- | ----- | ----- | ---- | ----- | ---- | ----- | ---- | --- | ---- | 
|                                                               |                                                |                                                       |                          |      | Year Ended December 31,
|                                                               |                                                |                                                       |                          |      |                        
|                                                               |                                                |                                                       |                          |      | 2002                    |       | 2001  |      | 2000 
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |      
|Revenue, net                                                   |                                                |                                                       | 100.0                    | %    |                         |       | 100.0 | %    |       |      | 100.0 | %   
|Cost of revenue                                                |                                                |                                                       | 57.9                     |      |                         |       | 52.9  |      |       |      | 47.8  |     
|Provision for excess and obsolete inventory                    |                                                |                                                       | 8.7                      |      |                         |       |      |      |       |      |      |     
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|Gross profit                                                   |                                                |                                                       | 33.4                     |      |                         |       | 47.1  |      |       |      | 52.2  |     
|Operating expenses:                                            |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|                                                               | Research and development                       |                                                       |                          | 20.2 |                         |       |       | 18.1 |       |      |       | 11.7 |    
|                                                               | Selling, general and administrative            |                                                       |                          | 34.2 |                         |       |       | 36.5 |       |      |       | 21.3 |    
|                                                               | Amortization of goodwill and intangible assets |                                                       |                          | 8.6  |                         |       |       | 5.1  |       |      |       | 2.3  |    
|                                                               | Amortization of deferred stock compensation    |                                                       |                          | 0.6  |                         |       |       | 4.9  |       |      |       | 3.9  |    
|                                                               | Impairment of goodwill and intangible assets   |                                                       |                          | 89.3 |                         |       |       | 4.1  |       |      |       |     |    
|                                                               | Impairment
of loan to officer                  |                                                       |                          | 3.1  |                         |       |       |     |       |      |       |     |    
|                                                               | Restructuring charges                          |                                                       |                          | 29.8 |                         |       |       | 1.7  |       |      |       |     |    
|                                                               | In-process research and development            |                                                       |                          | 11.1 |                         |       |       | 6.1  |       |      |       |     |    
|                                                               | Merger costs                                   |                                                       |                          |     |                         |       |       |     |       |      |       | 0.2  |    
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|                                                               |                                                |                                                       | Total operating expenses |      |                         | 196.9 |       |      |       | 76.5 |       |      |     | 39.4 | 
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|Income (loss) from operations                                  |                                                |                                                       | (163.5                   | )    |                         |       | (29.4 | )    |       |      | 12.8  |     
|Interest income (expense), net                                 |                                                |                                                       | (0.1                     | )    |                         |       | 1.3   |      |       |      |      |     
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|Income (loss) before income taxes                              |                                                |                                                       | (163.6                   | )    |                         |       | (28.1 | )    |       |      | 12.8  |     
|Income tax provision (benefit)                                 |                                                |                                                       | 2.2                      |      |                         |       | (3.9  | )    |       |      | 6.4   |     
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|Income (loss) before extraordinary item                        |                                                |                                                       | (165.8                   | )    |                         |       | (24.2 | )    |       |      | 6.4   |     
|Loss on early extinguishment of debt net of income tax benefit |                                                |                                                       |                         |      |                         |       |      |      |       |      | 0.4   |     
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|Net income (loss)                                              |                                                |                                                       | (165.8                   | )    |                         |       | (24.2 | )    |       |      | 6.0   |     
|Deemed Series A Preferred Stock dividend                       |                                                |                                                       | (1.9                     | )    |                         |       |      |      |       |      |      |     
|Accretion
of Series A Preferred Stock redemption obligations   |                                                |                                                       | (1.3                     | )    |                         |       |      |      |       |      |      |     
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     
|                                                               |                                                | Net income (loss) attributable to common stockholders |                          |      | (169.0                  | )%    |       |      | (24.2 | )%   |       |      | 6.0 | %   
|                                                               |                                                |                                                       |                          |      |                         |       |       |      |       |      |       |     

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Comparison of Years Ended December 31, 2001 and 2002

Revenue, net.We classify our products into two product lines: Wireless
Wide Area Network, or WWAN, product line, and; Wireless Local Area Network, or
WLAN, product line. The WWAN product line includes point-to-point Lynx and
Tsunami products and point-to-multipoint Tsunami products. The WLAN product
line includes 802.11a and ORiNOCO products. Prior to the March 26, 2002 merger
with Proxim, Inc., we did not have a WLAN product line. Historical
WLAN revenue prior to March 26, 2002 of the former Proxim, Inc. and prior to
August 5, 2002 for the ORiNOCO products acquired from Agere are not reported in
the table below. Revenue information by product line is as follows (in
thousands):

|             |               |      |        |         |  |   |         |         | 
|------------ | ------------- | ---- | ------ | ------- |  | - | ------- | ------- | 
|Product Line |               | 2002 |        | 2001   
|             |               |      |        |        
|WWAN         |               | $    | 83,799 |         |  | $ | 105,730 |        
|WLAN         |               |      | 60,861 |         |  |   |        |        
|             |               |      |        |         |  |   |         |        
|             | Total revenue |      | $      | 144,660 |  |   | $       | 105,730 | 
|             |               |      |        |         |  |   |         |        

For the year ended December 31, 2001, three distributors, Comstor, Somera
Communications, Inc. and Tessco Technologies accounted for 29.4%, 11.4% and
10.5%, respectively, of total revenue. For the year ended December 31, 2002,
Comstor accounted for 23.0% of total revenue.

Revenue increased 36.9% from $105.7 million in 2001 to $144.7 million in
2002. Revenue increased primarily due to the contribution of sales of WLAN
products totaling $60.9 million acquired in both the merger with Proxim, Inc.
on March 26, 2002 and the acquisition of the ORiNOCO product line from Agere on
August 5, 2002. This increase was partially offset by a decrease in WWAN
product sales. The decrease in WWAN product sales was attributable, in part,
to the adoption of a uniform sell-through revenue recognition methodology for
products that are sold through distribution channels with rights of return.
This accounting methodology change was implemented on a prospective basis
effective June 29, 2002, and resulted in the deferral of $14.7 million of
revenue from WWAN products shipped to distributors as of
December 31, 2002, that
were not sold through to end customers.

Cost of revenue.Cost of revenue increased 49.7% from $55.9 million in
2001 to $83.7 million in 2002. As a percentage of revenue, cost of revenue
increased from 52.9% in 2001 to 57.8% in 2002. The increase in cost of revenue
was primarily attributable to increased revenue. The increase in cost of
revenue as a percentage of revenue was primarily attributable to the
contribution of sales from WLAN products acquired in both the merger with
Proxim, Inc. and the acquisition of the 802.11 WLAN systems business from Agere
Systems. WLAN products generally carry lower gross margins as a percentage of
revenue than WWAN products.

Provision for Excess and Obsolete Inventory,We recorded a provision for
excess and obsolete inventory, including purchase commitments, totaling $12.7
million during 2002 as part of our restructuring charge, of which $7.7 million
related to excess and obsolete inventory and $5.0 million related to purchase
commitments. To mitigate the component supply constraints that have existed in
the past, we built inventory levels for certain components with long
lead times and entered into longer-term commitments for certain components. The
excess inventory charges were due to the following factors:



| |  |  | A sudden and significant decrease in demand for certain Lynx and Tsunami license-exempt point-to-point products;                                                                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Notification from customers that they would not be ordering as much as they had previously indicated;                                                                             
|
| |  |  | Managements strategy to discontinue the Lynx and Tsunami
point-to-point licensed products in order to concentrate on the
license-exempt products; and                            
|
| |  |  | Managements strategy to discontinue certain Lynx and Tsunami
license-exempt products in order to concentrate on selling next
generation Lynx and Tsunami license-exempt products.

Due to
these factors, inventory levels exceeded the our requirements based
on current 12-month sales forecasts. The additional excess and obsolete
inventory charge was calculated based on the inventory levels in excess of the
estimated 12-month demand for each specific product family. We do not currently
anticipate that the excess inventory subject to this reserve will be used at a
later date based on our current 12-month demand forecast. We use a 12-month
demand forecast because the wireless communications industry is characterized
by rapid technological changes such that if we have not sold a product
after a 12-month period it is unlikely that

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the product will be sold. The following is a summary of the movements in
the reserve for excess and obsolete inventory during 2002:

|                                                     |  |   |         |  
|---------------------------------------------------- |  | - | ------- | -
|Balance as of December 31, 2001                      |  | $ | 3,021   |  
|Additional reserve for excess and obsolete inventory |  |   | 7,686   |  
|Balance acquired with Proxim, Inc.                   |  |   | 45,114  |  
|Inventory scrapped                                   |  |   | (22,976 | )
|                                                     |  |   |         |  
|Balance as of December 31, 2002                      |  | $ | 32,845  |  
|                                                     |  |   |         |  

Research and development.Research and development expenses increased
52.6% from $19.1 million in 2001 to $29.2 million in 2002. The increase in
research and development expense was primarily attributable to the cost of
increased personnel, including employees added as a result of both the Proxim,
Inc. merger and the acquisition of the 802.11 WLAN systems business of Agere,
prototype spending for the development of new products and enhancements to
existing products. As a percentage of revenue, research and development
expenses increased from 18.1% in 2001 to 20.2% in 2002 primarily due to
increased personnel expenses.

Selling, general and administrative.Selling, general and administrative
expenses increased 28.2% from $38.6 million in 2001 to $49.5 million in 2002.
The increase in selling, general and administrative expense was primarily
attributable to increases in sales and marketing personnel expenses, including
employees added as a result of both the Proxim, Inc. merger and the acquisition
of the 802.11 WLAN systems business of Agere, advertising, tradeshow, and
public relations expenses. As a percentage of revenue, selling, general and
administrative expenses decreased from 36.5% in 2001 to 34.2% in 2002. The
percentage decrease was primarily due to efforts to control costs, including
the reductions of headcount and discretionary spending.

Amortization of goodwill and other intangible assets.Amortization of
goodwill and other intangible assets increased from $5.4 million in 2001 to
$12.5 million in 2002. Amortization of goodwill and other intangible assets
increased primarily due to the increased intangible assets from both the merger
with Proxim, Inc. on March 26, 2002 and the acquisition of the 802.11 WLAN
systems business of Agere offset by the cessation of amortization of goodwill
arose from acquisitions completed prior to June 30, 2001 subsequent to the
adoption of SFAS No. 142 beginning on January 1, 2002.

Amortization of deferred stock compensation.Amortization of deferred
stock compensation decreased from $5.2 million in 2001 to $0.9 million in 2002.
Amortization of deferred stock compensation decreased primarily due to the
issuance of stock options at fair value since the completion of our initial
public offering in 2000.

Impairment of goodwill and intangible assets.In December 2002, due to
the recent significant decline in forecasted revenue and the cash flows
therefrom, we made a complete assessment of the carrying value of all goodwill
and other intangibles assets in accordance with SFAS No. 142.
First, we
determined the fair value of its equity to be less than the carrying value of
goodwill. As such, an impairment charge was applicable in accordance with SFAS
No. 142 as of December 31, 2002. Then we quantified the goodwill impairment as
the amount by which the carrying amount of the asset exceeded the estimated
fair value of the asset. The carrying value of goodwill totaling $138.8
million as of December 31, 2002 exceeded the estimated fair value of $9.7
million and, accordingly, we took a charge for the impairment of goodwill of $129.1
million.

Impairment
of loan to officer.Prior to 2002, Proxim, Inc. had guaranteed up to $5
million of obligations of an officer of the Company, with respect
to a margin loan with an investment bank. We assumed the guaranty in
the merger with Proxim, Inc. and on October 15, 2002, the investment
bank called our guaranty of $5 million. We continue to seek repayment from the
officer under a Reimbursement and Security Agreement. In this regard, in
January 2003, the officer made a cash payment of $0.5 million to
us with the proceeds of a second mortgage on his home. We
assessed the recoverability of the remaining balance of the loan with respect
to the officers current financial position and recorded an impairment charge of
$4.5 million in the fourth quarter of 2002. This impairment charge does not
constitute forgiveness of the officers indebtedness to us. Future payments by
the officer under the Reimbursement and Security Agreement will be recorded as
income in the period cash is received.

Restructuring charges.During 2002, we recorded $43.2 million of
restructuring charges, including $35.4 million, $3.6 million, $2.3 million and
$1.9 million in the first, second, third and fourth quarters of 2002,
respectively, related to closure of certain facilities, discontinued product
lines and severance pay. The charges included $40.8 million of cash provisions,
which included severance of $7.4 million for 194 employees,
$33.1 million related to excess facilities and for
future lease commitments and exit costs related to the closure of four
facilities, $0.3 related to consulting fees. The charge also included $2.4
million of non-cash provisions related to fixed assets that will no longer be
used at the facilities.

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During 2001, we recorded $1.8 million of restructuring charges related to the
closure of our former Ubiquity operations and employee severance. The charges
included $1.6 million of cash provisions, which included severance of $1.4
million for 26 employees and $0.2 million for future lease commitments and exit
costs related to the Petaluma office facility. The charge also included $0.2
million of non-cash provisions primarily related to fixed assets and other
assets that will no longer be used at the facility.

The following table summarizes the restructuring activity in 2001 and 2002
(in thousands):

|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|---------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|                                   |  | Severances |        | Facilities |  | Other |        | Total
|                                   |  |            |        |            |  |       |        |      
|Balance as of December 31, 2000    |  | $          |       |            |  | $     |       |       |  | $ |       |   |  | $ |        |  
|Provision charged to operations    |  |            | 1,382  |            |  |       | 208    |       |  |   | 226    |   |  |   | 1,816   |  
|Charges utilized                   |  |            | (1,184 | )          |  |       | (156   | )     |  |   | (46    | ) |  |   | (1,386  | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2001    |  |            | 198    |            |  |       | 52     |       |  |   | 180    |   |  |   | 430     |  
|Reclassifications
among categories |  |            |       |            |  |       | 180    |       |  |   | (180   | ) |  |   |        |  
|Balance acquired with Proxim, Inc. |  |            |       |            |  |       | 1,066  |       |  |   |       |   |  |   | 1,066   |  
|Provision charged to operations    |  |            | 7,395  |            |  |       | 33,080 |       |  |   | 2,702  |   |  |   | 43,177  |  
|Charges utilized                   |  |            | (7,593 | )          |  |       | (3,928 | )     |  |   | (2,702 | ) |  |   | (14,223 | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2002    |  | $          |       |            |  | $     | 30,450 |       |  | $ |       |   |  | $ | 30,450  |  
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  

In-process research and development.Purchased in-process research and
development (IPR&D) consist primarily of acquired technology that has not
reached technological feasibility and had no alternative future use as of the
date of acquisition. See Note 5 to the consolidated financial statements for
additional information regarding the IPR&D projects.

The $16.1 million expensed to purchased in-process research and
development in 2002 related to next generation Enterprise Access Points, Radio
Backbone Systems, Broadband Gateways and Network Management products acquired
in the acquisition of Ageres 802.11 WLAN systems business, technology for next
generation ASICs acquired in the nBand acquisition and 802.11a and HomeRF 2.0
wireless networking products acquired related to the Proxim, Inc. merger.

The $6.4 million expensed to purchased in-process research and development
in 2001 related to the WirelessHome acquisition for point-to-multipoint
technology.

Merger costs.In the fourth quarter of 2000, we incurred $3.2 million of
merger costs in connection with the aborted acquisition of Adaptive Broadband
Corporation. Adaptive Broadband Corporation reimbursed us $3.0 million of those
costs. The additional $0.2 million in 2000 was recorded in operating expenses.
The additional $30,000 in the first quarter of 2001 represented additional
merger costs recorded in operating expenses.

Interest income (expense), net.Interest income (expense), net decreased
from income of $1.3 million in 2001 to expense of $85,000 in 2002. The increase
in interest expense is mainly attributable to interest on the convertible
promissory notes issued in August 2002 and decreased interest income due to
lower applicable return rates on cash balances.

Income tax provision (benefit).The income tax provision for 2002 was
primarily the result of establishing a full valuation allowance in the first
quarter of 2002 to offset deferred tax assets brought forward from December 31,
2001. In assessing our ability to realize deferred income tax assets, we
considered whether it is more likely than not that some or all of the deferred
tax assets will be realized. As a result of the losses incurred, there is
significant uncertainty, as to the realizability of the deferred tax assets.
Accordingly, the Company recorded a valuation allowance of approximately $11.3
million against our deferred tax assets in the year ended December 31, 2002.
Our income tax provision was ($4.1) million for the year ended December 31,
2001 as compared to an income tax provision of $3.2 million for the year ended
December 31, 2002. Our effective tax rates were (13.8%) for the year ended
December 31, 2001 and (1.3%) for the year ended December 31, 2002. The
effective rates in 2001 and 2002 were higher than federal statutory rate of 35%
plus the state tax rate of 6%, net of federal benefits, primarily due to the
increase in valuation allowance, expenses related to charges for goodwill
impairment, amortization of goodwill and intangible assets, purchased
in-process research and development and equity investments that were not
deductible for income tax purposes.

Comparison of Years Ended December 31, 2000 and 2001

Revenue, net.Revenue was $105.5 million for the year ended December 31,
2000 compared to $105.7 million for the year ended December 31, 2001. For the
year ended December 31, 2001, three distributors, Comstor, Somera
Communications, Inc. and Tessco Technologies accounted for 29.4%, 11.4% and
10.5%, respectively, of total revenue. For the year ended December 31, 2000,
Somera Communications, Inc. and Avant Telecoms, Inc., a value-added reseller,
accounted for 21.4% and 11.1%, respectively, of total revenue. In 1999, 2000,
and 2001 sales to all distributors, which had certain limited rights of return
of the companys products, accounted for approximately 23.1%, 39.5% and 69.8%
of net revenue. In addition, export sales, which were denominated in U.S.
dollars

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and consisted of domestic sales to customers in foreign countries accounted
for approximately 23.1%, 33.2% and 24.3% of net revenue in 1999, 2000 and 2001,
respectively.

Cost of revenue.Cost of revenue increased 10.7% from $50.5 million for
the year ended December 31, 2000 to $55.9 million for the year ended December
31, 2001. As a percentage of revenue, cost of revenue increased from 47.8% for
the year ended December 31, 2000 to 52.9% for the year ended December 31, 2001.
The increase in cost of revenue and the increase in cost of revenue as a
percentage of revenue from the year ended December 31, 2000 to the year ended
December 31, 2001 was primarily due to lower than expected increase in revenue
and production volume.

Research and development.Research and development expenses increased
54.4% from $12.4 million for the year ended December 31, 2000 to $19.1 million
for the year ended December 31, 2001. The increase in research and development
expenses was primarily attributable to the cost of increased personnel and
prototype spending for the development of new products and enhancements to
existing products. As a percentage of revenue, research and development
expenses increased from 11.7% for the year ended December 31, 2000 to 18.1% for
the year ended December 31, 2001.

Selling, general and administrative.Selling, general and administrative
expenses increased 71.3% from $22.5 million for the year ended December 31,
2000 to $38.6 million for the year ended December 31, 2001. The increase in
selling, general and administrative expenses was primarily attributable to
increased personnel in the international sales organization, advertising and
marketing programs, tradeshow, and public relations expenses. As a percentage
of revenue, selling, general and administrative expenses increased from 21.3%
for the year ended December 31, 2000 to 36.5% for the year ended December 31,
2001.

Amortization of goodwill and other intangible assets.Amortization of
goodwill and other intangible assets increased 128.4% from $2.4 million for the
year ended December 31, 2000 to $5.4 million for the year ended December 31,
2001. The increase in amortization was attributable to goodwill and other
intangible assets related to the WirelessHome acquisition in March 2001.

In July 2001, the Financial Accounting Standards Board issued SFAS No.s
141 and 142, Business Combinations and Goodwill and Other Intangibles,
respectively. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. Under SFAS No.
142, effective January 1, 2002, goodwill is no longer subject to amortization
over its estimated useful life. Rather, goodwill is subject to at least an
annual assessment for impairment, applying a fair-value based test.
Additionally, an acquired intangible asset should be separately recognized if
the benefit of the intangible asset is obtained through contractual or other
legal rights, or if the intangible asset can be sold, transferred, licensed,
rented, or exchanged, regardless of the acquirers intent to do so. As a result
of our adoption of SFAS 142, as of January 1, 2002, we no longer amortize
goodwill. Goodwill amortization for the year ended December 31, 2001 was
approximately $5.0 million.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
144 Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 addresses financial accounting and reporting for the long-lived assets to
be held and used, and disposed of. The statement will be effective for
financial statements issued for fiscal years beginning after December 15, 2001.
Although we currently do not expect the adoption of SFAS No. 144 to have a
material impact on our financial statements, we will continue to assess any
impairment of our long lived assets.

Amortization of deferred stock compensation.Amortization of deferred
stock compensation increased 24.9% from $4.2 million for the year ended
December 31, 2000 to $5.2 million for the year ended December 31, 2001.
Amortization of deferred stock compensation for both periods includes the sale
of stock and issuance of options at prices deemed to be below fair market
value. Amortization of deferred stock compensation for the year ended December
31, 2001 also included $2.2 million of stock compensation expense recorded in
the fourth quarter in connection with the issuance of 558,950 shares to certain
individuals upon WirelessHome meeting certain development milestones.

Impairment of goodwill and intangible assets.We recorded $4.3 million of
impairment of goodwill related to our former Ubiquity operations during the
first quarter of 2001. The amount of the charge equaled the unamortized amount
of the goodwill as of the date of the closure of the Ubiquity operations, as no
future benefit was anticipated since WirelessHome had replaced Ubiquity as the
developer of our point-to-multipoint systems.

Restructuring charges.During the first and second quarter of 2001, we
recorded $1.2 million of restructuring charges related to the closure of our
former Ubiquity operations. The charges included $1.0 million of cash
provisions, which included severance of $0.8 million for 12 employees and $0.2
million for future lease commitments and exit costs related to the Petaluma
office facility. As of

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December 31, 2001, approximately $0.8 million of the $1.0 million of cash
provisions was incurred. The charge also included $0.2 million of non-cash
provisions primarily related to fixed assets and other assets that will no
longer be used at the facility.

In addition, during the second and third quarter of 2001, the Company
recorded $0.6 million associated with restructuring the operations at the
Companys headquarters, primarily related to employee severances.

The following table summarizes the restructuring activity in 2001 (in
thousands):

|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ---- | ----- |  | - | --- | - |  | - | ------ | -
|                                |  | Severances |        | Facilities |  | Other |      | Total
|                                |  |            |        |            |  |       |      |      
|Balance as of December 31, 2000 |  | $          |       |            |  | $     |     |       |  | $ |    |   |  | $ |       |  
|Provision charged to operations |  |            | 1,382  |            |  |       | 208  |       |  |   | 226 |   |  |   | 1,816  |  
|Charges utilized                |  |            | (1,184 | )          |  |       | (156 | )     |  |   | (46 | ) |  |   | (1,386 | )
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|Balance as of December 31, 2001 |  | $          | 198    |            |  | $     | 52   |       |  | $ | 180 |   |  | $ | 430    |  
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  

In-process research and development.At the time of the WirelessHome
acquisition in March 2001, the WirelessHome technology was in an early stage of
development, and the products technical feasibility had not yet been
demonstrated. Furthermore, the marketability of the potential future product
was unproven. As a result of WirelessHome meeting the development milestones in
accordance with the acquisition agreement, we allocated $6.4 million of the
final total purchase price to in-process research and development.

Merger costs.In the fourth quarter of 2000, we incurred $3.2 million of
merger costs in connection with the aborted acquisition of Adaptive Broadband
Corporation. Adaptive Broadband Corporation reimbursed us $3.0 million of those
costs. The additional $0.2 million in 2000 was recorded in operating expenses.
The additional $30,000 in the first quarter of 2001 represented additional
merger costs recorded in operating expenses.

Interest expense.Interest expense decreased from $1.5 million for the
year ended December 31, 2000 to $137,000 for the year ended December 31, 2001.
Interest expense in 2000 represented interest incurred on term loans and a
revolving credit line we entered into in November 1999 as part of the
recapitalization. Interest expense decreased, because we repaid all borrowings
outstanding under this debt in August 2000. Interest expense in 2001 represents
agency and commitment fees related to our unused $10 million revolving credit
facility.

Interest income.Interest income decreased from $1.7 million for the year
ended December 31, 2000 to $1.5 million for the year ended December 31, 2001.
The decrease in interest income was primarily due to the decrease in
investments.

Income tax provision (benefit).Our income tax provision was $6.8 million
for the year ended December 31, 2000 as compared to an income tax benefit of
$4.1 million for the year ended December 31, 2001. Our effective tax rates were
50.4% for the year ended December 31, 2000 and (13.8%) for the year ended
December 31, 2001. The effective rates in 2000 and 2001 were higher than
federal statutory rate of 35% plus the state tax rate of 6%, net of federal
benefits, primarily due to expenses related to charges for goodwill impairment,
amortization of goodwill and intangible assets, purchased in-process research
and development and equity investments that were not deductible for income tax
purposes.

Liquidity and Capital Resources

Cash and cash equivalents decreased from $16.6 million at December 31,
2001 to $16.5 million at December 31, 2002. Cash and cash equivalents decreased
by $14.5 million from $31.1 million at December 31, 2000 to $16.5 million at
December 31, 2001.

Net cash
used in operating activities was $27.5 million for the year ended
December 31, 2002, primarily due to the net loss after the effect of non-cash
charges, an increase in inventory and other assets and a decrease in accrued
liabilities partially offset by a decrease in accounts receivable and an
increase in accounts payable. Net cash used in operating activities was $12.0
million for the year ended December 31, 2001, primarily due to the net loss
after the effect of non-cash charges, an increase in accounts receivable and
inventory and a decrease in account payable and accrued liabilities, partially
offset by an increase in other assets. Net cash used in operating activities
was $13.1 million for the year ended December 31, 2000, primarily due to an
increase in accounts receivable, inventory and other assets, partially offset
by net income after the effect of non-cash charges and an increase in account
payable and accrued liabilities.

Net cash used in investing activities was $48.0 million for the year ended
December 31, 2002, due to $51.5 million in cash used in

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the merger with Proxim, Inc., the acquisition of the 802.11 WLAN systems
business of Agere and the nBand acquisition and by $3.6 million in capital
spending, partially offset by $7.0 million in net proceeds from the sale of
investment securities. Net cash used in investing activities was $2.6 million
for the year ended December 31, 2001 due to capital spending of $4.8 million
and $12.7 million of spending associated with the acquisition of WirelessHome,
partially offset by the net proceeds from the sale of investment securities of
$14.9 million. Net cash used in investing activities was $27.4 million for the
year ended December 31, 2000 due to capital spending of $3.8 million, $23.6
million in purchases of investment securities, and $1.5 million in restricted
cash, offset by $1.5 million in proceeds from sale of investment securities.

Net cash
provided by financing activities was $75.4 million for the year
ended December 31, 2002 due to proceeds from the issuance of Series A preferred
stock, convertible promissory notes and the issuance of common stock as a
result of the exercise of employee stock options and employee stock purchase
plan purchases partially offset by purchases of treasury stock related to
employee stock forward sale agreements. Net cash provided by financing
activities was $29,000 for the year ended December 31, 2001 due to issuance of
common stock as a result of the exercise of employee stock options and the
employee stock purchase plan purchases offset by repayment of long-term debt
and by purchases of treasury stock. Net cash provided by financing activities
was $69.7 million for the year ended December 31, 2000 due to $95.2 million in
net proceeds from issuance of shares, partially offset by $22.0 million
repayment of long-term debt, $2.5 million in net borrowings on line of credit,
and $1.1 million in issuances of stock subscription loans to employees.

We occupy our facilities under several non-cancelable operating lease
agreements expiring at various dates through November 2010, and require payment
of property taxes, insurance, maintenance and utilities. Future payments under
contractual obligations as of December 31, 2002, were as follows (in
thousands):

|                                       |  |                        |         |           |  |       |        |       |  |        |        |  |  |   |       |  |  |   |         | 
|-------------------------------------- |  | ---------------------- | ------- | --------- |  | ----- | ------ | ----- |  | ------ | ------ |  |  | - | ----- |  |  | - | ------- | 
|                                       |  | Payments due by period
|                                       |  |                       
|                                       |  | Total amounts          |         | Less than |  | 1-3   |        | 4-5   |  | Over 5
|                                       |  | Committed              |         | 1 year    |  | years |        | years |  | years 
|                                       |  |                        |         |           |  |       |        |       |  |       
|Operating leases                       |  | $                      | 65,818  |           |  | $     | 9,380  |       |  | $      | 10,051 |  |  | $ | 9,938 |  |  | $ | 36,449  | 
|Purchase order commitments             |  |                        | 1,509   |           |  |       | 1,509  |       |  |        |       |  |  |   |      |  |  |   |        | 
|Redemption of Series A
Preferred Stock |  |                        | 106,899 |           |  |       |       |       |  |        |       |  |  |   |      |  |  |   | 106,899 | 
|                                       |  |                        |         |           |  |       |        |       |  |        |        |  |  |   |       |  |  |   |         | 
|                                       |  | $                      | 174,226 |           |  | $     | 10,889 |       |  | $      | 10,051 |  |  | $ | 9,938 |  |  | $ | 143,348 | 
|                                       |  |                        |         |           |  |       |        |       |  |        |        |  |  |   |       |  |  |   |         | 

For the year ended December 31, 2002, we recorded a restructuring charge
related to the committed future lease payments for closed facilities, net of
estimated future sublease receipts of $34.3 million was included in the above
disclosures. As of December 31, 2002, we had unconditional purchase order
commitments of $1.5 million for excess and obsolete inventory, which were
included as other current liabilities.

We are required to redeem all outstanding shares of Series A Preferred
Stock for cash in August 2007 if not previously converted into Common
Stock.

In December 2002, we entered into a secured credit facility, and
subsequently amended the credit facility in March 2003. Under the secured
credit facility we can borrow up to $20 million pursuant to a revolving loan
which will mature on April 1, 2004. The amount that we may borrow under the
secured credit facility is determined by a borrowing base equal to 80% of
eligible accounts receivable from account debtors who are not distributors plus
50% of eligible accounts receivable from account debtors who are distributors.
If the outstanding principal amount of the loan exceeds our borrowing base from
time to time, we will be required to immediately pay to the lender such excess.
We are required to comply with financial covenants that limit our maximum
quarterly adjusted net loss and require that we maintain unrestricted cash
balances on deposit at the lender in an amount not less than the outstanding
principal balance under the credit facility plus $7.5 million until December
31, 2003, increasing to $10 million beginning January 1, 2004. If we fail to
comply with these financial covenants, the lender will be entitled to assume
collection of our accounts receivable and we will be required to meet a minimum
tangible net worth requirement and certain other terms of the facility will
change. Obligations under the secured credit facility are secured by a
security interest on substantially all of the assets of Proxim, except for
intellectual property. If we breach the financial covenants, obligations under
the secured credit facility will also be secured by a security interest on our
intellectual property.

The
secured credit facility requires the consent of our lender in order to incur
debt, grant liens, make acquisitions or merge, make certain restricted payments
and sell assets. The events of default under the secured credit facility
include the failure to pay amounts due, including principal and interest,
within three days after it becomes due, failure to observe or perform covenants
(subject to grace periods in certain cases), bankruptcy and insolvency events,
defaults under certain of our other obligations and the occurrence of a
material adverse change in our business.

Proxim is seeking to renegotiate a material lease on a building in
Sunnyvale, California that is in excess of the requirements of the business for
the foreseeable future. This building was vacated in July 2002, and the net
expected lease costs were included the restructuring charge recorded in the
second quarter of 2002, totaling over $29 million through the term of the lease
in 2010, net of expected sublease proceeds. The rent rates of this lease are
substantially greater than the current local market lease rates and this unused
space represents a negative cash flow of approximately $800,000 per quarter.
The Company has not been able to sublease the building since it was vacated in
July 2002.

To date, the building owner has not been responsive to our requests to
renegotiate the lease. Since November 2002, we have ceased making direct lease
payments and the building owner has been utilizing our cash security deposits
to cover the monthly payments. The building owner could elect to stop using
our security deposits for this purpose at any time, and the lease further
obligates us to replenish the security deposits. These deposits, supplemented
by a letter of credit, however, could cover lease rent payments until December
2003. The building owner also has the option to terminate the remaining rent
under the lease and sue us for the net present value of the lease less the
present value of the amount for which we show the building owner could have
leased the building to another party, plus the building owners releasing
costs. The building owner has notified us of our defaults, but has not elected
to terminate the lease at this time. Instead, the building owner has
threatened legal action to force us to directly pay the monthly rent since
November, as well as interest and penalties. Accordingly, we have an opportunity to cure our breach by restoring the
security deposits as required by the lease, paying interest and
penalties, and remaining current on future rent obligations under the
lease. In the event that the building
owner were to terminate the lease and sue us for breach, we would be in breach
of the covenants of our Bank Line of Credit, and our borrowing rights could be
limited or terminated. In this event, we would not have enough cash available
to meet the potential damages sought under the lease, and we could be required
to seek protection from the bankruptcy courts. At this time, we cannot
determine whether the building owner is willing to renegotiate the current
lease or will pursue remedies through the courts.

We have taken steps to reduce our expenses from operations by decreasing
research and development and general and administrative expenses in order to
begin generating cash flow from operations in the first quarter of 2003. These
steps were taken in October 2002, and we recorded approximately $1.9 million of
restructuring charges related primarily to severance payments in the fourth
quarter of 2002. We also reduced the amount of consignment inventories held by
distributors by reducing manufacturing volumes in the fourth quarter of 2002
and expect to reduce the amount of consignment inventories in the first quarter
of 2003 below the expected sell through of products during that periods.

We believe that our current available cash and investments combined with
our available borrowings will be sufficient to finance our working capital and
capital expenditure requirements for at least the next 12 months. Our
management intends to invest any cash in excess of current operating
requirements in interest-bearing investment-grade securities. Our future
capital requirements will depend upon many factors, including management of
working capital, the success of marketing, sales and distribution efforts, the
timing of research and product development efforts and expansion of our
marketing efforts.

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There can be no assurance that additional capital beyond the amounts
currently forecasted by us will not be required nor that any such required
additional capital will be available on reasonable terms, if at all, at such
time or times as required by us. We may need to raise additional funds if our
estimates change or prove inaccurate or in order for us to take advantage of
unanticipated opportunities or to strengthen our financial position. Our
ability to raise funds may be adversely affected by a number of factors
relating to Proxim, as well as factors beyond our control, including the
continued weakness of the wireless communications industry, volatility and
uncertainty in the capital markets, our ability to remain listed on
the Nasdaq National Market, our ability to pay obligations as they
become due, as well as increased market uncertainty
following the terrorist attacks of September 11, 2001, the ongoing U.S. war on
terrorism and the war with Iraq. There can be no assurance that any financing
will be available on terms acceptable to us, if at all, and any need to raise
additional capital through the issuance of equity or convertible debt
securities may result in additional, and perhaps significant dilution.

