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**UNITED      STATES**

**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,                2006** |
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**OR**

| o  | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 FOR THE TRANSITION PERIOD FROM                TO** |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Commission      File Number 000-29053**

**TERABEAM,      INC.**

**(Exact      name of registrant as specified in its charter)**

| **Delaware****(State                  or other jurisdiction****of                  incorporation or organization)** | **04-2751645****(I.R.S.                  Employer****Identification                  No.)** |
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**2115      O’Nel Drive**

**San      Jose, CA 95131**

**(Address      of principal executive offices)**

**(408)      731-2700**

**(Registrant’s      telephone number, including area code)**

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

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

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

No

| Large                    accelerated filer  o         |  Accelerated                    filer  o      |  Non-accelerated                    filer  x |
|---------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|-------------------------------------------------------------|

**DOCUMENTS      INCORPORATED BY REFERENCE**

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**PART      I**

**Item      1.    Business.**

**Overview**

|   | · | Telaxis                Communications Corporation – In April 2003, we (then a private company                known as Young Design, Inc.) acquired Telaxis, a publicly traded                company                focused on developing high capacity millimeter wave wireless products,                and                thus became a publicly traded company.  Young Design, Inc. had                developed, produced, and sold wireless data products, primarily in                microwave frequencies. |
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|   | · | KarlNet,                Inc. – In May 2004, we acquired KarlNet, a pioneer and leader in software                development for operating and managing wireless                networks. |
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|  | · | Terabeam                Corporation – In June 2004, we acquired Terabeam Corporation, a developer                and provider of wireless fiber solutions using high frequency millimeter                wave (60 GHz radio frequency) and free space optics (transferring                data                through the air with light) technologies which had raised a substantial                amount of cash as a private company.  In addition to the cash                and wireless fiber solutions, the Terabeam Corporation acquisition                provided us with the capability to pursue non-communication millimeter                wave products business (such as radar systems and sub-systems) from                military and non-military governmental and other customers through                its                Harmonix Division. |
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|   | · | Ricochet                Networks – In June 2004, we acquired Ricochet Networks,                Inc.  Ricochet was originally formed to acquire certain assets                from the bankruptcy estate of Metricom.  Prior to its                bankruptcy, Metricom had deployed the Ricochet® network in many major                metropolitan cities including New York, Los Angeles, San Francisco,                Seattle, Chicago, Philadelphia, Phoenix, Baltimore, Philadelphia,                Atlanta,                Dallas/Fort Worth, Minneapolis, and Washington, DC.  Currently                serving over 6,000 paying subscribers in the greater San Diego, CA                and                Denver, CO, metropolitan areas, the Ricochet network spans over 520                square                miles of active footprint.  Ricochet is investigating the                feasibility of restoring service in markets where previously                deployed.  In addition, Ricochet is pursuing opportunities to                provide Homeland Defense and public safety systems utilizing the                Ricochet                solution.  Also, Ricochet is offering equipment to service                providers, WISPs, and municipalities who wish to offer wireless Internet                services and become part of Ricochet’s network.  Ricochet’s                services business is operated independent of the rest of our business–                the equipment business – except for certain overlapping personnel and                functions.  We are now trying to combine the expertise and                capabilities of Ricochet with those of Proxim to pursue the municipal                wireless network market. |
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|   | · | Proxim                Corporation – In July 2005, we acquired substantially all of the assets                and operations of Proxim Corporation (“Old Proxim”) from the bankruptcy                estate of Old Proxim.  Old Proxim was the result of the merger                between Western Multiplex Corporation and Proxim, Inc. in March                2002.  Both Western Multiplex and Proxim, Inc. were designers                and manufacturers of broadband wireless systems.  In                August 2002, Old Proxim acquired Agere Systems’ 802.11 wireless local                area network equipment business, including its ORiNOCO® 802.11b product                line. |
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**Industry      Background and Markets**

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*Hot      Spots to Community Access Networks*

*Fixed      Wireless Broadband for Urban and Rural Areas*

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*Cellular      Backhaul*

*Private      Enterprise Networks*

*Security      and Surveillance*

*The      Desire for Redundancy and Reduced Vulnerability*

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

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**Strategy**

**Capitalize      on our technology expertise to introduce new products rapidly.**

**Leverage      our channels of distribution.  **

**Expand      our sales efforts and sales outside of the United      States.**

**Leverage      synergies between Proxim Wireless and Ricochet Networks in pursuit of Community      Access Networks.  **

**Capitalization      of Assets.  **

**Expand        through acquisitions. **

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**Products**

*Broadband      Wireless Access Products*

*Tsunami      MP.11.*

*WiMAX.*

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*Wi-Fi      Mesh.*

*MeshMAXTM.*

*Enterprise      Wi-Fi Products*

*ORiNOCO      Access Points.    *

*ORiNOCO      Client Cards.    *

*Point-to-Point        Products*

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*Lynx      products.*

*Tsunami      products.*

*GigaLink      products.  *

*Services      Business*

**Technology**

*Radio        frequency technology.*

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*Digital      signal processing technology.*

*MAC.  *

*System      software.*

**Research      and Development**

|   | · | advancing                our broadband mesh and MeshMAX                systems; |
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|   | · | advancing                our WiMAX products; |
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|   | · | advancing                our other point-to-multipoint                systems; |
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|   | · | adapting                our products to additional frequencies and                interfaces; |
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|   | · | developing                higher speed products; |
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|   | · | increasing                  the performance of our digital signal processing technology;                  and |
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|   | · | designing                  our products for lower cost, outsourced manufacturing, assembly,                  and                  testing. |
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**Sales      and Marketing**

*Services        Business*

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**Customer      Service**

**Manufacturing**

|   | · | an                    unpredictable customer demand                    environment; |
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|   | · | limited                  backlog; |
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|   | · | uncertain                acceptance of new products and                services; |
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|   | · | competition;                and |
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|   | · | challenges                in managing growth. |
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**Competition**

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**Intellectual      Property**

|   | · | A                three-year supply agreement pursuant to which Agere originally agreed                to                supply Old Proxim with chipsets, modules and cards at specified                prices; |
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|   |   |   |
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|   | · | a                perpetual license originally enabling Old Proxim to use Agere technology                related to the wireless LAN equipment business;                and |
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|   | · | a                7-1/2 year patent cross-license agreement for Old Proxim’s and                Agere’s respective patent                portfolios. |
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**Government      Regulation**

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

**Employees**

**Item      1A.     Risk Factors.**

*General      Overview*

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*Cautionary      Statements*