Quarterly Results Of Operations

The following table presents our operating results for each of the eight
quarters in the period ending December 31, 2002. The information for each of
these quarters is unaudited and has been prepared on the same basis as our
audited financial statements appearing elsewhere in this Annual Report on Form
10-K. In the opinion of management, all necessary adjustments, consisting only
of normal recurring adjustments, have been included to present fairly the
unaudited quarterly results when read in conjunction with our audited financial
statements and related notes. We have experienced and expect to continue to
experience fluctuations in operating results from quarter to quarter.
Historical operating results are not necessarily indicative of the results that
may be expected for any future period.

|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |         |         | 
|----------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ------ | ------------------------------------- | ------ | ---- | ------ | ----- | ------ | ---- | ------ | ------ | ------ | ---- | ------- | ----- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | - | -------- | ------- | ------- | 
|                                                                  |                                                |                          |        | 2001                                  |        | 2001 |        | 2001  |        | 2001 |        | 2002   |        | 2002 |         | 2002  |        | 2002
|                                                                  |                                                |                          |        | Q1                                    |        | Q2   |        | Q3    |        | Q4   |        | Q1 (i) |        | Q2   |         | Q3    |        | Q4  
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |     
|                                                                  |                                                |                          |        | (Unaudited)                          
|                                                                  |                                                |                          |        | (In thousands, except per share data)
|Statements of operations data:                                    |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Revenue, net                                                      |                                                | $                        | 37,585 |                                       |        | $    | 22,295 |       |        | $    | 21,675 |        |        | $    | 24,175  |       |        | $    | 25,414  |        |        | $ | 45,177  |        |        | $ | 24,118  |        |        | $ | 49,951   |        
|Cost of revenue                                                   |                                                |                          | 18,899 |                                       |        |      | 12,085 |       |        |      | 12,829 |        |        |      | 12,074  |       |        |      | 14,662  |        |        |   | 25,977  |        |        |   | 14,091  |        |        |   | 28,955   |        
|Provision
for excess and obsolete inventory(i)                    |                                                |                          |       |                                       |        |      |       |       |        |      |       |        |        |      |        |       |        |      | 12,659  |        |        |   |        |        |        |   |        |        |        |   |         |        
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Gross profit (loss)                                               |                                                |                          | 18,686 |                                       |        |      | 10,210 |       |        |      | 8,846  |        |        |      | 12,101  |       |        |      | (1,907  | )      |        |   | 19,200  |        |        |   | 10,027  |        |        |   | 20,996   |        
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Operating expenses:                                               |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|                                                                  | Research and development                       |                          |        | 4,077                                 |        |      |        | 5,054 |        |      |        | 5,151  |        |      |         | 4,832 |        |      |         | 4,549  |        |   |         | 7,295  |        |   |         | 8,699  |        |   |          | 8,616   |        
|                                                                  | Sales, general and administrative              |                          |        | 9,989                                 |        |      |        | 9,488 |        |      |        | 10,427 |        |      |         | 8,699 |        |      |         | 8,750  |        |   |         | 11,647 |        |   |         | 15,220 |        |   |          | 13,874  |        
|                                                                  | Amortization of goodwill and
intangible assets |                          |        | 822                                   |        |      |        | 1,414 |        |      |        | 1,491  |        |      |         | 1,713 |        |      |         | 144    |        |   |         | 2,209  |        |   |         | 4,606  |        |   |          | 5,508   |        
|                                                                  | Amortization of deferred stock
compensation    |                          |        | 1,941                                 |        |      |        | 315   |        |      |        | 303    |        |      |         | 2,637 |        |      |         | 245    |        |   |         | 180    |        |   |         | 316    |        |   |          | 114     |        
|                                                                  | Impairment of goodwill and
intangible assets   |                          |        | 4,331                                 |        |      |        |      |        |      |        |       |        |      |         |      |        |      |         |       |        |   |         |       |        |   |         |       |        |   |          | 129,108 |        
|                                                                  | Impairment on loan to officer                  |                          |        |                                      |        |      |        |      |        |      |        |       |        |      |         |      |        |      |         |       |        |   |         |       |        |   |         |       |        |   |          | 4,500   |        
|                                                                  | Restructuring charges                          |                          |        | 1,108                                 |        |      |        | 312   |        |      |        | 396    |        |      |         |      |        |      |         | 35,378 |        |   |         | 3,582  |        |   |         | 2,335  |        |   |          | 1,882   |        
|                                                                  | In-process research and development            |                          |        |                                      |        |      |        |      |        |      |        |       |        |      |         | 6,400 |        |      |         | 4,536  |        |   |         | 1,200  |        |   |         | 10,364 |        |   |          |        |        
|                                                                  | Merger costs                                   |                          |        | 30                                    |        |      |        |      |        |      |        |       |        |      |         |      |        |      |         |       |        |   |         |       |        |   |         |       |        |   |          |        |        
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|                                                                  |                                                | Total operating expenses |        |                                       | 22,298 |      |        |       | 16,583 |      |        |        | 17,768 |      |         |       | 24,281 |      |         |        | 53,602 |   |         |        | 26,113 |   |         |        | 41,540 |   |          |         | 163,602 | 
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Loss from operations                                              |                                                |                          | (3,612 | )                                     |        |      | (6,373 | )     |        |      | (8,922 | )      |        |      | (12,180 | )     |        |      | (55,509 | )      |        |   | (6,913  | )      |        |   | (31,513 | )      |        |   | (142,606 | )      
|Interest income (expense), net                                    |                                                |                          | 472    |                                       |        |      | 444    |       |        |      | 304    |        |        |      | 173     |       |        |      | 131     |        |        |   | 240     |        |        |   | (355    | )      |        |   | (101     | )      
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Loss before income taxes                                          |                                                |                          | (3,140 | )                                     |        |      | (5,929 | )     |        |      | (8,618 | )      |        |      | (12,007 | )     |        |      | (55,378 | )      |        |   | (6,673  | )      |        |   | (31,868 | )      |        |   | (142,707 | )      
|Income tax provision (benefit)                                    |                                                |                          | 1,346  |                                       |        |      | (1,797 | )     |        |      | (2,905 | )      |        |      | (740    | )     |        |      | 3,224   |        |        |   |        |        |        |   |        |        |        |   |         |        
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Net loss                                                          |                                                |                          | (4,486 | )                                     |        |      | (4,132 | )     |        |      | (5,713 | )      |        |      | (11,267 | )     |        |      | (58,602 | )      |        |   | (6,673  | )      |        |   | (31,868 | )      |        |   | (142,707 | )      
|Deemed Series A Preferred Stock dividend                          |                                                |                          |       |                                       |        |      |       |       |        |      |       |        |        |      |        |       |        |      |        |        |        |   |        |        |        |   | (2,740  | )      |        |   |         |        
|Accretion
of Series A Preferred Stock redemption obligations      |                                                |                          |       |                                       |        |      |       |       |        |      |       |        |        |      |        |       |        |      |        |        |        |   |        |        |        |   | (476    | )      |        |   | (1,414   | )      
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Net loss attributable to Common
stockholders                      |                                                | $                        | (4,486 | )                                     |        | $    | (4,132 | )     |        | $    | (5,713 | )      |        | $    | (11,267 | )     |        | $    | (58,602 | )      |        | $ | (6,673  | )      |        | $ | (35,084 | )      |        | $ | (144,121 | )      
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Net loss attributable to Common
stockholders   basic and diluted |                                                | $                        | (0.08  | )                                     |        | $    | (0.07  | )     |        | $    | (0.10  | )      |        | $    | (0.19   | )     |        | $    | (0.96   | )      |        | $ | (0.06   | )      |        | $ | (0.29   | )      |        | $ | (1.20    | )      
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        
|Shares used to compute net loss per share
 basic and diluted     |                                                |                          | 55,999 |                                       |        |      | 57,509 |       |        |      | 57,747 |        |        |      | 58,912  |       |        |      | 61,275  |        |        |   | 119,215 |        |        |   | 119,557 |        |        |   | 120,134  |        
|                                                                  |                                                |                          |        |                                       |        |      |        |       |        |      |        |        |        |      |         |       |        |      |         |        |        |   |         |        |        |   |         |        |        |   |          |        



---

|(i) |  | The results include the
reclassification of a provision for excess and obsolete inventory of
$12.7 million from restructuring charges to cost of revenue recorded in
the first quarter ended March 27, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
quarterly revenue and loss from operations results have varied and
are likely to continue to fluctuate significantly from quarter to quarter.

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Our quarterly results may fluctuate for many reasons, including the
following:



| |  |  | the effectiveness of our distribution channels and the success in
maintaining our current distribution channels and developing new
distribution channels;                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to effectively manage the development of new business segments and markets;                                                                                     
|
| |  |  | seasonal factors that may affect capital spending by customers;                                                                                                             
|
| |  |  | our ability to successfully manage the integration of operations;                                                                                                           
|
| |  |  | the sell-through rate of our ORiNOCO products (acquired in our
acquisition of Ageres 802.11 WLAN systems business) through consumer
retail channels;                       
|
| |  |  | market adoption of radio frequency, or RF, standards-based products
(such as those compliant with the IEEE 802.11b, IEEE 802.11a, IEEE
802.11g or Bluetooth specifications);
|
| |  |  | our ability to develop, introduce, ship and support new products and
product enhancements and to manage product transitions;                                                
|
| |  |  | the sell-through rate of our WLAN and WWAN products through commercial distribution channels;                                                                               
|
| |  |  | market demand for our point-to-point Lynx and Tsunami systems;                                                                                                              
|
| |  |  | market demand for our point-to-multipoint systems;                                                                                                                          
|
| |  |  | the mix of products sold because our products generate different gross margins;                                                                                             
|
| |  |  | a decrease in the average selling prices of our products;                                                                                                                   
|
| |  |  | our ability to upgrade and develop our systems and infrastructure;                                                                                                          
|
| |  |  | difficulties in expanding and conducting international operations; and                                                                                                      
|
| |  |  | general economic conditions and economic conditions specific to the wireless communications industry.                                                                       

We have experienced disruptions in our operations from some of the factors
listed above and may experience them again. In addition, we are dependent on
decisions by service providers, businesses and other enterprises to build
wireless networks. These decisions are in turn dependent upon the success and
expected demand for the services offered by those service providers, businesses
and other enterprises.

Our operating expenses are largely
based on anticipated revenue trends, and a high percentage of our expenses are
and will continue to be fixed in the short term. As a result, any delay in
generating or recognizing revenue could cause significant variations in our
operating results from quarter to quarter and could result in substantial
operating losses.

Due to the above factors, we believe that quarter-to-quarter comparisons
of our operating results are not a good indication of our future performance.
It is likely that in some future quarters, our operating results may be below
the expectations of public market analysts and investors. In this event, the
price of our common stock may fall.

Seasonality

Historically, our revenues have been higher in the last two quarters of
the fiscal year. In addition our revenues have historically been significantly
higher in the last month of each quarter. This shift may primarily be
attributed to the budgetary constraints of the customers in our industry and
weather conditions that make an outdoor installation more difficult during the
winter. However, going forward, we believe the impact of seasonal fluctuations
on our business will decrease because demand for our products is increasing at
a rate that outpaces any budget restrictions our customers may have. Moreover,
our expansion into international markets may minimize the impact that weather
conditions may have on our overall sales.

RISK FACTORS

This Annual Report on Form 10-K also contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us described below and
elsewhere in this Form 10-K.

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You should carefully consider the risks described below before making an
investment decision with respect to our common stock. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations.

If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline and you could
lose all or part of your investment.

We may not achieve certain benefits and synergies expected from our March 26,
2002 merger with Proxim, Inc. or the August 5, 2002 acquisition of the 802.11
WLAN systems business of Agere, either of which may have a material adverse
effect on our business, financial condition and operating results and/or could
result in the loss of key personnel.

We will need to overcome significant challenges in order to realize any
benefits or synergies from our merger with Proxim, Inc. and our acquisition of
the 802.11 WLAN systems business of Agere, including Ageres ORiNOCO product
line. Such challenges include the timely, efficient and successful execution
of a number of post-transaction events, including:



| |  |  | integrating the operations of these businesses, particularly geographically dispersed operations;
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | integrating the management
information systems, accounting systems and reporting process;        
|
| |  |  | retaining and assimilating the key personnel of each company;                                    
|
| |  |  | retaining existing customers of each company and attracting additional customers;                
|
| |  |  | retaining strategic partners of each company and attracting new strategic partners; and          
|
| |  |  | creating uniform standards, controls, procedures, policies and information systems.              

The execution of these post-transaction events will involve considerable risks and may not be successful. These risks include:



| |  |  | the potential disruption of our ongoing business and distraction of our management;                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | unanticipated expenses, including
possible restructuring charges, and potential delays related to integration of technology and other resources of these companies;
|
| |  |  | the impairment of relationships with employees, suppliers and
customers as a result of any integration of new management personnel;
and                            
|
| |  |  | potential unknown liabilities associated with the transactions and
the combined operations.                                                                        

In addition, termination of employees in connection with our restructuring
efforts following these transactions may expose us to claims seeking damages
for wrongful terminations. In that regard, we are party to disputes, including
legal actions, with a number of former employees. These disputes relate
primarily to claims for wrongful termination and severance benefits due to
several reductions in force we have implemented in 2001 and 2002 following the
merger with Proxim, Inc. and the acquisition of Ageres 802.11 WLAN systems
business.

As a
result of the merger between Proxim and Western Multiplex, and the
acquisition of Agere Systems 802.11 WLAN systems business
during 2002, we identified a requirement to consolidate and integrate
our management information systems. We are implementing a new
enterprise resource planning and financial accounting and planning
system during the second quarter of 2003, and integrating this new
system with our customer relationship management system and our
product management system, as well as creating electronic interfaces
to certain supply chain partners information systems and
certain customers information systems. Implementation of the
new management information system, including the integration with
other systems is a very complex process that requires significant
financial resources and personnel time, as well as unifying operating
policies and procedures to ensure that the total system operates
efficiently and effectively. Delays or errors in the implementation could
result in additional costs and cause disruptions to our business,
which could adversely affect our ability to accurately report our
financial results on a timely basis and could have a material adverse effect on our business,
financial condition and operating results.

The combined company may not succeed in addressing these risks or any
other problems encountered in connection with our merger with Proxim, Inc. or
our acquisition of Ageres 802.11 WLAN systems business.

We are not profitable and may not be profitable in the future.

For the year ended December 31, 2002 we had a $244.5 million net loss
attributable to holders of our Common Stock. We cannot assure you that our
revenue will increase or continue at current levels or growth rates or that we
will achieve profitability or generate cash from operations in future periods.
In view of the rapidly evolving nature of our business and the limited
histories of Western Multiplex, Proxim, Inc. and the Agere 802.11
wireless systems business we acquired in producing many of
their products, period-to-period comparisons of operating results are not
necessarily meaningful and you should not rely on them as indicating what our
future performance will be.

We expect that we will continue to incur significant sales, marketing,
product development and administrative expenses. As a result, we will need to
generate significant revenue to achieve profitability and we cannot assure you
that we will achieve profitability

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in the future. Any failure to
significantly increase our revenue or control costs as we
implement our product and distribution strategies would harm our business,
operating results and financial condition.

The
market price of our Common Stock may further decline as a result of our merger with
Proxim, Inc. or our acquisitions of Ageres 802.11 WLAN systems business.

The
market price of our Common Stock declined following our acquisitions
in 2002 and may further decline as a result of these
transactions for a number of reasons, including if:



| |  |  | the integration of the these businesses is not completed in a timely
and efficient manner;                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the combined company does not achieve the perceived benefits of these
transactions as rapidly or to the extent anticipated by financial
analysts, industry analysts or investors; or
|
| |  |  | the effect of these transactions on our financial results is not
consistent with the expectations of financial analysts, industry
analysts or investors.                            

In this regard, our financial results for the third quarter of 2002 did
not meet the expectations of financial analysts and the market price of our
Common Stock declined.

Our merger with Proxim, Inc. and our acquisition of Ageres 802.11 WLAN systems
business may adversely affect our financial results.

We incurred transaction costs of approximately $16.7 million in
connection with our merger with Proxim, Inc. and approximately $5 million in
connection with the Agere asset purchase. If the benefits of these transactions
do not exceed the associated costs, including costs associated with integrating
these businesses and dilution to our stockholders resulting from the issuance
of shares in connection with the merger and the asset purchase and
related financing, our financial
results, including earnings per share, could be materially harmed.

Products sales could decline if customer relationships are disrupted by our
merger with Proxim, Inc. and our acquisition of Ageres 802.11 WLAN systems
business.

The merger with Proxim, Inc. or the Agere asset purchase may have the
effect of disrupting customer relationships. Former customers of Western
Multiplex, Proxim, Inc. and Agere may not continue their current buying
patterns following these transactions. Customers may defer purchasing
decisions as they evaluate the likelihood of successful integration of the
combined company or may instead purchase products of competitors. Any
significant delay or reduction in orders for our products could cause our
products sales to decline.

We have a limited operating history with some of our current product lines,
which makes your evaluation of our business difficult and will affect many
aspects of our business.

Proxim, Inc. produced its 802.11a products for a limited amount of time
and Western Multiplex had just begun production of its Tsunami
point-to-multipoint product prior to the merger. Agere also had a limited
operating history with its 802.11 WLAN equipment. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in developing industries, particularly companies in
relatively new and rapidly evolving markets. These risks include:



| |  |  | an evolving and unpredictable business model;     
| | - |  | --------------------------------------------------
|
| |  |  | uncertain acceptance of new products and services;
|
| |  |  | competition; and                                  
|
| |  |  | challenges in managing growth.                    

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

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We may experience fluctuations in operating results and may not be able to
adjust spending in time to compensate for any unexpected revenue shortfall
which may cause operating results to fall below expectations of securities
analysts and investors.

Our operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which will be outside our control. We
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues in relation to planned expenditures could materially harm our
operating results and financial condition, and may cause our operating results
to fall below the expectations of securities analysts and investors. If this
happens, the trading price of our Common Stock could decline significantly.

Factors that may harm operating results include:



| |  |  | the effectiveness of our distribution channels and the success in
maintaining our current distribution channels and developing new
distribution channels;                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to effectively manage the development of new business segments and markets;                                                                                     
|
| |  |  | seasonal factors that may affect capital spending by customers;                                                                                                             
|
| |  |  | our ability to successfully manage the integration of operations;                                                                                                           
|
| |  |  | the sell-through rate of our ORiNOCO products (acquired in our
acquisition of Ageres 802.11 WLAN systems business) through consumer
retail channels;                       
|
| |  |  | market adoption of radio frequency, or RF, standards-based products
(such as those compliant with the IEEE 802.11b, IEEE 802.11a, IEEE
802.11g or Bluetooth specifications);
|
| |  |  | our ability to develop, introduce, ship and support new products and
product enhancements and to manage product transitions;                                                
|
| |  |  | the sell-through rate of our WLAN and WWAN products through commercial distribution channels;                                                                               
|
| |  |  | market demand for our point-to-point Lynx and Tsunami systems;                                                                                                              
|
| |  |  | market demand for our point-to-multipoint systems;                                                                                                                          
|
| |  |  | the mix of products sold because our products generate different gross margins;                                                                                             
|
| |  |  | a decrease in the average selling prices of our products;                                                                                                                   
|
| |  |  | our ability to upgrade and develop our systems and infrastructure;                                                                                                          
|
| |  |  | difficulties in expanding and conducting international operations; and                                                                                                      
|
| |  |  | general economic conditions and economic conditions specific to the wireless communications industry.                                                                       

Historically, Proxim, Inc. and Western Multiplex did not operate with a
significant order backlog and a substantial portion of their revenues in any
quarter were derived from orders booked and shipped in that quarter.
Accordingly, a significant component of our revenue expectations will be based
almost entirely on internal estimates of future demand and not on firm customer
orders. Planned operating expense levels are relatively fixed in the short
term and are based in large part on these estimates. If orders and revenue do
not meet expectations, our operating results could be materially adversely
affected. In this regard, we did not achieve our revenue targets in the third
quarter of 2002, and we incurred a net loss attributable to the holders of our
Common Stock of $35.1 million in that quarter.

We have adopted a uniform sell-through method of revenue recognition that may
result in greater variability in our revenue recognition and therefore
increased fluctuations in our operating results.

Effective at the beginning of the third quarter of 2002, we adopted a
uniform sell-through revenue recognition methodology for products that are sold
through distribution channels with rights of return under accounting principles
generally accepted in the United States of America. After the merger of
Proxim, Inc. and Western Multiplex, we maintained the historical revenue
recognition methods used by the two companies prior to the merger for the
respective product lines: a sell-through method for wireless local area
networking, or WLAN, products, and a sell-in method for wireless wide area
networking, or WWAN, products. We have adopted the sell-through method on a
uniform basis because, following the acquisition of Ageres 802.11 WLAN systems
business, which also uses the sell-through method, the WLAN business is
expected to represent more than half of Proxims revenues, and adopting one
uniform method is consistent with the Companys plans to sell bundled and
integrated WLAN and WWAN products. The adoption of

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the sell-through method of revenue recognition for WWAN products could
result in greater variability in our revenue recognition, and,
therefore,
increased fluctuations in our operating results, because sell-through shipments
to customers may not be as predictable as sell-in shipments to distributors.

Our operating results have
been, and could further be, adversely affected as a result of
purchase accounting treatment and the impact of amortization and impairment of
intangible assets relating to the merger and the Agere asset purchase.

In accordance with generally accepted accounting principles, we accounted for our merger with Proxim, Inc. using the purchase method of
accounting. Under the purchase method of accounting, we have recorded the
market value of our Common Stock issued in connection with the merger, the fair
value of the options to purchase Proxim, Inc. Common Stock that became options
to purchase Proxim Corporation Common Stock and the amount of direct
transaction costs as the cost of combining with Proxim, Inc. We have allocated
the cost of the individual assets acquired and liabilities assumed, including
various identifiable intangible assets (such as acquired technology and
acquired trademarks and trade names) and in-process research and development,
based on their respective fair values at the date of the completion of the
merger. Intangible assets are required to be amortized prospectively over
their estimated useful lives. The purchase price was allocated to deferred
compensation, based on the portion of the intrinsic value of the unvested
Proxim, Inc. options we have assumed to the extent that service is required
after completion of the merger in order to vest. Any excess of the purchase
price over those fair market values will be accounted for as goodwill. We are
not required to amortize goodwill against income but goodwill and other
non-amortizable intangible assets will be subject to periodic reviews for
impairment.

In this regard, due to the decline in forecasted revenue in future
periods, we took a charge of $129.1 million related to the impairment of
goodwill in accordance with SFAS No. 142 in the fourth quarter of 2002. The
impairment charged was measured as the amount that the carrying amount exceeded
its estimated fair value. If we are required to recognize additional impairment
charges, the charge
will negatively impact reported earnings in the period of the charge.

Shares eligible for future sale, including shares owned by our principal
stockholders, may cause the market price of our Common Stock to drop
significantly, even if our business is doing well.

The potential for sales of substantial amounts of our Common Stock into
the public market may adversely affect the market price of our Common Stock.
To finance our acquisition of Ageres 802.11 WLAN systems business, we entered
into a securities purchase agreement with Warburg Pincus and Broadview Capital,
who agreed to collectively invest $75 million in the Company. These investors
received 1,640,000 shares of Series A Preferred Stock in the amount of
approximately $41 million, with a conversion price of approximately $3.06 per
share, and warrants to purchase approximately 6.7 million shares of our Common
Stock valued at $12.3 million. The value of the warrants was recorded as a
reduction of the Series A Preferred Stock carrying value and recorded as
additional paid-in capital. A deemed preferred stock dividend representing the
beneficial conversion feature of the Series A Preferred Stock of $2.7 million
was also recorded to increase the loss attributable to holders of our Common
Stock. The remaining $34 million of the investment was in the form of
convertible notes. Upon receipt of approval of our stockholders at a special
meeting held on October 8, 2002, the notes issued to these investors were
converted into 1,360,000 shares of Series A Preferred Stock and we granted to
these investors additional warrants to purchase approximately 5.6 million
shares of our common stock. In total, the investors were granted warrants to
acquire 12,271,345 shares of Common Stock for approximately $3.06 per share.
The Series A Preferred Stock and warrants issued to the investors represent
approximately 25% of our outstanding Common Stock on an as-converted and
as-exercised basis as of December 31, 2002. The initial liquidation preference
of $25.00 attributable to the Series A Preferred Stock bears interest at an
annual rate of 8% through the third anniversary of the date of issuance,
resulting in an increase in the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock over time, to an aggregate of
approximately 31.1 million. We agreed to file this registration statement with
the Securities and Exchange Commission to register this Common Stock. Upon the
effectiveness of the registration statement of which this prospectus forms a
part, the investors will have the right to resell the Common Stock.

In addition, approximately 32.1 million of our outstanding shares of
Common Stock are held by affiliates of Ripplewood Investments L.L.C. and an
aggregate of approximately 6.0 million of our outstanding shares of Common
Stock are held by Jonathan Zakin, who is our Chairman and Chief Executive
Officer, and his affiliates. The shares of Common Stock held by these
stockholders are restricted securities within the meaning of Rule 144 under
the Securities Act and are eligible for resale subject to the volume, manner of
sale, holding period and other limitations of Rule 144 or in a registered
offering. In the event that the affiliates of Ripplewood Investments L.L.C.
distribute shares that they hold to their members and partners that are not
affiliates of the Company, those distributed shares could be immediately sold
without regard to any volume limitations. In connection with the execution of
the merger agreement between Proxim, Inc., Western Multiplex and certain other
parties, the affiliates of Ripplewood Investments L.L.C.

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that now hold shares of Proxim Corporation Common Stock entered into a
stockholders agreement that set limitations on their ability to transfer their
shares, including distributions to members and partners, for a limited period
of time and provided registration rights with respect to their shares. In
exchange for a voting agreement in connection with the Agere asset purchase,
and effective as of August 27, 2002, we released the affiliates of Ripplewood
Investments L.L.C. from the resale restrictions set forth in such stockholders
agreement. If affiliates of Ripplewood Investments L.L.C. distribute all or a
significant number of our shares, the market price of our Common Stock may
decline significantly.

In addition to outstanding shares eligible for sale, as of December 31,
2002, options and warrants to acquire 44.2 million shares of our Common Stock
were outstanding. Also, as of December 31, 2002, approximately an additional
21.7 million shares of our Common Stock were reserved for issuance to our
employees under existing and/or assumed stock option plans.

Competition within the wireless networking industry is intense and is expected
to increase significantly. Our failure to compete successfully could
materially harm our prospects and financial results.

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

We could be at a disadvantage when compared to competitors, particularly
Alcatel, Business Networks AB, Cisco Systems, D-Link, Intel Corporation and
LinkSys (announced to be acquired by Cisco Systems on March 20, 2003, subject
to regulatory approvals), that have broader distribution channels, brand
recognition, extensive patent portfolios and more diversified product lines.
We have several competitors in our commercial wireless business, including
without limitation, Alvarion (the merger of Breezecom and Floware), Ceragon
Networks, Cisco Systems, DMC Stratex Networks, Enterasys Networks, Harris
Corporation, Intel Corporation, Intersil Corporation, Nokia Corporation, Symbol
Technologies and 3Com Corporation.

We also face competition from a variety of companies that offer different
technologies in the emerging home networking market, including several
companies developing competing wireless networking products. Additionally,
numerous companies have announced their intention to develop competing products
in both the commercial wireless and home networking markets, including several
Asia-based companies offering low-price IEEE 802.11b products. We could also
face future competition from companies that offer products which replace
network adapters or offer alternative communications solutions, or from large
computer companies, PC peripheral companies, as well as other large networking
equipment companies that integrate network adapters into their
products. Furthermore, we could face competition from certain of
our OEM customers, which have, or could acquire, wireless engineering and
product development capabilities, or might elect to offer competing
technologies. We can offer no assurance that we will be able to compete
successfully against these competitors or those competitive pressures we face
will not adversely affect our business or operating results.

Many of our present and potential competitors have substantially greater
financial, marketing, technical and other resources with which to pursue
engineering, manufacturing, marketing, and distribution of their products.
These competitors may succeed in establishing technology standards or strategic
alliances in the WLAN and building-to-building markets, obtain more rapid
market acceptance for their products, or otherwise gain a competitive
advantage. We can offer no assurance that we will succeed in developing
products or technologies that are more effective than those developed by our
competitors. Furthermore, we compete with companies that have high volume
manufacturing and extensive marketing and distribution capabilities, areas in
which we have only limited experience. We can offer no assurance that we will
be able to compete successfully against existing and new competitors as
wireless markets evolve and the level of competition increases.

Wireless networking markets are subject to rapid technological change and to
compete, we must continually introduce new products that achieve broad market
acceptance.

We have expended substantial resources in developing products that are
designed to conform to the IEEE 802.11 standards and the HomeRF specification.
There can be no assurance, however, that the IEEE 802.11 compliant products and
Symphony HomeRF products will have a meaningful commercial impact. In 1999,
the IEEE approved a new 2.4 GHz WLAN standard, designated as

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802.11b. Based on direct sequence spread spectrum technology, this new
standard increased the nominal data rate from 2 Mbps to 11 Mbps. In addition,
we developed higher-speed frequency hopping technology based on the FCC Part 15
rule change adopted in August 2000, that allowed for wider band hopping
channels and increased the data rate from 1.6 Mbps to up to 10 Mbps based on
the HomeRF 2.0 standard. There can be no assurance that any such new products
will compete effectively with IEEE 802.11b standard compliant products. In
this regard, we have discontinued the development and production of HomeRF and
HomeRF 2.0 products due to the widespread market adoption of products based on
the IEEE 802.11b standard. In August 2002, we completed the acquisition of
Ageres 802.11 WLAN systems business, including its ORiNOCO product line, and
we are now selling a full line of 802.11b products.

In 1999, a group of computer and telecommunications industry leaders, led
by Ericsson, began developing a short range RF method to connect mobile devices
without cables called Bluetooth. Based on low power 2.4 GHz frequency hopping
spread spectrum technology, numerous organizations are planning to deploy
Bluetooth technology in a wide variety of mobile devices such as cellular
telephones, notebook computers and handheld computers. We have not developed
products that comply with Bluetooth. While Bluetooth technology is available
to develop or acquire in the market, there can be no assurance that we will
develop or acquire such technology, or that if we do develop or acquire such
technology, that such products will be competitive in the market.

In 2000, the IEEE approved a new 5 GHz WLAN standard designated as
802.11a. This new standard is based on Orthogonal Frequency Division
Multiplexing, or OFDM, technology with multiple data rates ranging from below
10 Mbps to approximately 50 Mbps. In 1999, the European Telecommunications
Standards Institute Project BRAN (Broadband Radio Access Networks) committee
approved a new 5 GHz WLAN standard designated as HiperLAN2, also based on OFDM
technology. We are currently shipping commercial units of 802.11a products,
and certain competitors are also shipping 802.11a products.

The IEEE is evaluating a number of improvements and enhancements to the
802.11a at 5 GHz and 802.11b at 2.4 GHz standards. The 802.11g proposal is a
high speed extension of 802.11b, offering up to 54 Mbps of throughput, that is
expected to be approved during 2003 and commercial products are expected to be
available by early 2003. Certain competitors are shipping pre-standard
versions of 802.11g products. In addition, we have begun commercial shipment
of dual-band adapters that comply with both the 802.11b and the 802.11a
standards. The 802.11e proposal is a quality of service enhancement to the
802.11a and 802.11b protocol for streaming multimedia support. The 802.11i
proposal addresses enhanced security for both 802.11a and 802.11b. The 802.11h
proposal addresses dynamic frequency selection and transmit power control for
worldwide radio regulation.

Given the emerging nature of the WLAN market, there can be no assurance
that the products and technology, or our other products or technology, will not
be rendered obsolete by alternative or competing technologies. In addition,
when we announce new products or product enhancements that have the potential
to replace or shorten the life cycle of our existing products, customers may
defer purchasing our existing products. These actions could materially
adversely affect our operating results by unexpectedly decreasing sales,
increasing our inventory levels of older products and exposing us to greater
risk of product obsolescence. As the market for our wireless networking
products is evolving, we believe our ability to compete successfully in this
market is dependent upon the continued compatibility and interoperability of
our products with products and architectures offered by other vendors. To
remain competitive, we need to introduce products in a timely manner that
incorporate or are compatible with these new technologies as they emerge. If
we are unable to enter a particular market in a timely manner with internally
developed products, we may license technology from other businesses or acquire
other businesses as an alternative to internal research and development.

To remain competitive, we will need
to expand
and adapt our organization. Failure to
effectively manage growth could result in an inability to support and maintain
our operations.

We
anticipate that we will need to expand and adapt our organization in order to
address new market opportunities for our products. This could place
a significant strain on our management, operational and financial resources.
We cannot assure you that:



| |  |  | our personnel, systems, procedures and controls will be adequate to support our future operations;           
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | our management will be able to identify, hire, train, motivate or manage required personnel; or              
|
| |  |  | our management will be able to successfully identify and exploit existing and potential market opportunities.

We announced a reorganization of our corporate structure on December 9,
2002, consolidating our operating divisions from four to two. We cannot assure
you that this reorganization will be successful or will not impair our ability
to manage our business. In

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addition, we could experience lower earnings as a result of expenses
associated with growing our operations, whether through internal development or
through acquisitions.

We will depend on international sales and our ability to sustain or expand
international sales is subject to many risks, which could adversely affect our
operating results.

During the year ended ending December 31, 2002, international sales
accounted for approximately 38% of our total sales. Revenue from shipments by
Western Multiplex to customers outside of the United States, principally to a
limited number of distributors, represented 24% and 33% of total revenue during
the calendar years 2001 and 2000, respectively. Revenue from shipments by
Proxim, Inc. to customers outside the United States, principally to a limited
number of distributors and OEM customers, represented 33% and 18% of total
revenue during the calendar years 2001 and 2000, respectively. Ageres sales
of its ORiNOCO products included sales to a number of international customers,
and we expect that we will continue to sell these products to a significant
percentage of international customers. We expect that our revenue from
shipments to international customers will vary as a percentage of total
revenue.

There are certain risks inherent in doing business in international markets, including the following:



| |  |  | uncertainty of product acceptance by customers in foreign countries;                                        
| | - |  | ------------------------------------------------------------------------------------------------------------
|
| |  |  | difficulty in assessing the ability to collect on orders to be shipped in an uncertain economic environment;
|
| |  |  | difficulty in collecting accounts receivable;                                                               
|
| |  |  | export license and documentation requirements;                                                              
|
| |  |  | unforeseen changes in regulatory requirements;                                                              
|
| |  |  | difficulties in staffing and managing multinational operations;                                             
|
| |  |  | governmental restrictions on the repatriation of funds into the United States;                              
|
| |  |  | foreign currency fluctuations;                                                                              
|
| |  |  | longer payment cycles for international distributors;                                                       
|
| |  |  | tariffs, duties taxes and other trade barriers;                                                             
|
| |  |  | difficulties in finding foreign licensees or joint venture partners; and                                    
|
| |  |  | potential political and economic instability.                                                               

There is a risk that such factors will harm our ability to continue to
successfully operate internationally and our efforts to expand international
operations. In this regard, our revenue levels have been affected, in part, by
reduced ability to ship our products to international customers in cases where
collectibility, based on a number of factors, could not be reasonably assured.

While we may extend limited credit terms, fluctuations in currency
exchange rates could cause our products to become relatively more expensive to
customers in a particular country, leading to a reduction in sales or
profitability in that country. There can be no assurance that foreign markets
will continue to develop or that we will receive additional orders to supply
our products to foreign customers. Our business and operating results could be
materially adversely affected if foreign markets do not continue to develop or
if we do not receive additional orders to supply our products for use by
foreign customers.

To successfully expand international sales, we will need to recruit
additional international sales and support personnel and expand our
relationships with international distributors and value-added resellers. This
expansion will require significant management attention and financial
resources. We may incur these additional costs and add these management
burdens without successfully expanding sales. This failure would harm our
operating results.

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The outbreak of war in Iraq with the U.S. and other countries may adversely
affect domestic and international demand for our products and result in a
further deterioration of global economic conditions, and may increase
shipment times and costs for our products.

The outbreak of war in Iraq with the U.S. and other countries may
adversely affect domestic and international demand for our products and result
in a further deterioration of global economic conditions. The continued
worsening of the U.S. economy has caused and may continue to cause U.S.
businesses to slow spending on products and delay sales cycles. A continued
worsening in the global economy may also cause foreign businesses to slow or
halt spending on our products. The economic uncertainty resulting from the
unpredictable nature of ongoing military action and other involvements
associated with a war in Iraq may continue to negatively impact consumer and
business confidence in the near term. In addition, we manufacture a
substantial portion of our products outside the United States, and we
may experience delays in the delivery of our products or increased
shipping costs as a result of increased security measures. This economic uncertainty may make it
more difficult to continue implementing our business strategy and may adversely
impact our future revenues.

Our revenue may decline and our ability to achieve profitability may be
threatened if the demand for wireless services in general and broadband
wireless access systems in particular does not continue to grow.

Our success is dependent on the continued trend toward wireless
telecommunications and data communications services. If the rate of growth
slows and service providers reduce their capital investments in wireless
infrastructure or fail to expand into new geographic markets, our revenue may
decline. Unlike some competitors such as Alcatel, Cisco Systems, Intel
Corporation, Linksys and Nortel Networks Corporation, among others, our
principal product offerings rely on wireless technologies. Accordingly, we
would experience a greater impact from a decline in the demand for wireless
services than some of our most important competitors. In addition, wireless
access solutions are unproven in the marketplace and some of the wireless
technologies, such as our Tsunami point-to-multipoint technology and 802.11a
and HomeRF 2.0 technologies in which we are currently investing substantial
capital, have only been commercially introduced in the last few years. If
wireless access technology turns out to be unsuitable for widespread commercial
deployment, it is unlikely we could generate enough sales to achieve and
sustain profitability. We have listed below, in order of importance, the
factors that we believe are key to the success or failure of broadband wireless
access technology:



| |  |  | its reliability and security and the perception by end users of its reliability and security;                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | its capacity to handle growing demands for faster transmission of increasing amounts of data, voice and video;                       
|
| |  |  | the availability of sufficient frequencies for network service
providers to deploy products at commercially reasonable rates;        
|
| |  |  | its cost-effectiveness and performance compared to other forms of
broadband access, whose prices and performance continue to improve;
|
| |  |  | its suitability for a sufficient number of geographic regions; and                                                                   
|
| |  |  | the availability of sufficient site locations for network service
providers to install products at commercially reasonable rates.    

We have experienced the effects of many of the factors listed above in
interactions with customers selecting wireless versus wire line technology.
For example, because of the frequency with which individuals using cellular
phones experience fading or a loss of signal, customers often hold the
perception that all broadband wireless technologies will have the same
reliability constraints even though the wireless technology we use does not
have the same problems as cellular phones. In some geographic areas, because
of adverse weather conditions that affect wireless transmissions, but not wire
line technologies, we are not able to sell products as successfully as
competitors with wire line technology. In addition, future legislation, legal
decisions and regulation relating to the wireless telecommunications industry
may slow or delay the deployment of wireless networks.

We may also lose customers to different types of wireless technologies.
Many of our products operate in the unlicensed frequency bands, in compliance
with various governmental regulations. In addition, many of the emerging
wireless standards utilize these unlicensed frequency bands. The proliferation
and market acceptance of unlicensed wireless products increases the probability
of interference among unlicensed devices. Increasing interference can
adversely affect the operation of our unlicensed products, resulting in
customers selecting alternative products that do not operate in these
unlicensed frequency bands. For example, we have only a limited offering of
products that operate in licensed radio spectrums. Some customers, however,
may want to operate in licensed radio spectrums because they sometimes offer
less interference than license free radio spectrums or have other advantages.

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Our business will depend on rapidly evolving telecommunications and Internet
industries.

Our future success is dependent upon the continued growth of the data
communications and wireless industries, particularly with regard to Internet
usage. The global data communications and Internet industries are evolving
rapidly and it is difficult to predict potential growth rates or future trends
in technology development. We cannot assure you that the deregulation,
privatization and economic globalization of the worldwide telecommunications
market that has resulted in increased competition and escalating demand for new
technologies and services will continue in a manner favorable to us or our
business strategies. In addition, there can be no assurance that the growth in
demand for wireless and Internet services, and the resulting need for high
speed or enhanced data communications products and wireless systems, will
continue at its current rate or at all.

The combined company may be dependent on and receive a significant percentage
of its revenue from a limited number of OEM customers.

A limited number of OEM customers may contribute a significant percentage
of our revenue. Sales to one Proxim, Inc. customer in calendar year
2000 represented approximately 12% of total revenue. Ageres sales of its
ORiNOCO products included sales to OEM customers. We expect that sales to a
limited number of OEM customers will continue to account for a substantial
portion of our revenue for the foreseeable future. Proxim, Inc. also
experienced quarter-to-quarter variability in sales to each of its major OEM
customers. Sales of many of Proxim, Inc.s wireless networking products
depended upon the decision of a prospective OEM customer to develop and market
wireless solutions that incorporated Proxim, Inc.s wireless technology. OEM
customers orders are affected by a variety of factors, including the
following:



| |  |  | new product introductions;                                   
| | - |  | -------------------------------------------------------------
|
| |  |  | end user demand for OEM customers products;                 
|
| |  |  | OEM customers product life cycles;                          
|
| |  |  | inventory levels;                                            
|
| |  |  | market and OEM customers adoption of new wireless standards;
|
| |  |  | manufacturing strategies;                                    
|
| |  |  | lengthy design-in cycles;                                    
|
| |  |  | pricing;                                                     
|
| |  |  | regulatory changes;                                          
|
| |  |  | contract awards; and                                         
|
| |  |  | competitive situations.                                      

Proxim, Inc.s agreements with OEM customers typically did not require
minimum purchase quantities. The loss of one or more of, or a significant
reduction in orders from, our major OEM customers could materially and
adversely affect our operating results or stock price. In this regard, in the
first quarter of 2001, Intel Corporation, a HomeRF OEM customer, announced that
it would offer competing IEEE 802.11b products for its next generation of
consumer wireless networking devices. This announcement resulted in a decrease
in the market price of Proxim, Inc.s common stock. In addition, there can be
no assurance that we will become a qualified supplier for new OEM customers or
that we will remain a qualified supplier for existing OEM customers.

Our WWAN business derives a substantial portion of its revenue from a limited
number of distributors. Therefore, a decrease or loss in business from any of
them may cause a significant delay or decline in our revenue and could harm our
reputation.

Our WWAN
business has historically generated a significant amount of revenue from a limited
number of distributors. The loss of business from any of these distributors or
the delay of significant orders from any of them, even if only temporary, could
significantly reduce our

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revenue, delay recognition of revenue, harm our reputation or reduce our
ability to accurately predict cash flow. One distributor
accounted for approximately 23% of our total revenue in the year
ended December 31, 2002. For the year ended December 31, 2001, approximately
52% of WWAN revenue was derived from three distributors, and approximately 30%
of our revenue was derived from one of the three distributors. We do not have long-term contracts with any of these distributors.
While we expect to have a more diversified and expansive end customer base, the future
success of our business will depend significantly on the timing and size of
future purchase orders, if any, from a limited number of
distributors. In addition, as we continued the development of our
distribution channels, we may consolidate demand through fewer,
larger distributors in order the effectively manage a growing base of
VARs, resellers and sub-distributors.

We depend on limited suppliers for key components that are difficult to
manufacture, and because we may not have long-term arrangements with these
suppliers, we could experience disruptions in supply that could decrease or
delay the recognition of revenues.

We depend on single or limited source suppliers for several key components
used in our products. Proxim, Inc. and Agere depended on single sources for
our proprietary application specific integrated circuits, or ASICs, and
assembled circuit boards. Any disruptions in the supply of these components or
assemblies could delay or decrease our revenues. In addition, even for
components with multiple sources, there have been, and may continue to be,
shortages due to capacity constraints caused by high demand. In connection
with our acquisition of Ageres 802.11 WLAN systems business, we have entered
into a three-year strategic supply agreement with Agere, pursuant to which
Agere will provide us with 802.11 chips, modules and cards. Other than this
agreement, we do not have any long-term arrangements with our suppliers. If,
for any reason, a supplier fails to meet our quantity or quality requirements,
or stops selling components to us or our contract manufacturers at commercially
reasonable prices, we could experience significant production delays and cost
increases, as well as higher warranty expenses and product reputation problems.
Because the key components and assemblies of our products are complex,
difficult to manufacture and require long lead times, we may have difficulty
finding alternative suppliers to produce our components and assemblies on a
timely basis. We have experienced shortages of some of these components in the
past, which delayed related revenue, and we may experience shortages in the
future. In addition, because the majority of our products have a short sales
cycle of between 30 and 90 days, we may have difficulty in making accurate and
reliable forecasts of product needs. As a result, we could experience
shortages in supply, which could delay or decrease revenue because our
customers may cancel their orders or choose a competitor for their future
needs.

We have limited manufacturing capabilities and we will need to increasingly
depend on contract manufacturers for our manufacturing requirements.

We have limited manufacturing capability and limited experience in large
scale or foreign manufacturing. There can be no assurance that we will be able
to develop or contract for additional manufacturing capacity on acceptable
terms on a timely basis. In addition, in order to compete successfully, we
will need to achieve significant product cost reductions. Although we intend
to achieve cost reductions through engineering improvements, production
economies, and manufacturing at lower cost locations including outside the
United States, there can be no assurance that we will be able to do so. In
order to remain competitive, we must continue to introduce new products and
processes into our manufacturing environment, and there can be no assurance
that any such new products will not create obsolete inventories related to
older products. For example, as a part of our restructuring charge in the
first quarter of 2002, we increased our provision for obsolete and excess
inventory, including purchase commitments, totaling $12.7 million, of which
$7.7 million related to excess inventory and $5.0 million related to purchase
commitments. We subsequently reclassified this provision to cost of revenue
for the first quarter of 2002. The provision related to a decrease in demand
for certain products as well as our strategy to discontinue certain products in
order to concentrate on selling next generation products.

Proxim, Inc. relied on contract and subcontract manufacturers for turnkey
manufacturing and circuit board assemblies which subjects us to additional
risks, including a potential inability to obtain an adequate supply of finished
assemblies and assembled circuit boards and reduced control over the price,
timely delivery and quality of such finished assemblies and assembled circuit
boards. If our Sunnyvale facility were to become incapable of operating, even
temporarily, or were unable to operate at or near our current or full capacity
for an extended period, our business and operating results could be materially
adversely affected.

Proxim, Inc. outsourced manufacturing for its HomeRF products with
Flextronics International, Inc., a turnkey contract manufacturer. Western
Multiplex depended on three domestic contract manufacturers to produce the
majority of its products, and it depended on one of these manufacturers for the
entire production of its Tsunami point-to-multipoint product. Changes in our
manufacturing operations to incorporate new products and processes, or to
manufacture at lower cost locations outside the United States, could cause
disruptions, which, in turn, could adversely affect customer relationships,
cause a loss of market opportunities and negatively affect our business and
operating results. In addition, our reliance on a limited number of
manufacturers involves a number of risks, including the risk that these
manufacturers may terminate their relationship with us, may choose not to
devote adequate capacity to produce our products or may delay production of our
products. If any of these risks are realized, we could experience an

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interruption in supply, which could have an adverse impact on the timing
and amount our revenues. During the fourth quarter of 2002, we began to
transition manufacturing of our Tsunami point-to-multipoint products from a
domestic contract manufacturing to off-shore contract manufacturing. There can
be no assurance that we will be able to effectively transition these products,
which, in turn, could adversely affect customer relationships, cause a loss of
market opportunities and negatively affect our business and operating results.

Our reliance on contract manufacturers could subject us to additional
costs or delays in product shipments as demand for our products increases or
decreases. Some contract manufacturers have decreased their operations in
response to an overall contraction in demand for wireless networking products.
There can be no assurance that we will effectively manage our contract
manufacturers or that these manufacturers will meet our future requirements for
timely delivery of products of sufficient quality and quantity. The inability
of our contract manufacturers to provide us with adequate supplies or the loss
of a contract manufacturer would result in costs to acquire additional
manufacturing capacity and delays in shipments of our products, materially
adversely affecting our business and operating results. In addition,
cancellations in orders as a result of decreases in demand for products may
subject us to claims for damages. In this regard, we are party to disputes,
including legal actions, with a number of suppliers and vendors. These
disputes relate primarily to excess materials and order cancellation claims
that resulted from declines in demand for our products during 2001 and 2002 and
the commensurate reductions in manufacturing volumes.

We may need additional capital in the future and may not be able to secure
adequate funds on terms acceptable to us.

Our cash and investment balance declined $11.3 million in the fourth
quarter of 2002. We currently believe that our existing liquidity sources,
including our bank line of credit, will
satisfy our capital requirements for at least the next twelve months. In
December 2002 we finalized a new credit facility with Silicon Valley Bank. The
facility provides for borrowing of up to $20 million; however the facility also
requires us to maintain at least the outstanding principal plus $7.5 million on deposit with Silicon Valley
Bank. Our ability to borrow under the credit facility is subject to a number of
restrictions, as described in Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity herein. We cannot
assure you that we will have access to the credit facility. We are seeking to
renegotiate the terms of a material lease, as described in Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Liquidity. If the building owner were to terminate the lease and sue us for
breach, we would be in breach of the covenants in the credit facility, and our
borrowing rights could be limited or terminated. We may need to raise additional funds if our estimates change or prove
inaccurate or in order for us to take advantage of unanticipated opportunities
or to strengthen our financial position. Because our stock is currently
trading near historically low levels, any financing at these levels could be
significantly dilutive to existing stockholders.

Our ability to raise funds may be adversely affected by a number of
factors relating to us, as well as factors beyond our control, including
increased market uncertainty following the events of
September 11, 2001, the ongoing U.S. war on terrorism and in
Iraq as well as conditions in capital
markets. There can be no assurance that such financing will be available on
terms acceptable to us if at all.

We may be unable to achieve the manufacturing cost reductions and improvements
required in order to achieve or maintain profitability.

The average selling prices of the products of Western Multiplex, Proxim,
Inc. and Ageres WLAN systems business declined in recent years. If we do not
reduce production costs and other expenses, we may not be able to offset this
continuing decline and achieve or maintain profitability. We must also develop
and introduce on a timely basis new products that can be sold at higher average
selling prices or produced at lower costs.

Failure to decrease the cost of our products or to effectively develop new
systems would cause our revenue to decline or to increase more slowly.

We expect that average selling prices of our products will continue to
decrease because one of our strategies is to increase the percentage of
domestic and international sales being made through distributors and
value-added resellers, and to OEM customers, which involve lower prices than
our direct sales. This risk from declining average selling prices may also
intensify because we expect that market conditions, particularly falling prices
for competing broadband solutions, will force us to reduce prices over time.
Under some circumstances, we may be forced to reduce prices even if it causes
us to decrease gross profit or to take a loss on our products. We may also be
unable to reduce sufficiently the cost of our products to enable us to compete
with other broadband access technologies with lower product costs. In order to
remain competitive, we will need to design our products so that they can be
manufactured with low-cost, automated manufacturing, assembly and testing
techniques. We cannot assure you that we will be successful in designing our
products to allow contract manufacturers to use lower-cost, automated
techniques. In addition, any redesign may fail to result in sufficient cost
reductions to allow us to significantly reduce the price of our products or
prevent our gross profit from declining as prices decline.

Because many of our current and planned products are or will be highly complex,
they may contain defects or errors that are detectable only after deployment in
complex networks and which, if detected, could harm our reputation, result in
costs to us in excess of our estimates, adversely affect our operating results,
result in a decrease in revenue or result in difficulty collecting accounts
receivable.

Many of our complex products can only be fully tested when deployed in
commercial networks. As a result, end users may discover defects or errors or
experience breakdowns in their networks after the products have been deployed.
The occurrence of any defects or errors in these products, including defects or
errors in components supplied by our contract manufacturers, could result in:



| |  |  | failure to achieve market acceptance and loss of market share;
| | - |  | --------------------------------------------------------------
|
| |  |  | cancellation of orders;                                       
|
| |  |  | difficulty in collecting accounts receivable;                 
|
| |  |  | increased service and warranty costs;                         

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| |  |  | diversion of resources, legal actions by customers and end users; and      
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | increased insurance costs and other losses to our business or to end users.

If we experience warranty failure that indicate either manufacturing or
design deficiencies, we may be required to recall units in the field and or
stop producing and shipping such products until the deficiency is identified
and corrected. In the event of such warranty failures, our business could be
adversely affected resulting in reduced revenue, increased costs and decreased
customer satisfaction. Because customers often delay deployment of a full
system until the products have been tested by them and any defects have been
corrected, we expect these revisions to cause delays in orders by our customers
for our systems. Because our strategy is to introduce more complex products in
the future, this risk will intensify over time. End users have discovered
errors in our products in the past and may discover errors in our products in
the future. Recently, we have identified performance issues related to a power
supply component provided by one of our contract manufacturers. If the costs
of remediating problems experienced by our customers exceeds our warranty
reserves, these costs may adversely affect our operating results.

To compete effectively, we will need to establish and expand new distribution
channels for our point-to-point and point-to-multipoint products and 802.11
WLAN products.

Western Multiplex sold its point-to-point and point-to-multipoint products
and Agere sold its ORiNOCO products through domestic and international
distributors. We intend to add new distributors and value-added resellers for
the Tsunami point-to-multipoint products. In general, distributors,
value-added resellers and retailers offer products of several different
companies, including products that may compete with our products. Accordingly,
they may give higher priority to products of other suppliers, thus reducing our
efforts to sell our products. In addition they often focus on specific markets
and we will need to add new distributors and value-added resellers as we expand
our sales to new markets. Agreements with distributors and retailers are
generally terminable at their option. Any reduction in sales efforts or
termination of a relationship may materially and adversely affect our business
and operating results. Use of distributors and retailers also entails the risk
that they will build up inventories in anticipation of substantial growth in
sales. If such growth does not occur as anticipated, they may substantially
decrease the amount of products ordered in subsequent quarters. Such
fluctuations could contribute to significant variations in our future operating
results.

Broadband wireless access solutions have some disadvantages and limitations as
compared to other alternative broadband access solutions that may prevent
widespread adoption, which could hurt our prospects.

Broadband wireless access solutions, including point-to-point and
point-to-multipoint systems, compete with other high-speed access solutions
such as digital subscriber lines, cable modem technology, fiber optic cable and
other high-speed wire line and satellite technologies. If the market for our
point-to-point and point-to-multipoint solutions fails to develop or develops
more slowly than we expect due to this competition, our sales opportunities
will be harmed. Many of these alternative technologies can take advantage of
existing installed infrastructure and are generally perceived to be reliable
and secure. As a result, they have already achieved significantly greater
market acceptance and penetration than point-to-point and point-to-multipoint
broadband wireless access technologies. Moreover, current point-to-point and
point-to-multipoint broadband wireless access technologies have inherent
technical limitations that may inhibit their widespread adoption in many areas,
including the need for line-of-sight installation and, in the case of operating
frequencies above 11 GHz, reduced communication distance in bad weather.

We expect point-to-point and point-to-multipoint broadband wireless access
technologies to face increasing competitive pressures from both current and
future alternative technologies. In light of these factors, many service
providers may be reluctant to invest heavily in broadband wireless access
solutions.

Broadband wireless access products require a direct line-of-sight, which may
limit the ability of service providers to deploy them in a cost-effective
manner and could harm our sales.

Because of line-of-sight limitations, service providers often install
broadband wireless access equipment on the rooftops of buildings and on other
tall structures. Before undertaking these installations, service providers
must generally secure roof rights from the owners of each building or other
structure on which the equipment is to be installed. The inability to easily
and cost-effectively obtain roof rights may deter customers from choosing to
install broadband wireless access equipment, which could have an adverse effect
on our sales.

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Inability to attract and retain key personnel could hinder our ability to
operate.

Our success depends to a large extent on the continued services of Mr.
Jonathan N. Zakin, Chairman and Chief Executive Officer, Mr. Keith E. Glover, our Executive
Vice President, Chief Financial Officer and Secretary, and other members of our
senior management team. The loss of the services of any of these management
members could harm our business because of the crucial role each of them is
expected to play in our operations and strategic development. In order to be
successful, we must also retain and motivate key employees, including those in
managerial, technical, marketing and sales positions. In particular, our
product generation efforts depend on hiring and retaining qualified engineers.
Experienced management and technical, sales, marketing and support personnel in
the wireless networking industry are in high demand and competition for their
talents is intense. This is particularly the case in Silicon Valley, where our
headquarters are located. In addition, our employees may experience
uncertainty about their participation in the future of the combined company due
to the following issues relating to recent business combination transactions:
changing employee roles with respect to Proxims announced operations
strategies, the management of an increasing number of geographically dispersed
operations and the related challenges of integrating a growing number of
diverse local regulations, customs and practices. These conditions may
adversely affect our ability to attract and retain key management, technical,
sales and marketing personnel. We must also continue to motivate employees and
keep them focused on the strategies and goals of the combined company, which
may be particularly difficult due to the potential distractions of the merger
and morale challenges posed by any workforce reduction that may be implemented.

We may have difficulties with our acquisitions and investments, which could
adversely affect our growth and financial condition.

From time to time, we may consider new business opportunities and
ventures, including acquisitions, in a broad range of areas. Any decision to
pursue a significant business expansion or new business opportunity would be
accompanied by risks, including, among others:



| |  |  | requiring to invest a substantial amount of capital, which could
materially harm our financial condition and ability to implement our
existing business strategy;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | requiring to issue additional equity interests, which would be dilutive to our stockholders;                                                                     
|
| |  |  | placing additional and substantial burdens on our management personnel and financial and operational systems;                                                    
|
| |  |  | the difficulty of assimilating the operations, technology and personnel of the acquired companies;                                                               
|
| |  |  | the potential disruption of our ongoing business;                                                                                                                
|
| |  |  | the possible inability to retain key technical and managerial personnel;                                                                                         
|
| |  |  | potential additional expenses associated with amortization of purchased intangible assets or the impairment of goodwill;                                         
|
| |  |  | additional expenses associated with the activities and expansion of the acquired businesses; and                                                                 

44



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| |  |  | the possible impairment of relationships with existing employees, customers, suppliers and investors.
| | - |  | -----------------------------------------------------------------------------------------------------

In addition, we cannot assure you that we will be successful in overcoming
these risks or any other problems encountered in connection with any
acquisitions or other investments that we may make in the future.

Several of our stockholders beneficially own a significant percentage of our
Common Stock, which will allow them to significantly influence matters
requiring shareholder approval and could discourage potential acquisitions of
our company.

Following the issuances of Series A Preferred Stock and warrants to
purchase Common Stock to Warburg Pincus and Broadview Capital, assuming
conversion and exercise of these securities, these investors collectively
represent approximately 25% of our outstanding Common Stock as of December 31,
2002. Affiliates of Ripplewood Investments L.L.C. control approximately 27% of
our outstanding Common Stock on an as-converted and as-exercised basis
including dividends. These stockholders will be able to exert significant
influence over actions requiring the approval of our stockholders, including
many types of change of control transactions and any amendments to our
certificate of incorporation. The interests of these stockholders may be
different than those of other stockholders of our company. In addition, the
significant ownership percentage of these stockholders could have the effect of
delaying or preventing a change of control of our company or otherwise
discouraging a potential acquiror from obtaining control of our company.

Holders of our Series A Preferred Stock have rights that are senior to those of
our Common Stock.

Holders of our Series A Preferred Stock are entitled to receive certain
benefits not available to holders of our common stock. In particular:



| |  |  | from August 2005 through August 2007, shares of Series A Preferred
Stock will be entitled to dividends equal to 8% of their liquidation
preference per year, payable, at our election, in cash or shares of our
Common Stock valued at the then-market price;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | each share of Series A Preferred Stock will have an initial
liquidation preference of $25.00 and the liquidation preference will
bear interest at 8%, compounded semi-annually, for three years. The
liquidation preference is subject to adjustments in the event we
undertake a business combination or other extraordinary transaction, or
we are liquidated or dissolved;                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | in August 2007, we will be required to redeem all outstanding shares
of Series A Preferred Stock, if any, for cash equal to their liquidation
preference plus accrued and unpaid dividends;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | in the event of a change of control of our company, we will have the
right to convert the Series A Preferred Stock into Common Stock if upon
such conversion the holders of Series A Preferred Stock would receive
liquid securities or cash with a fair market value equal to or greater
than 110% of the liquidation preference then in effect. If the
consideration is less than 110% of the liquidation preference, we may
either modify the conversion price so that the consideration will equal
110% of the liquidation preference then in effect or repurchase the
Series A Preferred Stock for cash at 101% of the liquidation preference
then in effect. In addition, in the event of a change of control that
occurs prior to August 2005, the liquidation preference will increase as
necessary to provide for three years of accretion;
|
| |  |  | holders of Series A Preferred Stock have rights to acquire additional
shares of our capital stock or rights to purchase property in the event
of certain grants, issuance or sales;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | the conversion price of the Series A Preferred Stock, which initially
shall be approximately $3.06 per share, will be subject to customary
weighted average anti-dilution adjustments and other customary
adjustments;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | the approval of holders of a majority of the Series A Preferred Stock
is separately required to approve changes to our certificate of
incorporation or bylaws that adversely affect these holders rights, any
offer, sale or issuance of our equity or equity-linked securities
ranking senior to or equally with the Series A Preferred Stock, and any
repurchase or redemption of our equity securities (other than from an
employee, director or consultant following termination), or the
declaration or payment of any dividend on our common stock; and                                                                                                                                                                                                                                                                                      
|
| |  |  | for so long as Warburg Pincus owns at least 25% of its shares of
Series A Preferred Stock or the Common Stock issuable on conversion of
its Series A Preferred Stock and exercise of its warrants, Warburg
Pincus will have the right to nominate for                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

45



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| |  |  | election one member of our board of directors, who will sit on all major
board committees for so long as such committee membership does not
conflict with any applicable law or regulation or any listing requirements
of the Nasdaq National Market.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are obligated to register the
Series A Preferred Stock on a resale registration statement with
the Securities and Exchange Commission. We do not intend to register
the Series A Preferred Stock until after our annual meeting of
stockholders, at which time we will seek stockholder approval for an
amendment to our certificate of incorporation to increase the number
of shares of common stock authorized for issuance thereunder. To the
extent we are not able to register or maintain the effectiveness of
the resale registration statement for the Series A Preferred
Stock, we could incur substantial financial penalties.

If we fail to protect our intellectual property rights or if such rights are
not adequately protected under current law, competitors may be able to use our
technology or trademarks and this could weaken our competitive position, reduce
our revenue and increase costs.

We rely on intellectual property laws to protect our products,
developments and licenses. We also rely on confidentiality agreements with
some of our licensees and other third parties and confidentiality agreements
and policies covering our employees.

We cannot assure you that such laws and measures will provide sufficient
protection, that other companies will not develop technologies that are similar
or superior or that third parties will not copy or otherwise obtain and use our
technologies without authorization.

Possible third-party claims of infringement of proprietary rights against us
could have a material adverse effect on our business, results of operation and
financial condition.

The communications industry is characterized by a relatively high level of
litigation based on allegations of infringement of proprietary rights. There
can be no assurance that third parties will not assert infringement claims
against us, that any such assertion of infringement will not result in
litigation or that we would prevail in such litigation. Furthermore, any such
claims, with or without merit, could result in substantial cost to our business
and diversion of our personnel, require us to develop new technology or enter
into royalty or licensing arrangements. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to us, or at all. In the
event of a successful claim of infringement or misappropriation against us, and
our failure or inability to develop non-infringing technology or to license the
infringed, misappropriated or similar technology at a reasonable cost, our
business, results of operations and financial condition would be materially
adversely affected. In addition, we may be obligated to indemnify our
customers against claimed infringement of patents, trademarks, copyrights and
other proprietary rights of third parties. Any requirement to indemnify our
customers could have a material adverse effect on our business, results of
operations and financial condition.

Prior to the completion of our merger with Proxim, Inc., Proxim, Inc. commenced
United States patent infringement and International Trade Commission legal
actions against a number of its competitors, and legally remains the subject of
counter suits and patent infringement counterclaims. Should the outcome of
this patent, trade commission or any related litigation be unfavorable, we may
be required to pay damages and other expenses, or we could be enjoined from
selling certain products, which could materially and adversely affect our
business, financial condition and operating results.

Proxim, Inc.s involvement in patent and International Trade Commission
litigation with respect to alleged infringement of certain of its United States
patent rights related to direct sequence wireless local area networking
technology has resulted in, and could in the future continue to result in,
substantial costs and diversion of management resources of the combined
company. In addition, this litigation, if determined adversely to us, could
result in the payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could materially and
adversely affect our business, financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9,
2001, Proxim, Inc. filed to remove Compex from the ITC complaint as Compex
entered into an agreement with Proxim, Inc. to license these patents. Intersil
and Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

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On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc.
sought declaratory judgment for non-infringement, invalidity and
unenforceability of certain Agere patents, as well as damages for violation of
the antitrust laws of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a permanent injunction against Proxim, Inc. based on
alleged patent infringement counterclaims. On December 18, 2001, Proxim, Inc.
filed an answer and counterclaims seeking declaratory judgments for
non-infringement, invalidity and unenforceability of the four asserted Symbol
patents, injunctive and monetary relief for Symbols infringement of a Proxim,
Inc. patent, monetary relief for Symbols false patent marking, and injunctive
and monetary relief for Symbols unfair competition under the Lanham Act,
common law unfair competition and tortious interference.

On August 5, 2002, in connection with our acquisition of the 802.11 WLAN
systems business from Agere, we announced that we had entered into a
cross-license agreement with Agere whereby, in part, Agere agreed to settle the
pending patent-related litigation between the two companies.

On
March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.

We are a party to disputes, including legal actions, with a number of
suppliers and vendors. These disputes relate primarily to excess materials and
order cancellation claims that resulted from the declines in demand for our
products during 2001 and 2002 and the commensurate reductions in manufacturing
volumes. We have recorded reserves related to these disputes to the extent
that management believes that the Company is liable. We intend to vigorously
defend ourself in these matters.

The results of any litigation matters are inherently uncertain. In the
event of any adverse decision in the described legal actions or disputes, or
any other related litigation with third parties that could arise in the future
with respect to patents or other intellectual property rights relevant to our
products, we could be required to pay damages and other expenses, to cease the
manufacture, use and sale of infringing products, to expend significant
resources to develop non-infringing technology, or to obtain licenses to the
infringing technology. These matters are in the early stages of litigation
and, accordingly, we cannot make any assurance that these matters will not
materially and adversely affect our business, financial condition or operating
results.

Compliance with governmental regulations in multiple jurisdictions where we
sell our products is difficult and costly.

In the United States, we are subject to various Federal Communications
Commission, or FCC, rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio spectrum.
Our spread spectrum wireless products are certified for unlicensed operation in
the 902  928 MHz, 2.4  2.4835 GHz, 5.15  5.35 GHz and 5.725  5.825 GHz
frequency bands. Operation in these frequency bands is governed by rules set
forth in Part 15 of the FCC regulations. The Part 15 rules are designed to
minimize the probability of interference to other users of the spectrum and,
thus, accord Part 15 systems secondary status in the frequency. In the event
that there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of our products experience excessive
interference from primary users, market acceptance of our products could be
adversely affected, which could materially and

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adversely affect our business and operating results. The FCC, however,
has established certain standards that create an irrefutable presumption of
noninterference for Part 15 users and we believe that our products comply with
such requirements. There can be no assurance that the occurrence of regulatory
changes, including changes in the allocation of available frequency spectrum,
changes in the use of allocated frequency spectrum, or modification to the
standards establishing an irrefutable presumption for unlicensed Part 15 users,
would not significantly affect our operations by rendering current products
obsolete, restricting the applications and markets served by our products or
increasing the opportunity for additional competition.

The FCC
is coordinating discussions between the United States military and
the commercial wireless industry regarding the operation and
potential interference from unlicensed 5 GHz systems. These
discussions are intended to resolve the potential interference issues
without a rule change to the operation of unlicensed 5 GHz
systems. If a solution cannot be agreed upon by the parties, the FCC
could change the regulations related to the operation of unlicensed
5 GHz products. Such a change could have a material adverse
affect upon the sale of our unlicensed 5 GHz products.

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

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



| |  |  | decrease the growth of the broadband wireless industry;
| | - |  | -------------------------------------------------------
|
| |  |  | hinder our ability to conduct business internationally;
|
| |  |  | reduce our revenues;                                   
|
| |  |  | increase the costs and pricing of our products;        
|
| |  |  | increase our operating expenses; and                   
|
| |  |  | expose us to significant liabilities.                  

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

If the trading price of our common
stock does not increase, we may not be able to meet the continued
listing criteria for the Nasdaq National Market, which would
adversely affect the ability of investors to trade our common stock
and could adversely affect our business and financial condition.

On March 25, 2003, we received a
letter from The Nasdaq Stock Market, Inc. notifying us that for the
prior 30 consecutive trading days, the bid price of our common stock
had closed below the $1.00 per share minimum required for continued
inclusion on Nasdaq pursuant to Nasdaqs Marketplace Rules. In
accordance with the Marketplace Rules, the Company will be provided
180 calendar days, or until September 22, 2003, to regain
compliance with this requirement. Compliance will be achieved if the
bid price per share of our common stock closes at $1.00 per share or
greater for a minimum of ten (10) consecutive trading days prior to
September 22, 2003. If compliance with the Marketplace Rules as
currently in effect is not achieved by September 22, 2003,
Nasdaq will notify us that our stock will be delisted from the Nasdaq
National Market. In the event of such notification, we would have an
opportunity to appeal Nasdaqs determination or to apply to
transfer our common stock to The Nasdaq SmallCap Market.