|   | · | **The                continuing uncertainty in the telecommunications industry and the                global                economy is adversely affecting our sales due in part to our being                a                smaller, younger company.**  In the past few years, the                overall economic climate in the United States and many other parts                of the                world has been recovering from a downturn.  This downturn and                recovery has resulted in our customers having less capital available                from                capital markets, and less willingness to spend internal capital,                to                purchase equipments such as ours.  As a result, potential                customers may be less willing to spend their limited budgets on products                from us, a relatively small, young company that may not survive the                leaner                economic times.  Because we do not have the financial resources                or name recognition of larger companies, this economic cycle may                adversely                affect the growth and stability of our business and our financial                condition and results of                operations. |
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|   | · | **We                currently have limited capital resources, which could adversely impact                our                operations, ability to grow our business, attractiveness as a supplier                to                customers, attractiveness to investors, and viability as an ongoing                company.**  We have a recent history of unprofitable                operations, and our capital resources have been declining and are                limited.  These factors could cause potential customers to                question our long-term viability as a supplier and thus decide not                to                purchase products from us.  Further, our limited capital                resources could inhibit our ability to grow our business because                typically                we have to pay our suppliers sooner than we receive payment from                our                customers.  These factors could cause potential investors to                question our long-term viability or believe that we will need to                raise                additional capital on terms more favorable than a typical investor                would                obtain by simply buying our stock in the public markets and thus                decide                not to purchase our stock.  All these factors could have an                adverse impact on our operations, financial results, stock price,                and                viability as an ongoing company. |
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|   | · | **The                broadband wireless equipment industry in which we principally operate                is                intensely competitive which could negatively impact our financial                results.**  The telecommunications equipment industry in                which we operate is intensely competitive.  Most of our products                are intended for outdoor broadband wireless networks (generally our                broadband wireless access and point-to-point products) or indoor                wireless                networks (generally our enterprise Wi-Fi products).  Competition                is intense in this industry for a number of reasons.  For                example, there are relatively few barriers to entry in this                market.  Also, this industry has attracted substantial media and                other attention in recent months in part due to the ability of this                equipment to provide broadband Internet connectivity simply, quickly,                and                efficiently.  These same reasons, among others, have caused a                number of companies to develop products that compete (or could be                viewed                as competing) with ours.  This large number of companies                offering products that may be perceived to be similar or even                interchangeable with our products can have the effect of reducing                the                prices at which we are able to sell our products.  In turn, this                can reduce our gross margins and negatively impact our general financial                results. |
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|   | · | **We                face substantial competition from a number of larger companies with                substantially greater resources and longer operating histories, and                we may                not be able to compete effectively.**  Many of our                competitors or perceived competitors offer a variety of competitive                products and services and some may offer broader telecommunications                product lines.  These companies include AirSpan Networks,                Alcatel, Alvarion, Business Networks AB, Ceragon, Cisco (including                LinkSys), D-Link, Ericson, Fujitsu, Harris Corporation, Harris Stratex                Networks, Intel Corporation, Motorola (including Orthogon and Symbol                Technologies), NEC, Netgear, Nokia, Nortel, SMC, and 3Com                Corporation.  Additionally, our millimeter wave radio products                must compete with the existing and new fiber optic infrastructure                and                suppliers in the United States and elsewhere.  Many of these                companies have greater customer recognition, installed bases, financial                resources, and sales, production, marketing, manufacturing, engineering,                and other capabilities than we do. |
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|   | · | **We                also face competition from private and start-up companies given the                limited barriers to entry in our business.**  We face                actual and potential competition not only from established companies,                but                also from start-up and other private companies that are developing                and                marketing new commercial products and services.  Many of the                products we sell are based on standards established by the Institute                of                Electrical and Electronics Engineers (IEEE) that require                interoperability.  Also, there are not substantial technical                development difficulties, manufacturing difficulties, prohibitive                intellectual property rights, or high business start-up costs that                may                create greater barriers to entry in other businesses.  As a                result, there are limited barriers to entry into a number of markets                we                serve.  This lack of significant barriers and the perceived                attractiveness of some of these markets, among other reasons, have                resulted in private companies entering these markets.  These                private companies include Aperto, Aruba, Belaire Networks, Buffalo,                Colubris Networks, Firetide, Redline, Trango Broadband, Trapeze Networks,                and Tropos. |
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|   | · | **We                may experience difficulty in differentiating our products from other                broadband wireless products which may reduce our sales and gross                margins.**  We believe that some products in the                broadband wireless equipment business in which we primarily operate                have                become commodities in which there is intense price competition, and                we                believe that trend will continue and intensify.  We need to                carefully and clearly distinguish our products from competing products                and                technologies that may be able to provide wireless broadband access                or                connectivity.  Points of distinction include service and support                offered for our products, operating range of our products, scalability                of                networks using our products, remote management and monitoring                capabilities, durability and robustness of our products, data rate                transmission capabilities of our products, ease and speed of installation                of our products, markets served by our products, cost of our products,                other features of our products, security and interference issues,                and                value proposition of our products for our customers.  Failure to                distinguish our products for our customers, investors, and others                could                hinder market acceptance of our products, delay our obtaining customers                for our products, force reductions in contemplated sales prices of                our                products, and reduce our overall sales and gross margins.  This                ability to distinguish is becoming more important as we try to introduce                more feature-rich products at higher                prices. |
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|   | · | **Potential                customers may view price as the primary differentiator between our                products and products of our competitors, which could reduce the                price at                which we can sell our products and negatively impact our financial                results.  **Because many products in our broadband                wireless equipment business have to comply with specific public standards,                at times potential customers may perceive there to be little other                than                price to differentiate our products from products of a                competitor.  This intense customer focus on pricing can have the                effect of reducing the prices at which we are able to sell our                products.  In turn, this can reduce our gross margins and                negatively impact our general financial                results. |
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|   | · | **Alternative                broadband connectivity technologies may have advantages over our                products                and make our products less attractive to customers.**  A                number of competing technologies may be able to provide high-speed,                broadband access or connectivity.  These competing technologies                include digital subscriber lines, hybrid fiber coaxial cable, fiber                optic                cable, T-1/E-1 and other high-speed wire, laser (also known as free                space                optics), satellite, and other mesh wireless, point-to-multipoint                wireless,                and point-to-point wireless technologies.  Some of these                technologies may have advantages over our products, such as lower                cost,                greater range, better security, and greater current market                acceptance. |
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|   | · | **New                broadband connectivity technologies may be developed that have advantages                over our products and make our products less attractive to                customers.  **New products or new technologies may be                developed that supplant or provide lower-cost or better performing                alternatives to our products.  For example, many of the products                we sell are based on the IEEE 802.11a/b/g standards.  We believe                products are being developed based on various new IEEE 802.11 standards,                such as 802.11n (MIMO), 802.11r (fast roaming), and 802.11s (wireless                mesh), and IEEE 802.16 (also known as WiMAX) standards which may                have                advantages over products based on the IEEE 802.11a/b/g standards,                such as                greater data transmission capabilities, greater quality of service,                non-line of sight capabilities, and longer                range. |
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|   | · | **The                actual or potential availability of new broadband connectivity                technologies could cause our customers to delay buying                decisions.**  We operate in a business where there is                rapid technological change, and new standards, products, and technologies                are continually introduced to the market in actual or conceptual                form.  These new products or technologies may have or appear or                be described to have advantages over our products or other products                then                currently available.  Even though actual products may not be                available until some (perhaps indefinite) time after initial introduction                of the conceptual standard, product, or technology, the possibility                of                obtaining these new products could cause potential customers to delay                their decision to buy products such as ours.  This delay could                adversely impact our business, financial condition, and results of                operations. |
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|   | · | **The                costs of developing products to operate in accordance with these                new                broadband connectivity technologies would be substantial and could                adversely affect our operating results.**  As a                well-known supplier of broadband wireless equipment, we are expected                to                provide products on the cutting-edge of technology.  This means                supplying products operating in accordance with new broadband connectivity                technologies.  Developing these products is a time-consuming and                expensive process.  These costs could adversely affect our                operating results.  Alternatively, if we do not develop new                products, customers may view us as not maintaining our technological                leadership so be unwilling to purchase products from                us. |
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|   | · | **We                are selling into a market that has a broad range of desired product                characteristics and features which may make it difficult for us to                develop                products that will address a broad enough market to be commercially                viable.  **We are selling into a market place that is                experiencing a convergence of competing technologies.  The                market that we currently serve is experiencing a convergence of voice                driven telecommunications methodology and data centric networking                based                methodology.  As a result there exists a divergence of product                requirements and corporate cultures for our customers and even within                the                same customer.  Typically, established telecommunications                providers desire extremely robust products with the expectation of                a                relatively long effective life.  Networking providers on the                other hand are looking for optimal performance at any given time                with the                assumption that they will be upgrading the equipment again in several                years and therefore are extremely cost sensitive.  In addition,                established telecommunications providers seek products that fit into                their                existing networks (T-1, E-1, OC-3, OC-12 interfaces and data rates)                while                networking based providers prefer ethernet interfaces and data                rates.  If we are unable to satisfy one or more of the                requirements of our current and prospective customers, we may lose,                or                fail to gain, meaningful market                share. |
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|   | · | **We                may not develop products for the portions of the broadband connectivity                and access markets that grow.**  Predicting which                segments of the broadband connectivity and access markets will develop                and                at what rate these markets will grow is difficult.  We may                needlessly spend money and resources developing products for a market                that                does not develop.  On the other hand, we may miss market                opportunities if we fail to act promptly and decisively to develop                new                products.  Our business, financial condition, and results of                operations will be materially adversely affected if we develop the                wrong                product or miss market                opportunities. |
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|   | · | **Our                sales may decline if we are unable to keep pace with rapid technological                changes and industry standards.**  Our ability to succeed                in our competitive market will depend upon successful development,                introduction, and sale of new products and enhancements on a timely                and                cost-effective basis in response to changing customer requirements                and                competitors’ product developments.  We may not be successful in                selecting, developing, manufacturing, and marketing new products                or                enhancements which could adversely affect our                sales. |
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|   | · | **We                believe that the prices for our products will decline over time which                could hurt our financial results.**  We believe that                average selling prices for our products will tend to decline from                the                point at which a product is initially priced and                marketed.  Reasons for this decline may include the maturation                of such products, the effect of volume price discounts in existing                and                future contracts, technology changes, and the intensification of                competition, including from lower-cost foreign suppliers.  This                price decline could hurt our financial                results. |
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|   | · | **The                expected price decline of our products will hurt our financial results                unless we are able to offset those declines with cost savings or                new                product introductions.**  We will attempt to offset                expected price declines of our products by reducing our product costs                and                non-product costs and by introducing new products with higher gross                margins.  If we are unable to offset declining selling prices by                reducing direct materials and manufacturing expenses, our gross margins                will decline.  If we cannot develop new products in a timely                manner or we fail to achieve increased sales of new products at higher                gross margins, our revenue and gross margins may                decline. |
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|   | · | **Our                plans to continue to introduce new products will require capital                and other                investments that may not be recovered.**  We devote                significant resources to the development and marketing of new products                and                technologies and expect to continue to do so.  These investments                include facilities, equipment, inventory, personnel, and other items                to                develop and produce these products and to provide marketing, sales,                service and support, and administration organizations to service                and                support these products.  We anticipate many of these commitments                and expenditures would be made in advance of realization of increased                sales, which may not occur.  If sales do not increase as                expected, our gross margins and general financial performance would                be                adversely affected. |
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|   | · | **Our                financial results have fluctuated significantly, and we expect the                fluctuations will continue for a variety of reasons, many of which                are out                of our control.**  Our quarterly financial results have                fluctuated significantly for a number of reasons including our                acquisitions of the assets of Proxim Corporation in July 2005; Terabeam                Corporation, Ricochet Networks, Inc., and KarlNet, Inc. in the second                quarter of 2004; the combination of Telaxis and Young Design in April                2003; our limited long-term commitments from customers; the receipt                of                significant customer orders; timing of obtaining customers for any                new                products we may introduce; the mix of our product sales; our manufacturing                capacity constraints and our ability to fulfill orders; our inability                to                obtain components in the quantities we need; new product introductions                by                us or by our competitors; seasonal factors that may affect capital                spending by customers; and general economic conditions.  We                expect that many of these and other factors will continue to affect                our                business and will cause our financial results to fluctuate in the                future. |
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|   | · | **Our                past acquisition activity and contemplated future acquisition activity                contributes to the difficulty in predicting our future financial                performance.**  The combination of Telaxis and Young                Design in April 2003 resulted in changes in our financial                performance.  The historically unprofitable financial results of                Telaxis caused the operating results of the combined company to be                unprofitable in the second quarter of 2003.  Although the                combined company did briefly return to profitability, the acquisitions                of                the unprofitable Terabeam Corporation, KarlNet, Inc., and Ricochet                Networks, Inc. in the second quarter of 2004 have caused the company                to be                unprofitable in later 2004 and early 2005.  However, the                company’s balance sheet was significantly stronger given the addition of                the assets from the acquired companies.  These additional assets                enabled us to acquire the operations of Proxim Corporation in July                2005,                which has significantly increased our revenue but also our                expenses.  We have stated our intention to make selected                acquisitions from time to time and, therefore, expect that our future                acquisition activity will contribute to fluctuations in our financial                results and to difficulties in predicting our financial                performance. |
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|   | · | **We                may not achieve the contemplated benefits of any acquisition we make                which                could materially and adversely affect our business.**  We                may not be able to achieve the expected synergies and other benefits                of                any acquisitions we make at all or to the extent and in the time                periods                expected.  We may not be able to integrate the operations in a                cost-effective, timely manner without material liabilities or loss                of                desired employees, suppliers, or customers.  Our management may                be distracted from our core business due to the                acquisition.  The expected cost savings from the transaction may                not be fully realized or may take longer to realize than                expected.  The time and costs required to integrate, establish,                manage, and operate the operations we acquire may be greater than                we                anticipated.  Our investors, competitors, customers, suppliers,                employees, and others may react negatively to the                acquisition.  We may make acquisitions in business areas in                which we have little experience operating so may not fully benefit                from                the acquisition.  We may be exposed to lawsuits, risks,                liabilities, or obligations imposed on or threatened against us arising                from the acquisition.  For example, we believe that Symbol                Technologies, Inc. commenced its lawsuit against us as a result of                our                acquiring Proxim Corporation’s operations.  We may face                unexpected difficulties, costs, and delays in implementing common                internal                controls, disclosure controls, systems, and procedures, including                financial accounting systems, particularly in light of the enhanced                scrutiny given to those items in the current                environment.  Addition of these operations may increase the                difficulty for us, financial analysts, and others to predict the                combined                company’s future business and financial performance.  These                factors may cause us to want or need to raise additional debt or                equity                capital, which, if available at all, may be on terms deemed undesirable                by                investors, customers, suppliers, employees, or others.  These                factors could materially and adversely affect our business, perception                in                our market, and financial results.  Should these factors                materially and adversely affect our business, it could result in                a                material impairment charge to write-down                goodwill. |
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|   | · | **Purchase                accounting treatment and the impact of amortization and impairment                of                intangible assets relating to the Proxim Corporation asset purchase                could                cause our operating results to be adversely                affected.  **In accordance with generally accepted                accounting principles, we accounted for the Proxim Corporation asset                purchase using the purchase method of accounting.  We have                allocated the cost of the individual assets acquired and liability                assumed, including various identifiable intangible assets (such as                acquired technology and acquired trademarks and trade names), based                on                their respective fair values at the date of the completion of the                acquisition.  For example, in the third quarter of 2006, we                recorded a charge of $4.8 million related to the developed technology                acquired from Proxim Corporation.  We may be required to further                reduce the carrying value of these assets in the future which could                adversely impact our financial                results. |
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|   | · | **The                fact that we receive few long-term purchase commitments from customers                contributes to the difficulty in predicting our future financial                performance.**  Due to the nature of our products and                customers, we generally have a very short time between receiving                an order                and shipping the order.  Few of our customers provide us with                long-term purchase commitments.  As a result, we generally have                a relatively low backlog and have limited visibility of sales going                forward.  This lack of visibility contributes to the difficulty                in predicting our future financial performance by us, financial analysts,                and investors. |
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|   | · | **The                fact that we receive few long-term purchase commitments from customers                contributes to our inventory risk which could adversely affect our                financial results.  **Due to the nature of our products                and customers, we generally have a very short time between receiving                an                order and shipping the order.  Few of our customers provide us                with long-term purchase commitments.  As a result, we generally                have limited visibility of sales going forward.  However, our                customers generally demand relatively quick delivery of                products.  This means that we have to estimate product                demand.  If we under-estimate demand, we may lose                sales.  If we over-estimate demand, we may end up with having to                take charges for excess and/or obsolete inventory.  These                factors could adversely affect our financial                results. |
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|   | · | **Receipt                of significant customer orders have caused our financial results                to                fluctuate and contribute to the difficulty in predicting our future                financial performance.**  At times, we have received                significant orders from customers that have caused our financial                results                to fluctuate.  For example, we received large orders from a                single customer in 2003 that contributed positively to the financial                results of several quarters in 2003.  The non-recurrence of                those orders in 2004 made our financial results look worse in                comparison.  We expect that at times we may get similar                significant orders in the future which could cause significant                fluctuations in sales, gross margins, and operating                results.  These fluctuations contribute to the difficulty in                predicting our future financial performance by us, financial analysts,                and                investors. |
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|   | · | **Difficulties                in obtaining the components we need to manufacture our products have                caused our financial results to fluctuate and contribute to the difficulty                in predicting our future financial performance.**  At                times we have been unable to obtain sufficient components to manufacture                certain of our products.  We believe this shortage had a                negative impact on our revenue and financial results for those                quarters.  Given the number of components in our products, the                age of some of our products, and the limited number of suppliers                of some                of these components, we may experience similar component shortages                from                time to time in the future.  These shortages could contribute to                fluctuations in our financial results and to the difficulty in predicting                our future financial performance. |
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|   | · | **We                cannot predict whether we will be able to achieve profitability,                which                could adversely affect our ability to continue as a going concern                and our                stock price.**  We were profitable on an operating and                GAAP basis in the fourth fiscal quarter of 2005.  We were not                profitable in any quarter of 2006.  We have made no predictions                concerning our future profitability or lack of                profitability.  Our inability to achieve may affect our ability                to continue as a going concern and cause the market price of our                stock to                decline or prevent it from rising. |
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|   | · | **We                expect that changes in stock option accounting rules will adversely                impact                our reported operating results and may adversely affect our                competitiveness in the employee marketplace.  **We have                adopted FASB Statement No. 123R (“SFAS 123R”), *Share-Based                Payment*, as our accounting method for stock options for accounting                periods beginning January 1, 2006 and after.  SFAS 123R requires                that all share-based payments to all employees, including grants                of                employee stock options, are to be included in the financial statements                based on their fair values.  The adoption of SFAS 123R and                resulting charges on our financial statements have significantly                reduced                our operating and net income and we expect will continue to do                so.  These charges may result in our having operating and net                losses rather than operating and net profits.  As a result of                adopting the changes specified in SFAS 123R, it could negatively                impact                our use of employee stock plans to reward employees, putting us at                a                competitive disadvantage in attracting and retaining key                employees. |
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|   | · | **Our                indirect sales model makes us dependent on third party distributors                and                resellers, which could adversely impact our financial results and                reputation.  **Most of our products are sold through both                domestic and international distributors and resellers.  These                distributors generally focus on selling to a specific market or geographic                region.  These distributors and resellers carry and sell                products from other suppliers in addition to our own.  We expect                to continue to engage additional distributors and resellers to sell                our                products.  Use of distributors and resellers makes us dependent,                to some extent, on those third parties who will have the relationships                with the end customers.  We may not be successful in attracting                qualified distributors and resellers.  Use of these distributors                and resellers could cause significant fluctuation in and adversely                impact                our future revenue and operating results due to price, extended payment                term, and other concessions demanded by our distributors, our limited                relationships with actual end-users of our products, the time and                costs                associated with maintaining our distributor and reseller relationships,                the time and costs associated with engaging new distributors and                resellers, the possibility that they may give other suppliers’ products                priority over our own, the possibility of channel and price conflict,                the                possibility of customer confusion and customer dissatisfaction, and                potential accounting, operational, and financial results problems                if they                build excess inventory. |
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|   | · | **We                have a limited number of distributors so any decrease in business                from                them could cause a decline in our revenue.**  The loss of                business from any of our distributors or the delay of significant                orders                from our distributors could significantly reduce our revenue, even                if it                is only temporary.  We do not have long-term contracts with our                distributors.  Our ability to accurately forecast our revenue                hinges on the timing and size of future purchase orders taken by                our                distributors.  Any reduction in revenue could have a materially                adverse affect on our operating results and financial                condition. |
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|   | · | **We                may be unsuccessful in our efforts to obtain larger customers, and                these                efforts could adversely impact our current                business.**  We are trying to expand our customer base by                obtaining larger customers.  Our efforts may not be                successful.  For example, larger customers may not want to                deploy products like many of ours that operate in unlicensed frequencies                or they may seek products with feature sets that are different from                what                we offer.  Our efforts could adversely impact our current                business due to diversion of efforts and attention, our current customers                not being pleased by our customer expansion efforts, and other                reasons. |
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|   | · | **Our                business depends in part on continued demand for broadband connectivity                and access.**  The future success of our business is                dependent in part upon the continued and increasing demand for high-speed,                broadband connectivity and access, particularly with regard to the                Internet, and for high-speed telecommunications products.  The                markets for such services may not grow at all or as                expected. |
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|   | · | **We                depend on our senior employees who are extensively involved in many                aspects of our business, and our business would likely be harmed                if we                lose their services and cannot hire additional qualified                personnel.**  Particularly because we are a relatively                small company, our future operating results depend in significant                part                upon the continued contributions of senior management and key sales                and                technical personnel, many of who would be difficult to replace if                their                services become unavailable to us due to death, illness, or other                reasons.  Future operating results also depend upon the ability                to attract and retain qualified management, sales, and technical                personnel.  Competition for these personnel is intense, and we                may not be successful in attracting or retaining them.  Only a                limited number of persons with the requisite skills to serve in these                positions may exist, and it may be difficult for us to hire the skilled                personnel we need.  We have experienced difficulty in                attracting, hiring, and retaining experienced sales personnel with                the                right blend of skills for our company, and we may experience difficulty                with other types of personnel in the                future. |
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|   | · | **We                have no key-man life insurance on any of our executive officers or                other                employees.  **Loss of the services of any of our key                executive officers or other key employees could have a material adverse                effect on our business, financial condition, and results of                operations.  The lack of key man insurance means that we would                receive no insurance proceeds to buffer any such adverse                effects. |
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|   | · | **We                do not currently have a succession plan in place.**  We                currently do not have a succession plan in place if our chief executive                officer or other senior personnel were to become unable to perform                their                responsibilities due to illness, injury, termination of service,                or other                reasons.  Loss of the services of our chief executive officer or                other senior personnel could have a material adverse effect on our                business, financial condition, and results of operations.  Lack                of a succession plan could exacerbate our difficulties in overcoming                the                issues created by the loss of services of our chief executive officer                or                other senior personnel due to uncertainty and responsibility transition                issues. |
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|   | · | **Our                limited internal manufacturing capacity may be insufficient to meet                customers’ desires for our products, which could harm our sales and damage                our reputation.**  Our internal manufacturing capacity,                by design, is limited.  At times, we have been unable to deliver                certain internally-manufactured products as quickly and in the quantities                that customers desire.  These inabilities could damage                relationships with customers and have a material adverse effect on                our                reputation, business, financial condition, and results of                operations. |