We cannot assure you that we will be
able to maintain the listing of our common stock on the Nasdaq
National Market, or that we will be able to meet the listing criteria
for the Nasdaq SmallCap Market. If as a result of the application of
these listing requirements, our common stock is delisted from The
Nasdaq National Market, our common stock would become more difficult
to buy and sell. In addition, our common stock could be subject to
certain rules placing additional requirements on brokers-dealers who
sell or make a market in our securities. Consequently, if we were
removed from the Nasdaq National Market, the ability or willingness
of broker-dealers to sell or make a market in our common stock might
decline, which would adversely affect the ability of investors to
resell our common stock. In addition, our ability to secure
additional capital in financing transactions with investors might be
impacted, which would adversely affect our business and financial
condition.

The price of our Common Stock may be subject to wide fluctuation, and you may
lose all or part of your investment in our Common Stock.

The
trading prices of our common
stock has been subject to wide fluctuations, and such trend is likely to
continue with respect to the trading price of our common stock. The trading
price of our Common Stock may fluctuate in response to a number of events and
factors, including:



| |  |  | quarterly variations in revenues and operating results;                               
| | - |  | --------------------------------------------------------------------------------------
|
| |  |  | announcements of innovations and new products;                                        
|
| |  |  | strategic developments or business combinations by us or our competitors;             
|
| |  |  | changes in our expected operating expense levels;                                     
|
| |  |  | changes in financial estimates and recommendations of financial and industry analysts;
|
| |  |  | the operating and securities price performance of comparable companies; and           

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| |  |  | news reports relating to trends in the wireless communications industry.
| | - |  | ------------------------------------------------------------------------

In addition, the stock market in general, and the market prices for
wireless-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of these companies.
These broad market and industry fluctuations may influence the trading price of
our common stock. These trading price fluctuations may make it more difficult
to use our Common Stock as currency to make acquisitions that might otherwise
be advantageous, or to use stock options as a means to attract and retain
employees. In addition, you may lose all or part of your investment in our
common stock.

Provisions of our certificate of incorporation, bylaws and Delaware law could
deter takeover attempts.

Some provisions in our certificate of incorporation and bylaws could
delay, prevent or make more difficult a merger, tender offer, proxy contest or
change of control of our company despite the possibility that such transactions
may be viewed to be in the best interest of our stockholders since such
transactions could result in a higher stock price than the then-market price of
our common stock. Among other things, our certificate of incorporation and
bylaws:



| |  |  | authorize our board of directors to issue preferred stock with the
terms of each series to be fixed by the board of directors;              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | divide our board of directors into three classes so that only
approximately one-third of the total number of directors is elected each
year;
|
| |  |  | permit directors to be removed only for cause; and                                                                                          
|
| |  |  | specify advance notice requirements for stockholder proposals and director nominations.                                                     

In addition, with some exceptions, the Delaware General Corporation Law
will restrict or delay mergers and other business combinations between the
Company and any stockholder that acquires 15% or more of our voting stock.




Item 7A.Quantitative and Qualitative Disclosures About Market Risk

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements.

Interest Rate Sensitivity

We maintain a short-term investment portfolio consisting mainly of
corporate bonds purchased with an average maturity of less than one year. These
available-for-sale securities are subject to interest rate risk and will
decline in value if market interest rates increase. If market interest rates
were to increase immediately and uniformly by 10 percent from levels at
December 31, 2002, the fair value of the portfolio would decline by an
immaterial amount. We generally have the ability to hold our fixed income
investments until maturity and therefore do not expect our operating results or
cash flows to be affected to any significant degree by the effect of a sudden
change in market interest rates on our securities portfolio.

Exchange Rate Risk

We currently have operations in the United States and several countries in
South America, Europe and Asia. The functional currency of all our operations
is the U.S. dollar. Though some expenses are incurred in local currencies by
our overseas operations, substantially all of our transactions are made in U.S.
dollars, hence, we have minimal exposure to foreign currency rate fluctuations
relating to our transactions.

While we expect our international revenues to continue to be denominated
predominately in U.S. dollars, an increasing portion of our international
revenues may be denominated in foreign currencies in the future. As a result,
our operating results may become subject to significant fluctuations based upon
changes in exchange rates of certain currencies in relation to the U.S. dollar.
We will analyze our exposure to currency fluctuations and may engage in
financial hedging techniques in the future to attempt to minimize the effect of
these potential fluctuations; however, exchange rate fluctuations may adversely
affect our financial results in the future.

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Investment Risk

We are exposed to market risk as it relates to changes in the fair value
of our investments. We invest in equity investments in a public company for
business and strategic purposes and we have classified these securities as
available-for-sale. We also invest in equity instruments in a private company.
These equity investments, primarily in technology companies, are subject to
significant fluctuations in fair value due to the volatility of the stock
market and the industries in which these companies participate. As of December
31, 2002, we had unrealized gain of $307,000 which was recorded as a separate
component of stockholders equity. Our objective in managing our exposure to
stock market fluctuations is to minimize the impact of stock market declines to
our earnings and cash flows. There are, however, a number of factors beyond our
control.

Continued market volatility, as well as mergers and acquisitions, have the
potential to have a material impact on our results of operations in future
periods.

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##### Table of Contents






Item 8.Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                |  |      |    | 
|----------------------------------------------- |  | ---- | -- | 
|                                                |  | Page
|                                                |  |     
|Report of Independent Accountants               |  |      | 52 | 
|Report
of Independent Public Accountants        |  |      | 53 | 
|Consolidated Balance Sheets                     |  |      | 54 | 
|Consolidated Statements of Operations           |  |      | 55 | 
|Consolidated Statements of Stockholders Equity |  |      | 56 | 
|Consolidated Statements of Cash Flows           |  |      | 59 | 
|Notes to Consolidated Financial Statements      |  |      | 60 | 

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
Proxim Corporation (formerly Western Multiplex Corporation).

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders equity and of
cash flows present fairly, in all material respects, the financial position of
Proxim Corporation (formerly Western Multiplex Corporation) and its
subsidiaries at December 31,
2002 and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Companys management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

The
consolidated financial statements of Proxim Corporation as of December 31, 2001,
and for each of the two years in the period ended December 31, 2001, were
audited by other independent accountants who have ceased operation. Those
independent accountants expressed an unqualified opinion on those financial
statements in their report dated January 28, 2002.

As discussed above, the consolidated financial statements of Proxim
Corporation as of December 31, 2001, and for each of the two years in the
period ended December 31, 2001, were audited by other independent accountants
who have ceased operations. As described in Note 4, these consolidated
financial statements have been revised to include the transitional disclosures
required by Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, which was adopted by the Company as of January 1,
2002. We audited the transitional disclosures described in Note 4. In our
opinion, the transitional disclosures of 2001 in Note 4 are
appropriate. However, we were not engaged to audit, review, or apply any
procedures to the 2001 and 2000 consolidated financial statements of the
Company other than with respect to such disclosures and, accordingly, we do not
express an opinion or any other form of assurance on the 2001 or 2000
consolidated financial statements taken as a whole.

PricewaterhouseCoopers LLP

San Jose, California
January 24, 2003, except for Note 19, as to which the date is March 17, 2003.

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Predecessor Auditor (Arthur Andersen LLP) Opinion

The following report is a copy of a report previously issued by Arthur
Andersen LLP and has not been reissued by Arthur Andersen LLP. As discussed in
the Summary of Significant Accounting Policies note, in 2002, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). As discussed in the
Summary of Significant Accounting Policies note, the corporation has presented
the transitional disclosures for 2001 and 2000 required by SFAS No. 142. The
Arthur Andersen LLP report does not extend to these changes to the 2001 and
2000 consolidated financial statements. The adjustments to the 2001 and 2000
consolidated financial statements were reported on by Pricewaterhouse Coopers
LLP as stated in their report appearing herein.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Western Multiplex Corporation:

We have audited the accompanying consolidated balance sheets of Western
Multiplex Corporation (a Delaware corporation, formerly known as Glenayre
Western Multiplex) and subsidiaries as of December 31, 2000 and 2001, and the
related consolidated statements of operations, stockholders equity and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Western Multiplex
Corporation and subsidiaries as of December 31, 2000 and 2001, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a) is
presented for the purposes of complying with the Securities and Exchange
Commissions rules and is not a part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



| | /s/ ARTHUR ANDERSEN LLP
| | -----------------------

San Jose, California
January 28, 2002

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PROXIM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

|                                          |                           |                      |        |              |         |      |        |        |         | 
|----------------------------------------- | ------------------------- | -------------------- | ------ | ------------ | ------- | ---- | ------ | ------ | ------- | 
|                                          |                           |                      |        | December 31,
|                                          |                           |                      |        |             
|                                          |                           |                      |        | 2002         |         | 2001
|                                          |                           |                      |        |              |         |     
|ASSETS                                   
|Current assets:                           |                           |                      |        |              |         |      |        |       
|                                          | Cash and cash equivalents |                      | $      | 16,535       |         |      | $      | 16,552 |        
|                                          | Short-term investments    |                      |        | 513          |         |      |        | 6,738  |        
|                                          | Accounts receivable, net  |                      |        | 30,535       |         |      |        | 27,396 |        
|                                          | Inventory, net            |                      |        | 36,799       |         |      |        | 19,906 |        
|                                          | Other current assets      |                      |        | 4,657        |         |      |        | 2,413  |        
|                                          | Deferred tax assets       |                      |        |             |         |      |        | 8,224  |        
|                                          |                           |                      |        |              |         |      |        |       
|                                          |                           | Total current assets |        |              | 89,039  |      |        |        | 81,229  | 
|Property and equipment, net               |                           |                      | 10,110 |              |         |      | 8,776  |       
|Goodwill, net                             |                           |                      | 9,726  |              |         |      | 35,901 |       
|Intangible assets, net                    |                           |                      | 61,926 |              |         |      | 712    |       
|Deferred tax assets, long-term portion    |                           |                      |       |              |         |      | 3,125  |       
|Restricted cash and long-term investments |                           |                      | 2,489  |              |         |      | 2,084  |       
|Other long-term assets                    |                           |                      | 4,133  |              |         |      | 2,571  |       
|                                          |                           |                      |        |              |         |      |        |       
|                                          |                           | Total assets         |        | $            | 177,423 |      |        | $      | 134,398 | 
|                                          |                           |                      |        |              |         |      |        |       

|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |         |         |         | 
|--------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------------------------------------------------------------------------------------------- | -------- | ------ | ------- | - | ------- | ------- | ------- | 
|LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
|AND
STOCKHOLDERS EQUITY                                       
|Current liabilities:                                            |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                | Accounts payable                                                                                                                                                           |                            | $                                                                                              | 18,147   |        |         | $ | 7,549   |        
|                                                                | Accrued liabilities                                                                                                                                                        |                            |                                                                                                | 16,917   |        |         |   | 8,597   |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                |                                                                                                                                                                            | Total current liabilities  |                                                                                                |          | 35,064 |         |   |         | 16,146  |        
|Long-term debt                                                  |                                                                                                                                                                            |                            | 101                                                                                            |          |        |         |  |        
|Restructuring accruals, long-term portion                       |                                                                                                                                                                            |                            | 26,579                                                                                         |          |        |         |  |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                |                                                                                                                                                                            | Total liabilities          |                                                                                                |          | 61,744 |         |   |         | 16,146  |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|Commitments
and contingencies (Notes 15 and 16)                 |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                | Mandatorily redeemable convertible Preferred Stock: Series A, no par
value; authorized 5,000,000 shares: 3,000,000 shares issued and
outstanding at December 31, 2002      |                            |                                                                                                | 64,412   |        |         |   |        |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|Stockholders equity:                                           |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                | Common stock, Class A, par value $.01; authorized 200,000,000
shares: 162,328,944 and 101,325,501 shares issued and outstanding
at December 31,2002 and 2001, respectively |                            |                                                                                                | 1,623    |        |         |   | 1,013   |        
|                                                                | Common stock, Class B, par value $.01; authorized 100,000,000
shares: no shares issued and outstanding at December 31, 2002 and
2001, respectively                         |                            |                                                                                                |         |        |         |   |        |        
|                                                                | Additional paid-in capital                                                                                                                                                 |                            |                                                                                                | 335,830  |        |         |   | 159,626 |        
|                                                                | Treasury stock, at cost; 42,185,534 and 42,107,396 shares at
December 31, 2002 and 2001, respectively                                                                      |                            |                                                                                                | (21,585  | )      |         |   | (21,400 | )      
|                                                                | Deferred stock compensation                                                                                                                                                |                            |                                                                                                |         |        |         |   | (614    | )      
|                                                                | Notes receivable from stockholders                                                                                                                                         |                            |                                                                                                | (898     | )      |         |   | (918    | )      
|                                                                | Accumulated deficit                                                                                                                                                        |                            |                                                                                                | (264,010 | )      |         |   | (19,530 | )      
|                                                                | Accumulated other comprehensive income                                                                                                                                     |                            |                                                                                                | 307      |        |         |   | 75      |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                |                                                                                                                                                                            | Total stockholders equity |                                                                                                |          | 51,267 |         |   |         | 118,252 |        
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        
|                                                                |                                                                                                                                                                            |                            | Total liabilities, mandatorily redeemable convertible Preferred
Stock and stockholders equity |          | $      | 177,423 |   |         | $       | 134,398 | 
|                                                                |                                                                                                                                                                            |                            |                                                                                                |          |        |         |   |        

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PROXIM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |        |        | 
|------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | --------------------------------- | ----------- | ----------------------- | -------- | ---- | ---------- | ------ | ------- | - | ---------- | ------ | ------ | 
|                                                                                                              |                                                |                                   |             | Year Ended December 31,
|                                                                                                              |                                                |                                   |             |                        
|                                                                                                              |                                                |                                   |             | 2002                    |          | 2001 |            | 2000  
|                                                                                                              |                                                |                                   |             |                         |          |      |            |       
|Revenue, net                                                                                                  |                                                | $                                 | 144,660     |                         |          | $    | 105,730    |        |         | $ | 105,508    |       
|Cost of revenue                                                                                               |                                                |                                   | 83,685      |                         |          |      | 55,887     |        |         |   | 50,466     |       
|Provision for excess and obsolete inventory                                                                   |                                                |                                   | 12,659      |                         |          |      |           |        |         |   |           |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              |                                                | Gross profit                      |             |                         | 48,316   |      |            |        | 49,843  |   |            |        | 55,042 | 
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Operating expenses:                                                                                           |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              | Research and development                       |                                   |             | 29,159                  |          |      |            | 19,114 |         |   |            | 12,379 |       
|                                                                                                              | Selling, general and administrative            |                                   |             | 49,491                  |          |      |            | 38,603 |         |   |            | 22,531 |       
|                                                                                                              | Amortization of goodwill and intangible assets |                                   |             | 12,467                  |          |      |            | 5,440  |         |   |            | 2,382  |       
|                                                                                                              | Amortization of deferred stock compensation(*) |                                   |             | 855                     |          |      |            | 5,196  |         |   |            | 4,161  |       
|                                                                                                              | Impairment of goodwill and intangible assets   |                                   |             | 129,108                 |          |      |            | 4,331  |         |   |            |       |       
|                                                                                                              | Impairment of loan to officer                  |                                   |             | 4,500                   |          |      |            |       |         |   |            |       |       
|                                                                                                              | Restructuring charges                          |                                   |             | 43,177                  |          |      |            | 1,816  |         |   |            |       |       
|                                                                                                              | In-process research and development            |                                   |             | 16,100                  |          |      |            | 6,400  |         |   |            |       |       
|                                                                                                              | Merger costs                                   |                                   |             |                        |          |      |            | 30     |         |   |            | 185    |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              |                                                | Total operating expenses          |             |                         | 284,857  |      |            |        | 80,930  |   |            |        | 41,638 | 
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              |                                                | Income (loss) from operations     |             |                         | (236,541 | )    |            |        | (31,087 | ) |            |        | 13,404 | 
|Interest income (expense), net                                                                                |                                                |                                   | (85         | )                       |          |      | 1,393      |        |         |   | 85         |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Income (loss) before income taxes                                                                             |                                                |                                   | (236,626    | )                       |          |      | (29,694    | )      |         |   | 13,489     |       
|Income tax provision (benefit)                                                                                |                                                |                                   | 3,224       |                         |          |      | (4,096     | )      |         |   | 6,800      |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Income (loss) before extraordinary item                                                                       |                                                |                                   | (239,850    | )                       |          |      | (25,598    | )      |         |   | 6,689      |       
|Loss on early extinguishment of debt, net of income tax benefit of $241                                       |                                                |                                   |            |                         |          |      |           |        |         |   | (394       | )     
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Net income (loss)                                                                                             |                                                |                                   | (239,850    | )                       |          |      | (25,598    | )      |         |   | 6,295      |       
|Deemed Series A Preferred Stock dividend                                                                      |                                                |                                   | (2,740      | )                       |          |      |           |        |         |   |           |       
|Accretion
of Series A Preferred Stock redemption obligations                                                  |                                                |                                   | (1,890      | )                       |          |      |           |        |         |   |           |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Net income (loss) attributable to common stockholders                                                         |                                                | $                                 | (244,480    | )                       |          | $    | (25,598    | )      |         | $ | 6,295      |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Basic earnings (loss) per share                                                                               |                                                | $                                 | (2.33       | )                       |          | $    | (0.44      | )      |         | $ | 0.13       |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Diluted earnings (loss) per share                                                                             |                                                | $                                 | (2.33       | )                       |          | $    | (0.44      | )      |         | $ | 0.12       |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Shares used to compute basic earnings (loss) per share                                                        |                                                |                                   | 105,119,404 |                         |          |      | 57,559,434 |        |         |   | 47,044,568 |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|Shares used to compute diluted earnings (loss) per share                                                      |                                                |                                   | 105,119,404 |                         |          |      | 57,559,434 |        |         |   | 52,080,734 |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|(*) Amortization of deferred stock compensation was relating to
the associated expense categories as follows: |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              |                                                | Cost of revenue                   |             | $                       | 4        |      |            | $      | 23      |   |            | $      | 67     | 
|                                                                                                              |                                                | Research and development          |             |                         | 697      |      |            |        | 4,237   |   |            |        | 2,000  | 
|                                                                                                              |                                                | Sales, general and administrative |             |                         | 154      |      |            |        | 936     |   |            |        | 2,094  | 
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       
|                                                                                                              |                                                | $                                 | 855         |                         |          | $    | 5,196      |        |         | $ | 4,161      |       
|                                                                                                              |                                                |                                   |             |                         |          |      |            |        |         |   |            |       

The accompanying notes are an integral part of these consolidated financial statements.

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PROXIM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                                                                                              |  |                                                  |            |                |  |        |     |         |  |        |             |        |  |         |      |        |  |  |             |         |  |   |         |   |  |  |             |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ---------- | -------------- |  | ------ | --- | ------- |  | ------ | ----------- | ------ |  | ------- | ---- | ------ |  |  | ----------- | ------- |  | - | ------- | - |  |  | ----------- | - |  | - | ------- | -
|                                                                                                              |  | Common Stock                                     |            | Treasury Stock
|                                                                                                              |  |                                                  |            |               
|                                                                                                              |  | Class A                                          |            |                |  |        |     | Class B |  |        |             |        |  | Class A |      |        |  |  |             | Class B |  |   |         |  
|                                                                                                              |  | Shares                                           |            | Amount         |  | Shares |     | Amount  |  | Shares |             | Amount |  | Shares  |      | Amount
|                                                                                                              |  |                                                  |            |                |  |        |     |         |  |        |             |        |  |         |      |       
|                                                                                                              |  | (Dollars in thousands, except per share amounts)
|Balance as of December 31,
1999                                                                               |  |                                                  |           |                |  | $      |    |         |  |        | 80,000,000  |        |  | $       | 800  |        |  |  |            |         |  | $ |        |   |  |  | (42,000,000 | ) |  | $ | (21,000 | )
|Net income                                                                                                    |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Issuance of Class A common
stock pursuant to Employee
Stock Purchase Plan                                     |  |                                                  | 3,830,351  |                |  |        | 38  |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Conversion of Class B
common stock into Class
A common stock
immediately prior to
initial public
offering     |  |                                                  | 80,000,000 |                |  |        | 800 |         |  |        | (80,000,000 | )      |  |         | (800 | )      |  |  | (42,000,000 | )       |  |   | (21,000 | ) |  |  | 42,000,000  |   |  |   | 21,000  |  
|Issuance of Class A common
stock in connection
with Ubiquity
acquisition                                      |  |                                                  | 692,772    |                |  |        | 7   |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Stock options assumed in
connection with the
Ubiquity acquisition                                             |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Issuance of Class A common
stock in connection
with initial public
offering, net of issuance
costs of $12,460 |  |                                                  | 8,625,000  |                |  |        | 86  |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Exercise of stock
options                                                                                     |  |                                                  | 16,000     |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Exercise of warrants in
connection with the
recapitalization of the
Company                                   |  |                                                  | 4,370,000  |                |  |        | 44  |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Deferred stock
compensation                                                                                   |  |                                                  | 35,296     |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Unrealized gain on
investments                                                                                |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|                                                                                                              |  |                                                  |            |                |  |        |     |         |  |        |             |        |  |         |      |        |  |  |             |         |  |   |         |   |  |  |             |   |  |   |         |  
|Total comprehensive income                                                                                    |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|                                                                                                              |  |                                                  |            |                |  |        |     |         |  |        |             |        |  |         |      |        |  |  |             |         |  |   |         |   |  |  |             |   |  |   |         |  
|Note receivables
from stockholders                                                                            |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|                                                                                                              |  |                                                  |            |                |  |        |     |         |  |        |             |        |  |         |      |        |  |  |             |         |  |   |         |   |  |  |             |   |  |   |         |  
|Balance sheet as of December
31, 2000                                                                         |  |                                                  | 97,569,419 |                |  |        | 975 |         |  |        |            |        |  |         |     |        |  |  | (42,000,000 | )       |  |   | (21,000 | ) |  |  |            |   |  |   |        |  
|Net loss                                                                                                      |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Issuance of Class A common
stock pursuant to
Employee Stock Purchase
Plan                                     |  |                                                  | 130,266    |                |  |        | 1   |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Issuance of Class A common
stock in connection with
the WirelessHome
acquisition                              |  |                                                  | 1,649,324  |                |  |        | 16  |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  
|Stock options and warrants
assumed in connection
with the WirelessHome
acquisition                            |  |                                                  |           |                |  |        |    |         |  |        |            |        |  |         |     |        |  |  |            |         |  |   |        |   |  |  |            |   |  |   |        |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |               |         |         |  |             |    |  |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | ----- |  | ------------- | ------- | ------- |  | ----------- | -- |  |  | - | ------- | - |  | - | ------- | -
|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |               |         |         |  | Accumulated |    |  |  |   |         |   |  |  
|                                                                                                              |  |                                                  |         |         |  | Deferred     |        | Notes        |  | Retained     |        | Other |  |               |         |         |  |             |    | 
|                                                                                                              |  | Additional                                       |         | Stock   |  | Receivable   |        | Earnings     |  | Compre-      |        |       |  |               |         | Compre-
|                                                                                                              |  | Paid-In                                          |         | Compen- |  | from         |        | (Accumulated |  | hensive      |        |       |  |               |         | hensive
|                                                                                                              |  | Capital                                          |         | sation  |  | Stockholders |        | Deficit)     |  | Income(loss) |        | Total |  | Income (Loss)
|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |              
|                                                                                                              |  | (Dollars in thousands, except per share amounts)
|Balance as of December 31,
1999                                                                               |  | $                                                | 31,433  |         |  | $            |       |              |  | $            |       |       |  | $             | (227    | )       |  | $           |   |  |  | $ | 11,006  |   |  | $ |        |  
|Net income                                                                                                    |  |                                                  |        |         |  |              |       |              |  |              |       |       |  |               | 6,295   |         |  |             |   |  |  |   | 6,295   |   |  |   | 6,295   |  
|Issuance of Class A common
stock pursuant to Employee
Stock Purchase Plan                                     |  |                                                  | 1,879   |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 1,917   |   |  |   |        |  
|Conversion of Class B
common stock into Class
A common stock
immediately prior to
initial public
offering     |  |                                                  |        |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   |        |   |  |   |        |  
|Issuance of Class A common
stock in connection
with Ubiquity
acquisition                                      |  |                                                  | 5,535   |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 5,542   |   |  |   |        |  
|Stock options assumed in
connection with the
Ubiquity acquisition                                             |  |                                                  | 834     |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 834     |   |  |   |        |  
|Issuance of Class A common
stock in connection
with initial public
offering, net of issuance
costs of $12,460 |  |                                                  | 91,040  |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 91,126  |   |  |   |        |  
|Exercise of stock
options                                                                                     |  |                                                  | 8       |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 8       |   |  |   |        |  
|Exercise of warrants in
connection with the
recapitalization of the
Company                                   |  |                                                  | 2,141   |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 2,185   |   |  |   |        |  
|Deferred stock
compensation                                                                                   |  |                                                  | 8,471   |         |  |              | (4,310 | )            |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 4,161   |   |  |   |        |  
|Unrealized gain on
investments                                                                                |  |                                                  |        |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             | 12 |  |  |   | 12      |   |  |   | 12      |  
|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |               |         |         |  |             |    |  |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                    |  |                                                  |        |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   |        |   |  | $ | 6,307   |  
|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |               |         |         |  |             |    |  |  |   |         |   |  |   |         |  
|Note receivables
from stockholders                                                                            |  |                                                  |        |         |  |              |       |              |  |              | (1,062 | )     |  |               |        |         |  |             |   |  |  |   | (1,062  | ) |  |   |         |  
|                                                                                                              |  |                                                  |         |         |  |              |        |              |  |              |        |       |  |               |         |         |  |             |    |  |  |   |         |   |  |   |         |  
|Balance sheet as of December
31, 2000                                                                         |  |                                                  | 141,341 |         |  |              | (4,310 | )            |  |              | (1,062 | )     |  |               | 6,068   |         |  |             | 12 |  |  |   | 122,024 |   |  | $ |        |  
|Net loss                                                                                                      |  |                                                  |        |         |  |              |       |              |  |              |       |       |  |               | (25,598 | )       |  |             |   |  |  |   | (25,598 | ) |  |   | (25,598 | )
|Issuance of Class A common
stock pursuant to
Employee Stock Purchase
Plan                                     |  |                                                  | 1,284   |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 1,285   |   |  |   |        |  
|Issuance of Class A common
stock in connection with
the WirelessHome
acquisition                              |  |                                                  | 12,089  |         |  |              |       |              |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 12,105  |   |  |   |        |  
|Stock options and warrants
assumed in connection
with the WirelessHome
acquisition                            |  |                                                  | 665     |         |  |              | (323   | )            |  |              |       |       |  |               |        |         |  |             |   |  |  |   | 342     |   |  |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.

56



---



##### Table of Contents



PROXIM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  (Continued)



|                                                                                        |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |  |         |   |  |  |   |  |  |  |   | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----------- | -------------- |  | ------ | ----- | ------- |  | ------ | - | ------ |  | ------- | - | ------ |  |  | ----------- | ------- |  |  | ------- | - |  |  | - |  |  |  | - | 
|                                                                                        |  | Common Stock                                     |             | Treasury Stock
|                                                                                        |  |                                                  |             |               
|                                                                                        |  | Class A                                          |             |                |  |        |       | Class B |  |        |   |        |  | Class A |   |        |  |  |             | Class B |  |  |         |  
|                                                                                        |  | Shares                                           |             | Amount         |  | Shares |       | Amount  |  | Shares |   | Amount |  | Shares  |   | Amount
|                                                                                        |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |       
|                                                                                        |  | (Dollars in thousands, except per share amounts)
|Common stock redemption
related to
WirelessHome
acquisition                             |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  | (107,396    | )       |  |  | (400    | ) |  |  |  |  |  |  |  | 
|Stock price protection
contingent consideration
related to the
WirelessHome
acquisition |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Deferred stock compensation
related to WirelessHome
acquisition                         |  |                                                  | 558,950     |                |  |        | 6     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Compensation expense in
connection with
employees stock forward
sale agreements        |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Exercise of stock
options                                                               |  |                                                  | 1,328,782   |                |  |        | 14    |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Other deferred stock
compensation                                                       |  |                                                  | 88,760      |                |  |        | 1     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Reversal of deferred
compensation in
connection with
termination
employees              |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Amortization of deferred
stock compensation                                             |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Unrealized gain on
investments                                                          |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|                                                                                        |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |  |         |   |  |  |   |  |  |  |   | 
|Total comprehensive loss                                                                |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|                                                                                        |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |  |         |   |  |  |   |  |  |  |   | 
|Note receivables
from stockholders                                                      |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|                                                                                        |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |  |         |   |  |  |   |  |  |  |   | 
|Balance as of December 31,
2001                                                         |  |                                                  | 101,325,501 |                |  |        | 1,013 |         |  |        |  |        |  |         |  |        |  |  | (42,107,396 | )       |  |  | (21,400 | ) |  |  |  |  |  |  |  | 
|Net loss                                                                                |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Issuance of Class A common
stock pursuant to
Employee Stock Purchase
Plan               |  |                                                  | 247,556     |                |  |        | 2     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Issuance of Class A common
stock in connection with
Proxim, Inc.
acquisition            |  |                                                  | 59,506,503  |                |  |        | 595   |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Stock options and warrants
assumed in connection
with Proxim, Inc.
acquisition          |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 
|Issuance of Class A common
stock in connection with
nBand Communications
acquisition    |  |                                                  | 180,144     |                |  |        | 2     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |  |        |   |  |  |  |  |  |  |  | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  |             |    |  |  |  |          |   |  |   |          |   |  |  |  | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ------- |  | ------------ | ------ | ------------ |  | ------------- | ---- | ----- |  | ------------- | -------- | ------- |  | ----------- | -- |  |  |  | -------- | - |  | - | -------- | - |  |  |  | 
|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  | Accumulated |    |  |  |  |          |   |  |   |          |   |  | 
|                                                                                        |  |                                                  |         |         |  | Deferred     |        | Notes        |  | Retained      |      | Other |  |               |          |         |  |             |    |  |  |  |          |  
|                                                                                        |  | Additional                                       |         | Stock   |  | Receivable   |        | Earnings     |  | Compre-       |      |       |  |               |          | Compre- |  |             |    | 
|                                                                                        |  | Paid-in                                          |         | Compen- |  | from         |        | (Accumulated |  | hensive       |      |       |  |               |          | hensive |  |             |    | 
|                                                                                        |  | Capital                                          |         | sation  |  | Stockholders |        | Deficit)     |  | Income (Loss) |      | Total |  | Income (loss) |          |         |  |            
|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  |            
|                                                                                        |  | (Dollars in thousands, except per share amounts) |         |         |  |             
|Common stock redemption
related to
WirelessHome
acquisition                             |  |                                                  |        |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | (400     | ) |  |   |         |   |  |  |  | 
|Stock price protection
contingent consideration
related to the
WirelessHome
acquisition |  |                                                  | 2,519   |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 2,519    |   |  |   |         |   |  |  |  | 
|Deferred stock compensation
related to WirelessHome
acquisition                         |  |                                                  | 2,198   |         |  |              | (2,204 | )            |  |               |     |       |  |               |         |         |  |             |   |  |  |  |         |   |  |   |         |   |  |  |  | 
|Compensation expense in
connection with
employees stock forward
sale agreements        |  |                                                  | 191     |         |  |              | (191   | )            |  |               |     |       |  |               |         |         |  |             |   |  |  |  |         |   |  |   |         |   |  |  |  | 
|Exercise of stock
options                                                               |  |                                                  | 726     |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 740      |   |  |   |         |   |  |  |  | 
|Other deferred stock
compensation                                                       |  |                                                  | 363     |         |  |              | (532   | )            |  |               |     |       |  |               |         |         |  |             |   |  |  |  | (168     | ) |  |   |         |   |  |  |  | 
|Reversal of deferred
compensation in
connection with
termination
employees              |  |                                                  | (1,750  | )       |  |              | 1,750  |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  |         |   |  |   |         |   |  |  |  | 
|Amortization of deferred
stock compensation                                             |  |                                                  |        |         |  |              | 5,196  |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 5,196    |   |  |   |         |   |  |  |  | 
|Unrealized gain on
investments                                                          |  |                                                  |        |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             | 63 |  |  |  | 63       |   |  |   | 63       |   |  |  |  | 
|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  |             |    |  |  |  |          |   |  |   |          |   |  |  |  | 
|Total comprehensive loss                                                                |  |                                                  |        |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  |         |   |  | $ | (25,535  | ) |  |  |  | 
|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  |             |    |  |  |  |          |   |  |   |          |   |  |  |  | 
|Note receivables
from stockholders                                                      |  |                                                  |        |         |  |              |       |              |  |               | 144  |       |  |               |         |         |  |             |   |  |  |  | 144      |   |  |   |          |   |  |  |  | 
|                                                                                        |  |                                                  |         |         |  |              |        |              |  |               |      |       |  |               |          |         |  |             |    |  |  |  |          |   |  |   |          |   |  |  |  | 
|Balance as of December 31,
2001                                                         |  |                                                  | 159,626 |         |  |              | (614   | )            |  |               | (918 | )     |  |               | (19,530  | )       |  |             | 75 |  |  |  | 118,252  |   |  | $ |         |   |  |  |  | 
|Net loss                                                                                |  |                                                  |        |         |  |              |       |              |  |               |     |       |  |               | (239,850 | )       |  |             |   |  |  |  | (239,850 | ) |  |   | (239,850 | ) |  |  |  | 
|Issuance of Class A common
stock pursuant to
Employee Stock Purchase
Plan               |  |                                                  | 575     |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 577      |   |  |   |         |   |  |  |  | 
|Issuance of Class A common
stock in connection with
Proxim, Inc.
acquisition            |  |                                                  | 132,700 |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 133,295  |   |  |   |         |   |  |  |  | 
|Stock options and warrants
assumed in connection
with Proxim, Inc.
acquisition          |  |                                                  | 25,294  |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 25,294   |   |  |   |         |   |  |  |  | 
|Issuance of Class A common
stock in connection with
nBand Communications
acquisition    |  |                                                  | 448     |         |  |              |       |              |  |               |     |       |  |               |         |         |  |             |   |  |  |  | 450      |   |  |   |         |   |  |  |  | 

The accompanying notes are an integral part of these consolidated financial statements.