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|   | · | **Our                limited internal manufacturing capacity makes us dependent on contract                manufacturers, which could harm our sales and damage our                reputation.**  Our internal manufacturing capacity, by                design, is limited.  We currently expect to rely on domestic and                international contract manufacturers to provide manufacturing of                our                complete products, components, and subassemblies.  Our failure                to obtain satisfactory performance from any contract manufacturers                could                cause us to fail to meet customer requirements, lose sales, and expose                us                to product quality issues.  In turn, this could damage                relationships with customers and have a material adverse effect on                our                reputation, business, financial condition, and results of                operations. |
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|   | · | **We                may be unable to engage contract manufacturers to manufacture our                products                which could force us to increase our internal manufacturing                capacity.**  The technical nature of our products, the                wide variety of our products, and the current uncertainty and historical                fluctuation in our business may make contract manufacturers unwilling                or                reluctant to manufacture products for us at all or on acceptable                terms.  It may be difficult and time-consuming to engage a                third-party manufacturer or manufacturers.  If we are unable to                engage a third-party manufacturer or manufacturers, we may have to                increase our internal manufacturing capability.  We may be                unable to do so at all or without significant                expense. |
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|   | · | **Interruptions                in our manufacturing operations could have an adverse effect on our                revenue.**  Any interruption in our manufacturing                operations could cause our product supply to be interrupted or lose                market                opportunities and have an adverse affect on our revenue, customer                relationships, and operating results.  Interruptions could                result from  introduction of new products or processes; timing,                language, cultural, and other issues arising from the use of contract                manufacturers located outside the U.S.; terminations of relationship                with                manufacturers; not producing products at adequate capacity; delays                in                shipments of our products due to changes in demand; or insufficient                quality or quantity of products. |
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|   | · | **Because                many of our components or products are provided by limited or                single-source suppliers, we may not be able to obtain sufficient                quantities to meet our business needs.**  Many of the                components, subassemblies, and services necessary for the manufacture                of                our systems are obtained from a sole supplier or a limited group                of                suppliers.  We generally do not have any committed long-term                supply agreements with these vendors.  We have from time to time                experienced an inability to obtain an adequate supply of required                components and subassemblies.  Our inability to obtain these                components in the quantities and at the times we desire could halt                production, reduce our ability to meet customer demands, and reduce                our                sales. |
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|   | · | **Because                many of our components or products are provided by limited or                single-source suppliers, we may not be able to obtain sufficient                quantities at prices to make our products                profitably.  **Many of the components, subassemblies, and                services necessary for the manufacture of our systems are obtained                from a                sole supplier or a limited group of suppliers.  Our inability to                obtain these items at the prices we desire could hurt our sales and                lower                our margins. |
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|   | · | **Because                many of our components or products are provided by limited or                single-source suppliers, we may have to purchase extra inventory                that                ultimately may not be used.**  Many of the components,                subassemblies, and services necessary for the manufacture of our                systems                are obtained from a sole supplier or a limited group of                suppliers.  A supplier may decide to end the manufacture of a                product and provide us with an opportunity to make a last-time buy                of the                product.  In that situation, we have to estimate our future                needs for that product.  If we underestimate, we would have an                insufficient supply to manufacture our products.  If we                overestimate, we may end up purchasing inventory that is not used                or                becomes obsolete and that ultimately we have to write off.  That                loss could adversely affect our financial                results. |
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|   | · | **Our                inability to receive sufficient quantities of limited or single source                components or products could make us develop alternative sources,                which                could reduce our sales and may be time consuming and expensive if                it can                be done at all.**  In the event of a reduction or                interruption in the supply of a key component, we may have to develop                alternative sources for the component.  We may not be able to                locate an alternative supplier of certain products or components                at all or                at acceptable prices.  Our inability to develop alternative                sources for components could result in delays or reductions in product                shipments, increase our costs, and reduce or eliminate our profit                margins.  Even if we are successful at developing alternative                sources, a significant amount of time could be required to receive                an                adequate flow of components from the alternative                source. |
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|   | · | **Our                inability to receive sufficient quantities of limited or single source                components or products could make us reconfigure our products, which                could                reduce our sales and may be time consuming and expensive if it can                be done                at all.**  In the event of a reduction or interruption in                the supply of a key component, we may have to reconfigure our products                to                work with different components.  Reconfiguration of our products                to adapt to new components could entail substantial time and                expense.  We may be unable to reconfigure our products to work                with new components.  Even if we are successful at reconfiguring                our products, a significant amount of time could be required to receive                an                adequate flow of replacement                components. |
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|   | · | **Our                reliance on limited or single-source suppliers makes us vulnerable                to                difficulties at those suppliers.**  The production of our                products is vulnerable to production difficulties, quality variations,                work stoppages, acts of God such as weather and fire, and other events                beyond our control at our suppliers.  All of these events could                adversely affect the cost and timely delivery of our                products. |
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|   | · | **Failure                to maintain adequate levels of inventory could result in a reduction                or                delay in sales and harm our results of operations.**  In                a competitive industry such as the wireless telecommunications equipment                industry, the ability to effect prompt turnaround and delivery on                customer                orders can make the difference in maintaining an ongoing relationship                with                our customers.  This competitive market condition requires us to                keep some inventory of certain products on hand to meet such market                demands.  Given the variability of customer requirements and                purchasing power, it is difficult to predict the amount of inventory                needed to satisfy demand.  If we over- or under-estimate                inventory requirements to fulfill customer needs, our results of                operations could be adversely affected.  If market conditions                change swiftly, it may not be possible                to terminate purchasing contracts in a timely fashion to prevent                excessive                inventory increases.  In particular, increases in inventory                could materially adversely affect operations if such inventory is                ultimately not used or becomes                obsolete. |
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|   | · | **Our                failure to effectively manage our recent and anticipated future growth                could strain our management, infrastructure, and other resources                and                adversely affect our results of operations.**  We expect                our recent and anticipated future growth to present management,                infrastructure, systems, and other operating issues and                challenges.  These issues include controlling expenses, the                development, introduction, marketing, and sales of new products,                the                development and application of consistent internal controls and reporting                processes, the integration and management of a geographically and                ethnically diverse group of employees, and the monitoring of third-party                manufacturers and suppliers.  Any failure to address these                issues at a pace consistent with our business could cause inefficiencies,                additional operational expenses and inherent risks, greater risk                of                billing delays, inventory write-downs, and financial reporting                difficulties. |
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|   | · | **Difficulties                in reducing our operating expenses could harm our results of                operations.  **A material portion of our operating                expenses is fixed.  If we experience a material reduction or                delay in sales, we may find it difficult to reduce our operating                expenses                on a timely basis.  Difficulties of this nature would adversely                affect our financial condition and harm our operating                results. |
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|   | · | **War                in Iraq and the war on terrorism could adversely affect domestic                and                international demand for our products.  **The war in Iraq                and on terrorism has led to economic uncertainty at home and abroad                which                could impact the demand for our products.  Customers as a result                may reduce their spending on our products coupled with the increased                shipping costs and delays due to heightened security, which could                have a                material adverse affect on our operating                results. |
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|   | · | **We                typically permit flexible purchase order changes that may adversely                affect                our margins and operating results.**  We have typically                permitted purchase orders to be modified or canceled with limited                or no                penalties.  Any inability or failure to reduce actual costs or                cancel supplier and contract manufacturing commitments in response                to a                customer modification or cancellation could adversely affect our                gross                margins and operating results. |
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|   | · | **Our                business and financial results could be adversely affected by warranty                claims.**  Products as complex as ours frequently contain                undetected errors or defects, especially when first introduced or                when new                versions are released.  This is especially a concern for us                given our anticipated continuing introduction of new                products.  The occurrence of such errors or defects could result                in products being returned under warranty for repair or replacement                with                us having to bear the associated expense.  Although we maintain                what we believe to be appropriate overall warranty reserves based                on                historical repair occurrences, an unanticipated high repair occurrence                related to a specific product or number of products could make the                reserves inadequate at any specific time and adversely affect our                financial results. |
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|   | · | **Our                business and financial condition could be adversely affected by product                liability claims.**  Products as complex as ours                frequently contain undetected errors or defects, especially when                first                introduced or when new versions are released.  This is                especially a concern for us given our anticipated continuing introduction                of new products.  The occurrence of such errors or defects could                result in product liability claims being brought against                us.  Although we have not had any material product liability                claims brought against us to date, such claims may be brought in                the                future and could adversely affect our financial                results. |
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|   | · | **Our                international business activities expose us to a number of risks                not                present in our United States operations, which we have limited experience                addressing.  **Our international business activities may                carry additional costs, risks and difficulties, including complying                with                complex foreign laws and treaties applicable to doing business and                selling                our products in other countries; availability of suitable export                financing; timing and availability of export licenses; tariffs and                other                trade barriers; difficulties in staffing and managing foreign operations;                difficulties in complying with foreign customs and general ways of                doing                business; and political and economic instability which may be more                pronounced in less-developed areas.  We have limited experience                in facing many of these issues and may not be able to address the                issues                in a manner to enable us to expand our international sales and                operations. |
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|   | · | **Because                of international sales and operations, we may be exposed to currency                risk                that could adversely affect our financial condition and results of                operations.  **Particularly following our acquisition of                the operations of Proxim Corporation, a significant portion of our                sales                to date have been made to customers located outside the United States,                and                we expect that a significant portion of our future sales will continue                to                be to customers outside the United States.  We are currently                trying to increase our sales to customers outside the United                States.  Historically, our international sales have been                denominated in United States dollars.  For international sales                that are denominated in United States dollars, a decrease in the                relative                value of foreign currencies could make our products less price-competitive                and could have an adverse effect on our financial condition and results                of                operations.  For any international sales denominated in foreign                currencies, a decrease in the value of the foreign currencies relative                to                the United States dollars could result in decreased margins from                those                transactions. |
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|   | · | **The                laws and legal systems of foreign governments may limit our ability                to                enforce our rights against our customers.**  Our customer                purchase and other agreements may be governed by foreign laws, which                may                differ significantly from United States laws.  Also, the court                systems and procedures in foreign countries may differ significantly                from                United States courts.  Therefore, we may be limited in our                ability to collect our accounts receivable, to enforce our other                rights                under such agreements, and to collect damages, if                awarded. |
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|   | · | **Lack                of relationships in foreign countries may limit our ability to expand                our                international operations and sales.**  In many cases,                regulatory authorities in foreign countries own or strictly regulate                local                telephone companies.  Established relationships between                government-owned or government-controlled telephone companies and                their                traditional indigenous suppliers of telecommunications equipment                often                limit access to those markets.  The successful expansion of our                international operations in some markets will depend in part on our                ability to form and maintain strong relationships with established                companies providing communication services and equipment or other                local                partners in those regions.  The failure to establish regional or                local relationships could limit our ability to successfully market                or sell                our products in international markets and expand our international                operations. |
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|   | · | **Governmental                regulation affecting markets in which we compete or products we make                or                services we offer could adversely affect our business and results                of                operations.  **Radio communications and services are                extensively regulated by the United States and foreign governments                as well                as by international treaties.  To operate in a jurisdiction, we                must obtain regulatory approval for our products and comply with                differing                and evolving standards and regulations.  The delays inherent in                this approval process may cause the cancellation, postponement, or                rescheduling of the installation of communications systems by us                and our                customers.  The failure to comply with regulations in a                jurisdiction could result in the suspension or cessation of our ability                to                operate in that jurisdiction.  New regulations or changes in the                interpretation of existing regulations could require us to modify                our                products or services and incur substantial costs to bring our products                or                services into compliance. |
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|   | · | **Our                products typically require regulatory approval before they can be                commercially deployed.**  Our products must typically                receive regulatory approvals before they can be commercially                deployed.  As a result, customers may require that we obtain                these approvals before buying or agreeing to buy our                products.  Obtaining these approvals can be a long, expensive                process.  Delays in obtaining the necessary approvals could                hinder market acceptance of our products, delay sales of our products,                and                adversely affect our ability to market those                products. |
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|   | · | **New                regulations could have an adverse impact on our ability to supply                products                and our financial results**.  New regulations could be                enacted that adversely impact our business.  For example, the                directive on the restriction on the use of certain hazardous substances                in                electrical and electronic equipment (RoHS directive) limits the use                of                substances (such as lead and mercury) in products sold in the European                Union marketplace.  Also, the directive on waste electronic and                electrical equipment (WEEE) imposes obligations on suppliers of electronic                equipment sold in the European Union marketplace.  New                regulations such as these may disrupt our supply of components needed                to                supply our products at the times and in the quantities desired by                our                customers.  They may also require that we revise the design of                some of our products and have some of our products re-qualified with                our                customers or regulatory agencies.  The new regulations                may increase the costs of supplying products.  These results                could adversely impact our product supply capabilities, relationships                with                customers, and financial                results. |
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|   | · | **Changes                in governmental regulation could adversely affect our competitive                position.**  Governmental laws and regulations applicable                to our products and services evolve and change                frequently.  These changes could hurt our competitive                position.  For example, a point we often use in marketing our                equipment products is that our products have been approved by the                United                States Federal Communications Commission, which sometimes can be                a long,                expensive process.  The Federal Communications Commission may                relax this approval process and potentially allow more products to                operate                as approved products.  If enacted, these regulations could make                it easier for competitive products to qualify as products approved                by the                Federal Communications Commission.  Conversely, if the Federal                Communications Commission made the certification process more difficult,                it could impede our ability to bring products to market in a timely                manner.  In either case, this could adversely affect our                competitive position.  Similarly, changes in the laws and                regulations applicable to our service business could adversely affect                our                competitive position in that                business. |
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|   | · | **We                are subject to domestic and international authorities’ allocations of the                radio frequency spectrum.**  Equipment to support new                systems and services can be marketed only if suitable frequency                allocations are made available to telecommunications service                providers.  The process of allocating frequencies to service                providers is typically expensive, complex, and lengthy.  If                service providers and others are delayed in deploying new systems                and                services, we could experience lack of orders or delays in                orders.  Similarly, failure by regulatory authorities to                allocate suitable frequency spectrum could have a material adverse                effect                on our results. |
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|   | · | **At                time we rely on a limited number of customers for a material portion                of                   our sales, which exposes us to risks relating to the loss of sales                and                credit risk.**  For the year ended December 31, 2006,                three unrelated customers each accounted for more than 10% of our                sales.  In addition, we have a number of other substantial                customers.  We are currently attempting to increase our number                of substantial customers which could increase our customer concentration                risks.  Our ability to maintain or increase our sales in the                future will depend in part upon our ability to obtain additional                orders                from these customers.  Our customer concentration also results                in concentration of credit risk.  An acquisition of one of our                significant customers could cause any current orders to be delayed                or                canceled and no new orders being placed with us and could further                concentrate our customer base.  Adverse developments such as                these with our significant customers could adversely impact our sales                and                financial results. |
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|   | · | **The                continuing uncertainty in the telecommunications industry has caused                us to                maintain tight credit limits, which may be adversely affecting our                sales.**  Many of our potential customers have faced or                are facing financial difficulties due to the industry-wide uncertainty                and                depressed conditions.  As a result, we have maintained what we                believe to be stringent policies concerning the extension of credit                to                potential customers.  We believe that these tight credit                policies may be limiting our sales.  As a result, we may loosen                our credit policies, which may increase our sales but may also increase                the likelihood of having bad debts from customers who can’t or won’t                pay. |
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|   | · | **Given                the relatively small size of some of our customers, they may not                be able                to pay for the products they purchase from us in the time period                we expect                or at all.**  We are subject to credit risk in the form                of trade accounts receivable.  We could face difficulties in                receiving payment in accordance with our typical policies allowing                payment                within 30 days, although we have granted longer terms to some                customers.  Some of our customers are new and smaller service                providers which do not have the financial resources of existing,                larger                service providers.  Any delay, inability, or refusal to pay for                purchases of our products may materially adversely affect our                business.  Difficulties of this nature have occurred in the                past, and we believe they will likely occur in the                future. |
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|   | · | **Our                failure or inability to protect our intellectual property could adversely                affect our business and operations, particularly in our equipment                business                which has otherwise relatively low barriers to                entry.**  Our ability to compete depends in part on our                ability to protect our intellectual property.  The steps we have                taken to protect our technology may be inadequate to prevent                misappropriation of our technology and processes.  Existing                trade secret, trademark, and copyright laws offer only limited                protection.  Our patents could be invalidated or                circumvented.  Inability or failure to protect our intellectual                property could remove                a barrier to a competitor entering our broadband wireless equipment                business, which in general has lower barriers to entry than other                businesses. |
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|   | · | **Laws                of foreign countries where we do business may provide less intellectual                property protection for our products, which could adversely affect                our                ability to compete in our price-sensitive                business.**  The laws of certain foreign countries in                which our products are or may be developed, manufactured, or sold                may                provide less protection for the intellectual property contained in                our                products.  We may not seek to obtain patents and other forms of                intellectual property rights in certain foreign countries to the                same                extent we seek United States patents and other forms of intellectual                property protection, which could reduce our international                protection.  This may make the possibility of piracy of our                technology and products more likely.  This piracy could result                in cheaper copies of our products being available on the market,                which                could adversely affect our business and financial                results. |
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|   | · | **Our                intellectual property rights do not prevent other companies from                developing similar technology, which could be superior to                ours.**  Other companies could develop products that use                similar and perhaps superior technology.  This technology could                be developed in a way to not violate or infringe our intellectual                property                rights.  As a result, our intellectual property rights provide                no assurance that competing and perhaps superior products won’t be                developed, even if we are able to protect our intellectual property                rights. |
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|   | · | **We                may engage in litigation to protect our intellectual property, which                could                be costly, long, and distracting even if ultimately                successful.  **If we believe our intellectual property                rights are being infringed, we may commence litigation or take other                actions to enforce our patents, protect our trade secrets and know-how,                or                determine the scope and validity of the patents or intellectual property                rights of others.  There can be no assurance that we would be                successful in any such litigation.  Further, any lawsuits we                commence would increase the likelihood of counterclaims being brought                against us by the companies we sue.  Any litigation could result                in substantial cost and divert the attention of our management, which                could harm our operating results and future                operations. |
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|   | · | **Much                of our material intellectual property is not protected by patents,                which                may reduce the extent to which we can protect our intellectual                property.**  We rely primarily on trade secret laws,                confidentiality procedures, patents, copyrights, trademarks, and                licensing                arrangements to protect our intellectual property.  While we do                have a number of patents, the patents alone do not provide significant                protection for much of our intellectual property used in our current                equipment products.  A significant portion of our proprietary                technology is know-how, and employees with know-how may depart before                transferring their know-how to other employees.  The fact that                much of our intellectual property is not covered by patents could                reduce                the extent to which we can protect our rights in that intellectual                property. |
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|   | · | **Our                products and operations could infringe on the intellectual property                rights                of others, which could have an adverse impact on our                business.**  We would have to address any such                infringements by seeking licenses, altering our products, or no longer                selling the products.  Any licenses we may be required to seek                may be expensive or otherwise onerous.  Similarly, changing our                products may be costly, time-consuming, and impractical and could                detract                from the value of our products.  A party making a claim of                infringement could secure a judgment against us that requires us                to pay                substantial damages.  A judgment could also include an                injunction or other court order that could prevent us from selling                our                products.  Any claim of infringement by a third party also could                cause us to incur substantial costs defending against the claim,                even if                the claim is invalid, and could distract the attention of our                management.  Any of these events could seriously harm our                business. |
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|   | · | **Our                settlement of the litigation commenced against us by Symbol Technologies                adversely impacts our financial results.  **In February                2006, we settled the lawsuit that had been brought against us by                Symbol                Technologies, Inc. alleging that certain of our products violated                certain                of their patents.  Symbol had successfully sued Proxim                Corporation alleging that certain of Proxim Corporation’s products                infringed two of the Symbol patents that Symbol asserted against                us.  As part of the settlement, we agreed to pay Symbol fixed                royalties totaling $4.3 million through the second quarter of                2009.  We will have to pay these royalties even if we                discontinue the sale of products alleged by Symbol to violate their                patents.  Additionally, we may end up paying Symbol more fixed                royalties than we would have paid if we had negotiated a royalty                based on                product sales or some other contingent basis.  As a result, the                settlement of the                Symbol litigation adversely impacts our financial results, and the                impact                may be more adverse than if we had attempted to and had been successful                in                settling the litigation on some other basis.  Additionally, our                willingness to settle these claims brought by Symbol may increase                the                likelihood that other companies will commence similar claims against                us. |
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|   | · | **We                have limited experience operating our Ricochet® network and may be unable                to operate it effectively, which could adversely impact our                business.**  Our business historically has focused on                selling wireless communications equipment.  Our purchase of                Ricochet Networks in June 2004 was our first major entry into providing                wireless communication services – actual Internet connectivity instead of                just providing the equipment to enable the connectivity.  The                services market is a very different market from the equipment market                with                different customer bases, methods of doing business, and other                issues.  We may not be successful at addressing the different                issues and challenges relating to our services business.  The                services business may divert management’s attention and financial and                other resources from our equipment business.  These issues could                adversely impact our overall business and financial                results. |
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|   | · | **Our                entry into the wireless communications services business through                Ricochet®                could adversely impact our equipment business because those customers                may                perceive us as now competing with them.**  In our                equipment business, we generally sell our products to companies that                provide wireless communications connectivity and                services.  Those companies may be displeased with our purchase                of Ricochet, as they may believe this purchase now makes us an actual                or                potential competitor to them.  Therefore, these companies may be                reluctant to, and may not, purchase further wireless communications                equipment from us or may reduce their purchases.  These                reductions in purchases could adversely impact our overall business                and                financial results. |
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|   | · | **We                expect to continue to generate losses as we continue to operate and                possibly expand our Ricochet® network and service.**  Our                Ricochet business has a history of losses, and we expect to incur                significant additional operating losses in the future.  We                cannot predict when or if we will be able to achieve or sustain                profitability for our Ricochet business.  Previous owners of                Ricochet similarly experienced difficulty in achieving or sustaining                profitability of the business.  If we are unable to achieve or                sustain profitability or positive cash flow from Ricochet’s operating                activities, we may be unable to conduct that business effectively                or                competitively. |
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|   | · | **We                expect that our overall financial results will be negatively impacted                by                the losses from our Ricochet® network and service.  **In                2006, our Ricochet service business constituted approximately 3.6%                of                overall revenue but constituted approximately 8.8% of our net                loss.  The unprofitable wireless communications services                business disproportionately increased the net loss of our overall                company.  We expect that the operations of the services business                will continue to be unprofitable and adversely impact our overall                financial results.  Continued unprofitability could result in                internal and external pressures to take actions to reduce the losses                associated with that services business, which could include selling                the                business or shutting it down, making operational changes at Ricochet,                changing the business model, or other actions.  We may have to                incur significant costs if we undertake any of those actions given                the                contractual lease commitments and other obligations of                Ricochet. |
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|   | · | **We                may be unsuccessful in our efforts in expanding Ricochet’s business                activities in the municipal network market and in other types of                business.**  We have increased our efforts to utilize                Ricochet’s assets and capabilities in areas other than simply operating                the Ricochet**®** network for subscribers.  For                example, we are more frequently combining the capabilities of Ricochet                as                a network operator with the network equipment capabilities of Proxim                to                pursue municipal wireless network opportunities.  We are also                investigating creative ways to leverage the Ricochet**®**                equipment installed by previous owners of the Ricochet**®**                network.  However, our efforts may be unsuccessful and may not                contribute positively to our financial results and even could adversely                impact our financial results. |
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|   | · | **We                may be unable to grow the user base and geographically expand the                Ricochet® network due in part to the turbulent history of                Ricochet.  **We are the fourth owner and operator of the                Ricochet network in less than five years.  The initial operator                of the network commenced voluntary bankruptcy proceedings and, we                believe,                did not perform some of its agreements relating to the network, including                agreements to expand the network.  These ownership changes,                bankruptcy, and related uncertainty and non-performance of agreements                have                damaged Ricochet’s reputation and relationships that could be vital to the                successful operation                and possible expansion of the network.  This history may cause                users to be reluctant to subscribe to the Ricochet service and may                cause                third parties to be reluctant to contract with us relating to the                operation and possible expansion of the network.  These issues                in general could adversely impact our efforts to maintain and grow                our                user base and geographically expand the Ricochet network and our                business                in general. |
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|   | · | **The                data access market in which Ricochet operates is highly competitive,                which                could adversely impact our ability to attract and retain users of                our                Ricochet® service.**  Competition in the market for data                access and communications services is intense. A number of privately                and                publicly held communications and data access companies have developed                or                are developing new wireless and wired communications and data access                services and products using technologies that may compete with                ours.  Some wireless data service companies have operated for                many years and are already broadly deployed in major markets and                well-recognized.  Many of these companies have significantly                greater resources, more established brand names, and larger customer                bases                than we do.  In addition, several companies in various other                industries, such as the satellite communications industry, may enter                the                market for mobile data access in the future.  Further, we may                face competition from Internet service providers that could offer                Internet, online or data access services at prices lower than those                offered by us.  This competition could limit our ability to                increase our user base, cause us to lose market share, and force                us to                reduce prices or incur additional selling, marketing and product                development expenses, any of which could harm our business and our                results                of operations. |
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|   | · | **Different                data access technologies may have advantages over our Ricochet® service,                which could adversely impact our ability to attract and retain users                of                our service.  **The market for data access and                communications services is characterized by rapidly changing technology,                new product introductions, and evolving industry standards.  A                number of data access technologies, such as broadband wireless, digital                subscriber lines and cable modems, generally are able to provide                faster                data rates than our network.  This may negatively affect user                perceptions as to the attractiveness of our wireless service and                result in                pressure to reduce our prices.  Increased data rates also may                result in the widespread development and acceptance of applications                that                require a higher data transfer rate than our service                provides.  Our success will depend to a substantial degree on                our ability to differentiate our service from competitive offerings                and                promote and sell the advantages of our service.  Our inability                to do this could cause us to be unable to increase our users and                to lose                users to competing service                providers. |
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|   | · | **The                success of our Ricochet business ultimately may depend on our ability                to                attract and retain sufficient users to our Ricochet®                service.**  There may only be a limited market today for                our Ricochet service, and we bear the risk that we will not sell                enough                subscriptions to our service or generate sufficient revenue for us                to                recoup the substantial expenditures we have made and will continue                to make                to operate and possibly expand our network.  In addition,                competition to provide wireless data access services of the type                Ricochet                offers could result in a high turnover rate among our users, which                could                have an adverse effect on our business and results of                operations. |
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|   | · | **User                demand for our Ricochet® service is unpredictable.**  We                cannot reliably project potential demand for our Ricochet service,                including whether there will be sufficient demand at the prices we                need                for that business to be profitable in either the markets in which                we                currently operate or in any markets into which we may                expand.  We cannot reliably predict demand because the market                for mobile wireless data access services is in the early stages of                development and it is not clear what combination of features is required                for a service to gain broad user acceptance.  Different possible                features include cost, security, speed of connectivity, reliability,                ease                of use, and quality of service.  How we address these issues is                likely to affect the demand for our Ricochet                service. |
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|   | · | **Our                success depends, in part, on our ability to market our Ricochet®                service.**  We believe that a substantial marketing                effort is necessary to stimulate demand for our Ricochet                service.  We expect to be marketing and advertising our service                to attract users to our service.  From time to time, we may                undertake special marketing plans or promotions for our                service.  We may engage channel partners or others to assist us                with marketing our service.  We cannot predict whether these                marketing efforts will be successful and attract the users that we                need to                sustain our Ricochet business and operations.  If we are unable                to market our service successfully, or at all, our ability to attract                users and generate revenues will be adversely affected and our business                will be adversely impacted. |
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|   | · | **The                success of our Ricochet® service depends, in part, on our ability to                provide adequate customer support.**  We currently                provide users of the Ricochet service with customer support.  We                cannot predict whether users of our service will be satisfied with                the                customer support provided.  If we are unable to provide adequate                customer service, our ability to retain users could be adversely                affected                and our reputation and business could be adversely                impacted. |
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|   | · | **We                may be unable to attract users and compete with other data access                providers if we do not expand our Ricochet® network coverage                area.  **We currently are offering our Ricochet service                in only two general markets.  We are actively considering the                expansion of the Ricochet service into other                markets.  Competitive factors may require that we offer our                service in additional markets as well as further develop our Ricochet                network in the markets where we already are offering                service.  If we do not expand our network, we may be unable to                attract users and compete with other data access providers, which                may                offer a competing service with a broader coverage                area.  Consequently, our business and financial results could be                adversely impacted. |
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|   | · | **There                are numerous contingencies involved in the possible expansion of                our                Ricochet® network, which if not resolved as expected could adversely                impact our business.**  Before we decide to expand our                Ricochet network to offer service to users in other targeted markets,                we                must consider a number of business, regulatory, and implementation                issues,                risks, and contingencies, many of which are not within our                control.  These issues include predicted costs of expansion,                long-term financial commitments we may need to make to expand, other                obligations we may need to incur to expand, making an accurate assessment                of potential markets, ability to use equipment installed by a previous                operator of the Ricochet system, resolving any issues created by                previous                operators of the Ricochet system in the targeted market, cost and                availability of network and circuit backhaul connections, any specific                regulatory requirements relating to expansion into a given market,                and                delays or refusals by local governments or other third parties to                enter                into the agreements we need to deploy our network.  We may not                be able to address these issues and risks in a timely basis or at                the cost                that we have assumed or at all.  Unfavorable or untimely                resolution of these issues could adversely impact our business and                financial results. |
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|   | · | **We                may not effectively manage our expansion of the Ricochet® service into new                markets, which could adversely impact our reputation and                business.  **If we decide to expand our network, we must                manage the design, deployment, installation, maintenance, operation,                and                support of a bigger mobile wireless data access network.  If we                are unable to manage this future growth effectively, or if we experience                difficulties in managing the growth of our network, our business,                results                of operations, reputation and prospects for growth could be adversely                impacted. |
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|   | · | **Our                inability to obtain and retain attachment rights for our Ricochet® network                equipment could adversely affect our ability to operate or expand                our                network.**  The operation and possible expansion of our                network depend to a significant degree on our ability to obtain and                maintain rights to attach our poletop radios to municipal or other                facilities from local municipalities, public utilities, or other                governmental or third-party entities.  We may face delays or                rejections in attempting to obtain the approvals and agreements necessary                to install, attach, and maintain our network equipment.  These                difficulties may, in some cases, be exacerbated by issues created                by                former operators of the Ricochet network.  Our inability to                obtain these agreements in a timely manner and on terms acceptable                to us,                or at all, could force us to seek alternative sites on which to install                network radios.  In turn, use of these alternatives sites could                significantly increase the time and cost required to operate or expand                the                network. |
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|   | · | **Our                inability to obtain and retain space on rooftops or towers for our                Ricochet® network equipment could adversely affect our ability to operate                or expand our network.**  The operation and possible                expansion of our network depend to a significant degree on our ability                to                lease space for our wired access points on building rooftops or on                transmission towers owned by third parties.  There is                substantial competition from a variety of communications companies                for                these sites.  Given this competition, obtaining the desired                space can be a time-consuming, expensive process.  If we are                unable to identify and negotiate leases for the desired space in                a timely                manner and on terms favorable or acceptable to us, the operation                and                expansion of our network could be                impaired. |
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|   | · | **Our                ability to increase the number of users of the Ricochet® system and to                expand the geographic reach of the Ricochet system could be limited                by                availability of necessary equipment.**  One of the assets                we acquired when we purchased Ricochet was its significant inventory                of                modem, poletop radio, and wired access point equipment.  We                believe this inventory will enable continued operation and some amount                of                expansion of the Ricochet network without significant inventory                costs.  However, at some point, our operation and possible                expansion of the Ricochet network may require us to obtain additional                inventory.  Doing some may be a time-consuming, expensive                process, if we are able to do so at all.  Our inability to                obtain this additional inventory at the times, in the quantities,                and at                the prices we desire could adversely impact our competitive position,                our                continued operation of the network, our plans to expand the network,                and                our general business. |
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|   | · | **Our                Ricochet® service depends on a network connections provided by third                parties, which are subject to disruption by events beyond our                control.**  Our success will depend upon the adequacy,                reliability, and security of the networks and circuits used to carry                data                within our Ricochet network and between our Ricochet network and                corporate                networks and the Internet.  Because these connections used to                carry the data are owned or controlled by third parties, we have                no                control over their quality and maintenance.  Generally, we have                limited recourse against the providers of these connections if the                connection fails.  If there is any failure of the Internet                backbone, the network connecting our system to the Internet backbone,                any                circuit supporting the exchange of data between our wired access                points or                our network interface facilities, or any other link in the delivery                chain,                whether from operational disruption, natural disaster, or otherwise,                our                service could be interrupted and our reputation, business, and results                of                operations could be adversely                affected. |
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|   | · | **The                failure of our third-party contractors to maintain and repair the                Ricochet® system equipment on a timely, efficient basis could adversely                affect our reputation with our customers.**  We generally                use third-party contractors to install and replace when needed our                poletop                radios and wired access points.  The successful operation of our                network is dependent on timely actions by these parties, which can                be                affected by numerous factors, including the supply of labor, materials                and                equipment, and prevailing weather conditions, all of which are beyond                our                control.  Failure to repair the network in a timely fashion                could adversely impact our relationship with our customers, our general                reputation, and our business and                prospects. |
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|   | · | **The                Ricochet® network operates in unlicensed radio frequencies, which subject                the network to harmful interference issues.**  Because                the Ricochet network operates in frequency bands on a license-free                basis,                the Federal Communication Commission requires that we not cause harmful                interference to licensed users in the band and we must accept any                interference present in the bands.  Excessive harmful                interference could disrupt our service and discourage users from                subscribing to or retaining our service.  This could harm our                reputation, affect our competitive position, and impair our business                and                results of operations. |
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|   | · | **Compliance                with new governmental regulations, such as Section 404 of the                Sarbanes-Oxley Act, could increase our costs and adversely impact                our                financial results.**  Increasing amounts of time and                resources are being spent on complying with ever-changing governmental                regulations and public disclosure requirements.  Specifically,                Section 404 of the Sarbanes-Oxley Act currently requires that management                and independent public accountants review and evaluate annually internal                control systems of companies subject to that section and attest to                their                effectiveness.  We are not currently subject to Section 404 and                do not know when or if we will be required to comply with the requirements                of that section or what the requirements will be if and when we become                subject to that section.  However, in anticipation of becoming                subject to that section, we have begun our compliance efforts and                are                expending related time and costs.  The costs and time required                to become Section 404 compliant could be substantial, even assuming                we are                completely successful.  In addition, even before becoming                subject to Section 404, we are being billed significantly increased                independent auditor fees, we believe largely due to the Sarbanes-Oxley                Act                and other regulations.  Compliance with the Sarbanes-Oxley Act                and other regulations could cause us to increase our legal, accounting,                other personnel, and other costs as more time and personnel would                be                needed to help maintain compliance.  These costs of compliance                could adversely impact our financial                results. |
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|   | · | **We                are a defendant in pending stockholder litigation that could materially                and adversely affect our business.**  We are a party to                four purported securities class action lawsuits.  These lawsuits                relate to the underwriters’ alleged unlawful activities in connection with                our initial public offering in February 2000.  The lawsuits have                been assigned along with approximately 1,000 other lawsuits making                substantially similar allegations against hundreds of other publicly                traded companies and their public offering underwriters to a single                federal judge for consolidated pre-trial purposes.  A tentative                settlement of these lawsuits has been reached between the plaintiffs                and                affected companies.  However, there can be no assurance that                this or any other settlement will be consummated, particularly in                light of                a recent decision by the appellate court.  These lawsuits are at                an early stage and involve substantial uncertainty and, accordingly,                we                cannot predict the outcome.  Defending lawsuits of this nature                can be a lengthy and expensive process, and we may not                prevail.  Even if we prevail or the action is settled, the costs                associated with these lawsuits could be substantial.  In                addition, these lawsuits could have other material adverse impacts                on us,                such as management distraction, adverse publicity, and adverse reaction                from the financial markets, from our customers, or from actual or                potential strategic partners.  The difficulties and                uncertainties relating to these lawsuits very likely may be increased                and                complicated because of the large number of pending similar cases                and other                parties involved.  The outcome of these lawsuits could                materially compromise our ability to continue to operate our                business. |
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|   | · | **We                have elected to participate in a proposed settlement of this pending                stockholder litigation, but there can be no assurance that this settlement                will be consummated.**  In June 2003, we elected to                participate in a proposed settlement agreement with the plaintiffs                in the                pending stockholder litigation.  The proposed settlement does                not provide for the resolution of any claims against the underwriter                defendants.  The parties to the proposed settlement submitted                formal settlement documents to the court in June 2004 and requested                approval by the court of the proposed settlement.  The court did                issue an order preliminarily approving the proposed settlement and                held a                fairness hearing at which objections to the proposed settlement were                heard.  However, while the court was considering whether to                grant final approval, the appellate court issued a ruling which caused                the                court to stay further proceedings on the settlement while the appellate                proceedings are resolved.  Consummation of the proposed                settlement remains conditioned on, among other things, receipt of                final                court approval and resolution of the appellate proceedings in a way                that                permits approval of the proposed settlement.  Given the number                of companies and attorneys involved in these proceedings, we expect                that                any consummation of this settlement will be a lengthy                process.  There can be no assurance that this settlement will be                consummated. |
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|   | · | **Proceeds                under our directors’ and officers’ insurance policies may be unavailable                or insufficient to cover our exposure under the proposed settlement                of the                pending stockholder litigation or other exposure relating to this                litigation.  **The proposed settlement provides that the                insurers of the participating issuer defendants will guarantee that                the                plaintiffs will recover at least $1 billion from the underwriter                defendants.  Any amounts necessary to fund that guarantee would                come from participating issuers’ directors’ and officers’ liability                insurance policy proceeds as opposed to funds of the participating                issuer                defendants themselves.  However, we could be required to                contribute to the costs of the settlement if our insurance coverage                were                insufficient to pay our allocable share of the settlement                costs.  We have a total of $15 million in directors and officers                insurance coverage applicable to this litigation.  We currently                believe that this insurance coverage would be sufficient to cover                our                allocable share of the settlement costs.  However, the insurance                proceeds may be unavailable if the companies issuing those policies                experience financial difficulties or are otherwise unable or unwilling                to                pay under those policies.  Also, there can be no assurance that                proceeds under those policies would be sufficient to cover our exposure                under the settlement.  Further, given the uncertainty as to                whether that settlement will be approved, there can be no assurance                that                this insurance coverage would be sufficient to cover any costs or                other                obligations imposed upon us if the litigation proceeds to trial or                other                resolution. |
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|   | · | **Our                stock price has been volatile and may continue to be                volatile.**  The market price of our common stock has                been volatile and is likely to remain volatile.  Some of the                reasons for the volatility are within our control, but many are beyond                our                control and unrelated to our operating performance.  We believe                the following factors, among others, have contributed to our stock                price                volatility: |
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|   | o | Our                financial performance and                results |
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|   | o | Announcements                by us concerning our relationships with our existing or new                customers |
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|   | o | Announcements                by us concerning our completed and contemplated acquisitions and                other                strategic growth plans |
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|   | o | Announcements                by our customers |
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|   | o | Our                integration of Telaxis Communications and Young Design following                the April                2003 combination of the two                companies |
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|   | o | Our                integration of Terabeam Corporation, Ricochet Networks, Inc. and                KarlNet,                Inc. following the second quarter 2004 acquisition of those                companies |
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|   | o | Our                integration of the assets of Proxim Corporation, acquired in the                third                quarter of 2005 |
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|   | o | Sales                of shares of our stock that we issued in connection with our completed                acquisitions or the perception that such shares may be                sold |
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|   | o | The                relatively low number of shares of our stock that trade on an average                day |
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|   | o | The                introduction of new products by us |
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|   | o | The                financial performance of our                competitors |
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|   | o | The                introduction of new products by our                competitors |
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|   | o | Other                announcements by our competitors |
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|   | o | General                conditions of the financial markets |
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|   | · | **Two                stockholders own a significant beneficial interest in our common                stock                which could allow them to influence matters requiring stockholder                approval.**  As of March 16, 2007, Robert E. Fitzgerald,                our chief executive officer and board member, directly and through                Concorde Equity II, LLC (a company controlled by him), and funds                owned by                Mobius Venture Capital together owned approximately 21% of our common                stock.  As a result of their ownership these stockholders may be                able to exert influence over actions, which require stockholder approval,                for example, certain types of changes in control or amendments to                our                certificate of incorporation. |
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|   | · | **Registration                of the restricted stock held by one of our major stockholders could                cause                our stock price to fall.**  One stockholder, Concorde                Equity II, owned approximately 10% of our outstanding common stock                on                March 16, 2007.  Concorde Equity is a company controlled by                Robert E. Fitzgerald, a board member and our chief executive                officer.  Concorde Equity received this stock in a private                placement in connection with the combination of Young Design and                Telaxis                in April 2003.  As such, this stock has been and is currently                subject to restrictions on sale or transfer.  In the merger                agreement, we agreed to register this stock with the SEC in the first                half                of 2004, which, if completed, would enable this stock to be sold                with less                restriction.  We have not yet registered this                stock.  This registration and potential sale of large amounts of                our common stock could cause our stock price to fall or prevent it                from                increasing. |
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|   | · | **Future                actual or potential stock sales by Concorde Equity II could cause                our                stock price to fall or prevent it from increasing.**  Our                stock held by Concorde Equity II is currently subject to restrictions                on                sale or transfer due to that company being controlled by our chief                executive officer and board member Robert E.                Fitzgerald.  However, portions of this stock can be (and have                been) sold in the open market.  Between September 2005 and                February 2006, Concorde Equity II sold 1,000,000 shares of our common                stock.  That constituted approximately 28% of Concorde Equity                II’s holdings prior to the sales.  Certain of our other                stockholders and other third parties viewed these stock sales negatively                because they were being made by a company controlled by our chief                executive officer.  Concorde Equity II may make additional sales                of our common stock in the future.  Generally, these sales                require public filings.  Actual or potential sales of our stock                by Concorde Equity II could cause our stock price to fall or prevent                it                from increasing for numerous reasons.  For example, a                substantial amount of our common stock becoming available (or beingperceived                to become available) for sale in the public market could cause the                market                price of our common stock to fall or prevent it from increasing,                particularly given the relatively low trading volumes of our                stock.  Also, actual or potential sales by Concorde Equity II                could be viewed negatively by other investors because Concorde Equity                II                is controlled by a member of our board of directors and chief executive                officer. |
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|   | · | **Future                actual or potential stock distributions or sales by Mobius Venture                Capital                could cause our stock price to fall.**  Funds controlled                by Mobius Venture Capital owned approximately 10% of our outstanding                common stock on March 16, 2007.  Because Mobius Venture Capital                owns directly or indirectly more than 10% of our outstanding common                stock,                any sales or distributions by that stockholder are required to be                reported                publicly shortly after they occur.  Actual or potential sales of                this stock by that stockholder (or their investors) could cause our                stock                price to fall or prevent it from increasing for numerous                reasons.  For example, a substantial amount of our common stock                becoming available (or being perceived to become available) for sale in                the public market could cause the market price of our common stock                to fall                or prevent it from increasing, particularly given the relatively                low                trading volumes of our stock. |
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|   | · | **Future                actual or potential sales of the stock we issue upon exercise of                stock                options could cause our stock price to fall.**  As of                March 16, 2007, we had options outstanding to buy approximately 2,690,532                shares of our common stock and may grant options or other stock grants                relating to an additional approximately 693,544 shares of our common                stock.  We have filed registration statements with the SEC                relating to the shares of our common stock that may be issued pursuant                to                the exercise of those outstanding stock options and stock options                or other                stock grants that we may grant in the future.  In many cases,                holders of those options could decide to exercise the options and                immediately sell the shares.  A substantial amount of this                common stock becoming available (or being perceived to become available)                for sale in the public market could cause the market price of our                common                stock to fall or prevent it from increasing, particularly given the                relatively low trading volumes of our stock.  Further, actual or                potential sales of this stock could be viewed negatively by other                investors because some of these stock options are held by our directors                and senior executives. |
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|   | · | **Future                actual or potential sales of the stock we issue upon exercise of                stock                warrants could cause our stock price to fall.**  On March                16, 2007, we had warrants outstanding to purchase approximately 153,377                shares of our common stock at a weighted average purchase price of                $1.53                per share.  Shares of our common stock received upon exercise of                those warrants may, depending on the method of exercise, be immediately                available for public sale.  A substantial amount of this common                stock becoming available (or being perceived to become available)                for sale                in the public market could cause the market price of our common stock                to                fall or prevent it from increasing, particularly given the relatively                low                trading volumes of our stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | **If                we raise additional capital by issuing stock, the result may be dilutive                to existing stockholders.**  Our board of directors may                decide to issue additional equity securities in many situations without                the need for any stockholder vote.  Given the recent prices for                our common stock, significant dilution to our stockholders could                result if                we raise additional funds by issuing equity                securities.  Further, these issuances may also involve issuing                stock at a price per share below the current trading                prices.  For example, on December 8, 2003, we issued 500,000                shares of our common stock in a private placement at a price of $4.10                per                share.  That price was an approximately 14% discount from the                last sale price of our common stock on that date of $4.75 per                share. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | **We                have limited capital resources and our prospects for obtaining additional                financing, if required, are uncertain.**  Our future                capital requirements will depend on numerous factors, including expansion                of marketing and sales efforts, development costs of new products,                the                timing and extent of commercial acceptance for our products, our                integration with the operations of Proxim Corporation, Terabeam                Corporation, Ricochet Networks, Inc., and KarlNet, Inc. and any other                companies we may acquire, and potential changes in strategic                direction.  Additional financing may not be available to us in                the future on acceptable terms or at all.  If funds are not                available, we may have to delay, scale back, or terminate business                or                product lines or our sales and marketing, research and development,                acquisition, or manufacturing programs.  Our inability to obtain                capital could seriously damage our business, operating results, financial                condition, viability as an ongoing company, and cause our stock price                to                decline. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **We                may raise additional capital on terms that we or our stockholders                find                onerous, which could adversely affect our financial results and stock                price.**  In the future, we may be able to raise                additional debt or equity capital only on terms that we find                onerous.  Alternatively, some of our stockholders may find the                terms of our capital arrangements to be onerous.  For example, a                small number of stockholders expressed displeasure at our issuing                shares                in December 2003 in a private placement at a price below the current                trading price of our stock.  We may also obtain funds through                arrangements with partners or others that may require us to relinquish                rights to certain of our technologies or potential products or other                assets.  The terms of our capital arrangements or the perceived                onerous nature of those arrangements could adversely affect our financial                results and stock price. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