57



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##### Table of Contents



PROXIM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  (Continued)



|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |   |         |   |  |  |   |  |  |   |   | 
|------------------------------------------------------------------------------------------ |  | ------------------------------------------------ | ----------- | -------------- |  | ------ | ----- | ------- |  | ------ | - | ------ |  | ------- | - | ------ |  |  | ----------- | ------- |  | - | ------- | - |  |  | - |  |  | - | - | 
|                                                                                           |  | Common Stock                                     |             | Treasury Stock
|                                                                                           |  |                                                  |             |               
|                                                                                           |  | Class A                                          |             |                |  |        |       | Class B |  |        |   |        |  | Class A |   |        |  |  |             | Class B |  |   |         |  
|                                                                                           |  | Shares                                           |             | Amount         |  | Shares |       | Amount  |  | Shares |   | Amount |  | Shares  |   | Amount
|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |       
|                                                                                           |  | (Dollars in thousands, except per share amounts)
|Issuance of Series A preferred
stock Warrants                                              |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Deemed Series A Preferred
Stock dividend                                                   |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Accretion of Series A Preferred
Stock redemption value                                     |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Common Stock repurchase
related to stock forward sale
agreements                           |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  | (78,138     | )       |  |   | (185    | ) |  |  |  |  |  |   |  | 
|Compensation expense in
connection with
employees stock forward
sale agreements           |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Issuance of Class A
Common Stock in connection
with achievement of
Card Access milestones  |  |                                                  | 302,328     |                |  |        | 3     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Issuance of Class A
Common Stock in connection
with achievement of
WirelessHome milestones |  |                                                  | 83,330      |                |  |        | 1     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Exercise of stock
options                                                                  |  |                                                  | 683,582     |                |  |        | 7     |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Amortization of deferred
stock compensation                                                |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Unrealized gain on
investments                                                             |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |   |         |   |  |  |   |  |  |   |   | 
|Total comprehensive loss                                                                   |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |   |         |   |  |  |   |  |  |   |   | 
|Repayment of notes receivable
from stockholders                                            |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|Reversal of deferred tax
asset recognized upon
recapitalization and related
tax election   |  |                                                  |            |                |  |        |      |         |  |        |  |        |  |         |  |        |  |  |            |         |  |   |        |   |  |  |  |  |  |   |  | 
|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |   |         |   |  |  |   |  |  |   |   | 
|Balance as of December 31,
2002                                                            |  |                                                  | 162,328,944 |                |  | $      | 1,623 |         |  |        |  |        |  |         |  |        |  |  | (42,185,534 | )       |  | $ | (21,585 | ) |  |  |  |  |  | $ |  | 
|                                                                                           |  |                                                  |             |                |  |        |       |         |  |        |   |        |  |         |   |        |  |  |             |         |  |   |         |   |  |  |   |  |  |   |   | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  |             |     |  |  |   |        |   |  |  |          |  
|------------------------------------------------------------------------------------------ |  | ------------------------------------------------ | ------- | ------- |  | ------------ | ---- | ------------ |  | ------------ | ---- | ----- |  | ------ | -------- | ------- |  | ----------- | --- |  |  | - | ------ | - |  |  | -------- | -
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  | Accumulated |     |  |  |   |        |   |  | 
|                                                                                           |  |                                                  |         |         |  | Deferred     |      | Notes        |  | Retained     |      | Other |  |        |          |         |  | Compre-    
|                                                                                           |  | Additional                                       |         | Stock   |  | Receivable   |      | Earnings     |  | Compre-      |      |       |  |        |          | hensive
|                                                                                           |  | Paid-in                                          |         | Compen- |  | from         |      | (Accumulated |  | hensive      |      |       |  |        |          | Income 
|                                                                                           |  | Total                                            |         | sation  |  | Stockholders |      | Deficit)     |  | Income(Loss) |      | Total |  | (loss)
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |       
|                                                                                           |  | (Dollars in thousands, except per share amounts)
|Issuance of Series A preferred
stock Warrants                                              |  |                                                  | 13,993  |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | 13,993 |   |  |  |         |  
|Deemed Series A Preferred
Stock dividend                                                   |  |                                                  | 2,740   |         |  |              |     |              |  |              |     |       |  |        | (2,740   | )       |  |             |    |  |  |   |       |   |  |  |         |  
|Accretion of Series A Preferred
Stock redemption value                                     |  |                                                  | (1,046  | )       |  |              |     |              |  |              |     |       |  |        | (1,890   | )       |  |             |    |  |  |   | (2,936 | ) |  |  |         |  
|Common Stock repurchase
related to stock forward sale
agreements                           |  |                                                  | (433    | )       |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | (618   | ) |  |  |         |  
|Compensation expense in
connection with
employees stock forward
sale agreements           |  |                                                  | 241     |         |  |              | (241 | )            |  |              |     |       |  |        |         |         |  |             |    |  |  |   |       |   |  |  |         |  
|Issuance of Class A
Common Stock in connection
with achievement of
Card Access milestones  |  |                                                  | (3      | )       |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   |       |   |  |  |         |  
|Issuance of Class A
Common Stock in connection
with achievement of
WirelessHome milestones |  |                                                  | 36      |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | 37     |   |  |  |         |  
|Exercise of stock
options                                                                  |  |                                                  | 384     |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | 391    |   |  |  |         |  
|Amortization of deferred
stock compensation                                                |  |                                                  |        |         |  |              | 855  |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | 855    |   |  |  |         |  
|Unrealized gain on
investments                                                             |  |                                                  |        |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             | 232 |  |  |   | 232    |   |  |  | 232      |  
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  |             |     |  |  |   |        |   |  |  |          |  
|Total comprehensive loss                                                                   |  |                                                  |        |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   |       |   |  |  | (239,618 | )
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  |             |     |  |  |   |        |   |  |  |          |  
|Repayment of notes receivable
from stockholders                                            |  |                                                  |        |         |  |              |     |              |  |              | 20   |       |  |        |         |         |  |             |    |  |  |   | 20     |   |  |  |          |  
|Reversal of deferred tax
asset recognized upon
recapitalization and related
tax election   |  |                                                  | 1,275   |         |  |              |     |              |  |              |     |       |  |        |         |         |  |             |    |  |  |   | 1,275  |   |  |  |          |  
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  |             |     |  |  |   |        |   |  |  |          |  
|Balance as of December 31,
2002                                                            |  | $                                                | 335,830 |         |  | $            |     |              |  | $            | (898 | )     |  | $      | (264,010 | )       |  | $           | 307 |  |  | $ | 51,267 |   |  |  |          |  
|                                                                                           |  |                                                  |         |         |  |              |      |              |  |              |      |       |  |        |          |         |  |             |     |  |  |   |        |   |  |  |          |  

The accompanying notes are an integral part of these consolidated financial statements.

58



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##### Table of Contents



PROXIM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |         |       |         |         |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------------------------------------------------- | ---------------------------------------- | ----------------------------------------- | ------- | ----------------------- | ------- | ------- | ------ | ------ | ------- | ------- | ----- | ------- | ------- | -
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         | Year Ended December 31,
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                        
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         | 2002                    |         | 2001    |        | 2000  
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |       
|Cash flows from operating activities:                                                         |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              | Net income (loss)                                                                    |                                                                            | $                                        | (239,850                                  | )       |                         | $       | (25,598 | )      |        | $       | 6,295   |      
|                                                                                              | Adjustments to reconcile net income (loss) to net cash used in
operating activities: |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |         |      
|                                                                                              |                                                                                      | Deferred tax assets                                                        |                                          |                                           | 12,624  |                         |         |         | (6,211 | )      |         |         | (199  | )      
|                                                                                              |                                                                                      | Depreciation and amortization                                              |                                          |                                           | 17,215  |                         |         |         | 12,692 |        |         |         | 8,345 |        
|                                                                                              |                                                                                      | Impairment of goodwill and other intangible assets                         |                                          |                                           | 129,108 |                         |         |         | 4,331  |        |         |         |      |        
|                                                                                              |                                                                                      | Impairment of loan to officer                                              |                                          |                                           | 4,500   |                         |         |         |       |        |         |         |      |        
|                                                                                              |                                                                                      | In-process research and development                                        |                                          |                                           | 16,100  |                         |         |         |       |        |         |         |      |        
|                                                                                              |                                                                                      | Accrued interest on convertible notes payable                              |                                          |                                           | 469     |                         |         |         |       |        |         |         |      |        
|                                                                                              |                                                                                      | Provision for excess and obsolete inventory                                |                                          |                                           | 12,659  |                         |         |         | 6,400  |        |         |         |      |        
|                                                                                              |                                                                                      | Provision for bad debts, sales returns and price protection                |                                          |                                           |        |                         |         |         | 7,331  |        |         |         | 618   |        
|                                                                                              |                                                                                      | Provision for restructuring charges                                        |                                          |                                           | 43,177  |                         |         |         | 1,816  |        |         |         |      |        
|                                                                                              |                                                                                      | Changes in assets and liabilities, net of effect of business
combinations: |                                          |                                           |         |                         |         |         |        |        |         |         |       |        
|                                                                                              |                                                                                      |                                                                            | Accounts receivable, net                 |                                           |         | 5,775                   |         |         |        | (435   | )       |         |       | (26,080 | )      
|                                                                                              |                                                                                      |                                                                            | Inventory, net                           |                                           |         | (11,188                 | )       |         |        | (8,957 | )       |         |       | (5,406  | )      
|                                                                                              |                                                                                      |                                                                            | Other assets                             |                                           |         | (5,156                  | )       |         |        | 2,433  |         |         |       | (6,921  | )      
|                                                                                              |                                                                                      |                                                                            | Accounts payable and accrued liabilities |                                           |         | (12,890                 | )       |         |        | (5,748 | )       |         |       | 11,616  |        
|                                                                                              |                                                                                      |                                                                            | Payable to parent company                |                                           |         |                        |         |         |        | (35    | )       |         |       | (1,374  | )      
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              |                                                                                      |                                                                            |                                          | Net cash used in operating activities     |         |                         | (27,457 | )       |        |        | (11,981 | )       |       |         | (13,106 | )
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Cash flows from investing activities:                                                         |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              | Purchase of property and equipment                                                   |                                                                            | (3,556                                   | )                                         |         |                         | (4,812  | )       |        |        | (3,804  | )      
|                                                                                              | Purchase of investment securities                                                    |                                                                            |                                          |                                          |         |                         |         | (10,771 | )      |        |         | (23,632 | )    
|                                                                                              | Sale of short-term investments                                                       |                                                                            |                                          | 7,043                                     |         |                         |         | 25,659  |        |        |         | 1,497   |      
|                                                                                              | Restricted cash                                                                      |                                                                            |                                          |                                          |         |                         |         |        |        |        |         | (1,500  | )    
|                                                                                              | Net cash used in acquisitions                                                        |                                                                            |                                          | (51,454                                   | )       |                         |         | (12,666 | )      |        |         |        |      
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              |                                                                                      |                                                                            |                                          | Net cash used in investing activities     |         |                         | (47,967 | )       |        |        | (2,590  | )       |       |         | (27,439 | )
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Cash flows from financing activities:                                                         |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              | Repayment of long-term debt                                                          |                                                                            |                                          |                                          |         |                         |         | (1,703  | )      |        |         | (21,972 | )    
|                                                                                              | Repayment of line of credit                                                          |                                                                            |                                          |                                          |         |                         |         |        |        |        |         | (2,476  | )    
|                                                                                              | Proceeds from repayments of notes receivable from
stockholders                       |                                                                            |                                          | 20                                        |         |                         |         | 144     |        |        |         | (1,062  | )    
|                                                                                              | Proceeds from issuance of Series A Preferred Stock                                   |                                                                            |                                          | 41,000                                    |         |                         |         |        |        |        |         |        |      
|                                                                                              | Proceeds from issuance of convertible promissory notes                               |                                                                            |                                          | 34,000                                    |         |                         |         |        |        |        |         |        |      
|                                                                                              | Issuance of Common Stock, net                                                        |                                                                            |                                          | 1,005                                     |         |                         |         | 1,988   |        |        |         | 95,236  |      
|                                                                                              | Purchase of treasury stock                                                           |                                                                            |                                          | (618                                      | )       |                         |         | (400    | )      |        |         |        |      
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              |                                                                                      |                                                                            |                                          | Net cash provided by financing activities |         |                         | 75,407  |         |        |        | 29      |         |       |         | 69,726  |  
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Net increase (decrease) in cash and cash equivalents                                          |                                                                                      |                                                                            | (17                                      | )                                         |         |                         | (14,542 | )       |        |        | 29,181  |        
|Cash and cash equivalents at beginning of year                                                |                                                                                      |                                                                            | 16,552                                   |                                           |         |                         | 31,094  |         |        |        | 1,913   |        
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Cash and cash equivalents at end of year                                                      |                                                                                      | $                                                                          | 16,535                                   |                                           |         | $                       | 16,552  |         |        | $      | 31,094  |        
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Supplemental disclosures:                                                                     |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|                                                                                              | Cash paid (received) during the year for:                                            |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |         |      
|                                                                                              |                                                                                      |                                                                            | Income taxes                             |                                           | $       | (7,935                  | )       |         | $      | 2,038  |         |         | $     | 7,740   |        
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Non-cash transactions:                                                                        |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        
|Issuance of common stock and stock options assumed in connection
with merger and acquisitions |                                                                                      | $                                                                          | 159,039                                  |                                           |         | $                       | 12,061  |         |        | $      | 6,376   |        
|                                                                                              | Restructuring charges                                                                |                                                                            | $                                        | 2,450                                     |         |                         | $       | 226     |        |        | $       |        |      
|                                                                                              | Provision for excess and obsolete inventory                                          |                                                                            | $                                        | 7,686                                     |         |                         | $       |        |        |        | $       |        |      
|                                                                                              | Accretion
of Series A Preferred Stock redemption obligations                         |                                                                            | $                                        | 2,936                                     |         |                         | $       |        |        |        | $       |        |      
|                                                                                              | Warrants issued in connection with Series A Preferred Stock                          |                                                                            | $                                        | 13,993                                    |         |                         | $       |        |        |        | $       |        |      
|                                                                                              | Deemed preferred stock dividend                                                      |                                                                            | $                                        | 2,740                                     |         |                         | $       |        |        |        | $       |        |      
|                                                                                              | Conversion of promissory notes into Series A Preferred Stock                         |                                                                            | $                                        | 34,000                                    |         |                         | $       |        |        |        | $       |        |      
|                                                                                              | Accrued interest on convertible notes payable in Preferred Stock                     |                                                                            | $                                        | 469                                       |         |                         | $       |        |        |        | $       |        |      
|                                                                                              |                                                                                      |                                                                            |                                          |                                           |         |                         |         |         |        |        |         |        

The accompanying notes are an integral part of these condensed consolidated financial statements.

59



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##### Table of Contents



PROXIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1  The Company

Proxim Corporation (the Company) is the company created by the merger of
Proxim, Inc. and Western Multiplex Corporation, or Western Multiplex, on March
26, 2002. Western Multiplex merged with Proxim, Inc. located in Sunnyvale,
California which designs, manufactures and markets high performance wireless
local area networking, or WLAN, and building-to-building network products based
on radio frequency, or RF, technology and changed its name to Proxim
Corporation. On August 5, 2002, the Company completed the acquisition of the
802.11 WLAN systems business of Agere Systems, Inc., or Agere, including its
ORiNOCO product line. The results of operations for the year ended December
31, 2002 include the financial results of the former Western Multiplex for the
period from January 1, 2002 to December 31, 2002, the results of the former
Proxim, Inc. for the period from March 27, 2002 to December 31, 2002, and the
results of the 802.11 WLAN systems business of Agere for the period from August
6, 2002 to December 31, 2002, in accordance with accounting principles
generally accepted in the United States of America. Western Multiplex was
founded in 1979 in Sunnyvale, California, as a vendor of radio components and
related services. In 1992, Western Multiplex changed its strategy, and became a
designer and manufacturer of broadband wireless systems and launched its Lynx
broadband wireless systems. These point-to-point systems are primarily used by
wireless operators to connect their base stations to other base stations and to
existing wire line networks. In 1999, Western Multiplex introduced its Tsunami
point-to-point broadband wireless systems, which primarily enable service
providers, businesses and other enterprises to expand or establish private
networks by bridging data and voice network traffic among multiple facilities.
Based on Western Multiplexs core technologies and the technology acquired
through its purchase of WirelessHome Corporation, or WirelessHome, in March
2001, Western Multiplex developed point-to-multipoint systems designed to
enable service providers, businesses and other enterprises to connect multiple
facilities within a geographic area to a central hub. Western Multiplex began
shipping its first generation of these products at the end of the fourth
quarter of 2001.

Risks and Uncertainties

The Company depends on single or limited source suppliers for several key
components used in the Companys products. Proxim, Inc. and Agere depended on single
sources for the Companys proprietary application specific integrated circuits, or ASICs,
and assembled circuit boards. Any disruptions in the supply of these
components or assemblies could delay or decrease our revenues. In addition,
even for components with multiple sources, there have been, and may continue to
be, shortages due to capacity constraints caused by high demand. In connection
with the Companys acquisition of Ageres 802.11 WLAN systems business, we have
entered into a three-year strategic supply agreement with Agere, pursuant to
which Agere will provide the Company with 802.11 chips, modules and cards.
Other than this agreement, we do not have any long-term arrangements with the
Companys suppliers.

The Company relies on contract and subcontract manufacturers for turnkey
manufacturing and circuit board assemblies which subjects the Company to
additional risks, including a potential inability to obtain an adequate supply
of finished assemblies and assembled circuit boards and reduced control over
the price, timely delivery and quality of such finished assemblies and
assembled circuit boards. If the Companys Sunnyvale facility were to become
incapable of operating, even temporarily, or were unable to operate at or near
the Companys current or full capacity for an extended period, the Companys
business and operating results could be materially adversely affected.

The
Company believes that its existing cash balances, anticipated cash
flows from operations and available line of credit will be sufficient
to meet its anticipated capital requirements for the next
12 months. If the Company has a need for additional capital
resources, the Company may be required to sell additional equity or
debt securities, secure additional lines of credit or obtain other
third party financing. The timing and amount of such capital
requirements cannot be determined at this time and will depend on a
number of factors, including demand for the Companys existing
and new products, and changes in the Companys industry. There
can be no assurance that such additional financing will be available
on satisfactory terms when needed, if at all. To the extent that
additional capital is raised through the sale of additional equity or
convertible debt securities, the issuance of such securities would
result in additional dilution to the Companys stockholders. In
addition, failure to raise such additional financing, if needed, may
result in the Company not being able to achieve its long-term
business objectives.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America with the instructions to Form 10-K.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates and such differences may be material to the
financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of Proxim
Corporation and all of its subsidiaries. The financial condition and results of
operations as of and for the years ended December 31, 2002, 2001 and 2000
include the results of acquired

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subsidiaries from their respective dates of acquisition. All significant
intercompany transactions and balances are eliminated in consolidation.

Note 2  Summary of Significant Accounting Policies

Cash, Cash Equivalents and Marketable Securities

The Company considers all highly liquid instruments with an original
maturity, or remaining maturity at the date of purchase of three months or less
when purchased to be cash equivalents. Cash equivalents consist primarily of
market rate accounts and highly rated commercial paper that are stated at cost,
which approximate fair value. Investments with maturities greater than three
months and less than one year as of the date of the balance sheet are
classified as marketable securities. Marketable securities consist of time
deposits with original maturities greater than three months and less than one
year and corporate debt obligations. Investments with maturities greater than
one year are classified as marketable securities, long-term. Marketable
securities are classified as available-for-sale as of the balance sheet date in
accordance with Statement of Financial Accounting Standard, or SFAS, No. 115,
Accounting for Certain Investments in Debt and Equity Securities, and are
reported at fair value, with unrealized gains and losses recorded as other
comprehensive income (loss) included in stockholders equity.

Other Financial Instruments

In addition to cash equivalents and marketable securities, the Companys
financial instruments include restricted cash and long-term investments and
accounts payable, which are carried at cost. Restricted cash and long-term
investments represent funds held as financial institutions as collateral on an
irrevocable standby letter of credit and as a security deposit for lease
agreements. This approximates the fair value.

Equity Investments

Equity investments representing ownership of less than 20% of the investee
in which the Company does not have the ability to exert significant influence
are accounted for using the cost method. The Company reviews its investments on
a regular basis and considers factors including the operating results,
available evidence of the market value and economic outlook of the relevant
industry sector. When the Company concludes that an other-than-temporary
impairment has resulted, the difference between the fair value and the carrying
value is written off and recorded as an impairment charge in the statement of
operations.

Inventories

Inventories are stated at the lower of cost or market, cost being
determined using the first in, first out method, less provisions made for
excess and obsolete inventory based on managements estimates.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets, ranging from three to five years.
Amortization of leasehold improvements is computed using the straight-line
method over the shorter of the remaining lease term or the estimated useful
lives of the improvements.

Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain identifiable intangibles
assets to be held and used for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company evaluates any possible impairment of long-lived assets
and certain intangible assets using estimates of undiscounted future cash
flows. If an impairment loss is to be recognized, it is measured as the amount
by which the carrying amount of the asset exceeds the fair value of the asset.
Management evaluates the fair value of its long-lived assets and certain
intangibles assets using primarily the estimated discounted future cash flows
method. Management uses other alternative valuation techniques whenever the
estimated discounted future cash flows method is not appropriate.

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Revenue Recognition

Product revenue is generally recognized upon shipment when persuasive
evidence of an arrangement exists, the price is fixed or determinable, and
collectibility is reasonably assured. A provision for estimated future sales
return and warranty costs is recorded at the time revenue is recognized. The
Company has no obligation to provide any modification or customization
upgrades, enhancements or other post-sale customer support. The Company grants
certain distributors limited rights of return and price protection on unsold
products. Product revenue on shipments to distributors which have rights of
return and price protection is deferred until shipment to end customers by the
distributors.

Effective June 29, 2002, the Company began to recognize sales of its
wireless wide area network, or WWAN, products to distributors with rights of
return upon shipment by the distributors to the end user customer. Prior to
June 29, 2002, the Company recognized revenue for sales of all WWAN products to
distributors with rights of return upon shipment to the distributor and
provided reserves for the estimated amount of product returns. The combination
of the changes resulting from the acquisition of the ORiNOCO business and the
adoption of one uniform method is consistent with the Companys plans to sell
bundled and integrated WLAN and WWAN products. This change in accounting
methodology is treated as a change in estimate, and was made on a prospective
basis, starting in the third quarter of 2002.

Revenue from services, such as pre-installation diagnostic testing and
product repair services, is recognized over the period for which the services
are performed, which is typically less than one month. Revenue from product
rentals is recognized rateably over the period of the rental.

Goodwill

Goodwill is the amount by which the cost of the acquired identifiable net
tangible and intangible assets exceeded the fair values of the acquired net
tangible and intangible assets on the date of purchase. Goodwill resulting from
business acquisitions completed prior to June 30, 2001 is reported at cost, net
of accumulated amortization. Amortization was calculated on a straight-line
basis over the estimated useful lives of 5 years. Effective January 1, 2002,
The Company adopted SFAS No. 142, Goodwill and Intangible Assets, and no
longer amortizes goodwill that arose from these acquisitions. Goodwill
resulting from business acquisitions completed after June 30, 2001 is reported
at cost and not subject to amortization in accordance with SFAS No. 142.

The Company tests goodwill for impairment annually, or more frequently if
events or changes in circumstances indicate that the asset might be impaired,
applying a fair-value based test. The impairment test consists of a comparison
of the fair value of the goodwill with its carrying value. If the carrying
value of the goodwill exceeds its fair value, an impairment loss shall be
recognized in an amount equal to that excess.

Acquisition-related Intangible Assets

Intangible assets result from business acquisitions accounted for under
the purchase method, and consist of developed technology, core technology,
customer relationships, tradename, patents and in-process research and
development. Intangible assets are reported at cost, net of accumulated
amortization. Identifiable intangible assets other than in-process research and
development and tradename are amortized on a straight-line basis over their estimated useful
lives ranging from two to five years. In-process research and development is
charged to operating expense in the period the acquisition is consummated.

Software Development Costs

Software development costs are capitalized once technological feasibility
is established, which the Company defines as completion of a working model. The
capitalized cost is then amortized on a straight-line basis over the estimated
product life, or on the ratio of current revenues to total projected product
revenues, whichever is greater. To date, the period between achieving
technological feasibility and the general availability of such software has
been short and software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs.

Income Taxes

The Company accounts for income taxes using the asset and liability
method, under which the expected future tax consequences of temporary
differences between the book and tax bases of assets and liabilities are
recognized as deferred tax assets and liabilities, and for net operating loss
and tax credit carryforwards. A valuation allowance is established when
necessary to reduce deferred tax assets

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where it is more likely than not that the deferred tax assets will not be
realized. The Company does not record a deferred tax provision on unremitted
earnings of foreign subsidiaries to the extent that such earnings are
considered permanently invested.

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.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income
(loss) available to Common Stockholders by the weighted average number of
common shares outstanding during the period. Diluted net income per share is
calculated using the weighted average number of outstanding shares of common
stock plus potential dilutive shares. Potential dilutive shares consist of
convertible preferred stock, stock options and warrants, using the treasury
stock method based on the average stock price for the period. The calculation
of diluted net loss per share excludes potential dilutive shares if the effect
is antidilutive.

Mandatorily Redeemable Convertible Preferred Stock (Preferred Stock)

The carrying value of Preferred Stock is adjusted by quarterly accretions,
on the effective-interest basis, so that the carrying amount will equal the
redemption amount at the earliest redemption date. These adjustments will be
effected through charges against additional paid-in capital and accumulated
deficit, as appropriate.

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion, or APB No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. The
Company provides additional pro forma disclosures as required under SFAS
No.123, Accounting for Stock-Based Compensation and SFAS No. 148 Accounting
for Stock-Bases Compensation  Transition and Disclosure.

Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income requires that companies
report comprehensive income (loss) and its components. Comprehensive income
(loss) is defined to include all changes in equity during a period except those
resulting from investments by owners and distributions to owners. The Company
has the following two items that comprise comprehensive income loss: (1) net
income/loss; and (2) unrealised gain/loss on investments.

Segment Reporting

SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, requires that companies report separately in the financial
statements certain financial and descriptive information about operating
segments profit or loss, certain specific revenue and expense items and
segment assets. Additionally, companies are required to report information
about revenue and assets by geographic areas and about major customers. The
Companys products are grouped into two product lines: wireless wide area
network, or WWAN, and wireless local area network, or WLAN.

Comparative Amounts

Certain comparative amounts have been reclassified to conform to current
years presentation.

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No.146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. The principal
difference between SFAS No. 146 and EITF Issue No. 94-3 relates to SFAS
No.146s timing for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS No. 146

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requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue No.
94-3 a liability for an exit cost as generally defined in EITF Issue No. 94-3
was recognized at the date of an entitys commitment to an exit plan. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002. SFAS No. 146 is applied prospectively upon adoption and, as
a result, would not have any impact on the Companys consolidated financial
statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee and further requires a
guarantor to provide additional disclosures regarding guarantees. The
Interpretations provisions for initial recognition and measurement should be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. The disclosure requirements are effective for financial statements of
periods that end after December 15, 2002. The adoption of this Interpretation
did not have a material effect on the Companys consolidated financial
statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003. The
Company believes that the adoption of this Interpretation will have no material
impact on its consolidated financial statements.

Note 3  Business Combinations

Acquisition of the 802.11 WLAN systems business of Agere Systems, Inc.

On August 5, 2002, the Company completed its acquisition of the 802.11
WLAN systems business of Agere, including its ORiNOCO product line, for $65
million in cash. To finance the acquisition, Warburg Pincus Private Equity
VIII, L.P., Broadview Capital Partners L.P. and affiliated entities agreed to
collectively invest $75 million in the Company. These investors received
1,640,000 shares of redeemable convertible Series A Preferred Stock (Preferred
Stock, Note 13) in the amount of approximately $41 million, with a conversion
price of approximately $3.06 per share, and warrants to purchase approximately
6.7 million shares of Common Stock valued at $12.3 million. The value of the
warrants was recorded as a reduction of the Preferred Stock carrying value and
recorded as additional paid-in capital. A deemed Preferred Stock dividend
representing the beneficial conversion feature of the Preferred Stock of $2.7
million was reflected in the determination of the loss attributable to Common
stockholders. The remaining $34 million was in the form of convertible notes.
Upon the receipt of approval of the Companys stockholders at a special meeting
held on October 8, 2002, the notes issued to these investors were converted
into 1,360,000 shares of Preferred Stock and warrants to purchase approximately 5.6 million shares of
Common Stock valued at $1.6 million. The warrants were recorded as a reduction of the
Preferred Stock carrying value and recorded as additional paid-in capital in
the quarter ended December 31, 2002. In total, the investors were granted
warrants to acquire 12,271,345 shares of Common Stock for approximately $3.06
per share. The Preferred Stock and warrants issued to the investors represent
approximately 28% of Proxims outstanding common stock on an as-converted and
as-exercised basis including dividends. In addition, in connection with the
transaction, the Company has entered into a patent cross-license agreement and
settled all outstanding patent-related litigation with Agere, and has entered
into a three-year strategic supply agreement, pursuant to which Agere will
provide 802.11 chips, modules and cards to the Company at specified prices. Total
consideration of $70.0 million for the acquisition comprised:



| |  |  | $65.0 million in cash; and                      
| | - |  | ------------------------------------------------
|
| |  |  | transaction costs of approximately $5.0 million.

The purpose of the acquisition is to gain key technology and establish a
leadership position in broadband wireless access systems market.

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The total purchase price was allocated to the tangible and identifiable
intangible assets, goodwill acquired and liabilities assumed on the basis of
their relative fair values as follows (in thousands):

|                                             |  |   |        |  
|-------------------------------------------- |  | - | ------ | -
|Inventory, net                               |  | $ | 557    |  
|Property and equipment                       |  |   | 163    |  
|Core technology                              |  |   | 8,521  |  
|Developed technology                         |  |   | 16,994 |  
|Customer relationships                       |  |   | 8,995  |  
|Tradename                                    |  |   | 5,909  |  
|Liabilities assumed                          |  |   | (4,589 | )
|Acquired in-process research and development |  |   | 10,364 |  
|Goodwill                                     |  |   | 23,086 |  
|                                             |  |   |        |  
|                                             |  | $ | 70,000 |  
|                                             |  |   |        |  

The liabilities assumed consist principally of restructuring charges
related to severance pay totaling $2.3 million for 55 employees, warranty
expense and other current liabilities.

The core and developed technology acquired include Enterprise Access
Points, Radio Backbone Systems, Broadband Gateways and Network Management
products. These products have already achieved technological feasibility in the
marketplace. The fair value assigned to the core technology and developed
technology totaled $8.5 million and $17.0 million respectively, and is being
amortized over the expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to the ORiNOCO customer base. In valuing the ORiNOCO customer
base, the Company employed an income approach similar to that used in valuing
the technology. The customer base includes original equipment manufacturers
(OEM) such as Avaya, Dell Computer, Fujitsu and Hewlett-Packard. The fair
value assigned to the ORiNOCO customer base totaled $9.0 million and is being
amortized over the expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to the ORiNOCO tradename. In valuing the tradename, the Company
utilized the relief from royalty methodology, which assumes that the value of
the asset equals the amount a third party would pay to use the asset and
capitalize on the related benefits of the asset. Therefore, a revenue stream
for the asset was estimated based on the revenue from the technology over the
next five years, which represents the developed, core and in-process revenue
stream. The Company then applied a 2.0% royalty rate to the forecasted revenue
to estimate the pre-tax income associated with the asset. The fair value
assigned to the tradename totaled $5.9 million and because the Company will
continue to use the ORiNOCO tradename the intangible asset will not be
amortized.

Purchased in-process research and development, or IPR&D, consisted of next
generation Enterprise Access Points, Radio Backbone Systems, Broadband Gateways
and Network Management products, which had not yet reached technological
feasibility and had no alternative future use as of the date of acquisition. As
of the valuation date, the 802.11 WLAN systems business of Agere was developing
next generation Enterprise Access Points, Radio Backbone Systems, Broadband
Gateways and Network Management products. These products are under development
and require additional hardware and software development. The value of the
IPR&D was determined by estimating the net cash flows from potential sales of
the products resulting from completion of this project, reduced by the portion
of net cash flows from the revenue attributable to core and developed
technology. The resulting cash flows were then discounted back to their present
value using a discount rate of 50%. The fair value assigned to the IPR&D
totaled $10.4 million and was expensed at the time of the acquisition.

Core technology, developed technology and customer relationships are being
amortized on a straight-line basis over the following estimated periods of
benefit:

|                       |  |         |  | 
|---------------------- |  | ------- |  | 
|Core technology        |  | 5 years
|Developed technology   |  | 2 years
|Customer relationships |  | 3 years

Acquisition of nBand Communications, Inc.

On April 18, 2002, the Company acquired nBand Communication, Inc.
(nBand), a California corporation. nBand is a startup developer of advanced
application specific integrated circuits (ASICs) designs that the Company
intends to use in the development of next generation ASICs. The purchase price
was $1.2 million and comprised of $550,000 in cash, 180,144 shares of Class A
common

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stock valued at approximately $450,000 and transaction expenses of
approximately $200,000. In the second quarter of 2002, the Company assigned the
entire purchase price of $1.2 million to purchased in-process research and
development as the acquired technology had not reached technological
feasibility.

Merger with Proxim, Inc.

On March 26, 2002, the merger between Western Multiplex Corporation and
Proxim, Inc. was completed, resulting in Proxim Corporation as the combined
company. The combined company provides broadband, or high speed, wireless
access products to service providers, businesses and other enterprises as well
as high performance WLAN products based on RF technology. The merger was
accounted for as a purchase transaction with Proxim, Inc. as the purchased
entity. Total consideration of $172.6 million for the merger and was adjusted
to $175.3 million in the third quarter of 2002 and comprised:



| |  |  | 59,506,503 shares of Class A common stock valued at approximately $133.3 million;                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------
|
| |  |  | options and warrants having an assumed value of approximately $25.3 million; and                                    
|
| |  |  | transaction costs originally estimated at $14.0 million were adjusted in the third quarter of 2002 to $16.7 million.

The total purchase price was allocated to the tangible and identifiable
intangible assets, goodwill acquired and liabilities assumed on the basis of
their relative fair values as follows (in thousands):

|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Cash and cash equivalents                    |  | $ | 35,961  |  
|Marketable securities                        |  |   | 991     |  
|Accounts receivable, net                     |  |   | 8,914   |  
|Inventory, net                               |  |   | 12,834  |  
|Other current assets                         |  |   | 1,150   |  
|Other long-term assets                       |  |   | 2,000   |  
|Plant and equipment                          |  |   | 3,958   |  
|Core technology                              |  |   | 18,010  |  
|Developed technology                         |  |   | 12,042  |  
|Patents                                      |  |   | 3,210   |  
|Liabilities assumed                          |  |   | (8,199  | )
|Acquired in-process research and development |  |   | 4,536   |  
|Goodwill                                     |  |   | 79,847  |  
|                                             |  |   |         |  
|                                             |  | $ | 175,254 |  
|                                             |  |   |         |  

The liabilities assumed consist principally of accounts payable, accrued
compensation and benefits and other current liabilities.