*Possible      Implications of Cautionary Statements*

**Item      1B.     Unresolved Staff Comments.**

**Item      2.         Properties.**

----

**Item      3.     Legal Proceedings.**

**IPO      Litigation**

----

*In re Initial Public Offering Securities Litigation*
*en banc*

**General**

**.**

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

----

**PART      II**

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

**Market      Information**

|                                  |   | **Terabeam                        Common Stock** |   |
|---------------------------------------|--------|--------------------------------------------------|--------|
|                                  |   | **High**                                         |   |   | **Low** |   |
| **2005**                              |   |                                             |   |   |   |   |
| First                        Quarter  |   | $                                                | 6.00   |   |   | $ | 2.33 |   |
| Second                        Quarter |   | $                                                | 3.03   |   |   | $ | 1.93 |   |
| Third                        Quarter  |   | $                                                | 3.56   |   |   | $ | 2.35 |   |
| Fourth                        Quarter |   | $                                                | 3.08   |   |   | $ | 2.21 |   |
|                                  |   |                                             |   |   |   |   |   |   |
| **2006**                              |   |                                             |   |   |   |   |   |   |
| First                        Quarter  |   | $                                                | 5.19   |   |   | $ | 2.59 |   |
| Second                        Quarter |   | $                                                | 3.96   |   |   | $ | 1.97 |   |
| Third                        Quarter  |   | $                                                | 2.40   |   |   | $ | 1.75 |   |
| Fourth                        Quarter |   | $                                                | 3.00   |   |   | $ | 1.95 |   |

**Equity      Compensation Plan Information**

| **Plan                        category**                                                                                                  | **Number                        of securities****to                        be issued upon****exercise                        of****outstanding                        options,****warrants                        and rights****(1)  *(a)*** | **Weighted-average****exercise                        price of****outstanding                        options,****warrants                        and rights (1)*****(b)*** | **Number                        of securities remaining****available                        for future issuance****under                        equity compensation****plans                        (excluding securities****reflected                        in column *(a))******(c)*** |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Equity                        compensation****plans                        approved by****security                        holders**     | 2,540,232                                                                                                                                                                                                                                              | $3.34                                                                                                                                                                      |                              794,781 (2)                                                                                                                                                                                                                         |
| **Equity                        compensation****plans                        not approved****by                        security holders** |                              18,375                                                                                                                                                                                           | $2.12                                                                                                                                                                      |                                   0                                                                                                                                                                                                     |
| **Total**                                                                                                                                 | 2,558,607                                                                                                                                                                                                                                              | $3.33                                                                                                                                                                      | 794,781                                                                                                                                                                                                                                                                                   |

** **
** **

----

----

**Item      6.     Selected Financial Data.**

|                                                                                |   |  **Year                        Ended December 31,** |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                                                                                |   | **2002**                                                 |   |   | **2003** |   |   | **2004** |   |   | **2005** |   |   | **2006** |   |
| **(in                        thousands, except per share data)**                    |   |
| **Consolidated                        Statements of Operations Data:**              |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue,                        net                                                 |   | $                                                        | 20,304 |   |   | $ | 27,241 |   |   | $ | 22,897 |   |   | $ | 58,982 |   |   | $ | 75,384 |   |
| Gross                        profit                                                 |   |                                                     | 7,928  |   |   |   | 11,527 |   |   |   | 9,483 |   |   |   | 24,909 |   |   |   | 31,137 |   |
| Income                        (loss) from continuing operations                |   |                                                     | 947    |   |   |   | 300 |   |   |   | (1,346 | ) |   |   | (11,160 | ) |   |   | (23,163 | ) |
| Extraordinary                        item                                           |   |                                                     | 89     |   |   |   | 4,347 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Change                        in accounting                                         |   |                                                     | 526    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net                        income (loss) applicable to common stockholders          |   |                                                     | 1,562  |   |   |   | 4,647 |   |   |   | (1,346 | ) |   |   | (11,160 | ) |   |   | (23,163 | ) |
| Basic                        earnings (loss) per share from continuing operations   |   |                                                     | 0.10   |   |   |   | 0.02 |   |   |   | (0.07 | ) |   |   | (0.51 | ) |   |   | (1.08 | ) |
| Basic                        – Extraordinary gain                             |   |                                                     | 0.01   |   |   |   | 0.35 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Basic                        – Change in accounting                           |   |                                                     | 0.06   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Basic                        earnings (loss) per share                              |   |                                                     | 0.17   |   |   |   | 0.37 |   |   |   | (0.07 | ) |   |   | (0.51 | ) |   |   | (1.08 | ) |
| Diluted                        earnings (loss) per share from continuing operations |   |                                                     | 0.10   |   |   |   | 0.02 |   |   |   | (0.07 | ) |   |   | (0.51 | ) |   |   | (1.08 | ) |
| Diluted                        – Extraordinary gain                           |   |                                                     | 0.01   |   |   |   | 0.34 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Diluted                        – Change in accounting                         |   |                                                     | 0.06   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Diluted                        earnings (loss) per share                       |   | $                                                        | 0.17   |   |   | $ | 0.36 |   |   | $ | (0.07 | ) |   | $ | (0.51 | ) |   | $ | (1.08 | ) |
| Shares                        used in computing basic earnings per share            |   |                                                     | 9,375  |   |   |   | 12,571 |   |   |   | 19,792 |   |   |   | 21,801 |   |   |   | 21,523 |   |
| Shares                        used in computing diluted earnings per share          |   |                                                     | 9,375  |   |   |   | 12,841 |   |   |   | 19,792 |   |   |   | 21,801 |   |   |   | 21,523 |   |

|                                                                    |   | **December                    31,** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                    |   | **2002**                            |   |   | **2003** |   |   | **2004** |   |   | **2005** |   |   | **2006** |   |
| **Consolidated                    Balance Sheet Data:**                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                    and cash equivalents and short term investments |   | $                                   | 939    |   |   | $ | 8,990 |   |   | $ | 40,737 |   |   | $ | 14,393 |   |   | $ | 10,458 |   |
| Working                    capital                                      |   |                                | 2,946  |   |   |   | 12,577 |   |   |   | 41,532 |   |   |   | 14,802 |   |   |   | 10,432 |   |
| Total                    assets                                         |   |                                | 8,572  |   |   |   | 20,719 |   |   |   | 77,284 |   |   |   | 74,758 |   |   |   | 49,875 |   |
| Long-term                    obligations, less current portion          |   |                                | 1,402  |   |   |   | 1,298 |   |   |   | 1,270 |   |   |   | 2,956 |   |   |   | 2,088 |   |
| Total                    stockholders’ equity                     |   | $                                   | 4,508  |   |   | $ | 16,185 |   |   | $ | 65,991 |   |   | $ | 52,718 |   |   | $ | 30,834 |   |

----

**Our      Quarterly Financial Data**

| Quarter(in                                    thousands, except per share data)                                                                                                                                                                                                                                                                                                                     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 2006                                                                                                                                                                                                                                                                                                                                                                                                |   | First |   |   | Second |   |   | Third |   |   | Fourth |   |
| Revenue                                                                                                                                   |   | $ | 18,536 |   |   | $ | 20,750 |   |   | $ | 17,876 |   |   | $ | 18,222 |   |
| Gross                                    profit                                                                                           |   |   | 7,641 |   |   |   | 8,688 |   |   |   | 6,569 |   |   |   | 8,239 |   |
| Net                                    income                                    (loss)                                                   |   |   | (4,483 | ) |   |   | (2,985 | ) |   |   | (13,664 | ) |   |   | (2,031 | ) |
| Basic                                    and diluted earnings (loss) per share                                                                                                                                                                                                                                                                                                                      |   | $ | (0.21 | ) |   | $ | (0.14 | ) |   | $ | (0.64 | ) |   | $ | (0.09 | ) |

| Quarter(in                                  thousands, except per share data)                                                                                                                                                                                                                                                                                                                   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 2005                                                                                                                                                                                                                                                                                                                                                                                            |   | First |   |   | Second |   |   | Third |   |   | Fourth |   |
| Revenue                                                                                                                               |   | $ | 6,597 |   |   | $ | 7,165 |   |   | $ | 18,147 |   |   | $ | 27,073 |   |
| Gross                                  profit                                                                                         |   |   | 3,278 |   |   |   | 3,478 |   |   |   | 5,501 |   |   |   | 12,652 |   |
| Net                                  income                                  (loss)                                                   |   |   | (970 | ) |   |   | (987 | ) |   |   | (10,013 | ) |   |   | 810 |   |
| Basic                                  and diluted earnings (loss) per share                                                                                                                                                                                                                                                                                                                    |   | $ | (0.04 | ) |   | $ | (0.04 | ) |   | $ | (0.47 | ) |   | $ | 0.04 |   |

| Quarter(in                                  thousands, except per share data)                                                                                                                                                                                                                                                                                                                   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 2004                                                                                                                                                                                                                                                                                                                                                                                            |   | First |   |   | Second |   |   | Third |   |   | Fourth |   |
| Revenue                                                                                                                               |   | $ | 6,017 |   |   | $ | 4,733 |   |   | $ | 6,370 |   |   | $ | 5,777 |   |
| Gross                                  profit                                                                                         |   |   | 2,466 |   |   |   | 1,540 |   |   |   | 2,688 |   |   |   | 2,789 |   |
| Net                                  income                                  (loss)                                                   |   |   | 303 |   |   |   | (1,605 | ) |   |   | (2,351 | ) |   |   | 2,307 |   |
| Basic                                  and diluted earnings (loss) per share                                                                                                                                                                                                                                                                                                                    |   | $ | 0.02 |   |   | $ | (0.10 | ) |   | $ | (0.09 | ) |   | $ | 0.10 |   |

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

**Overview**

----

**Critical      Accounting Policies**

*Revenue      Recognition*

*Asset      Impairment*

*Accounts      Receivable Valuation*

*Inventory      Valuation*

----

*Goodwill*

*Intangible      Assets*

----

**Result      of Operations**

**Years      Ended December 31, 2006 and 2005**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **Years                                        Ended****December                                        31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **2006**                                                                                                      |   |   | **2005** |   |
| Sales                                                                                                                                                               |   |                                                                                                          | 100    | % |   |   | 100 | % |
| Cost                                        of                                        sales                                                                         |   |                                                                                                          | 59     |   |   |   | 58 |   |
| Gross                                        profit                                                                                                                 |   |                                                                                                          | 41     |   |   |   | 42 |   |
| Operating                                        expenses                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                          |   |   |   |   |   |   |
| Selling                                                                                                                                                                                 |   |                                                                                                          | 24     |   |   |   | 17 |   |
| Restructuring                                        /impairment                                                                                                                        |   |                                                                                                          | 12     |   |   |   | 10 |   |
| Research                                        and                                        development                                                                                  |   |                                                                                                          | 19     |   |   |   | 14 |   |
| General                                        and                                        administrative                                                                                |   |                                                                                                          | 18     |   |   |   | 22 |   |
| Total                                        operating                                        expenses                                                                                                      |   |                                                                                                          | 73     |   |   |   | 62 |   |
| Operating                                        income                                        (loss)                                                               |   |                                                                                                          | (32    | ) |   |   | (20 | ) |
| Other                                        income                                                                                                                 |   |                                                                                                          | 1      |   |   |   | 1 |   |
| Income                                        taxes                                                                                                                 |   |                                                                                                          | -      |   |   |   | - |   |
| Minority                                        interest in net income of Merry Fields                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                          | -      |   |   |   | - |   |
| Net                                        income                                        (loss)                                                                     |   |                                                                                                          | (31    | )% |   |   | (19 | )% |

*Sales*

*Cost      of goods sold and gross profit*

----

*Sales      and Marketing Expenses*

*Restructuring      and impairment charges*

|   | · | A                charge of $881,000 from the write off of intangibles related to the                acquisition of Karlnet, Inc. in 2004.  The intangible assets,                Kbridge technology, Karlnet customer relationships, and the TurboCell                trade name were related to products that the Company decided to                discontinue. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $2.1 million charge related to the developed components technology                acquired in the acquisition of Terabeam Corporation in                2004. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | A                $3.6 million impairment charge related to the Terabeam trade name                in                accordance with the guidance contained in the SFAS 142, “Goodwill and                Other Intangible Assets”.   Subsequent to the Old Proxim                acquisition, the Company chose to sell its wireless equipment products                under the go to market name of Proxim Wireless.  Since there                will be no future revenue stream based on the Terabeam name, an                independent third party valuation determined that the fair value                of the                Terabeam trade name was de                minimis. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

*Research      and Development Expenses*

*General      and Administrative Expenses*

*Other      income (expenses)*

*Adoption      of SFAS 123R*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Years                          Ended****December                          31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2005**                                                                          |   |   | **2004** |   |
| Sales                                                                                                                                   |   |                                                                              | 100    | % |   |   | 100 | % |
| Cost                          of                          sales                                                                         |   |                                                                              | 58     |   |   |   | 59 |   |
| Gross                          profit                                                                                                   |   |                                                                              | 42     |   |   |   | 41 |   |
| Operating                          expenses                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                              |   |   |   |   |   |   |
| Selling                                                                                                                                                     |   |                                                                              | 17     |   |   |   | 11 |   |
| Restructuring                          /impairment                                                                                                          |   |                                                                              | 10     |   |   |   | 0 |   |
| Research                          and                          development                                                                                  |   |                                                                              | 14     |   |   |   | 13 |   |
| General                          and                          administrative                                                                                |   |                                                                              | 22     |   |   |   | 44 |   |
| Total                          operating                          expenses                                                                                                      |   |                                                                              | 62     |   |   |   | 68 |   |
| Operating                          income                          (loss)                                                               |   |                                                                              | (20    | ) |   |   | (27 | ) |
| Other                          income                                                                                                   |   |                                                                              | 1      |   |   |   | 21 |   |
| Income                          taxes                                                                                                   |   |                                                                              | -      |   |   |   | - |   |
| Minority                          interest in net income of Merry Fields                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                              | -      |   |   |   | - |   |
| Net                          income                          (loss)                                                                     |   |                                                                              | (19    | )% |   |   | (6 | )% |

*Sales*

*Cost      of goods sold and gross profit*

*Sales      and Marketing Expenses*

----

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

|   | · | A                $1.1 million charge related to the write off of certain software                development costs that had been previously capitalized under Financial                Accounting Standards Board Statement of Financial Accounting Standard                No.                86, “Accounting for the Costs of Computer Software to Be Sold, Leased,                or                Otherwise Marketed”.  The Company abandoned development of its                Logan software development project after acquiring similar software                in the                Proxim acquisition and determining that it would take significantly                longer                to bring Logan to market than anticipated and that, when commercially                available, Logan would not have the feature set required to be                competitive. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Research      and Development Expenses*

*General      and Administrative Expenses*

*Other      income (expenses)*

----

**Liquidity      and Capital Resources**

|                                                                                                                                                                                                                                                                                                                                                                                     |   | Payments                      due by period (numbers in thousands) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                     |   | Total                                                              |   |   | Less                      than 1year |   |   | 1                      -3 years |   |   | 4–                      5 years |   |   | After                      5 years |   |
| Operating                      leases – buildings – in use                                                                                                                                                                                                                                                                                                                   |   |                                                               | 6,443  |   |   |   | 2,545 |   |   |   | 3,159 |   |   |   | 355 |   |   |   | 384 |   |
| Operating                      leases – buildings – not in use                                                                                                                                                                                                                                                                                                               |   |                                                               | 1,231  |   |   |   | 642 |   |   |   | 499 |   |   |   | 90 |   |   |   | - |   |
| Notes                      payable                                                                                             |   |                                                               | 3,200  |   |   |   | 1,000 |   |   |   | 2,200 |   |   |   | - |   |   |   | - |   |
| Operating                      leases –                      equipment                                                   |   |                                                               | 762    |   |   |   | 346 |   |   |   | 416 |   |   |   | - |   |   |   | - |   |
| Employment                      Contracts                                                                                      |   |                                                               | 1,010  |   |   |   | 1,010 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                      contractual cash obligations                                                                                                                                                                                                                                                                                                                                  |   |                                                               | 12,646 |   |   |   | 5,543 |   |   |   | 6,274 |   |   |   | 445 |   |   |   | 384 |   |

**Recently      Issued Accounting Standards**

----

**Disclosures      About Market Risk**

**.**
** **

----

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

**Item      8.      Financial Statements and Supplementary      Data.**

**INDEX      TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Page** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| Report                of Independent Registered Public Accounting                Firm                                                                                                                                 |   | 53       |
| CONSOLIDATED                FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |
| Consolidated                Balance                Sheets                                                                                                                                                             |   | 54       |
| Consolidated                Statements of                Operations                                                                                                                                                   |   | 55       |
| Consolidated                Statement of Changes in Stockholders’                Equity                                                                                                                         |   | 56       |
| Consolidated                Statements of Cash                Flows                                                                                                                                                   |   | 57       |
| Notes                to Consolidated Financial                Statements                                                                                                                                              |   | 59       |
| Schedule                II – Valuation and Qualifying                Accounts                                                                                                                                   |   | 78       |

----

**Report      of Independent Registered Public Accounting Firm**

----

**TERABEAM,      INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **December                              31,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **2006**                                      |    |   | **2005** |   |
| **Assets**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                          |    |   |   |   |
| Current                              assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                          |    |   |   |   |
| Cash                              and cash                              equivalents                                                                                                                      |   | $                                             | 10,290  |   |   | $ | 14,133 |   |
| Investment                              securities –                              available-for-sale                                                                                               |   |                                          | 168     |   |   |   | 260 |   |
| Accounts                              receivable,                              net                                                                                                                       |   |                                          | 5,539   |   |   |   | 8,378 |   |
| Inventory                                                                                                                                                                                                |   |                                          | 10,142  |   |   |   | 10,070 |   |
| Prepaid                              expenses                                                                                                                                                            |   |                                          | 1,246   |   |   |   | 1,045 |   |
| Total                              current                              assets                                                                                                                                          |   |                                          | 27,385  |   |   |   | 33,886 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |    |   |   |   |   |   |
| Property                              and equipment,                              net                                                                                                          |   |                                          | 2,660   |   |   |   | 3,924 |   |
| Other                              Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                          |    |   |   |   |   |   |
| Restricted                              cash                                                                                                                                                   |   |                                          | 76      |   |   |   | 5,076 |   |
| Goodwill                                                                                                                                                                                       |   |                                          | 7,922   |   |   |   | 7,380 |   |
| Intangible                              assets,                              net                                                                                                               |   |                                          | 11,545  |   |   |   | 23,817 |   |
| Deposits                              and prepaid                              expenses                                                                                                        |   |                                          | 287     |   |   |   | 675 |   |
| Total                              other                              assets                                                                                                                                            |   |                                          | 19,830  |   |   |   | 36,948 |   |
| Total                              assets                                                                                                                                                                               |   | $                                             | 49,875  |   |   | $ | 74,758 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |    |   |   |   |   |   |
| **Liabilities                              and Stockholders’ Equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                          |    |   |   |   |   |   |
| Current                              liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                          |    |   |   |   |   |   |
| Accounts                              payable and accrued                              expenses                                                                                                          |   | $                                             | 13,887  |   |   | $ | 15,600 |   |
| Deferred                              revenue                                                                                                                                                            |   |                                          | 2,198   |   |   |   | 2,503 |   |
| License                              agreement payable - current                              maturities                                                                                                 |   |                                          | 868     |   |   |   | 981 |   |
| Total                              current                              liabilities                                                                                                                                     |   |                                          | 16,953  |   |   |   | 19,084 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |    |   |   |   |   |   |
| License                              agreement payable, net of current                              maturities                                                                                 |   |                                          | 2,088   |   |   |   | 2,956 |   |
| Total                              liabilities                                                                                                                                                                          |   |                                          | 19,041  |   |   |   | 22,040 |   |
| Commitments                              and                              contingencies                                                                                                        |   |                                          | -       |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |    |   |   |   |   |   |
| **Stockholders’                              Equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                          |    |   |   |   |   |   |
| Preferred                              stock, $0.01 par value; 4,500,000 shares authorized,                              none issued at                              December 31, 2006 and December 31, 2005                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                          | -       |   |   |   | - |   |
| Common                              stock, $0.01 par value, 100,000,000 shares authorized,                              21,552,572 issued                              and outstanding at December 31, 2006 and 21,446,217                              issued and outstanding                              at December 31, 2005                                                                                                                                                                                                                                                                               |   |                                          | 216     |   |   |   | 214 |   |
| Additional                              paid-in                              capital                                                                                                                     |   |                                          | 57,976  |   |   |   | 56,638 |   |
| Accumulated                              deficit                                                                                                                                                         |   |                                          | (27,285 | ) |   |   | (4,122 | ) |
| Accumulated                              other comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |    |   |   |   |   |   |
| Net                              unrealized loss on available-for-sale                              securities                                                                                           |   |                                          | (73     | ) |   |   | (12 | ) |
| Total                              stockholders’                              equity                                                                                                                              |   |                                          | 30,834  |   |   |   | 52,718 |   |
| Total                              liabilities and stockholders’                              equity                                                                                                              |   | $                                             | 49,875  |   |   | $ | 74,758 |   |

----

**TERABEAM,      INC.**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                                         |   | **For                      the Years Ended December 31,** |    |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                                                         |   | **2006**                                                  |    |   | **2005** |   |   | **2004** |   |
| Revenues                                                                                     |   | $                                                         | 75,384  |   |   | $ | 58,982 |   |   | $ | 22,897 |   |
| Cost                      of goods sold                                                      |   |                                                      | 42,745  |   |   |   | 31,930 |   |   |   | 13,414 |   |
| Restructuring                      provision for excess and obsolete inventory               |   |                                                      | 1,502   |   |   |   | 2,143 |   |   |   | - |   |
| Gross                      profit                                                            |   |                                                      | 31,137  |   |   |   | 24,909 |   |   |   | 9,483 |   |
| Operating                      expenses:                                                     |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Selling                      costs                                                           |   |                                                      | 18,008  |   |   |   | 9,789 |   |   |   | 2,557 |   |
| Restructuring                      charges                                                   |   |                                                      | 116     |   |   |   | 944 |   |   |   | - |   |
| Restructuring                      charge for impairment of intangible assets                |   |                                                      | 8,874   |   |   |   | 4,664 |   |   |   | - |   |
| Impairment                      of service reporting unit goodwill                           |   |                                                      | -       |   |   |   | 200 |   |   |   | - |   |
| General                      and administrative                                              |   |                                                      | 13,493  |   |   |   | 12,902 |   |   |   | 9,976 |   |
| Research                      and development                                                |   |                                                      | 14,520  |   |   |   | 8,000 |   |   |   | 2,949 |   |
| Total                      operating expenses                                                |   |                                                      | 55,011  |   |   |   | 36,499 |   |   |   | 15,482 |   |
| Operating                      loss                                                          |   |                                                      | (23,874 | ) |   |   | (11,590 | ) |   |   | (5,999 | ) |
| Other                      income (expense):                                                 |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Interest                      income                                                         |   |                                                      | 368     |   |   |   | 695 |   |   |   | 810 |   |
| Interest                      expense                                                        |   |                                                      | (190    | ) |   |   | (161 | ) |   |   | (209 | ) |
| Gain                      on sale of Phazar stock                                            |   |                                                      | -       |   |   |   | - |   |   |   | 3,882 |   |
| Other                      income (expense)                                                  |   |                                                      | 601     |   |   |   | (19 | ) |   |   | 168 |   |
| Total                      other income (expense)                                            |   |                                                      | 779     |   |   |   | 515 |   |   |   | 4,651 |   |
| Loss                      before income taxes and minority interests                         |   |                                                      | (23,095 | ) |   |   | (11,075 | ) |   |   | (1,348 | ) |
| Benefit                      (provision) for income taxes                                    |   |                                                      | (68     | ) |   |   | 16 |   |   |   | 2 |   |
| Loss                      before  minority interests                               |   |                                                      | (23,163 | ) |   |   | (11,059 | ) |   |   | (1,346 | ) |
|     Minority                      interest in net income of Merry Fields |   |                                                      | -       |   |   |   | (101 | ) |   |   | - |   |
| Net                      loss                                                                |   | $                                                         | (23,163 | ) |   | $ | (11,160 | ) |   | $ | (1,346 | ) |
|                                                                                         |   |                                                      |    |   |   |   |   |   |   |   |   |   |
| Weighted                      average shares - basic and diluted                             |   |                                                      | 21,523  |   |   |   | 21,801 |   |   |   | 19,792 |   |
| Loss                      per share - basic and diluted                                      |   | $                                                         | (1.08   | ) |   | $ | (0.51 | ) |   | $ | (0.07 | ) |