The core and developed technology acquired include 900MHz, RangeLAN,
Harmony, 802.11a and Skyline products for the enterprise/commercial markets;
Symphony HomeRF, HomeRF 2.0 and Netline products for the home/SOHO markets; and
Stratum and Stratum MP products for the building-to-building markets. These
products have already achieved technological feasibility in the marketplace.
The fair value assigned to the core technology and developed technology totaled
$18.0 million and $12.0 million respectively, and is being amortized over the
expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to patents and patent applications of Proxim, Inc. The Company
assumed that the patents and patent applications will continue to be used but
will be phased out over time as new technology is developed. To value the
patents and patent applications, we utilized the relief from royalty
methodology. The relief from royalty methodology assumes that the value of the
asset equals the amount a third party would pay to use the asset and capitalize
on the related benefits of the asset. Therefore, a revenue stream for the asset
is estimated, and then an estimated royalty rate is applied to the forecasted
revenue to estimate the pre-tax income associated with the asset. The pre-tax
income is then tax-affected to estimate the after-tax net income associated
with the asset. Finally, the after tax net income is discounted to the present
value using an appropriate rate of return that considers both the risk of the
asset and the associated cash flow estimates. The resulting cash flows were
then discounted back to their present value using a discount rate of 25%. The
fair value assigned to the patents totaled $3.2 million and is being amortized
over the expected life of its cash flows.

Purchased IPR&D consisted of 802.11a and HomeRF 2.0 wireless networking
products under development, which had not yet reached technological feasibility
and had no alternative future use as of the date of acquisition. As of the
valuation date, Proxim, Inc.

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was developing 802.11a WLAN adapters in PCI and Mini PCI form factors and
a connectorized access point as well as a HomeRF 2.0 voice data module, voice
data gateway and voice data gateway and answer machine. These products are
under development and require additional software development including NT 4.0
and Macintosh drivers along with additional functional testing. The value of
the IPR&D was determined by estimating the net cash flows from potential sales
of the products resulting from completion of this project, reduced by the
portion of net cash flows from the revenue attributable to core and developed
technology. The resulting cash flows were then discounted back to their present
value using a discount rate of 30%. The fair value assigned to the IPR&D
totaled $4.5 million and was expensed at the time of the acquisition.

Core technology, developed technology and patents are being amortized on a
straight-line basis over the following estimated periods of benefit:

|                     |  |         |  | 
|-------------------- |  | ------- |  | 
|Core technology      |  | 5 years
|Developed technology |  | 3 years
|Patents              |  | 5 years

Acquisition of WirelessHome

On March 22, 2001, the Company acquired WirelessHome located in Long
Beach, California in a cash and stock transaction. WirelessHome is a
development stage company that designs and develops point-to-multipoint
systems. The acquisition was accounted for as a purchase. The Company acquired
WirelessHome for a total consideration of $28.2 million comprised of:



| |  |  | 1,649,324 shares of Class A common stock valued at $12.1 million;                                                                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | $10.5 million in cash;                                                                                                                     
|
| |  |  | options and warrants having an assumed value of $0.7 million; a stock
price protection contingent consideration valued at $2.5 million; and
|
| |  |  | transaction costs of $2.4 million.                                                                                                         

As part of the transaction the Company assumed $2.0 million of net
liabilities, which consisted of $0.4 million of current assets, $0.9 million of
other assets and $3.3 million of current liabilities. In March 2001, the
Company issued an initial consideration of $23.0 million. As a result, the
Company recorded the initial purchase price allocation as follows: $24.7
million to goodwill and $0.3 million to deferred compensation.

The initial purchase price, as well as the initial allocation, were
subject to adjustments upon WirelessHome meeting certain development milestones
and other considerations as defined in the agreement to acquire WirelessHome.

On October 7, 2001, WirelessHome met the development milestones in
accordance with the acquisition agreement. This resulted in additional purchase
consideration of $5.2 million. We then evaluated and recorded the final
purchase price and stock compensation expense arising from the achievement of
those milestones. The total purchase price allocation, which consisted of $28.2
million of purchase price and $2.0 million of net liabilities assumed, was as
follows: $1.0 million to assembled workforce, $6.4 million to IPR&D $22.5
million to goodwill, and $0.3 million to deferred compensation. In addition, we
recorded $2.2 million of stock compensation expense as a result of releasing
and issuing 558,950 shares, which were previously held in escrow, to
individuals who were directly involved in the completion of the development
milestones.

The purchase price allocation and intangible assets valuation were based
on managements estimates of the after-tax net cash flows and gave
consideration to the following: (i) the employment of a fair market value
premise excluding any consideration specific to the Company which could result
in estimates of investment value for the subject assets; (ii) comprehensive due
diligence concerning all potential intangible assets including trademarks,
tradename, patents, copyrights, non-compete agreements, assembled work force,
customer relationships and sales channel; and (iii) the value of existing
technology was specifically addressed, with a view toward ensuring that the
relative allocations to existing technology and in-process research and
development were consistent with the relative contributions of each final
product.

In making its purchase price allocation, management considered present
value calculations of income, an analysis of project accomplishments and
remaining outstanding items and an assessment of overall contributions, as well
as project risks. The value

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assigned to purchased IPR&D was determined by estimating the costs to
develop the acquired technology into commercially viable products, estimating
the resulting net cash flows from the projects, and discounting the net cash
flows to their present value. The revenue projection used to value the IPR&D
was based on estimates of relevant market sizes and growth factors, expected
trends in technology, and the nature and expected timing of new product
introductions by the Company and its competitors. The resulting net cash flows
from such projects are based on managements estimates of cost of revenue,
operating expenses, and income taxes from such projects.

Acquisition of Ubiquity Communication, Inc.

On March 24, 2000, the Company acquired Ubiquity Communication, Inc.
(Ubiquity), located in Petaluma, California. Through the acquisition, the
Company acquired technology for use in its development of point-to-multipoint
systems. At the time of the acquisition, Ubiquity had seven employees,
including six engineers. In connection with the acquisition, the Company issued
692,772 shares of Class A common stock to its former owners and reserved
137,727 shares of our Class A common stock for issuance upon the exercise of
the Ubiquity options we assumed. The value of the consideration paid for the
acquisition of Ubiquity was $6.4 million. The transaction was accounted for
using the purchase method of accounting. In March 2001, the Ubiquity operations
were closed due to the acquisition of WirelessHome.

Goodwill and other intangible assets related to the acquisition of
Ubiquity totaled $6.8 million. In March 2001, the Company recorded an
impairment of the Ubiquity goodwill and other intangible assets of $4.3 million
as a result of closing the Ubiquity operations. The amount of the charge equals
the unamortized amount of these intangible assets as of the date of closure of
the Ubiquity operations as no future benefit is anticipated, since Ubiquity was
replaced by WirelessHome as the developer of point-to-multipoint systems. The
Ubiquity intangible asset of $229,000 is being amortized on a straight-line
basis over its estimated useful life of three years, or $76,000, per year.

Pro Forma Financial Information

The following table represents unaudited pro forma financial information
for the year ended December 31, 2002 and December 31, 2001 had Proxim
Corporation (formerly Western Multiplex Corporation), WirelessHome, Proxim,
Inc., nBand and the 802.11 WLAN systems business of Agere been combined as of
January 1, 2001. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have resulted had Proxim Corporation, WirelessHome, Proxim,
Inc., nBand and the 802.11 WLAN systems business of Agere been a combined
company during the specified periods. The pro forma results include the effects
of the amortization of identifiable intangible assets and goodwill and
adjustments to the income tax provision or benefits and accretion of Preferred
Stock. The pro forma combined results exclude the $6.4 million, $4.5 million,
$1.2 million and $10.4 million charges for acquired in-process technology from
WirelessHome, Proxim, Inc., nBand and the 802.11 WLAN systems business of Agere
acquisitions, respectively (in thousands except share data):

|                                                                         |  |                         |          |      |  |   |          |  
|------------------------------------------------------------------------ |  | ----------------------- | -------- | ---- |  | - | -------- | -
|                                                                         |  | Year ended December 31,
|                                                                         |  |                         |         
|                                                                         |  | 2002                    |          | 2001
|                                                                         |  |                         |          |     
|                                                                         |  | (unaudited)            
|Revenue                                                                  |  | $                       | 206,053  |      |  | $ | 343,290  |  
|Net loss attributable to
common stockholders                             |  | $                       | (262,630 | )    |  | $ | (110,948 | )
|Basic and diluted net loss
per share attributable to
common stockholders |  | $                       | (2.21    | )    |  | $ | (1.01    | )
|                                                                         |  |                         |          |      |  |   |          |  
|Shares used to compute basic
and diluted net loss per
share              |  |                         | 119,030  |      |  |   | 110,203  |  
|                                                                         |  |                         |          |      |  |   |          |  

Note 4   Goodwill and Other Intangible Assets

In December 2002, due to the recent significant decline in forecasted
revenue and the cash flows therefrom, the Company made a complete assessment of
the carrying value of all goodwill and other intangibles assets in accordance
with SFAS No. 142. The Company first determined the fair value of its equity
to be less than the carrying value of goodwill. As such, an impairment charge
was recognizable in accordance with SFAS No. 142 as of December 31, 2002. The
Company then quantified the goodwill impairment as the amount by which the
carrying amount of the asset exceeded the estimated fair value of the asset.
The carrying value of goodwill totaling $138.8 million as of December 31, 2002
exceeded the estimated fair value of $9.7 million resulting in a charge for the
impairment of goodwill of $129.1 million.

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Goodwill, net of impairment charge and amortizations, consist of the
following (in thousands):

|               |                                  |  |      |          |      |  |   |        | 
|-------------- | -------------------------------- |  | ---- | -------- | ---- |  | - | ------ | 
|               |                                  |  | 2002 |          | 2001
|               |                                  |  |      |          |     
|Goodwill, net: |                                  |  |      |          |      |  |   |       
|               | GTI                              |  | $    | 17,126   |      |  | $ | 17,126 | 
|               | WirelessHome                     |  |      | 18,775   |      |  |   | 18,775 | 
|               | Proxim, Inc                      |  |      | 79,847   |      |  |   |       | 
|               | 802.11 WLAN systems business     |  |      | 23,086   |      |  |   |       | 
|               |                                  |  |      |          |      |  |   |       
|               | Total goodwill before impairment |  |      | 138,834  |      |  |   | 35,901 | 
|               | Less: impairment charge          |  |      | (129,108 | )    |  |   |       | 
|               |                                  |  |      |          |      |  |   |       
|               | Total goodwill, net              |  | $    | 9,726    |      |  | $ | 35,901 | 
|               |                                  |  |      |          |      |  |   |       

The changes in the carrying amount of goodwill for the year ended December
31, 2002 are as follows (in thousands):

|                                  |  |   |          |  
|--------------------------------- |  | - | -------- | -
|Balance as of December 31, 2001   |  | $ | 35,901   |  
|Goodwill acquired during the year |  |   | 102,933  |  
|Impairment
charge                 |  |   | (129,108 | )
|                                  |  |   |          |  
|Balance as of December 31, 2002   |  | $ | 9,726    |  
|                                  |  |   |          |  

Acquired intangible assets, net of amortizations, consist of the following
(in thousands):

|                                 |                              |  |      |        |      |  |   |     | 
|-------------------------------- | ---------------------------- |  | ---- | ------ | ---- |  | - | --- | 
|                                 |                              |  | 2002 |        | 2001
|                                 |                              |  |      |        |     
|Acquired intangible assets, net: |                              |  |      |        |      |  |   |    
|                                 | WirelessHome and other       |  | $    | 136    |      |  | $ | 712 | 
|                                 | Proxim, Inc                  |  |      | 27,068 |      |  |   |    | 
|                                 | 802.11 WLAN systems business |  |      | 34,722 |      |  |   |    | 
|                                 |                              |  |      |        |      |  |   |    
|                                 | Total intangible assets, net |  | $    | 61,926 |      |  | $ | 712 | 
|                                 |                              |  |      |        |      |  |   |    

Acquired intangible assets by categories as of December 31, 2002 (in
thousands):

|                               |                        |  |                |        |              |  |   |        | 
|------------------------------ | ---------------------- |  | -------------- | ------ | ------------ |  | - | ------ | 
|                               |                        |  | Gross carrying |        | Accumulated 
|                               |                        |  | amounts        |        | amortization
|                               |                        |  |                |        |             
|Amortized intangible assets:   |                        |  |                |        |              |  |   |       
|                               | Core Technology        |  | $              | 26,531 |              |  | $ | 3,412  | 
|                               | Developed Technology   |  |                | 29,036 |              |  |   | 6,552  | 
|                               | Customer Relationships |  |                | 8,995  |              |  |   | 1,249  | 
|                               | Patents                |  |                | 3,439  |              |  |   | 771    | 
|                               |                        |  |                |        |              |  |   |       
|                               | Total                  |  | $              | 68,001 |              |  | $ | 11,984 | 
|                               |                        |  |                |        |              |  |   |       
|Unamortized intangible assets: |                        |  |                |        |              |  |   |       
|                               | Tradename              |  | $              | 5,909  |              |  |   |        | 
|                               |                        |  |                |        |              |  |   |       

Goodwill represents the excess of cost over the fair market value of net
assets acquired. Goodwill pushed down from the 1995 acquisition of the Company
by GTI totaled $22.0 million. Prior to January 1, 2002 this goodwill was
amortized on a straight-line basis over its estimated useful life of 30 years,
or $0.7 million per year. As a result of the Companys adoption of SFAS No.
142, as of January 1, 2002, the Company no longer amortizes goodwill. Goodwill
related to the acquisition of WirelessHome totaled $24.7 million. Prior to
December 31, 2001 this goodwill was amortized on a straight-line basis over its
estimated useful life of 5 years. As a result of the Companys adoption of SFAS
No. 142, as of January 1, 2002, the Company no longer amortizes goodwill. This
goodwill was subject to subsequent adjustments upon WirelessHome meeting
certain development milestones and other considerations. After WirelessHome met
those development milestones, the goodwill was adjusted to $22.5 million in the
fourth quarter of 2001. Goodwill related to the merger with Proxim, Inc.
totaled $77.2 million and was adjusted to $79.9 million in the third quarter of
2002 as a result of additional unanticipated transaction expenses. Goodwill
related to the 802.11 WLAN systems business of Agere totaled $23.1 million.

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Assembled workforce related to the acquisition of WirelessHome totaled
$1.0 million were reclassified as Goodwill on January 1, 2002. Patents related
to the acquisition of Ubiquity totaled $229,000, and are being amortized on a
straight-line basis over an estimated useful life of 3 years.

Core technology, developed technology and patents related to the merger
with Proxim, Inc. totaled $18.0 million, $12.0 million and $3.2 million
respectively, and are being amortized on a straight-line basis over an
estimated useful life of 5 years, 3 years and 5 years, respectively.

Core technology, developed technology and customer relationships related
to the acquisition of the 802.11 WLAN systems business of Agere totaled $8.5
million, $17.0 million and $9.0 million respectively, and are being amortized
on a straight-line basis over an estimated useful life of 5 years, 2 years and
3 years, respectively. The fair value assigned to the tradename totaled $5.9
million and because the Company will continue to use the ORiNOCO tradename the
intangible asset will not be amortized.

The following table presents the impact of SFAS No. 142 on net loss as if
the standard had been in effect for the year ended December 31, 2001 (in
thousands, except per share data):

|                                                          |                        |   |         |      | 
|--------------------------------------------------------- | ---------------------- | - | ------- | ---- | 
|Net loss as reported                                      |                        | $ | (25,598 | )   
|Add: goodwill amortization                                |                        |   | 4,371   |     
|                                                          | workforce amortization |   |         | 383  | 
|                                                          |                        |   |         |     
|Adjusted net loss                                         |                        | $ | (20,844 | )   
|                                                          |                        |   |         |     
|Basic and diluted net loss per share as reported          |                        | $ | (0.44   | )   
|Add: goodwill amortization                                |                        |   | 0.08    |     
|                                                          | workforce amortization |   |         | 0.00 | 
|                                                          |                        |   |         |     
|Adjusted basic and diluted net loss per share as reported |                        | $ | (0.36   | )   
|                                                          |                        |   |         |     

Note 5  Purchased In-Process Research and Development

Purchased in-process research and development consist primarily of
acquired technology that has not reached technological feasibility.

The amount expensed to purchased in-process research and development in
the third quarter of 2002 related to next generation Enterprise Access Points,
Radio Backbone Systems, Broadband Gateways and Network Management products
acquired in the acquisition of Ageres 802.11 WLAN systems business. The amount
expensed to purchased in-process research and development in the second quarter
of 2002 related to technology for next generation ASICs acquired in the nBand
acquisition. The amount expensed to purchased in-process research and
development in the first quarter of 2002 related to 802.11a and HomeRF 2.0
wireless networking products acquired in relations to the Proxim, Inc. merger.
The following table summarizes the key assumptions underlying the valuation for
the Companys purchase transactions completed during the year ended December
31, 2002 and 2001 (in thousands):

|                             |  |      |      |                     |  |                     |       |                        |  |  |      |  
|---------------------------- |  | ---- | ---- | ------------------- |  | ------------------- | ----- | ---------------------- |  |  | ---- | -
|                             |  |      |      |                     |  | Estimated Cost to   |       | Risk-Adjusted Discount
|                             |  |      |      |                     |  | complete Technology |       | Rate for In-Process   
|                             |  |      |      |                     |  | at                  |       | Research and          
|                             |  | Year |      | Time of Acquisition |  | Development        
|                             |  |      |      |                     |  |                    
|802.11 WLAN systems business |  |      | 2002 |                     |  | $                   | 1,322 |                        |  |  | 50.0 | %
|Proxim, Inc.                 |  |      | 2002 |                     |  | $                   | 2,387 |                        |  |  | 30.0 | %
|WirelessHome                 |  |      | 2001 |                     |  | $                   | 1,425 |                        |  |  | 35.0 | %

The discount rates reflect the risk of the respective technology and are
representative of the implied transaction rates.

The Company does not expect to achieve a material amount of expense
reductions or synergies as a result of integrating the acquired in-process
technology. Therefore, the valuation assumptions do not include any anticipated
synergies or cost saving
associated with the transactions. The Company expects that products
incorporating the acquired technology will be completed and

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begin to generate
cash flows between six to nine months after integration. Actual results have
been consistent in all material respects, with its assumptions at the effective
time of the transactions.

Development of this technology remains a significant risk due to the
remaining effort to achieve technological feasibility, rapidly changing
customer markets, uncertain standards for new products, and significant
competitive threats. The nature of the efforts to develop the acquired
technology into commercially viable products consists principally of developing
a new operating system, developing a new processor and interface, planning and
testing activities necessary to determine that the product can meet market
expectations, including functionality and technical requirements. Failure to
bring these products to market in a timely manner could result in a loss of
market share, or a lost opportunity to capitalize on emerging markets, and
could have a material adverse impact on the value of assets acquired.

Note 6  Balance Sheet Components

|                             |                                                          |                                                 |                                                              |        |         |                |        |        |        |        |   | 
|---------------------------- | -------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------ | ------ | ------- | -------------- | ------ | ------ | ------ | ------ | - | 
|                             |                                                          |                                                 |                                                              |        |         | 2002           |        | 2001  
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          |                                                 |                                                              |        |         | (in thousands)
|Marketable securities:       |                                                          |                                                 |                                                              |        |         |                |        |       
|                             | Corporate bonds and time deposits                        |                                                 | $                                                            | 2,489  |         |                | $      | 8,192  |       
|                             | Auction rate securities                                  |                                                 |                                                              |       |         |                |        | 630    |       
|                             | Equity investment in a wireless company listed
in Canada |                                                 |                                                              | 513    |         |                |        |       |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          |                                                 | 3,002                                                        |        |         |                | 8,822  |       
|                             | Less: long-term portion                                  |                                                 |                                                              | (2,489 | )       |                |        | (2,084 | )     
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             | Current portion                                          |                                                 | $                                                            | 513    |         |                | $      | 6,738  |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |        |       
|Accounts receivable, net:    |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | Gross accounts receivable                       |                                                              | $      | 52,750  |                |        | $      | 32,802 |       
|                             |                                                          | Less: deferred revenue                          |                                                              |        | (14,715 | )              |        |        |       |       
|                             |                                                          |                                                 | allowances for bad debts, sales returns
and price protection |        |         | (7,500         | )      |        |        | (5,406 | )
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | $                                               | 30,535                                                       |        |         | $              | 27,396 |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |        |       
|Inventory, net:              |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | Raw materials                                   |                                                              | $      | 37,472  |                |        | $      | 12,214 |       
|                             |                                                          | Work-in-process                                 |                                                              |        | 5,820   |                |        |        | 675    |       
|                             |                                                          | Finished goods                                  |                                                              |        | 17,523  |                |        |        | 10,038 |       
|                             |                                                          | Consignment inventories                         |                                                              |        | 8,829   |                |        |        |       |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          |                                                 | 69,644                                                       |        |         |                | 22,927 |       
|                             |                                                          | Less: reserve for excess and obsolete inventory |                                                              |        | (32,845 | )              |        |        | (3,021 | )     
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | $                                               | 36,799                                                       |        |         | $              | 19,906 |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |        |       
|Property and equipment, net: |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | Computer and test equipment                     |                                                              | $      | 18,102  |                |        | $      | 6,191  |       
|                             |                                                          | Furniture and fixtures                          |                                                              |        | 890     |                |        |        | 6,850  |       
|                             |                                                          | Leasehold improvements                          |                                                              |        | 265     |                |        |        | 1,871  |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          |                                                 | 19,257                                                       |        |         |                | 14,912 |       
|                             |                                                          | Less: accumulated depreciation                  |                                                              |        | (9,147  | )              |        |        | (6,136 | )     
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | $                                               | 10,110                                                       |        |         | $              | 8,776  |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |        |       
|Goodwill, net:               |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | Goodwill                                        |                                                              | $      | 19,325  |                |        | $      | 44,500 |       
|                             |                                                          | Less: Accumulated amortization                  |                                                              |        | (9,599  | )              |        |        | (8,599 | )     
|                             |                                                          |                                                 |                                                              |        |         |                |        |       
|                             |                                                          | $                                               | 9,726                                                        |        |         | $              | 35,901 |       
|                             |                                                          |                                                 |                                                              |        |         |                |        |        |       

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|                           |                                                  |                                |        |                |         |      |       |       |       |  
|-------------------------- | ------------------------------------------------ | ------------------------------ | ------ | -------------- | ------- | ---- | ----- | ----- | ----- | -
|                           |                                                  |                                |        | 2002           |         | 2001
|                           |                                                  |                                |        |                |         |     
|                           |                                                  |                                |        | (in thousands)
|Intangible assets, net:    |                                                  |                                |        |                |         |      |       |      
|                           |                                                  | Core technology                |        | $              | 26,531  |      |       | $     |      |  
|                           |                                                  | Developed technology           |        |                | 29,036  |      |       |       |      |  
|                           |                                                  | Acquired workforce             |        |                |        |      |       |       | 1,000 |  
|                           |                                                  | Customer relationships         |        |                | 8,995   |      |       |       |      |  
|                           |                                                  | Tradename                      |        |                | 5,909   |      |       |       |      |  
|                           |                                                  | Patents                        |        |                | 3,439   |      |       |       | 229   |  
|                           |                                                  |                                |        |                |         |      |       |      
|                           |                                                  |                                | 73,910 |                |         |      | 1,229 |      
|                           |                                                  | Less: Accumulated amortization |        |                | (11,984 | )    |       |       | (517  | )
|                           |                                                  |                                |        |                |         |      |       |      
|                           |                                                  | $                              | 61,926 |                |         | $    | 712   |      
|                           |                                                  |                                |        |                |         |      |       |       |       |  
|Other current liabilities: |                                                  |                                |        |                |         |      |       |      
|                           | Restructuring accruals, current portion          |                                | $      | 3,871          |         |      | $     | 430   |      
|                           | Accrued unconditional purchase order
commitments |                                |        | 1,509          |         |      |       |      |      
|                           | Accrued compensation                             |                                |        | 3,921          |         |      |       | 3,129 |      
|                           | Accrued warranty costs                           |                                |        | 2,041          |         |      |       | 869   |      
|                           | Other accrued liabilities                        |                                |        | 5,575          |         |      |       | 4,169 |      
|                           |                                                  |                                |        |                |         |      |       |      
|                           |                                                  | $                              | 16,917 |                |         | $    | 8,597 |      
|                           |                                                  |                                |        |                |         |      |       |       |       |  

The following is a summary of the movements in product warranty costs
during the year ended December 31, 2002 (in thousands):

|                                   |  |   |       |  
|---------------------------------- |  | - | ----- | -
|Balance as of December 31, 2001    |  | $ | 869   |  
|Balance acquired with acquisitions |  |   | 1,442 |  
|Settlements
made during the year   |  |   | (270  | )
|                                   |  |   |       |  
|Balance as of December 31, 2002    |  | $ | 2,041 |  
|                                   |  |   |       |  

Note 7  Impairment of loan to officer

The Company had guaranteed up to $5 million of obligations of an officer
of the Company, with respect to a margin loan with an investment bank that he
established prior to 2001. On October 15, 2002, the investment bank called the
Companys guaranty of $5 million. The Company continues to seek repayment from
the officer under a Reimbursement and Security Agreement. In this regard, in
January 2003, the officer made a cash payment of $0.5 million to the Company.
The Company assessed the recoverability of the remaining balance of the loan
with respect to the officers current financial position and recorded an
impairment charge of $4.5 million in the fourth quarter of 2002. This
impairment charge does not constitute forgiveness of the officers indebtedness
to the Company. Future payments by the officer under the Reimbursement and
Security Agreement will be recorded as income in the period cash is received.

Note 8  Revenue Information and Concentration of Credit Risks

The Companys products are grouped into two product lines: Wireless Wide
Area Network, or WWAN, product line, and; Wireless Local Area Network, or WLAN,
product line. The WWAN product line includes point-to-point Lynx and Tsunami
products and point-to-multipoint Tsunami products. The WLAN product line
includes 802.11a and ORiNOCO products. Prior to the March 26, 2002 merger with
Proxim, Inc., the Company did not have a WLAN product line. Historical WLAN
revenue prior to March 26, 2002 of the former Proxim, Inc. and prior to August
5, 2002 for the ORiNOCO products acquired from Agere are not reported in the
table below. Revenue information by product line is as follows (in thousands):

|             |               |      |                         |         |  |      |         |         |  |   |         |         | 
|------------ | ------------- | ---- | ----------------------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|             |               |      | Year ended December 31,
|             |               |      |                        
|Product Line |               | 2002 |                         | 2001    |  | 2000
|             |               |      |                         |         |  |     
|WWAN         |               | $    | 83,799                  |         |  | $    | 105,730 |         |  | $ | 105,508 |        
|WLAN         |               |      | 60,861                  |         |  |      |        |         |  |   |        |        
|             |               |      |                         |         |  |      |         |         |  |   |         |        
|             | Total revenue |      | $                       | 144,660 |  |      | $       | 105,730 |  |   | $       | 105,508 | 
|             |               |      |                         |         |  |      |         |         |  |   |         |        

The Company sells its products worldwide through a direct sales force,
independent distributors, and value-added resellers. It currently operates in
two geographic regions: North America and International. Revenue outside of the
North America are primarily

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export sales denominated in United States dollars. Disaggregated financial
information regarding the Companys revenue by geographic region is as follows
(in thousands):

|                    |               |      |                         |         |  |      |        |         |  |   |        |         | 
|------------------- | ------------- | ---- | ----------------------- | ------- |  | ---- | ------ | ------- |  | - | ------ | ------- | 
|                    |               |      | Year ended December 31,
|                    |               |      |                        
|Geographical region |               | 2002 |                         | 2001    |  | 2000
|                    |               |      |                         |         |  |     
|North America       |               | $    | 89,890                  |         |  | $    | 80,038 |         |  | $ | 70,479 |        
|International       |               |      | 54,770                  |         |  |      | 25,692 |         |  |   | 35,029 |        
|                    |               |      |                         |         |  |      |        |         |  |   |        |        
|                    | Total revenue |      | $                       | 144,660 |  |      | $      | 105,730 |  |   | $      | 105,508 | 
|                    |               |      |                         |         |  |      |        |         |  |   |        |        

The following table summarizes each customer which accounted for more than
10% of the Companys total revenue each year:

|                                              |  |                         |    |      |  |      |    |   |  |  |    |  
|--------------------------------------------- |  | ----------------------- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                              |  | Year ended December 31,
|                                              |  |                        
|Geographical region                           |  | 2002                    |    | 2001 |  | 2000
|                                              |  |                         |    |      |  |     
|Comstor                                       |  |                         | 23 | %    |  |      | 29 | % |  |  |   |  
|Somera                                        |  |                         |   |      |  |      | 11 | % |  |  | 21 | %
|Tessco Technologies, Inc.                     |  |                         |   |      |  |      | 11 | % |  |  |   |  
|Avant Telecoms, Inc. (a
value-added reseller) |  |                         |   |      |  |      |   |   |  |  | 11 | %

As of December 31, 2001 and 2000, approximately 78.0% and 77.0% of
accounts receivable, respectively, were concentrated with ten customers.

Note 9  Provision for Excess and Obsolete Inventory

The Company recorded a provision for excess and obsolete inventory,
including purchase commitments, totaling $12.7 million during 2002 as part of
our restructuring charge, of which $7.7 million related to excess and obsolete
inventory and $5.0 million related to purchase commitments. To mitigate the
component supply constraints that have existed in the past, the Company had
built inventory levels for certain components with long lead times and entered
into longer-term commitments for certain components. The excess inventory
charges were due to the following factors:



| |  |  | A sudden and significant decrease in demand for certain Lynx and Tsunami license-exempt point-to-point products;                                                                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Notification from customers that they would not be ordering as much as they had previously indicated;                                                                             
|
| |  |  | Managements strategy to discontinue the Lynx and Tsunami
point-to-point licensed products in order to concentrate on the
license-exempt products; and                            
|
| |  |  | Managements strategy to discontinue certain Lynx and Tsunami
license-exempt products in order to concentrate on selling next
generation Lynx and Tsunami license-exempt products.

Due to these factors, inventory levels exceeded the Companys requirements
based on current 12-month sales forecasts. The additional excess and obsolete
inventory charge was calculated based on the inventory levels in excess of the
estimated 12-month demand for each specific product family. The Company does
not currently anticipate that the excess inventory subject to this reserve will
be used at a later date based on our current 12-month demand forecast. The
Company uses a 12-month demand forecast because the wireless communications
industry is characterized by rapid technological changes such that if the
Company has not sold a product after a 12-month period it is unlikely that the
product will be sold. The following is a summary of the movements in the
reserve for excess and obsolete inventory during the year ended December 31,
2002:

|                                                     |  |   |         |   |  |  |  |  |  |  |  | 
|---------------------------------------------------- |  | - | ------- | - |  |  |  |  |  |  |  | 
|Balance as of December 31, 2001                      |  | $ | 3,021   |  
|Additional reserve for excess and obsolete inventory |  |   | 7,686   |  
|Balance acquired with Proxim, Inc.                   |  |   | 45,114  |  
|Inventory scrapped                                   |  |   | (22,976 | )
|                                                     |  |   |         |  
|Balance as of December 31, 2002                      |  | $ | 32,845  |  
|                                                     |  |   |         |  

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Note 10  Restructuring Charges

The Company accounts for restructuring charges under the provisions of
Emerging Issues Task Force (EITF) No. 94-3Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring) and Staff Accounting Bulletin
(SAB) No. 100 regarding the accounting for and disclosure of certain expenses
commonly reported in connection with exit activities and business combinations.

During 2001, the Company recorded $1.8 million of restructuring charges
related to the closure of its former Ubiquity operations and employee
severance. The charges include $1.6 million of cash provisions, which include
severance of $1.4 million for 26 employees and $0.2 million for future lease
commitments and exit costs related to the Petaluma office facility. The charge
also includes $0.2 million of non-cash provisions primarily related to fixed
assets and other assets that will no longer be used at the facility.

During 2002, the Company recorded $43.2 million of restructuring charges,
including $35.4 million, $3.6 million, $2.3 million and $1.9 million in the
first, second, third and fourth quarters of 2002, respectively, related to
closure of certain facilities, discontinued product lines and severance pay.
The charges include $40.8 million of cash provisions, which include severance
of $7.4 million for 194 employees, $33.1 million for future lease commitments,
net of estimated future sublease receipts, and exit costs related to the
closure of four facilities, $0.3 related to consulting fees. The charge also
includes $2.4 million of non-cash provisions related to fixed assets that will
no longer be used at the facilities. The estimated future sublease receipts
are based on current comparable rates for leases in the respective markets. If
facility rental rates continue to decrease in these markets or if it takes
longer than expected to sublease these facilities, the actual costs for
closures of facilities could exceed the original estimate of $33.1 million

The following table summarizes the restructuring activities in 2001 and
2002 (in thousands):

|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|---------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|                                   |  | Severances |        | Facilities |  | Other |        | Total
|                                   |  |            |        |            |  |       |        |      
|Balance as of December 31, 2000    |  | $          |       |            |  | $     |       |       |  | $ |       |   |  | $ |        |  
|Provision charged to operations    |  |            | 1,382  |            |  |       | 208    |       |  |   | 226    |   |  |   | 1,816   |  
|Charges utilized                   |  |            | (1,184 | )          |  |       | (156   | )     |  |   | (46    | ) |  |   | (1,386  | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2001    |  |            | 198    |            |  |       | 52     |       |  |   | 180    |   |  |   | 430     |  
|Reclassifications
among categories |  |            |       |            |  |       | 180    |       |  |   | (180   | ) |  |   |        |  
|Balance acquired with Proxim, Inc. |  |            |       |            |  |       | 1,066  |       |  |   |       |   |  |   | 1,066   |  
|Provision charged to operations    |  |            | 7,395  |            |  |       | 33,080 |       |  |   | 2,702  |   |  |   | 43,177  |  
|Charges utilized                   |  |            | (7,593 | )          |  |       | (3,928 | )     |  |   | (2,702 | ) |  |   | (14,223 | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2002    |  | $          |       |            |  | $     | 30,450 |       |  | $ |       |   |  | $ | 30,450  |  
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  

Note 11 Income Taxes

The Company provides for income taxes under the provisions of SFAS No.
109, Accounting for Income Taxes. SFAS No. 109 requires an asset and
liability based approach in accounting for income taxes. Deferred income tax
assets and liabilities are recorded to reflect the tax consequences on future
years of temporary differences of revenue and expense items for financial
statement and income tax purposes. Valuation allowances are provided against
assets that are not likely to be realized.