----

**TERABEAM,      INC.**

**CONSOLIDATED      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**

|                                                                                                                     |   | **Common                        Stock** |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|--------|------------|--------|--------|-------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|--------|-------------------------------------------|---------|--------|----------------------------------------------|--------|--------|--------------------------------------------------------------------------------|--------|
|                                                                                                                     |   | **Shares**                              |       |   | **Amount** |   |   | **Additional                        Paid-in Capital** |   |   | **Retained                        Earnings (Deficit)** |   |   | **Treasury                        Stock** |    |   | **Minority                        Interest** |   |   | **Accumulated                        Other Comprehensive (Loss) Income**  |   | **Total** |   |
| **Balances,                        December 31, 2003**                                                                   |   |                                    | 14,179,882 |   |       | $      | 142    |                                                  |   | $      | 6,173                                                  |   |   | $                                         | 8,673   |   |                                         | $      | -      |                                                                           |   | $ | - |   |   | $ | 1,197 |   |   | $ | 16,185 |   |
|                                                                                                                     |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                        issued for acquisitions                                                                     |   |                                    | 12,609,237 |   |       |   | 126    |                                                  |   |   | 59,552                                                 |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | 59,678 |   |
| Treasury                        stock purchased                                                                          |   |                                    | (4,683,183 | )      |       |   | (42    | )                                                     |   |   | (6,458                                                 | )      |   |                                      | -       |   |                                         |   | (1,155 | )                                                                              |   |   | - |   |   |   | - |   |   |   | (7,655 | ) |
| Distribution                        to Merry Fields members                                                              |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (50     | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | (50 | ) |
| Exercise                        of stock options and warrants                                                            |   |                                    | 239,911    |   |       |   | 2      |                                                  |   |   | 370                                                    |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | 372 |   |
| Comprehensive                        income:                                                                             |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        income (loss)                                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (1,346  | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | (1,346 | ) |
| Unrealized                        gain (loss) on investments, net of reclassification                        adjustments |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | (1,193 | ) |   |   | (1,193 | ) |
| Total                        comprehensive income (loss)                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (1,346  | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | (1,193 | ) |   |   | (2,539 | ) |
| **Balances,                        December 31, 2004**                                                                   |   |                                    | 22,345,847 |   |       | $      | 228    |                                                  |   | $      | 59,637                                                 |   |   | $                                         | 7,277   |   |                                         | $      | (1,155 | )                                                                              |   |   | - |   |   | $ | 4 |   |   | $ | 65,991 |   |
|                                                                                                                     |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Treasury                        stock purchased                                                                          |   |                                    | (1,033,750 | )      |       |   | (15    | )                                                     |   |   | (3,207                                                 | )      |   |                                      | -       |   |                                         |   | 1,155  |                                                                           |   |   | - |   |   |   | - |   |   |   | (2,067 | ) |
| Exercise                        of stock options and warrants                                                            |   |                                    | 134,120    |   |       |   | 1      |                                                  |   |   | 188                                                    |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | 189 |   |
| Merry                        Fields, loss of control                                                                     |   |                                    | -          |   |       |   | -      |                                                  |   |   | 20                                                     |   |   |                                      | (239    | )      |                                         |   | -      |                                                                           |   |   | 219 |   |   |   | - |   |   |   | - |   |
| Minority                        interest in net income of Merry Fields                                                   |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | 101 |   |   |   | - |   |   |   | 101 |   |
| Deconsolidation                        of Merry Fields                                                                   |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | (320 | ) |   |   | - |   |   |   | (320 | ) |
| Comprehensive                        income:                                                                             |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        income (loss)                                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (11,160 | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | (11,160 | ) |
| Unrealized                        gain (loss) on investments, net of reclassification                        adjustments |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | (16 | ) |   |   | (16 | ) |
| Total                        comprehensive income (loss)                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (11,160 | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | (16 | ) |   |   | (11,176 | ) |
| **Balances,                        December 31, 2005**                                                                   |   |                                    | 21,446,217 |   |       | $      | 214    |                                                  |   | $      | 56,638                                                 |   |   | $                                         | (4,122  | )      |                                         |   | -      |                                                                           |   |   | - |   |   | $ | (12 | ) |   | $ | 52,718 |   |
|                                                                                                                     |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercise                        of stock options and warrants                                                            |   |                                    | 106,355    |   |       |   | 2      |                                                  |   |   | 79                                                     |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | 81 |   |
| Employee                        stock option amortization                                                                |   |                                    | -          |   |       |   | -      |                                                  |   |   | 1,259                                                  |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | 1,259 |   |
| Comprehensive                        income:                                                                             |   |                                    |       |   |       |   |   |                                                  |   |   |                                                   |   |   |                                      |    |   |                                         |   |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        income (loss)                                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (23,163 | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | - |   |   |   | (23,163 | ) |
| Unrealized                        gain (loss) on investments, net of reclassification                        adjustments |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | -       |   |                                         |   | -      |                                                                           |   |   | - |   |   |   | (61 | ) |   |   | (61 | ) |
| Total                        comprehensive income (loss)                                                                 |   |                                    | -          |   |       |   | -      |                                                  |   |   | -                                                      |   |   |                                      | (23,163 | )      |                                         |   | -      |                                                                           |   |   | - |   |   |   | (61 | ) |   |   | (23,224 | ) |
| **Balances,                        December 31, 2006**                                                                   |   |                                    | 21,552,572 |   |       | $      | 216    |                                                  |   | $      | 57,976                                                 |   |   | $                                         | (27,285 | )      |                                         |   | -      |                                                                           |   |   | - |   |   | $ | (73 | ) |   | $ | 30,834 |   |

----

**TERABEAM,      INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(In      thousands)**

|                                                                                     |   | **For                        The Years Ended December 31,** |    |
|------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                     |   | **2006**                                                    |    |   | **2005** |   |   | **2004** |   |
| Cash                        flows from operating activities:                             |   |                                                        |    |   |   |   |   |   |   |
| Net                        income (loss)                                                 |   | $                                                           | (23,163 | ) |   | $ | (11,160 | ) |   | $ | (1,346 | ) |
| Depreciation                        and amortization                                     |   |                                                        | 5,106   |   |   |   | 3,449 |   |   |   | 1,249 |   |
| (Gain)                        loss on disposal of property and equipment                 |   |                                                        | -       |   |   |   | - |   |   |   | (14 | ) |
| Loss                        on write-down of investments available-for-sale              |   |                                                        | 32      |   |   |   | 120 |   |   |   | - |   |
| Realized                        (gain) loss on trading and available-for-sale securities |   |                                                        | -       |   |   |   | - |   |   |   | (3,521 | ) |
| Bad                        debt allowance (recovery)                                     |   |                                                        | 95      |   |   |   | 415 |   |   |   | 488 |   |
| Inventory                        allowance                                               |   |                                                        | (1,190  | ) |   |   | - |   |   |   | - |   |
| Employee                        stock option amortization                                |   |                                                        | 1,259   |   |   |   | - |   |   |   | - |   |
| Restructuring                        charge for impairment of intangible assets          |   |                                                        | 8,874   |   |   |   | 4,664 |   |   |   | - |   |
| Restructuring                        provision for excess and obsolete inventory         |   |                                                        | 1,502   |   |   |   | 2,143 |   |   |   | - |   |
| Impairment                        of service unit goodwill                               |   |                                                        | -       |   |   |   | 200 |   |   |   | - |   |
| Changes                        in assets and liabilities affecting operations:           |   |                                                        |    |   |   |   |   |   |   |   |   |   |
| Restricted                        cash                                                   |   |                                                        | -       |   |   |   | 60 |   |   |   | 740 |   |
| Accounts                        receivable, net                                          |   |                                                        | 2,699   |   |   |   | (1,661 | ) |   |   | 153 |   |
| Inventory                                                                                |   |                                                        | (758    | ) |   |   | 206 |   |   |   | (1,348 | ) |
| Deposits                                                                                 |   |                                                        | 357     |   |   |   | (222 | ) |   |   | 2 |   |
| Prepaid                        expenses                                                  |   |                                                        | (201    | ) |   |   | (897 | ) |   |   | 143 |   |
| Refundable                        income taxes                                           |   |                                                        | -       |   |   |   | 151 |   |   |   | 75 |   |
| Accounts                        payable and accrued expenses                             |   |                                                        | (1,805  | ) |   |   | 3,188 |   |   |   | (2,306 | ) |
| Deferred                        revenue                                                  |   |                                                        | (305    | ) |   |   | 2,344 |   |   |   | 96 |   |
| Net                        cash provided by (used in) operating activities               |   |                                                        | (7,498  | ) |   |   | 3,000 |   |   |   | (5,589 | ) |
| Cash                        flows from investing activities:                             |   |                                                        |    |   |   |   |   |   |   |   |   |   |
|     Release                        of restricted cash                |   |                                                        | 5,000   |   |   |   | - |   |   |   | - |   |
| Proceeds                        on disposal of property and equipment                    |   |                                                        | -       |   |   |   | 169 |   |   |   | 964 |   |
| Purchase                        of securities                                            |   |                                                        | -       |   |   |   | (241 | ) |   |   | (790 | ) |
| Purchase                        of property and equipment                                |   |                                                        | (445    | ) |   |   | (293 | ) |   |   | (37 | ) |
| Investment                        in capitalized software                                |   |                                                        | -       |   |   |   | (382 | ) |   |   | (601 | ) |
| Sale                        of securities                                                |   |                                                        | -       |   |   |   | 5,214 |   |   |   | 34,616 |   |
| Cash                        used for acquisitions                                        |   |                                                        | -       |   |   |   | (24,300 | ) |   |   | (4,800 | ) |
| Cash                        received from acquisitions                                   |   |                                                        | -       |   |   |   | 384 |   |   |   | 10,254 |   |
| Net                        cash provided by (used in) investing activities               |   |                                                        | 4,555   |   |   |   | (19,449 | ) |   |   | 39,606 |   |
| Cash                        flows from financing activities:                             |   |                                                        |    |   |   |   |   |   |   |   |   |   |
| Distributions                        to Merry Fields members                             |   |                                                        | -       |   |   |   | - |   |   |   | (50 | ) |
| Repurchase                        of common stock                                        |   |                                                        | -       |   |   |   | (2,069 | ) |   |   | - |   |
| Exercise                        of stock options                                         |   |                                                        | 81      |   |   |   | 189 |   |   |   | 372 |   |
| Purchase                        of treasury stock                                        |   |                                                        | -       |   |   |   | - |   |   |   | (7,655 | ) |
| Repayment                        of license agreement payable                            |   |                                                        | (981    | ) |   |   | - |   |   |   | - |   |
| Repayment                        of notes payable                                        |   |                                                        | -       |   |   |   | (2,906 | ) |   |   | (200 | ) |
| Repayment                        of capital leases                                       |   |                                                        | -       |   |   |   | - |   |   |   | (106 | ) |
| Net                        cash provided by (used in) financing activities               |   |                                                        | 900     |   |   |   | (4,786 | ) |   |   | (7,639 | ) |
| Net                        increase (decrease) in cash and cash equivalents              |   |                                                        | (3,843  | ) |   |   | (21,235 | ) |   |   | 26,378 |   |
| Cash                        and cash equivalents, beginning of period                    |   |                                                        | 14,133  |   |   |   | 35,368 |   |   |   | 8,990 |   |
| Cash                        and cash equivalents, end of period                          |   | $                                                           | 10,290  |   |   | $ | 14,133 |   |   | $ | 35,368 |   |

----

| Supplemental                    disclosure of cash flow information:                                                              |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cash                    paid for interest                                                                                         |   | $      | 119    |   |   | $      | 160    |   |   | $ | 200 |   |
| Income                    taxes paid                                                                                              |   | $      | 68     |   |   |   | -      |   |   | $ | 4 |   |
| Stock                    issued in acquisitions                                                                                   |   |   | -      |   |   |   | -      |   |   | $ | 59,678 |   |
| Deconsolidation                    of subsidiary:      Property and equipment                    removed |   |   | -      |   |   | $      | 1,455  |   |   |   | - |   |
| Note                    payable removed                                                                                           |   |   | -      |   |   | $      | 1,194  |   |   |   | - |   |
| Acquisition                    of license agreement in exchange for license agreement                    payable                  |   |   | -      |   |   | $      | 2,956  |   |   |   | - |   |

----

**TERABEAM,      INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.                  Organization**

**2006:**

|                                                                                                                                                                                                                                                                                                                                      |   | **Equipment** |    |   | **Services** |   |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|--------|--------------|--------|--------|-----------|--------|
| Assets                                                                                                        |   | $             | 48,833  |   |         | $      | 1,042  |      |   | $ | 49,875 |   |
| Revenue                                                                                                       |   | $             | 72,707  |   |         | $      | 2,677  |      |   | $ | 75,384 |   |
| Operating                      income                      (loss)                                             |   | $             | (21,781 | )      |         | $      | (2,093 | )         |   | $ | (23,874 | ) |

**2005:**

|                                                                                                                                                                                                                                                                                                                                      |   | **Equipment** |   |   | **Services** |   |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------|--------|--------------|--------|--------|-----------|--------|
| Assets                                                                                                        |   | $             | 71,960 |   |         | $      | 2,798  |      |   | $ | 74,758 |   |
| Revenue                                                                                                       |   | $             | 56,133 |   |         | $      | 2,849  |      |   | $ | 58,982 |   |
| Operating                      income                      (loss)                                             |   | $             | (9,101 | )      |         | $      | (2,489 | )         |   | $ | (11,590 | ) |

----

**2.                  Summary of Significant Accounting Policies**

*Use      of Estimates*

*Principles      of Consolidation*

*Asset      Impairment*

*Cash      and Cash Equivalents*

*Restricted      Cash*

*Investments*

* *

*Accounts      Receivable*

----

*Inventory*

*Warranty      Provision*

*Property      and Equipment*

*Purchase      Price Accounting*

*Goodwill*

*Intangible      Assets*

----

*Capitalized      Software*

*Income      Taxes*

*Revenue      Recognition*

----

*Stock      based compensation*

|                                                                                                                                                                                                                                                                                                                                                                     |   | **2006** |       |   | **2005** |   |   | **2004** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|----------|--------|--------|----------|--------|
| Expected                      volatility                                                                            |   |     | 250%-284   | %      |     |   | 111    | %        |   |   | 205 | % |
| Expected                      dividends                                                                             |   |     | -          |   |     |   | -      |     |   |   | - |   |
| Expected                      term (in                      years)                                                  |   |     | 4          |   |     |   | 5      |     |   |   | 5 |   |
| Risk-free                      rate                                                                                 |   |     | 4.51%-5.02 | %      |     |   | 3.58   | %        |   |   | 3.67 | % |

----

| **December                          31,**                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                           |   | **2005** |   |   | **2004** |   |
| Net                          income (loss) attributable to common stockholders, as                          reported:                                                          |   | $ | (11,160 | ) |   | $ | (1,346 | ) |
| Less:  Total                          stock based employee compensation expense determined                          under the fair value based method for all awards |   |   | (2,017 | ) |   |   | (563 | ) |
| Pro                          forma net income (loss) attributable to common                          stockholders                                                              |   | $ | (13,177 | ) |   | $ | 1,909 |   |
| Basic                          net income (loss) per common share, as reported                                                                                                 |   | $ | (0.51 | ) |   | $ | 0.07 |   |
| Basic                          net income (loss) per common share, pro forma                                                                                                   |   | $ | (0.60 | ) |   | $ | 0.10 |   |
| Diluted                          net income (loss) per common share, as reported                                                                                               |   | $ | (0.51 | ) |   | $ | 0.07 |   |
| Diluted                          net income (loss) per common share, pro forma                                                                                                 |   | $ | (0.60 | ) |   | $ | 0.10 |   |