The components of the provision (benefit) for income taxes for the years
ended December 31, 2002, 2001, and 2000 are as follows:

|         |         |   |                           |       |      |   |        |        |   |   |       |       |  
|-------- | ------- | - | ------------------------- | ----- | ---- | - | ------ | ------ | - | - | ----- | ----- | -
|         |         |   | Years ended December 31,}
|         |         |   |                          
|         |         |   | 2002                      |       | 2001 |   | 2000  
|         |         |   |                           |       |      |   |       
|Current  |         |   |                           |       |      |   |        |        |   |   |       |      
|         | Federal |   | $                         |      |      |   | $      |       |   |   | $     | 6,135 |  
|         | State   |   |                           |      |      |   |        | 13     |   |   |       | 864   |  
|         |         |   |                           |       |      |   |        |        |   |   |       |       |  
|         |         |   |                          |       |      |   | 13     |        |   |   | 6,999 |      
|Deferred |         |   |                           |       |      |   |        |        |   |   |       |      
|         | Federal |   |                           | 2,067 |      |   |        | (2,854 | ) |   |       | (137  | )
|         | State   |   |                           | 1,157 |      |   |        | (1,255 | ) |   |       | (62   | )
|         |         |   |                           |       |      |   |        |        |   |   |       |       |  
|         |         |   | 3,224                     |       |      |   | (4,109 | )      |   |   | (199  | )    
|         |         | $ | 3,224                     |       |      | $ | (4,096 | )      |   | $ | 6,800 |      
|         |         |   |                           |       |      |   |        |        |   |   |       |       |  

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The provision for income taxes differs from the amounts which would result
by applying the applicable statutory Federal income tax rate to income before
taxes, as follows (in thousands):

|                                                          |                           |   |                         |       |      |   |         |        |   |   |       |       | 
|--------------------------------------------------------- | ------------------------- | - | ----------------------- | ----- | ---- | - | ------- | ------ | - | - | ----- | ----- | 
|                                                          |                           |   | Year
Ended December 31,
|                                                          |                           |   |                        
|                                                          |                           |   | 2002                    |       | 2001 |   | 2000   
|                                                          |                           |   |                         |       |      |   |        
|Provision at federal statutory rate of 35%                |                           | $ | (82,819                 | )     |      | $ | (10,393 | )      |   | $ | 4,721 |      
|State income taxes, net of federal benefits               |                           |   | (12,069                 | )     |      |   | (242    | )      |   |   | 742   |      
|Goodwill impairment and amortization of intangible assets |                           |   | 36,860                  |       |      |   | 3,148   |        |   |   | 668   |      
|Amortization of deferred stock compensation               |                           |   | 299                     |       |      |   | 1,819   |        |   |   | 1,545 |      
|In-process research and development                       |                           |   | 5,635                   |       |      |   | 2,240   |        |   |   |      |      
|Change in valuation allowance                             |                           |   | 52,695                  |       |      |   |        |        |   |   |      |      
|Research and development tax credits                      |                           |   | (500                    | )     |      |   | (850    | )      |   |   | (798  | )    
|Other                                                     |                           |   | 3,123                   |       |      |   | 182     |        |   |   | (78   | )    
|                                                          |                           |   |                         |       |      |   |         |        |   |   |       |      
|                                                          | Total provision for taxes |   | $                       | 3,224 |      |   | $       | (4,096 | ) |   | $     | 6,800 | 
|                                                          |                           |   |                         |       |      |   |         |        |   |   |       |      

The major components of the net deferred tax asset are as follows (in
thousands):

|                     |                                                   |                        |   |              |   |      |   |        |        | 
|-------------------- | ------------------------------------------------- | ---------------------- | - | ------------ | - | ---- | - | ------ | ------ | 
|                     |                                                   |                        |   | December 31,
|                     |                                                   |                        |   |             
|                     |                                                   |                        |   | 2002         |   | 2001
|                     |                                                   |                        |   |              |   |     
|Deferred tax assets: |                                                   |                        |   |              |   |      |   |       
|                     | Inventory reserve                                 |                        | $ | 13,383       |   |      | $ | 1,223  |       
|                     | Goodwill and other intangibles assets             |                        |   | 25,580       |   |      |   | 3,069  |       
|                     | Restructuring reserve                             |                        |   | 12,407       |   |      |   | 174    |       
|                     | Other reserves and accruals                       |                        |   | 9,361        |   |      |   | 5,150  |       
|                     | Net operating losses                              |                        |   | 20,846       |   |      |   | 5,096  |       
|                     | Research and development credit and other credits |                        |   | 9,023        |   |      |   | 1,011  |       
|                     |                                                   |                        |   |              |   |      |   |       
|                     | Gross deferred tax asset                          |                        | $ | 90,600       |   |      | $ | 15,723 |       
|                     | Valuation allowance                               |                        |   | (90,600      | ) |      |   | (4,374 | )     
|                     |                                                   |                        |   |              |   |      |   |       
|                     |                                                   | Net deferred tax asset |   | $            |  |      |   | $      | 11,349 | 
|                     |                                                   |                        |   |              |   |      |   |        |       

As of December 31, 2002 the Companys federal and state net operating loss
carryforwards for income tax purposes were approximately
$54.0 million and $18.0
million, respectively. If not utilized, these net operating loss carryfowards
will begin to expire at various dates between 2006 and 2022. The Companys
federal and state research tax credit carryforwards for income tax purposes are
approximately $5.1 million and $5.9 million, respectively. If not utilized the
federal tax credit carryforwards will begin to expire in 2012. The Company has
a valuation allowance of approximately $90.6 million as of December 31, 2002
for deferred tax assets because of uncertainty regarding their realization.

Deferred tax assets of approximately $15.7 million as of December 31, 2002
pertain to certain net operating loss carryforwards and credit carryforwards
resulting from the exercise of employee stock options. When recognized, the
tax benefit of these loss and credit carryforwards are accounted for as a
credit to additional paid-in capital rather than a reduction to the income tax
provision.

The Internal Revenue Code of 1986, as amended, contains provisions that
may limit the net operating loss and credit carryforwards available for use in
any given period upon the occurrence of certain events, including a significant
change in ownership interests.

Note 12  Loss Per Share Attributable to Common Stockholders

The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings (loss) per share computations for the years
ended December 31, 2002, 2001 and 2000 (in thousands except share data):

|                                                      |  |                         |          |      |  |      |         |   |  |   |        | 
|----------------------------------------------------- |  | ----------------------- | -------- | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                                      |  | Year Ended December 31,
|                                                      |  |                        
|                                                      |  | 2002                    |          | 2001 |  | 2000
|                                                      |  |                         |          |      |  |     
|Net income (loss) attributable to common stockholders |  | $                       | (244,480 | )    |  | $    | (25,598 | ) |  | $ | 6,295  | 
|Weighted average common shares outstanding            |  |                         | 105,119  |      |  |      | 57,559  |   |  |   | 47,045 | 
|                                                      |  |                         |          |      |  |      |         |   |  |   |        | 
|Basic net income (loss) per share                     |  | $                       | (2.33    | )    |  | $    | (0.44   | ) |  | $ | 0.13   | 
|                                                      |  |                         |          |      |  |      |         |   |  |   |        | 

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|                                           |  |                         |         |      |  |      |        |   |  |   |        | 
|------------------------------------------ |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                           |  | Year Ended December 31,
|                                           |  |                        
|                                           |  | 2002                    |         | 2001 |  | 2000
|                                           |  |                         |         |      |  |     
|Weighted average common shares outstanding |  |                         | 105,119 |      |  |      | 57,559 |   |  |   | 47,045 | 
|Potential diluted shares                   |  |                         |        |      |  |      |       |   |  |   | 2,638  | 
|                                           |  |                         |         |      |  |      |        |   |  |   |        | 
|Shares used in diluted computation         |  |                         | 105,119 |      |  |      | 57,559 |   |  |   | 52,081 | 
|                                           |  |                         |         |      |  |      |        |   |  |   |        | 
|Diluted net income (loss) per share        |  | $                       | (2.33   | )    |  | $    | (0.44  | ) |  | $ | 0.12   | 
|                                           |  |                         |         |      |  |      |        |   |  |   |        | 

For the year ended December 31, 2002 and 2001 net loss per share was
computed using the weighted average number of ordinary shares outstanding
during the period. Net loss per share on a diluted basis is equivalent to
basic net loss per share because the effect of converting stock options and
warrants would be anti-dilutive. For the years ended December 31, 2002, 2001
and 2000 options to purchase 30,367,748, 10,258,659 and 716,000 shares of
common stock were excluded from the diluted net income per share calculations.
For the year ended December 31, 2002 and 2001 warrants to purchase 13,842,655
and 29,162 shares of common stock were excluded from the diluted net income per
share calculations. For the year ended December 2000 options were
anti-dilutive because the exercise prices was greater than the average market
price of the common shares during the period.

Basic and diluted income (loss) per share on extraordinary items for the
three years in the period ended December 31, 2001 are as follows (in thousands
except per share amounts):

|                                                                             |  |                         |         |      |  |      |        |  |  |   |        |  
|---------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ |  |  | - | ------ | -
|                                                                             |  | Year Ended December 31,
|                                                                             |  |                        
|                                                                             |  | 2002                    |         | 2001 |  | 2000
|                                                                             |  |                         |         |      |  |     
|Basic and diluted loss on early extinguishment of debt,
net of tax per share |  | $                       |        |      |  | $    |       |  |  | $ | (0.01  | )
|Shares used to compute the basic loss per share                              |  |                         | 105,119 |      |  |      | 57,559 |  |  |   | 47,045 |  
|Shares used to compute the diluted loss per share                            |  |                         | 105,119 |      |  |      | 57,559 |  |  |   | 52,081 |  

Note 13  Mandatorily Redeemable Convertible Preferred Stock

Mandatorily Redeemable Convertible Preferred Stock, or Preferred Stock, at
December 31, 2002 consists of the following:

|         |  |            |           |             |  |            |           |            |  |             |            |               |  |                 |           | 
|-------- |  | ---------- | --------- | ----------- |  | ---------- | --------- | ---------- |  | ----------- | ---------- | ------------- |  | --------------- | --------- | 
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | Total number of
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | shares of      
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | Common Stock   
|         |  |            |           |             |  |            |           |            |  | Liquidation |            | Issuable upon
|         |  | Authorized |           | Outstanding |  | Preference |           | Conversion
|         |  |            |           |             |  |            |           |           
|Series A |  |            | 5,000,000 |             |  |            | 3,000,000 |            |  | $           | 75,000,000 |               |  |                 | 3,000,000 | 
|         |  |            |           |             |  |            |           |            |  |             |            |               |  |                 |           | 

In August 2002, in connection with the acquisition of the 802.11 WLAN
systems business of Agere Systems, Inc., Warburg Pincus Private Equity VIII,
L.P., Brodview Capital Partners L.P. and affiliated entities agreed to
collectively invest $75 million in the Company. These investors received
1,640,000 shares of Series A Preferred Stock in the amount of approximately $41
million, with a conversion price of approximately $3.06 per share, and warrants
to purchase approximately 6.7 million shares of our Common Stock valued at
$12.3 million. The value of the warrants was recorded as a reduction of the
Series A Preferred Stock carrying value and recorded as additional paid-in
capital. A deemed preferred stock dividend representing the beneficial
conversion feature of the Series A Preferred Stock of $2.7 million was also
recorded to increase the loss attributable to holders of the Companys Common
Stock.

Upon receipt of approval of the Companys stockholders at a special
meeting held on October 8, 2002, the notes issued to these investors (Note 3)
were converted into 1,360,000 shares of Series A Preferred Stock and the
Company granted to these investors additional warrants to purchase
approximately 5.6 million shares of our common stock value at $1.7 million. In
total, the investors were granted warrants to acquire 12,271,345 shares of
Common Stock for approximately $3.06 per share value at $14.0 million. The
Series A Preferred Stock and warrants issued to the investors represent
approximately 25% of the Companys outstanding Common Stock on an as-converted
and as-exercised basis as of December 31, 2002.

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In Summary, the issuance of Preferred Stock, convertible notes and related
warrants and the subsequent conversion, accretion and interest accrual were
recorded as follows (in thousands):

|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  
|---------------------------------------------------------------- |  | ----------- | ------- | --------- |  | ------- | ------- | ----------- |  | ---------- | ------ | - |  | - | ------ | -
|                                                                 |  |             |         |           |  |         |         |             |  | Additional |        |   |  |  
|                                                                 |  | Convertible |         | Preferred |  | Paid-In |         | Accumulated
|                                                                 |  | Notes       |         | Stock     |  | Capital |         | Deficit    
|                                                                 |  |             |         |           |  |         |         |            
|Issuance of Series A Preferred Stock                             |  | $           |        |           |  | $       | 41,000  |             |  | $          |       |   |  | $ |       |  
|Issuance of convertible notes                                    |  |             | 34,000  |           |  |         |        |             |  |            |       |   |  |   |       |  
|Issuance of warrants                                             |  |             |        |           |  |         | (13,993 | )           |  |            | 13,993 |   |  |   |       |  
|Conversion of convertible notes                                  |  |             | (34,000 | )         |  |         | 34,000  |             |  |            |       |   |  |   |       |  
|Deemed Preferred Stock dividend                                  |  |             |        |           |  |         |        |             |  |            | 2,740  |   |  |   | (2,740 | )
|Accretion
of Preferred Stock redemption obligations              |  |             |        |           |  |         | 2,936   |             |  |            | (1,046 | ) |  |   | (1,890 | )
|Accrued interest on convertible notes payable in Preferred Stock |  |             |        |           |  |         | 469     |             |  |            |       |   |  |   |       |  
|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  
|Total                                                            |  | $           |        |           |  | $       | 64,412  |             |  | $          | 15,687 |   |  | $ | (4,630 | )
|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  

The holders of Preferred Stock have various rights and preferences as
follows:

Voting



| |  | For so long as Warburg Pincus owns at least 25% of its shares of Series A
Preferred Stock or the Common Stock issuable on conversion of its Series A
Preferred Stock and exercise of its warrants, Warburg Pincus will have the
right to nominate for election one member of the Companys board of
directors, who will sit on all major board committees for so long as such
committee membership does not conflict with any applicable law or regulation
or any listing requirements of the Nasdaq National Market.                                                                             
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The approval of holders of a majority of the Series A Preferred Stock is
separately required to approve changes to the Companys certificate of
incorporation or bylaws that adversely affect these holders rights, any
offer, sale or issuance of the Companys equity or equity-linked securities
ranking senior to or equally with the Series A Preferred Stock, and any
repurchase or redemption of the Companys equity securities (other than from
an employee, director or consultant following termination), or the
declaration or payment of any dividend on the Companys Common Stock.

Redemption



| |  | In August 2007, the Company will be required to redeem all outstanding shares
of Series A Preferred Stock, if any, for cash equal to their liquidation
preference, which bears interest at 8% per annum, compounded semi-annually,
for three years, plus accrued and unpaid dividends.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends



| |  | From August 2005 through August 2007, shares of Series A Preferred Stock will
be entitled to cumulative dividends equal to 8% of their liquidation
preference per year, payable, at the Companys election, in cash or shares of
the Companys Common Stock valued at the then-market price;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidation



| |  | Each share of Series A Preferred Stock will have an initial liquidation
preference of $25.00 and the liquidation preference will bear interest at 8%
per annum, compounded semi-annually, for three years. The liquidation
preference is subject to adjustments in the event the Company undertakes a
business combination or other extraordinary transaction, or the Company are
liquidated or dissolved.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Conversion



| |  | In the event of a change of control of the Company, the Company will have the
right to convert the Series A Preferred Stock into Common Stock if upon such
conversion the holders of Series A Preferred Stock would receive liquid
securities or cash with a fair market value equal to or greater than 110% of
the liquidation preference then in effect. If the consideration is less than
110% of the liquidation preference, the Company may either modify the
conversion price so that the consideration will equal 110% of the
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | liquidation preference then in effect or repurchase the Series A Preferred
Stock for cash at 101% of the liquidation preference then in effect. In
addition, in the event of a change of control that occurs prior to August
2005, the liquidation preference will increase as necessary to provide for
three years of accretion.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Holders of Series A Preferred Stock have rights to acquire additional shares
of the Companys capital stock or rights to purchase property in the event of
certain grants, issuance or sales.                                                                                                                                    
|
| |  | The conversion price of the Series A Preferred Stock, which initially shall
be approximately $3.06 per share, will be subject to customary weighted
average anti-dilution adjustments and other customary adjustments.                                                                                                           
|
| |  | At December 31, 2002, the Company has reserved 43,325,672 shares of Common
Stock for the conversion of Preferred stock.                                                                                                                                                                                                          

Note 14  Stockholders Equity

Common Stock

The Companys authorized common stock consists of Class A and Class B
common stock. Holders of Class A common stock are entitled to one vote per
share. Holders of Class B common stock are entitled to ten votes per share.
Each share of Class B common stock is convertible into one share of Class A
common stock at the election of the stockholder or, prior to the Companys
initial public offering, upon such event.

In conjunction with the recapitalization transaction in 1999 the Company
repurchased 42,000,000 shares of Class B common stock for $21.0 million from
Glenayre Technologies Inc. and held these shares as treasury stock.

Simultaneously with the closing of the Companys initial public offering,
all of the Companys then outstanding 38,000,000 shares of Class B common stock
and 42,000,000 shares of Class B treasury stock were automatically converted
into 38,000,000 shares of Class A common stock and 42,000,000 shares of Class A
treasury stock, respectively.

On March 26, 2002 the Company acquired Proxim, Inc. for 59,506,503 shares
of Class A Common Stock.

As of December 31, 2002, there were 162,328,944 shares of Class A Common
Stock issued and outstanding and 42,185,534 shares of Class A treasury stock.

Warrants

|                                                                 |  |              |            |           |  |               |              |  |  |              |            |  
|---------------------------------------------------------------- |  | ------------ | ---------- | --------- |  | ------------- | ------------ |  |  | ------------ | ---------- | -
|                                                                 |  |              |            |           |  |               |              |  |  | Total number
|                                                                 |  |              |            |           |  |               |              |  |  | of shares   
|                                                                 |  | Warrants     |            | Exercise  |  | issuable upon
|                                                                 |  | for Class A  |            | price per |  | exercise of  
|                                                                 |  | Common Stock |            | share     |  | warrants     
|                                                                 |  |              |            |           |  |              
|Balance at December 31, 2001                                     |  |              | 29,162     |           |  | $             | 9.61-$14.01  |  |  |              | 29,162     |  
|Issuance of warrants in connection with merger with Proxim, Inc. |  |              | 2,228,881  |           |  | $             | 6.85-$13.23  |  |  |              | 2,228,881  |  
|Issuance of warrants in connection with financing arrangements   |  |              | 12,271,345 |           |  | $             | 3.06         |  |  |              | 12,271,345 |  
|Warrants expired                                                 |  |              | (686,733   | )         |  | $             | 11.91-$13.23 |  |  |              | (686,733   | )
|                                                                 |  |              |            |           |  |               |              |  |  |              |            |  
|Total                                                            |  |              | 13,842,655 |           |  |               |             |  |  |              | 13,842,655 |  
|                                                                 |  |              |            |           |  |               |              |  |  |              |            |  

In connection with a new operating lease entered into in September 2000,
the Company issued 25,000 warrants to the lessor in November 2000. Each new
warrant is convertible into one share of Class A common stock of the Company at
an exercise price of $14.01 per share. These warrants are exercisable during
the period beginning on January 1, 2001 and ending on December 1, 2005. The
Company has estimated the fair value of the warrants using the Black-Scholes
option valuation model and has determined the compensation expense throughout
the life of the lease to be immaterial.

In connection with the acquisition of WirelessHome Corporation, the
Company assumed a warrant to purchase 4,162 shares of the Companys Class A
common stock at an exercise price of $9.61 per share. These warrants will
expire on December 16, 2009.

In connection with the acquisition of Proxim, Inc., the Company assumed
warrants to purchase 362,803, 323,930 and 1,542,148 shares of the Companys
Class A common stock at an exercise price of $11.91 and $13.23 and $6.85 per
share, respectively. These

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warrants expire on April 28, 2002, June 2, 2002 and November 27, 2005. As
of December 31, 2002 1,542,148 warrants were outstanding.

In connection with the acquisition of the 802.11 WLAN systems business of
Agere Systems, Inc., the Company issued 12,271,345 warrants to Warburg Pincus
Private Equity VIII, L.P., Brodview Capital Partners L.P. and affiliated
entities. Each new warrant is convertible into one share of Class A common
stock of the Company at an exercise price of approximately $3.06 per share. The
Company has estimated the fair value of the warrants using the Black-Scholes
option valuation model totaling $14.0 million (Note 13). The warrants will
expire on December 31, 200x. The following assumptions were applied when
estimating the fair value of the warrants issued in the year ended December 31,
2002 using the Black-Scholes option pricing model:

|                           |  |              |      |  
|-------------------------- |  | ------------ | ---- | -
|                           |  | Year ended  
|                           |  | December 31,
|                           |  | 2002        
|                           |  |             
|Risk-free interest rate    |  |              | 3.21 | %
|Expected life of option    |  | 5 years     
|Dividend yield             |  |              | 0    | %
|Volatility of common stock |  |              | 114  | %

Deferred Stock Compensation

In connection with the grant of certain stock options and sales of certain
stock to employees and directors during fiscal 2000, the Company recorded
deferred stock compensation within stockholders equity of $8.5 million,
representing the difference between the estimated fair value of the common
stock and the option exercise price of these options at the date of grant or
the stock sale price at the date of sale. Such amount is presented as a
reduction of stockholders equity. The portion of deferred stock compensation
associated with the stock options was amortized over the vesting period of the
applicable options using an accelerated method of amortization. Under the
accelerated method, each vested tranche of options is accounted for as a
separate option grant awarded for past services. Accordingly, the compensation
expense is recognized over the period during which the services will be
provided; however, the method results in a front-loading of the compensation
expense. For the portion of deferred stock compensation associated with stock
sales, the Company records the expense over the period the shares are vested
using the accelerated method. For the year ended December 31, 2002 the Company
recorded amortization of deferred compensation, net of cancellations, of
$855,000.

As part of the WirelessHome acquisition, the Company assumed certain
vested and unvested options that when exercised would result in approximately
14,400 and 113,000 shares of common stock outstanding, respectively. These
options have an average exercise price of $3.01 per share of the Companys
common stock. The unvested options resulted in additional deferred compensation
of $0.3 million recorded as of the date of acquisition which is amortized over
the remaining vesting period using the accelerated method.

During the year ended December 31, 2001, the Company reversed
approximately $1.8 million of deferred stock compensation previously recorded
due to cancellations of unexercised stock options.

During the year ended, as a result of WirelessHome meeting the development
milestones, the Company released and issued 558,950 shares to individuals who
were directly involved in the completion of the development milestones and
accordingly recorded $2.2 million of stock compensation expense. As of
December 31, 2003, all deferred stock compensation was amortized.

Employees Stock Forward Sale Agreements

On December 20, 2001 the Company entered into stock forward sale
agreements with certain employees. Under these agreements the Company will buy
back 78,138 shares at $7.91 in March 2002. The Company recorded the difference
between the stock price on December 20, 2001, $5.45 and the guaranteed price
per share of $7.91 as stock compensation expense for a total of $192,000 in the
fourth quarter of 2001. The Company recorded the difference between the stock
price on March 25, 2002, $2.37 and the stock price on December 20, 2001, $5.45
as stock compensation expense for a total of $241,000 in 2002.

Stock Option Plans

Employee Stock Purchase Plan

In June 2000, the Company adopted the Western Multiplex Corporation
Employee Stock Purchase Plan (ESPP), which is intended to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986. An annual increase

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in shares reserved will occur on the first day of each of the Companys
fiscal years beginning in 2001, 2002, 2003, 2004 and 2005 as defined in the
ESPP. As of December 31, 2002, 1,500,000 shares of Class A common stock was
reserved for issuance under the ESPP.

In August 2000, subsequent to the completion of the Companys initial
public offering, the Company began to administer the plan by enrolling
participants in the plan and processing payroll deductions. The first day of
the offering period was August 1, 2000. On January 31, 2001, the Company issued
123,025 shares at $10.20 per share to employees participating in the ESPP. On
July 31, 2001, the Company issued 7,241 shares at $4.80 per share to employees
participating in the ESPP. On January 31, 2002, the Company issued 56,511
shares at $2.52 per share to employees participating in the ESPP. On July 31,
2002 the Company issued 191,045 shares at $2.18 per share to employees
participating in the ESPP.

1999 Stock Incentive Plan

In November 1999, the Company adopted the Western Multiplex Corporation
1999 Stock Incentive Plan (the 1999 Plan) for key employees, officers,
directors, and consultants. The Company has reserved for issuance 13,500,000
shares of Class A common stock under the 1999 Plan. The type of awards that may
be made under the 1999 Plan are incentive stock options, non-qualified options,
stock appreciation rights, and other stock-based awards.

The exercise price for stock options may not be less than 100% of the fair
market value of the Companys Class A common stock on the date of the grant
(110% for any option granted to any stockholder who owns more than 10% of the
total combined voting power of all classes of stock of the Company or its
parent or subsidiary corporation), as determined by the Compensation Committee.
An option may not vest at less than 20% per year over five years, and will vest
on the specific schedule established by the Compensation Committee.

Ubiquity Communication Plans

In connection with the acquisition of Ubiquity Communication, Inc. on
March 24, 2000, the Company assumed the obligations under Ubiquity
Communications equity incentive plans (Ubiquity Plans). As a result, all
options granted under the Ubiquity Plans became options to purchase shares of
the Companys common stock. As of March 24, 2000, the Company assumed 137,727
options that had been granted under these plans. As of March 29, 2002, the
Company had no options outstanding under the Ubiquity Plans.

Platinum IP Stock Incentive Plan

In connection with the acquisition of WirelessHome on March 22, 2001, the
Company assumed obligations under WirelessHomes Platinum IP Stock Incentive
Plan (WirelessHome Plan). As a result, all options granted under the
WirelessHome Plan became options to purchase shares of the Companys common
stock. As of March 22, 2001, the Company assumed certain vested and unvested
options that when exercised would result in approximately 14,400 and 113,000
shares of common stock outstanding. As a result of WirelessHome meeting the
development milestones, in the fourth quarter of 2001 the Company issued 75,380
options, which were previously held in escrow to employees who were directly
involved in the completion of the development milestones.

Proxim, Inc. Stock Incentive Plans

In connection with the acquisition of Proxim, Inc. on March 26, 2002, the
Company assumed obligations under Proxim, Inc. Stock Incentive Plan (Proxim
Plan). As a result, all options granted under the Proxim Plan became options
to purchase shares of the Companys common stock. As of March 26, 2002, the
Company assumed certain vested and unvested options that when exercised would
result in approximately 8,679,657 and 7,294,702 shares of common stock
outstanding.

2002 Nonstatutory Merger Stock Option Plan

In March 2002, the Company established the 2002 Nonstatutory Merger Stock
Option Plan, or the 2002 Plan, and reserved 7.0 million shares of Class A
Common Stock for issuance to employees and officers upon exercise of awards
granted thereunder. The 2002 Plan provides for the grant of awards in the form
of stock options, restricted stock, performance shares, restricted stock units,
and stock unit awards to employees and officers at prices not less than 100% of
the fair market value of our Common Stock on the date of grant. The options
terminate ten years after the date of grant. Unless otherwise provided for by
the Board of Directors, the options are exercisable only upon vesting. Options
generally vest ratably over a 36-month period.

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2002 Acquisition Stock Option Plan

In August 2002, the Company established the 2002 Acquisition Stock Option
Plan, or the 2002 Acquisition Plan, and reserved 5.0 million shares of Class A
Common Stock for issuance to employees and officers upon exercise of awards
granted thereunder. The 2002 Acquisition Plan provides for the grant of awards
in the form of stock options, restricted stock, performance shares, restricted
stock units, and stock unit awards to employees and officers at prices not less
than 100% of the fair market value of our Common Stock on the date of grant.
The options terminate ten years after the date of grant. Unless otherwise
provided for by the Board of Directors, the options are exercisable only upon
vesting. Options generally vest ratably over a 36-month period.

2000 Stock Option Plan for Non-Employee Directors

In June 2000, the Company adopted the 2000 Stock Option Plan for
Non-Employee Directors. The Company has reserved for issuance a maximum of
1,500,000 shares of common stock pursuant to the grant of non-qualified stock
options to newly elected members of the board of directors who are not
employees of our Company.

The exercise price of any option granted under this plan is the per share
fair market value of the Companys common stock on the date the option is
granted except with respect to the initial grants made as of June 8, 2000 for
which the exercise price is $8.50. An individual who becomes a director will
receive an initial grant of an option to purchase 100,000 shares of the
Companys common stock, which option will be immediately vested upon grant as
to one-third of the shares subject to the option. The option will then become
vested as to one-third of the shares on each of the first and second
anniversaries of the date of the initial grant, so long as the director
continues to serve on the Companys board of directors on each vesting date. In
addition, so long as a director continues to serve on the Companys board of
directors, the director will, as of the third anniversary of the date of the
initial grant and triennially thereafter, receive an additional option to
purchase 15,000 shares, the terms of which will be the same as those described
above. On March 29, 2002 the Company had issued 60,000 stock options at an
exercise price of $4.08.

The following table summarizes stock options activity under all the Plans:

|                             |                              |  |                   |             |                  |  |                     |            |   |   |                  |      | 
|---------------------------- | ---------------------------- |  | ----------------- | ----------- | ---------------- |  | ------------------- | ---------- | - | - | ---------------- | ---- | 
|                             |                              |  |                   |             |                  |  | Options Outstanding
|                             |                              |  |                   |             |                  |  |                    
|                             |                              |  |                   |             |                  |  |                     |            |   |   | Weighted Average
|                             |                              |  | Options Available |             | Number of Shares |  | Exercise Price     
|                             |                              |  |                   |             |                  |  |                    
|Balance at December 31, 1999 |                              |  | 10,500,000        |             |                  |  |                    |            |   | $ |                 |     
|                             | Authorized                   |  |                   | 1,637,727   |                  |  |                     |           |   |   |                  |     | 
|                             | Granted                      |  |                   | (7,633,227  | )                |  |                     | 7,633,227  |   |   |                  | 4.62 | 
|                             | Exercised                    |  |                   |            |                  |  |                     | (16,000    | ) |   |                  | 0.50 | 
|                             | Cancelled                    |  |                   | 183,499     |                  |  |                     | (183,499   | ) |   |                  | 6.71 | 
|                             |                              |  |                   |             |                  |  |                     |            |   |   |                  |     
|Balance at December 31, 2000 |                              |  | 4,687,999         |             |                  |  | 7,433,728           |            |   |   | 4.53             |     
|                             | Authorized                   |  |                   | 3,185,998   |                  |  |                     |           |   |   |                  |     | 
|                             | Granted                      |  |                   | (5,832,825  | )                |  |                     | 5,832,825  |   |   |                  | 6.55 | 
|                             | Exercised                    |  |                   |            |                  |  |                     | (1,328,772 | ) |   |                  | 0.56 | 
|                             | Cancelled                    |  |                   | 1,679,122   |                  |  |                     | (1,679,122 | ) |   |                  | 5.92 | 
|                             |                              |  |                   |             |                  |  |                     |            |   |   |                  |     
|                             | Balance at December 31, 2001 |  |                   | 3,720,294   |                  |  |                     | 10,258,659 |   |   |                  | 5.91 | 
|                             | Authorized                   |  |                   | 38,744,226  |                  |  |                     |           |   |   |                  |     | 
|                             | Granted                      |  |                   | (26,788,631 | )                |  |                     | 26,788,631 |   |   |                  | 4.46 | 
|                             | Exercised                    |  |                   |            |                  |  |                     | (683,582   | ) |   |                  | 0.57 | 
|                             | Cancelled                    |  |                   | 5,994,446   |                  |  |                     | (5,995,960 | ) |   |                  | 6.22 | 
|                             |                              |  |                   |             |                  |  |                     |            |   |   |                  |     
|                             | Balance at December 31, 2002 |  |                   | 21,670,335  |                  |  |                     | 30,367,748 |   |   | $                | 4.63 | 
|                             |                              |  |                   |             |                  |  |                     |            |   |   |                  |     

As part of the merger with Proxim, Inc., the Company assumed certain
vested and unvested options that when converted would result in approximately
8.7 million and 7.3 million shares of common stock outstanding. These options
have a weighted average exercise price of $5.75 per share. Additionally,
approximately 10.8 million shares were available under Proxim, Inc. plans.

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The following table summarizes options outstanding and options exercisable
at December 31, 2002 under all the Plans:

|                         |  |                     |            |            |  |             |     |                     |  |          |       |  |  |          |            |  |  |   |       | 
|------------------------ |  | ------------------- | ---------- | ---------- |  | ----------- | --- | ------------------- |  | -------- | ----- |  |  | -------- | ---------- |  |  | - | ----- | 
|                         |  | Options Outstanding |            |            |  |             |     |                     |  |          |       |  |  |         
|                         |  |                     |            |            |  |             |     | Options Exercisable
|                         |  |                     |            |            |  | Weighted    |     |                     |  |          |       | 
|                         |  |                     |            |            |  | Average     |     | Weighted            |  |          |       |  |  | Weighted
|                         |  |                     |            |            |  | Contractual |     | Average             |  |          |       |  |  | Average 
|                         |  | Number of           |            | Life       |  | Exercise    |     | Number              |  | Exercise
|Range of Exercise Prices |  | Shares              |            | (in years) |  | Price       |     | of Shares           |  | Price   
|                         |  |                     |            |            |  |             |     |                     |  |         
|$0.20 - $0.50            |  |                     | 1,920,589  |            |  |             | 7.1 |                     |  | $        | 0.50  |  |  |          | 1,906,341  |  |  | $ | 0.50  | 
|$1.13 - $3.21            |  |                     | 12,263,638 |            |  |             | 8.7 |                     |  | $        | 2.53  |  |  |          | 2,335,908  |  |  | $ | 2.86  | 
|$3.32 - $5.08            |  |                     | 9,208,009  |            |  |             | 9.0 |                     |  | $        | 3.70  |  |  |          | 5,533,812  |  |  | $ | 3.68  | 
|$5.13 - $10.00           |  |                     | 4,595,738  |            |  |             | 7.6 |                     |  | $        | 7.57  |  |  |          | 4,228,626  |  |  | $ | 8.25  | 
|$10.02 - $29.11          |  |                     | 2,379,774  |            |  |             | 7.6 |                     |  | $        | 15.56 |  |  |          | 2,024,095  |  |  | $ | 15.91 | 
|                         |  |                     |            |            |  |             |     |                     |  |          |       |  |  |          |            |  |  |   |       | 
|$0.20 - $29.11           |  |                     | 30,367,748 |            |  |             | 8.4 |                     |  | $        | 4.63  |  |  |          | 16,028,782 |  |  | $ | 5.93  | 
|                         |  |                     |            |            |  |             |     |                     |  |          |       |  |  |          |            |  |  |   |       | 

Pro forma fair value disclosure under SFAS No. 123 and 148

The weighted average estimated grant date fair value, as defined by SFAS
No.123, for stock options granted under its stock option plans during 2002,
2001 and 2000 was $2.02, $6.06 and $4.40 per share, respectively. The weighted
average estimated grant date fair value of stock purchase rights granted
pursuant to its employee stock purchase plan during 2002 and 2001 was $1.85 and
$2.86 per share, respectively. The estimated grant date fair value disclosed by
the Company is calculated using the Black-Scholes option pricing model. The
Black-Scholes model, as well as other currently accepted option valuation
models, was developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from its stock option and purchase awards. These models also require highly
subjective assumptions, including future stock price volatility and expected
time until exercise, which greatly affect the calculated grant date fair value.

The following weighted average assumptions are included in the estimated
grant date fair value calculations for its stock option and purchase awards:

|                                |  |                         |      |         |  |         |      |   |  |  |      |  
|------------------------------- |  | ----------------------- | ---- | ------- |  | ------- | ---- | - |  |  | ---- | -
|                                |  | Year Ended December 31,
|                                |  |                        
|                                |  | 2002                    |      | 2001    |  | 2000   
|                                |  |                         |      |         |  |        
|Risk-free interest rate         |  |                         | 3.10 | %       |  |         | 4.00 | % |  |  | 6.00 | %
|Average expected life of option |  | 2.5 years               |      | 4 years |  | 4 years
|Dividend yield                  |  |                         | 0    | %       |  |         | 0    | % |  |  | 0    | %
|Volatility of common stock      |  |                         | 1.66 |         |  |         | 1.43 |   |  |  | 2.92 |  

Had the Company recorded compensation based on the estimated grant date
fair value, as defined by SFAS No. 123, for awards granted under its stock
option plans and stock purchase plan, the net income (loss) and net income
(loss) per share would have been changed to the pro forma amounts below for the
years ended December 31, 2002, 2001 and 2000 (in thousands, except per share
amounts):

|             |                                                                           |  |                          |          |      |  |      |         |   |  |   |         |  
|------------ | ------------------------------------------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|             |                                                                           |  | Years Ended December 31,
|             |                                                                           |  |                         
|             |                                                                           |  | 2002                     |          | 2001 |  | 2000
|             |                                                                           |  |                          |          |      |  |     
|Net loss:    |                                                                           |  |                          |          |      |  |      |         |   |  |   |        
|             | Net income (loss) as reported                                             |  | $                        | (244,480 | )    |  | $    | (25,598 | ) |  | $ | 6,295   |  
|             | Less: Stock-based compensation
expense determined under fair
value method |  |                          | (16,211  | )    |  |      | (24,267 | ) |  |   | (12,121 | )
|             |                                                                           |  |                          |          |      |  |      |         |   |  |   |         |  
|             | Pro forma net loss                                                        |  | $                        | (260,691 | )    |  | $    | (49,865 | ) |  | $ | (5,826  | )
|             |                                                                           |  |                          |          |      |  |      |         |   |  |   |         |  
|As reported: |                                                                           |  |                          |          |      |  |      |         |   |  |   |        
|             | Basic earnings (loss) per share                                           |  | $                        | (2.33    | )    |  | $    | (0.44   | ) |  | $ | 0.13    |  
|             | Diluted earnings (loss) per share                                         |  | $                        | (2.33    | )    |  | $    | (0.44   | ) |  | $ | 0.12    |  
|Pro forma:   |                                                                           |  |                          |          |      |  |      |         |   |  |   |        
|             | Basic loss per share                                                      |  | $                        | (3.13    | )    |  | $    | (0.87   | ) |  | $ | (0.12   | )
|             | Diluted loss per share                                                    |  | $                        | (3.13    | )    |  | $    | (0.87   | ) |  | $ | (0.12   | )

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The pro forma effect on net income (loss) and net income (loss) per share
for 2002, 2001 and 2000 is not representative of the pro forma effect on net
income (loss) in future years because it does not take into consideration pro
forma compensation expense related to grants made prior to 1996.

Note 15  Commitments and Contingencies

The Company occupies its facilities under several non-cancelable operating
lease agreements expiring at various dates through November 2010, and requiring
payment of property taxes, insurance, maintenance and utilities. Future minimum
lease payments under non-cancelable operating leases at September 27, 2002 were
as follows (in thousands):

|                             |  |   |        |  |  |  |  |  |  |  |  | 
|---------------------------- |  | - | ------ |  |  |  |  |  |  |  |  | 
|Year ending December 31:     |  |   |        | 
|2003                         |  | $ | 9,380  | 
|2004                         |  |   | 10,051 | 
|2005                         |  |   | 9,938  | 
|2006                         |  |   | 8,791  | 
|2007                         |  |   | 8,477  | 
|Thereafter                   |  |   | 19,181 | 
|                             |  |   |        | 
|Total minimum lease payments |  | $ | 65,818 | 
|                             |  |   |        | 

Total rental expenses related to these operating leases were $9.2 million,
$3.7 million and $478,000 for 2002, 2001 and 2000, respectively.

For the year ended December 31, 2002 the Company recorded a restructuring
charge relating to the committed future lease payment for closed facilities,
net of estimated future sublease receipts, of $34.3 million, was included in
the above disclosures.

Note 16  Legal Proceedings

The Companys involvement in patent and International Trade Commission
litigation with respect to alleged infringement of certain of its United States
patent rights related to direct sequence wireless local area networking
technology has resulted in, and could in the future continue to result in,
substantial costs and diversion of management resources of the combined
company. In addition, this litigation, if determined adversely to us, could
result in the payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could materially and
adversely affect our business, financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9,
2001, Proxim, Inc. filed to remove Compex from the ITC complaint as Compex
entered into an agreement with Proxim, Inc. to license these patents. Intersil
and Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

83



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On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc.
sought declaratory judgment for non-infringement, invalidity and
unenforceability of certain Agere patents, as well as damages for violation of
the antitrust laws of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a permanent injunction against Proxim, Inc. based on
alleged patent infringement counterclaims. On December 18, 2001, Proxim, Inc.
filed an answer and counterclaims seeking declaratory judgments for
non-infringement, invalidity and unenforceability of the four asserted Symbol
patents, injunctive and monetary relief for Symbols infringement of a Proxim,
Inc. patent, monetary relief for Symbols false patent marking, and injunctive
and monetary relief for Symbols unfair competition under the Lanham Act,
common law unfair competition and tortious interference.

On August 5, 2002, in connection with the Companys acquisition of the
802.11 WLAN systems business from Agere, the Company announced that we had
entered into a cross-license agreement with Agere whereby, in part, the Company
and Agere agreed to settle the pending patent-related litigation between the
two companies.

On
March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.

The Company is party to disputes, including legal actions, with a number
of suppliers and vendors. These disputes relate primarily to excess materials
and order cancellation claims that resulted from the declines in demand for our
products during 2001 and 2002 and the commensurate reductions in manufacturing
volumes. The Company has recorded reserves related to these disputes to the
extent that management believes that the Company is liable. The Company
intends to vigorously defend itself in these matters.

The results of any litigation matters are inherently uncertain. In the
event of any adverse decision in the described legal actions or disputes, or
any other related litigation with third parties that could arise in the future
with respect to patents or other intellectual property rights relevant to our
products, the Company could be required to pay damages and other expenses, to
cease the manufacture, use and sale of infringing products, to expend
significant resources to develop non-infringing technology, or to obtain
licenses to the infringing technology. These matters are in the early stages
of litigation and, accordingly, the Company cannot make any assurance that
these matters will not materially and adversely affect the Companys business,
financial condition, operating results, or cash flows.

Note 17  Supplemental Cash Flow Data

The Company paid cash of $51.5 million in connection with its merger with
Proxim, Inc. and the acquisition of nBand and the 802.11 WLAN systems business
of Agere in the year ended December 31, 2002, and paid cash of $12.7 million
for the acquisition of WirelessHome in December 31, 2001, respectively, as
follows (in thousands):

|                              |  |                        |          |      |  |   |         |  
|----------------------------- |  | ---------------------- | -------- | ---- |  | - | ------- | -
|                              |  | Year Ended December 31
|                              |  |                       
|                              |  | 2002                   |          | 2001
|                              |  |                        |          |     
|Purchase price                |  | $                      | 246,454  |      |  | $ | 28,200  |  
|Common stock issued           |  |                        | (159,039 | )    |  |   | (15,289 | )
|Accrued transactions
costs    |  |                        |         |      |  |   | (173    | )
|                              |  |                        |          |      |  |   |         |  
|Cash paid                     |  |                        | 87,415   |      |  |   | 12,738  |  
|Less: cash
acquired           |  |                        | (35,961  | )    |  |   | (72     | )
|                              |  |                        |          |      |  |   |         |  
|Net cash used in
acquisitions |  | $                      | 51,454   |      |  | $ | 12,666  |  
|                              |  |                        |          |      |  |   |         |  

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Note 18  Employee Benefit Plan

The Company adopted an Employees Investment 401(k) Plan that covers all
employees and provides that the Company match employees salary deferrals up to
4% of eligible employee compensation. The amounts charged to continuing
operations were $936,000 and $795,000 and $521,000 in 2002, 2001 and 2000,
respectively.

Note 19  Subsequent Event

On
March 17, 2003, the Company announced a settlement with Intersil Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.

As part of the confidential settlement agreement the two companies have
entered into a patent cross-license agreement for their respective patent
portfolios and Intersil will make a one-time payment of $6 million to the
Company. The two companies have also entered into a product supply agreement
defining the terms under which the Company will be able to purchase 802.11
products that utilize Intersils chipsets.

The Company expects to pay its patent litigation attorneys approximately
$3 million as final settlement of outstanding legal fees and expenses related
to the terminated patent litigation. The Company will record the amount of
approximately $6 million as licensing revenue in the quarter ending March 28,
2003.

85



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

On March 21, 2002, our Board of Directors, upon recommendation of the
Audit Committee, made a determination not to engage Arthur Andersen LLP as the
Companys independent accountants and, on March 26, 2002, engaged
PricewaterhouseCoopers LLP to serve as our independent accountants for
the fiscal year ended December 31, 2002. Arthur Andersens reports on our
consolidated financial statements for each of the years ended December 31, 2001
and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles.

During the years ended December 31, 2001 and 2000 and through the date of
our engagement of PricewaterhouseCoopers LLP, there were no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Arthur Andersens satisfaction, would have caused them to make reference to the
subject matter in connection with its report on the Companys consolidated
financial statements for such years; and there were no reportable events as
specified in Item 304(a)(1)(v) of Regulation S-K.

The information set forth above and additional information relating to our
change in accountants for the fiscal year ended December 31, 2002 is included
in our Current Report on Form 8-K filed on March 28, 2002.




Part III




|         |  |                                                   
|-------- |  | --------------------------------------------------
|Item 10. |  | Directors and Executive Officers of the Registrant

Information regarding our Directors required by Item 10 of Part III will
be included in our Proxy Statement relating to our 2003 annual meeting of
stockholders and is incorporated herein by reference. Information regarding
our Executive Officers required by Item 10 of Part III is set forth in Item 1,
Part I under the caption Business  Executive Officers. Information relating
to compliance with Section 16(a) of the Securities Exchange Act of 1934 will be
set forth in our Proxy Statement relating to our 2003 annual meeting of
stockholders and is incorporated herein by reference.




|         |  |                       
|-------- |  | ----------------------
|Item 11. |  | Executive Compensation

Information required by Item 11 of Part III will be included in our Proxy
Statement relating to our 2003 annual meeting of stockholders and is
incorporated herein by reference.




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

Information required by Item 12 of Part III will be included in our Proxy
Statement relating to our 2003 annual meeting of stockholders and is
incorporated herein by reference.




|         |  |                                               
|-------- |  | ----------------------------------------------
|Item 13. |  | Certain Relationships and Related Transactions

Information required by Item 13 of Part III will be included in our Proxy
Statement relating to our 2003 annual meeting of stockholders and is
incorporated herein by reference.




|         |  |                        
|-------- |  | -----------------------
|Item 14. |  | Controls and Procedures

Within 90 days prior to filing this report, we carried out an evaluation,
under the supervision and with the participation of our principal executive
officer and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic filings with the
Securities and Exchange

86



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Commission. It should be noted that the design of any system of controls
is based in part upon certain assumptions, and there can be no assurance that
any design will succeed in achieving its stated goals.

In addition, we reviewed our internal controls and there have been no
significant changes in our internal controls or in other factors that could
significantly affect our disclosure controls and procedures, nor were there any
significant deficiencies or material weaknesses in our internal controls,
subsequent to the date of their evaluation. As a result, no corrective actions
were required or undertaken.




|         |  |                                                       
|-------- |  | ------------------------------------------------------
|Item 15. |  | Exhibits, Financial Statements and Reports on Form 8-K

(a)           List of documents Filed as Part of this Report



| | (1) |  | Index to Consolidated Financial Statements
| | --- |  | ------------------------------------------

|                                                |  |      |    | 
|----------------------------------------------- |  | ---- | -- | 
|                                                |  | Page
|                                                |  |     
|Report of Independent Accountants               |  |      | 52 | 
|Report of Independent Public
Accountants        |  |      | 53 | 
|Consolidated Balance Sheets                     |  |      | 54 | 
|Consolidated Statements of Operations           |  |      | 55 | 
|Consolidated Statements of Stockholders Equity |  |      | 56 | 
|Consolidated Statements of Cash Flows           |  |      | 59 | 
|Notes to Consolidated Financial Statements      |  |      | 60 | 



| | (2) |  | Index to Financial Statement Schedules
| | --- |  | --------------------------------------

Schedule II  Valuation and Qualifying Accounts

All other schedules have been omitted because the required information is
included in the consolidated financial statements or the notes thereto, or is
not applicable or required.



| | (3) |  | Exhibits.
| | --- |  | ---------

The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this report and such Exhibit Index is
incorporated by reference herein. Management contracts or compensatory plans
or arrangements are identified in the accompanying Exhibit Index and such
identification listing is incorporated by reference herein.



| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------

On October 9, 2002, we filed a Current Report on Form 8-K under Item 5
announcing that on October 8, 2002, at a special meeting of our stockholders,
the stockholders of Proxim approved the conversion of $34 million in
outstanding principle amount of Proxims indebtedness into shares of Proxims
Series A convertible preferred stock with an initial $34 million liquidation
preference and the issuance of warrants to purchase approximately 5.563 million
shares of Proxims common stock.

On October 15, 2002, we filed a Current Report on Form 8-K under Item 5
disclosing certain events in connection with the Companys guaranty on behalf
of David King, our then President and Chief Operating Officer, and that certain
related Reimbursement and Security Agreement.

On October 21, 2002, we filed on Form 8-K/A an amendment to our Current
Report on Form 8-K filed on August 19, 2002 under Item 7 providing financial
statements, pro forma financial information and exhibits relating to our
acquisition of the ORiNOCO product line of Agere Systems Inc. pursuant to the
terms of that certain Asset Purchase Agreement dated as of June 14, 2002
between Proxim and Agere Systems Inc.

On October 22, 2002, we filed on Form 8-K/A a second amendment to our
Current Report on Form 8-K filed on August 19, 2002 solely for the purpose of
filing Exhibit 23.1, Consent of Independent Accountants.

87



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on the 31st day of March, 2003.

PROXIM CORPORATION

| |     |  |                                                                                                                   
| | --- |  | ------------------------------------------------------------------------------------------------------------------
| | By: |  | /s/ KEITH E. GLOVER

(Keith E. Glover, Executive Vice President of Finance,
Chief Financial Officer and Secretary)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonathan N. Zakin and Keith E. Glover,
jointly and severally, his attorneys-in-fact, each with full power of
substitution, for him in any and all capacities, to sign on behalf of the
undersigned any amendments to this Report on Form 10-K, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, and each of the undersigned does hereby
ratify and confirm all that each of said attorneys-in-fact, or his substitute
or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed by the following persons in the capacities and on
the dates indicated:

|                                                   |  |                                                                                                                         |  |               
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | --------------
|SIGNATURE                                          |  | TITLE                                                                                                                   |  | DATE          
|                                                   |  |                                                                                                                         |  |               
|/s/ JONATHAN N. ZAKIN

(Jonathan N. Zakin)         |  | Chairman of the Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)                           |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ KEITH E. GLOVER

(Keith E. Glover)             |  | Executive Vice President of Finance,
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer) |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ DAVID C. KING

(David C. King)                 |  | Vice-Chairman of the Board of
Directors                                                                                 |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ LARRY BETTINO
(Larry Bettino)                  |  | Director                                                                                                                |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ MERLE L. GILMORE

(Merle L. Gilmore)           |  | Director                                                                                                                |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ JEFFREY D. SAPER

(Jeffrey D. Saper)           |  | Director                                                                                                                |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ KENNETH E. WESTRICK

(Kenneth E. Westrick)     |  | Director                                                                                                                |  | March 31, 2003
|                                                   |  |                                                                                                                         |  |               
|/s/ JOSEPH R. WRIGHT, JR.

(Joseph R. Wright, Jr.) |  | Director                                                                                                                |  | March 31, 2003

88



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CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECTION 302(a) OF

THE SARBANES-OXLEY ACT OF 2002

I, Jonathan N. Zakin, certify that:



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



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



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



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



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

|      |                |  |     |  |                                                                                 
|----- | -------------- |  | --- |  | --------------------------------------------------------------------------------
|Date: | March 31, 2003 |  | By: |  | /s/ JONATHAN N. ZAKIN                                                           
|      |                |  |     |  | Jonathan N. Zakin
Chief Executive Officer
and Chairman of the Board of Directors

89



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CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302(a) OF

THE SARBANES-OXLEY ACT OF 2002

I, Keith E. Glover, certify that:



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



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



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



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



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

|      |                |  |     |  |                                                                                
|----- | -------------- |  | --- |  | -------------------------------------------------------------------------------
|Date: | March 31, 2003 |  | By: |  | /s/ KEITH E. GLOVER                                                            
|      |                |  |     |  | Keith E. Glover
Executive Vice President, Chief Financial Officer and Secretary

90



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EXHIBIT INDEX

|         |  |                                                                                                                                                                                                                                                                      
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                      
|Number   |  | Description                                                                                                                                                                                                                                                          
|         |  |                                                                                                                                                                                                                                                                      
|2.1(1)   |  | Amended and Restated Acquisition Agreement, dated as of September 30, 1999, by and among GTI Acquisition
Corp., Glenayre Technologies, Inc., the Registrant and WMC Holding Corp.                                                                                    
|         |  |                                                                                                                                                                                                                                                                      
|2.2(1)   |  | Amendment to Acquisition Agreement, dated as of October 31, 1999, by and among GTI Acquisition Corp.,
Glenayre Technologies, Inc., the Registrant and WMC Holding Corp.                                                                                              
|         |  |                                                                                                                                                                                                                                                                      
|2.3(2)   |  | Agreement and Plan of Reorganization, dated as of January 16, 2002, among the Registrant, Walnut-Pine
Merger Corp. and Proxim, Inc.                                                                                                                                  
|         |  |                                                                                                                                                                                                                                                                      
|2.4(3)   |  | Asset Purchase Agreement, dated as of June 14, 2002, by and between the Registrant and Agere Systems, Inc.                                                                                                                                                           
|         |  |                                                                                                                                                                                                                                                                      
|2.5(3)   |  | Securities Purchase Agreement, dated as of June 16, 2002, by and among the Registrant, Warburg Pincus
Private Equity VIII, L.P., Broadview Capital Partners L.P. and Broadview Capital Partners Qualified
Purchasers Fund L.P.                                       
|         |  |                                                                                                                                                                                                                                                                      
|3.1(1)   |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                                                                                 
|         |  |                                                                                                                                                                                                                                                                      
|3.2      |  | Certificate of
Designations, Preferences and Rights of Series A Convertible
Preferred Stock of the Registrant.                                                                                                                                                       
|         |  |                                                                                                                                                                                                                                                                      
|3.3(2)   |  | Amended and Restated By-laws of the Registrant.                                                                                                                                                                                                                      
|         |  |                                                                                                                                                                                                                                                                      
|4.1(1)   |  | Form of the Registrants Class A Common Stock Certificate.                                                                                                                                                                                                           
|         |  |                                                                                                                                                                                                                                                                      
|4.2(1)   |  | Stockholders Agreement, dated as of October 31, 1999, among the Registrant, WMC Holding Corp., GTI
Acquisition Corp. and Glenayre Technologies, Inc.                                                                                                                 
|         |  |                                                                                                                                                                                                                                                                      
|4.3(1)   |  | Registration Rights Agreement, dated as of June 8, 2000, among the Registrant, Ripplewood Holdings L.L.C.
and WMC Holding Corp.                                                                                                                                      
|         |  |                                                                                                                                                                                                                                                                      
|4.4(2)   |  | Stockholders Agreement, dated as of January 16, 2002, among Ripplewood Partners, L.P., Ripplewood Employee
Co-Investment Fund, L.P., WMC Holding L.L.C. and the Registrant.                                                                                          
|         |  |                                                                                                                                                                                                                                                                      
|4.5(4)   |  | Warrant to Purchase Common Stock of Proxim, Inc. issued to Motorola Corporation on June 2, 1999.                                                                                                                                                                     
|         |  |                                                                                                                                                                                                                                                                      
|4.6(4)   |  | Investor Rights Agreement dated as of June 2, 1999 between Proxim, Inc. and Motorola Corporation.                                                                                                                                                                    
|         |  |                                                                                                                                                                                                                                                                      
|4.7(5)   |  | Registration Rights Agreement between Proxim, Inc. and Siemens Aktiengesellshaft and Siemens Information
and Communication Mobile LLC dated September 27, 2000.                                                                                                      
|         |  |                                                                                                                                                                                                                                                                      
|4.8(6)   |  | Common Stock and Warrant Purchase Agreement dated as of November 27, 2001 by and between Proxim, Inc. and
each of the purchasers named in Exhibit A thereto.                                                                                                         
|         |  |                                                                                                                                                                                                                                                                      
|4.9(6)   |  | Form of Proxim, Inc. Common Stock Warrant issued to each of the purchasers (other than UBS Global Equity
Arbitrage Master Ltd. and PIPES Corporate Strategies Ltd.) in connection with the Common Stock and Warrant
Purchase Agreement dated as of November 27, 2001.
|         |  |                                                                                                                                                                                                                                                                      
|4.10(6)  |  | Form of Proxim, Inc. Common Stock Warrant issued to UBS Global Equity Arbitrage Master Ltd. and PIPES
Corporate Strategies Ltd. in connection with the Common Stock and Warrant Purchase Agreement dated as of
November 27, 2001.                                    
|         |  |                                                                                                                                                                                                                                                                      
|4.11(6)  |  | Form of Proxim, Inc. Irrevocable Proxy executed by each of UBS Global Equity Arbitrage Master Ltd. and
PIPES Corporate Strategies Ltd. in connection with the Common Stock and Warrant Purchase Agreement dated as
of November 27, 2001.                             
|         |  |                                                                                                                                                                                                                                                                      
|4.12     |  | Form of
Registrants Senior Convertible Promissory Notes issued to each of the investors
in connection with the Securities Purchase Agreement, dated
June 16, 2002.                                                                                                  
|         |  |                                                                                                                                                                                                                                                                      
|4.13     |  | Form of
Registrants Warrant issued to each of the investors in
connection with the Securities Purchase Agreement, dated
June 16, 2002.                                                                                                                              
|         |  |                                                                                                                                                                                                                                                                      
|10.1(1)* |  | Employment and Co-Investment Agreement, dated as of October 31, 1999, among Ripplewood Partners L.P., WMC
Holding Corp., Seaview Holdings L.L.C., the Registrant and Jonathan N. Zakin.                                                                              
|         |  |                                                                                                                                                                                                                                                                      
|10.2(1)  |  | Co-Investment Agreement, dated as of October 31, 1999, among Ripplewood Partners L.P., WMC Holding Corp.,
The Michael and Roberta Seedman Revocable Trust, Michael Seedman and the Registrant.                                                                       
|         |  |                                                                                                                                                                                                                                                                      
|10.3(1)* |  | Employment Agreement, dated as of November 1, 1999, by and between the Registrant and Amir Zoufonoun.                                                                                                                                                                
|         |  |                                                                                                                                                                                                                                                                      
|10.4(1)* |  | Subscription and Employee Stockholders Agreement, dated as of January 31, 2000, among WMC Holding Corp.,
the Registrant, Ripplewood Partners, L.P. and Amir Zoufonoun.                                                                                              
|         |  |                                                                                                                                                                                                                                                                      
|10.5(1)* |  | 1999 Western Multiplex Corporation Stock Incentive Plan.                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                      
|10.6(1)* |  | Western Multiplex Corporation Employee Stock Purchase Plan.                                                                                                                                                                                                          
|         |  |                                                                                                                                                                                                                                                                      
|10.7(1)* |  | Western Multiplex Corporation 2000 Stock Option Plan for Non-Employee Directors.                                                                                                                                                                                     

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##### Table of Contents



|           |  |                                                                                                                                                                                                                
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    |  |                                                                                                                                                                                                                
|Number     |  | Description                                                                                                                                                                                                    
|           |  |                                                                                                                                                                                                                
|10.8(1)    |  | Stocking Distributor Agreement, dated May 27, 1998, by and between the Registrant and Somera Communications
Inc.                                                                                               
|           |  |                                                                                                                                                                                                                
|10.9(1)    |  | Credit Agreement, dated as of November 1, 1999, among the Registrant, Credit Suisse First Boston as Lead
Arranger and as Agent and the several financial institutions from time to time party to the agreement.
|           |  |                                                                                                                                                                                                                
|10.10(1)   |  | Assignment and Assumption Agreement, dated October 18, 1999, between the Registrant and Glenayre
Electronics, Inc., including the Lease, dated July 1, 1996, between Glenayre Electronics, Inc. and Yercaf
N.V.
|           |  |                                                                                                                                                                                                                
|10.11(1)   |  | Lease, dated February 27, 1998, between Ubiquity Communication, Inc. and G&W/Copley Redwood Business Park,
L.P.                                                                                                
|           |  |                                                                                                                                                                                                                
|10.12(7)*  |  | Amended Promissory Note, dated as of January 26, 2001, made by Amir Zoufonoun in favor of the Registrant.                                                                                                      
|           |  |                                                                                                                                                                                                                
|10.13(1)*  |  | Amendment No. 1 to 1999 Western Multiplex Corporation Stock Incentive Plan, dated June 8, 2000.                                                                                                                
|           |  |                                                                                                                                                                                                                
|10.14(1)   |  | Intellectual Property Assignment, dated November 1, 1999, from Glenayre Electronics, Inc. to the Registrant.                                                                                                   
|           |  |                                                                                                                                                                                                                
|10.15(1)   |  | License Agreement, dated November 1, 1999, by and between Glenayre Electronics, Inc. and the Registrant.                                                                                                       
|           |  |                                                                                                                                                                                                                
|10.16(1)*  |  | Ubiquity Communication, Inc. 1997 Stock Option Plan.                                                                                                                                                           
|           |  |                                                                                                                                                                                                                
|10.17(1)*  |  | Ubiquity Communication, Inc. 1998 Stock Plan.                                                                                                                                                                  
|           |  |                                                                                                                                                                                                                
|10.18(1)*  |  | Ubiquity Communication, Inc. 1999 Stock Plan.                                                                                                                                                                  
|           |  |                                                                                                                                                                                                                
|10.19(1)*  |  | Amendment No. 1 to Western Multiplex Corporation 2000 Stock Option Plan for Non-Employee Directors, dated
June 19, 2000.                                                                                       
|           |  |                                                                                                                                                                                                                
|10.20(1)   |  | Management Services Agreement between Ripplewood Holdings L.L.C. and the Registrant, dated November 1, 1999.                                                                                                   
|           |  |                                                                                                                                                                                                                
|10.21(1)   |  | Security Agreement, dated as of November 1, 1999, made by the Registrant in favor of Credit Suisse First
Boston, as Agent.                                                                                     
|           |  |                                                                                                                                                                                                                
|10.22(1)   |  | Intellectual Property Security Agreement, dated as of November 1, 1999, between Credit Suisse First Boston,
as Agent, and the Registrant.                                                                      
|           |  |                                                                                                                                                                                                                
|10.23(2)   |  | Indemnification Agreement, dated as of January 15, 2002, among the Registrant, WMC Holding L.L.C.,
Ripplewood Partners, L.P. and Ripplewood Employee Co-Investment Fund, L.P.                                  
|           |  |                                                                                                                                                                                                                
|10.24(2)*  |  | Employment Agreement, dated January 16, 2002, between the Registrant and David C. King.                                                                                                                        
|           |  |                                                                                                                                                                                                                
|10.25(7)*  |  | Amended Employment and Co-Investment Agreement, dated as of May 9, 2001, among Ripplewood Partners L.P.,
WMC Holding LLC, Seaview Holdings L.L.C., the Registrant and Jonathan N. Zakin.                       
|           |  |                                                                                                                                                                                                                
|10.26(7)*  |  | Amendment No. 2 to Western Multiplex Corporation Stock Incentive Plan, dated May 18, 2001.                                                                                                                     
|           |  |                                                                                                                                                                                                                
|10.27(8)*  |  | Form of Proxim, Inc. Indemnification Agreement for Officers and Directors, Delaware.                                                                                                                           
|           |  |                                                                                                                                                                                                                
|10.28(9)*  |  | Proxim, Inc. 1994 Director Option Plan, as amended and restated.                                                                                                                                               
|           |  |                                                                                                                                                                                                                
|10.29(10)* |  | Proxim, Inc. Form of 1994 Director Option Plan Subscription Agreement.                                                                                                                                         
|           |  |                                                                                                                                                                                                                
|10.30(11)* |  | Proxim, Inc. 1995 Long-Term Incentive Plan, as amended and restated.                                                                                                                                           
|           |  |                                                                                                                                                                                                                
|10.31(12)* |  | Proxim, Inc. Form of 1995 Long-Term Incentive Plan Subscription Agreement.                                                                                                                                     
|           |  |                                                                                                                                                                                                                
|10.32(13)* |  | Proxim, Inc. 1999 Nonstatutory Stock Option Plan, as amended and restated.                                                                                                                                     
|           |  |                                                                                                                                                                                                                
|10.33(14)* |  | Proxim, Inc. Form of 1999 Nonstatutory Stock Option Plan Subscription Agreement.                                                                                                                               
|           |  |                                                                                                                                                                                                                
|10.34(15)* |  | Change of Control Severance Agreement entered into June 18, 1998 between Proxim, Inc. and David C. King.                                                                                                       
|           |  |                                                                                                                                                                                                                
|10.35(15)* |  | Change of Control Severance Agreement entered into June 18, 1998 between Proxim, Inc. and Keith E. Glover.                                                                                                     
|           |  |                                                                                                                                                                                                                
|10.36(16)  |  | Sublease Agreement between Applied Materials , Inc. (sublandlord) and Proxim, Inc. (subtenant) dated
March 3, 1999.                                                                                            
|           |  |                                                                                                                                                                                                                
|10.37(17)* |  | Reimbursement and Security Agreement between Proxim, Inc. and David C. King dated March 15, 2001.                                                                                                              
|           |  |                                                                                                                                                                                                                
|10.38(18)  |  | Intellectual Property Agreement, dated as of August 5, 2002, by and between Agere Systems, Inc. and the
Registrant.                                                                                            
|           |  |                                                                                                                                                                                                                
|10.39(18)  |  | Patent License Agreement, dated as of August 5, 2002, by and among Agere Systems Guardian Corporation,
Agere Systems, Inc. and the Registrant.                                                                 

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##### Table of Contents



|          |  |                                                                                                                                                 
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |                                                                                                                                                 
|Number    |  | Description                                                                                                                                     
|          |  |                                                                                                                                                 
|10.40(18) |  | Supply Agreement, dated as of August 5, 2002, by and between Agere Systems, Inc. and the Registrant.                                            
|          |  |                                                                                                                                                 
|10.41*    |  | First Amendment to Employment Agreement, dated December 9, 2002, between the Registrant and David C. King                                       
|          |  |                                                                                                                                                 
|10.42     |  | Loan and Security Agreement, dated December 27, 2002, by and between Silicon Valley Bank and the Registrant                                     
|          |  |                                                                                                                                                 
|10.43     |  | Amendment to Loan Agreement, dated March 18, 2003, by and between Silicon Valley Bank and the Registrant                                        
|          |  |                                                                                                                                                 
|21(2)     |  | Subsidiaries of the Registrant.                                                                                                                 
|          |  |                                                                                                                                                 
|23        |  | Consent of Independent Accountants.                                                                                                             
|          |  |                                                                                                                                                 
|99.1      |  | Certification of Chief Executive Officer pursuant to 18. USC. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
|          |  |                                                                                                                                                 
|99.2      |  | Certification of Chief Financial Officer pursuant to 18. USC. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002



---

|*    |  | Management contract or compensatory plan or arrangement.                                                                                                 
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  |  | Incorporated by reference to the Registrants Registration Statement on
Form S-1 (File No. 333-35200), as amended.                                       
|    
|(2)  |  | Incorporated by reference to the Registrants Registration Statement on
Form S-4 (File No. 333-82014).                                                   
|    
|(3)  |  | Incorporated by reference to the Registrants Report on Form 8-K filed
with the Securities and Exchange Commission on June 19, 2002.                     
|    
|(4)  |  | Incorporated by reference to Proxim, Inc.s Report on Form 10-Q filed
with the Securities and Exchange Commission on August 13, 1999.                    
|    
|(5)  |  | Incorporated by reference to Proxim, Inc.s Report on Form 10-Q filed
with the Securities and Exchange Commission on November 14, 2000.                  
|    
|(6)  |  | Incorporated by reference to Proxim, Inc.s Report on Form 8-K filed with
the Securities and Exchange Commission on November 28, 2001.                   
|    
|(7)  |  | Incorporated by reference to the Registrants Report on Form 10-K filed
with the Securities and Exchange Commission on February 25, 2002.                
|    
|(8)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
33-70712 filed with the Securities and Exchange Commission on December 15,
1993.  
|    
|(9)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-88369 filed with the Securities and Exchange Commission on October 4,
1999.   
|    
|(10) |  | Incorporated by reference to Proxim, Inc.s definitive proxy materials
filed with the Securities and Exchange Commission on April 15, 1994.              
|    
|(11) |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-54390 filed with the Securities and Exchange Commission on January 26,
2001.  
|    
|(12) |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
33-94910 filed with the Securities and Exchange Commission on July 24,
1995.      
|    
|(13) |  | Incorporated by reference to Proxim Corporations Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on March 27,
2002.
|    
|(14) |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-54390 filed with the Securities and Exchange Commission on January 26,
2001.  
|    
|(15) |  | Incorporated by reference to Proxim, Inc.s Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1999.                     
|    
|(16) |  | Incorporated by reference to Proxim, Inc.s Report on Form 10-Q filed
with the Securities and Exchange Commission on May 17, 1999.                       
|    
|(17) |  | Incorporated by reference to Proxim, Inc.s Report on Form 10-Q filed
with the Securities and Exchange Commission on August 14, 2001.                    
|    
|(18) |  | Incorporated by reference to the Registrants Report on Form 8-K filed
with the Securities and Exchange Commission on August 19, 2002.                   

93