*Advertising      costs*

*Shipping      and Handling Costs*

*Comprehensive      Income*

*Corporate      Structural Changes*

*Foreign      Currency Transactions*

*Fair      Value of Financial Instruments*

*Recent      Accounting Pronouncements*

----

**3.                 Inventory and Restructuring Provision for Excess and Obsolete      Inventory**

| (in                        thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    |   |   |                                    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **December                        31,** |   |   | **December                        31,** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2006**                                |   |   | **2005**                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                    |   |   |                                    |   |
| Raw                        materials                                                                                                                       |   | $                                       | 8,247  |   |                                    | $      | 4,737 |   |
| Work                        in                        process                                                                                              |   |                                    | 480    |   |                                    |   | 437 |   |
| Finished                        goods                                                                                                                      |   |                                    | 11,068 |   |                                    |   | 13,863 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                    | 19,795 |   |                                    |   | 19,037 |   |
| Allowance                        for excess and                        obsolescence                                                                        |   |                                    | (9,653 | )      |                                    |   | (8,967 | ) |
| Net                        Inventory                                                                                                                       |   | $                                       | 10,142 |   |                                    | $      | 10,070 |   |

**4.                  Restructuring Charges for Severance and Excess      Facilities**

----

**5.           Intangibles      and Restructuring Provision for Impairment of Intangibles**

*Schedule      of Non-Amortizable Assets*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **December                        31,**   |   |   | **December                        31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **2006**                                  |   |   | **2005**                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **(in                        thousands)** |   |
| Trade                        names – indefinite useful                        life                                                                                 |   |                                      | 2,250  |   |                                    |   | 2,250 |   |
|  Less:                        Impairment                        charge                                                                                              |   |                                      | (1,100 | )      |                                    |   | - |   |
| Trade                        names – indefinite useful life,                        net                                                                            |   | $                                         | 1,150  |   |                                    | $      | 2,250 |   |

*Schedule      of Amortizable Assets*

|                                                                                                                                                 |   | **December                      31,**   |   |   | **December                      31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                                                                                                 |   | **2006**                                |   |   | **2005**                              |   |
|                                                                                                                                                 |   | **(in                      thousands)** |   |
| Capitalized                      software – placed in service                                                                                  |   | $                                       | -      |   |                                  | $      | 1,225 |   |
| Patents,                      customer relationships and other technologies with identifiable                      useful                      lives |   |                                    | 14,521 |   |                                  |   | 24,031 |   |
| Total                      Intangible Assets                                                                                                         |   |                                    | 14,521 |   |                                  |   | 25,256 |   |
| Less:  accumulated                      amortization                                                                                       |   |                                    | (4,126 | )      |                                  |   | (3,689 | ) |
| Amortizable                      intangible assets, net                                                                                              |   | $                                       | 10,395 |   |                                  | $      | 21,567 |   |

*Impairment      of Intangibles*

|   | · | A                charge of $881,000 from the write off of intangibles related to the                acquisition of Karlnet, Inc. in 2004.  The intangible assets,                Kbridge technology, Karlnet customer relationships, and the TurboCell                trade name were related to products that the Company decided to                discontinue. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $2.1 million charge related to the developed components technology                acquired in the acquisition of Terabeam Corporation in                2004. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

*Prior      Year Impairment of Intangibles*

|   | · | A                $3.6 million impairment charge related to the Terabeam trade name                in                accordance with the guidance contained in the SFAS 142, “Goodwill and                Other Intangible Assets”.   Subsequent to the Old Proxim                acquisition, the Company chose to sell its wireless equipment products                under the go to market name of Proxim Wireless.  Since there                will be no future revenue stream based on the Terabeam name, an                independent third party valuation determined that the fair value                of the                Terabeam trade name was de minimis. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $1.1 million charge related to the write off of certain software                development costs that had been previously capitalized under Financial                Accounting Standards Board Statement of Financial Accounting Standard                No.                86, “Accounting for the Costs of Computer Software to Be Sold, Leased,                or                Otherwise Marketed”.  The Company abandoned development of its                Logan software development project after acquiring similar software                in the                Proxim acquisition due to market timing                issues. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**6.                 Investment Securities**

|                                                                                                                                                                                                                                                                                            |   | **December                        31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                            |   | **2006**                                |   |   | **2005** |   |
|                                                                                                                                                                                                                                                                                            |   | **Cost                        Basis**   |   |   | **Carrying                        Value** |   |   | **Cost                        Basis** |   |   | **Carrying                        Value** |   |
| Available-for-sale:                                                                                                                                                                                                                                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Equity                        investments                                          |   | $                                       | 240    |   |   | $ | 168 |   |   | $ | 273 |   |   | $ | 260 |   |
| Total                                                                              |   | $                                       | 240    |   |   | $ | 168 |   |   | $ | 273 |   |   | $ | 260 |   |

|                                                                                                                                                                                                                                                                                                                                                     |   | **2006** |   |   | **2005** |   |   | **2004** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Equity                      securities                                                    |   | $        | (32    | )      |     | $      | (120   | )        |   | $ | 3,521 |   |

----

**7.                  Property and Equipment**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **December                      31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2006**                              |   |   | **2005** |   |
| Building                      and                      improvements                                                                              |   | $                                     | 469    |   |   | $ | 684 |   |
| Equipment                                                                                                                                        |   |                                  | 5,098  |   |   |   | 4,438 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                  | 5,567  |   |   |   | 5,122 |   |
| Less:  accumulated                      depreciation                                                                                                                           |   |                                  | (2,907 | ) |   |   | (1,198 | ) |
| Property                      and equipment,                      net                                                                            |   | $                                     | 2,660  |   |   | $ | 3,924 |   |

**8.                  Allowance for Bad Debt**

|                                                                            |   | **Allowance                        for Bad Debt, Sales Returns and Discounts** |   |
|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                                                            |   | **2006**                                                                       |   |   | **2005** |   |
| Balance                        as of January 1                             |   | $                                                                              | 9,128  |   |   | $ | 591 |   |
| Bad                        debt adjustment                                      |   |                                                                           | (303   | ) |   |   | 280 |   |
| Allowance                        on acquired receivables                        |   |                                                                           | -      |   |   |   | 8,964 |   |
| Charge                        offs and other adjustments made during the period |   |                                                                           | (5,217 | ) |   |   | (707 | ) |
| Balance                        as of December 31                           |   | $                                                                              | 3,608  |   |   | $ | 9,128 |   |

**9.                  Allowance for Product Warranty      Costs**

|                                                               |   | **Product                        Warranty Costs** |   |
|--------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                               |   | **2006**                                          |   |   | **2005** |   |
| Balance                        as of January 1                |   | $                                                 | 1,366  |   |   | $ | 220 |   |
| Additional                        provision                        |   |                                              | 575    |   |   |   | 560 |   |
| Provision                        from acquired warranty costs      |   |                                              | -      |   |   |   | 1,053 |   |
| Settlements                        and other provision adjustments |   |                                              | (839   | ) |   |   | (467 | ) |
| Balance                        as of December 31              |   | $                                                 | 1,102  |   |   | $ | 1,366 |   |

**10.           Goodwill**

| **Acquisition**                   |   | **2006** |   |   | **2005** |   |
|-----------------------------------|--------|----------|--------|--------|----------|--------|
| KarlNet                           |   | $        | 2,491  |   |     | $      | 2,491 |   |
| Terabeam                          |   |     | 3,322  |   |     |   | 3,322 |   |
| Old                        Proxim |   |     | 2,109  |   |     |   | 1,567 |   |
| Goodwill                          |   | $        | 7,922  |   |     | $      | 7,380 |   |

----

**11.           Patent      License Agreement – License Agreement Payable**

|                                               |   | **December                          31,****2006** |   |   | **December                          31****2005** |   |
|----------------------------------------------------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------|--------|
| License                          Agreement Payable |   |                                              | 2,956  |   |                                             |   | 3,937 |   |
| Current                          portion           |   |                                              | (868   | )      |                                             |   | (981 | ) |
| Long                          term portion         |   | $                                                 | 2,088  |   |                                             | $      | 2,956 |   |

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

| 2007 |   | $ | 868   |   |
|------|--------|---|-------|--------|
| 2008 |   | $ | 1,064 |   |
| 2009 |   | $ | 1,024 |   |

**12.           Income      Taxes**

|                                                                                                                                                                                                                                                                                                                                                                                    |   | **December                                  31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                    |   | **2006**                                          |   |   | **2005** |   |   | **2004** |   |
| Current                                  tax expense (benefit)                                                                                                                                                                                                                                                                                                                          |   |                                              |   |   |   |   |   |   |   |
| Federal                                                                                                                            |   | $                                                 | -      |   |   | $ | - |   |   | $ | - |   |
| State                                  and                                  other                                                  |   |                                              | 68     |   |   |   | (16 | ) |   |   | (2 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                              | 68     |   |   |   | (16 | ) |   |   | (2 | ) |
| Deferred                                  tax expense (benefit)                                                                                                                                                                                                                                                                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Federal                                                                                                                            |   |                                              | -      |   |   |   | - |   |   |   | - |   |
| State                                                                                                                              |   |                                              | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                              | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   | $                                                 | 68     |   |   | $ | (16 | ) |   | $ | (2 | ) |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **December                        31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **2006**                                |   |   | **2005** |   |
| Current                        net deferred tax assets (liabilities):                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                    |   |   |   |   |
| Allowance                        for doubtful                        accounts                                                                          |   | $                                       | (32    | ) |   | $ | 87 |   |
| Inventory                        valuation                        allowance                                                                            |   |                                    | 1,335  |   |   |   | 749 |   |
| Accruals                                                                                                                                               |   |                                    | (91    | ) |   |   | 94 |   |
| Net                        operating loss                        carryforwards                                                                         |   |                                    | 7,560  |   |   |   | 5,501 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                    | 8,772  |   |   |   | 6,431 |   |
| Valuation                        allowance                                                                                                             |   |                                    | (8,772 | ) |   |   | (6,431 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                       | -      |   |   | $ | - |   |
| Non-current                        net deferred tax assets (liabilities):                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                    |   |   |   |   |   |   |
| Intangible                        and depreciable                        assets                                                                        |   | $                                       | 89     |   |   | $ | 513 |   |
| Accruals                                                                                                                                               |   |                                    | -      |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                    | 89     |   |   |   | 513 |   |
| Valuation                        allowance                                                                                                             |   |                                    | (89    | ) |   |   | (513 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                       | -      |   |   | $ | - |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | **December                      31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | **2006**                              |   |   | **2005** |   |   | **2004** |   |
| Tax                      expense (benefit) at U.S. statutory rate                                                                                                                                                                                                                                                                                                                                                                          |   | $                                     | (8,107 | ) |   | $ | (3,906 | ) |   | $ | (472 | ) |
| State                      income                      taxes                                                                             |   |                                  | (927   | ) |   |   | (446 | ) |   |   | (54 | ) |
| Merry                      Fields, LLC                      income                                                                       |   |                                  | -      |   |   |   | - |   |   |   | (55 | ) |
| Change                      in valuation                      allowance                                                                  |   |                                  | 1,917  |   |   |   | 5,430 |   |   |   | 1,387 |   |
| Permanent                      tax                      differences                                                                      |   |                                  | 7,185  |   |   |   | (1,073 | ) |   |   | (780 | ) |
| Other                      differences                                                                                                   |   |                                  | -      |   |   |   | (21 | ) |   |   | (28 | ) |
| Provision                      (benefit) for income                      taxes                                                           |   | $                                     | 68     |   |   | $ | (16 | ) |   | $ | (2 | ) |

**13.           Commitments**

*Leases*

| 2007                              |   | $      | 2,891 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| 2008                              |   |   | 1,968 |   |
| 2009                              |   |   | 1,006 |   |
| 2010                              |   |   | 601   |   |
| Thereafter                        |   |   | 739   |   |
| Total                                                                                                                                                |   | $      | 7,205 |   |

----

**14.           401(k)      – Retirement Plan**

**15.           Stockholders’      Equity**

*Stock      Warrants*

|                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Warrants                      Outstanding** |     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Number                      of Shares**     |     |   | **Per                      Share****Exercise                      Price** |   |
| Outstanding                      December 31,                      2003                                                          |   |                                          | 391,419  |   |   | $ | 2.08 |   |
| Warrants                      issued                                                                                                                                                                                                                                                                                                                                                                                          |   |                                          | 624,706  |   |   | $ | 0.40                      – 17.05 |   |
| Warrants                      exercised                                                                                                                   |   |                                          | (57,713  | ) |   | $ | 0.40                      – 2.27 |   |
| Warrants                      expired/canceled                                                                                                            |   |                                          | (116,947 | ) |   | $ | 0.40                      – 5.68 |   |
| Outstanding                      December 31,                      2004                                                          |   |                                          | 841,465  |   |   | $ | 0.40                      – 17.05 |   |
| Warrants                      issued                                                                                                                      |   |                                          | -        |   |   | $ | - |   |
| Warrants                      exercised                                                                                                                   |   |                                          | (31,948  | ) |   | $ | 2.08                      – 2.08 |   |
| Warrants                      expired/canceled                                                                                                            |   |                                          | (371,047 | ) |   | $ | 0.40                      – 17.05 |   |
| Outstanding                      December 31,                      2005                                                          |   |                                          | 438,470  |   |   | $ | 0.40                      – 5.68 |   |
| Warrants                      issued                                                                                                                      |   |                                          | -        |   |   | $ | - |   |
| Warrants                      exercised                                                                                                                   |   |                                          | (69,287  | ) |   | $ | 2.08                      – 2.27 |   |
| Warrants                      expired/canceled                                                                                                            |   |                                          | (215,806 | ) |   | $ | 2.08                      – 5.68 |   |
| Outstanding                      December 31,                      2006                                                          |   |                                          | 153,377  |   |   | $ | 0.40                      – 2.27 |   |

| **Expiration                      Date**                                                                                                                                     |   | **Number                      of****Warrants** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
| 2007                             |   |                                           | 98,377 |   |
| 2008                             |   |                                           | 55,000 |   |

*Stock      Options Issued*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **Options                      Outstanding** |      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **Number                      of****Shares** |      |   | **Per                      Share****Exercise                      Price** |   |
| Outstanding                      December 31,                      2003                                                                                                                                                                                                                                                                                             |   |                                         | 769,729   |   |   | $ | 0.92                      – 161.00 |   |
| Options                      granted                                                                                |   |                                         | 815,350   |   |   | $ | 2.47                      – 6.99 |   |
| Options                      exercised                                                                              |   |                                         | (182,198  | ) |   | $ | 0.96                      – 5.76 |   |
| Options                      expired/canceled                                                                       |   |                                         | (231,247  | ) |   | $ | 1.32–                      161.00 |   |
| Outstanding                      December 31,                      2004                                                                                                                                                                                                                                                                                                                           |   |                                         | 1,171,634 |   |   | $ | 0.92                      – 161.00 |   |
| Options                      granted                                                                                |   |                                         | 1,488,000 |   |   | $ | 2.35                      – 3.34 |   |
| Options                      exercised                                                                              |   |                                         | (102,172  | ) |   | $ | 1.60                      – 2.47 |   |
| Options                      expired/canceled                                                                       |   |                                         | (514,416  | ) |   | $ | 1.60                      – 161.00 |   |
| Outstanding                      December 31, 2005                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                         | 2,043,046 |   |   | $ | 0.92                      – 161.00 |   |
| Options                      granted                                                                                |   |                                         | 1,118,750 |   |   | $ | 1.81                      – 5.06 |   |
| Options                      exercised                                                                              |   |                                         | (37,068   | ) |   | $ | 1.60                      – 4.00 |   |
| Options                      expired/canceled                                                                       |   |                                         | (532,636  | ) |   | $ | 1.32                      – 17.88 |   |
| Outstanding                      December 31,                      2006                                                                                                                                                                                                                                                                                                                                               |   |                                         | 2,592,092 |   |   | $ | 0.92                      – 161.00 |   |

| **Options                    Outstanding**                   |                                 |   | **Options                    Exercisable** |   |
|--------------------------------------------------------------|--------------------------------------|--------|--------------------------------------------|--------|
| **Weighted****Average****Exercise                    Price** |                                 |   | **Number****Outstanding**                  |   |   | **Weighted****Average****Remaining                    Life****(years)** |   |   | **Weighted-****Average****Exercise                    Price** |   |   | **Number****Exercisable** |   |   | **Weighted-****Average****Exercise                    Price** |   |
| $                                                            | 0.00                    - 2.00       |   |                                       |   | 254,485 |   |   |   | 4.27 |   |   | $ | 1.72 |   |   |   | 65,985 |   |   | $ | 1.28 |   |
| $                                                            | 2.01                    – 4.00 |   |                                       |   | 1,951,518 |   |   |   | 3.64 |   |   | $ | 2.86 |   |   |   | 910,245 |   |   | $ | 2.85 |   |
| $                                                            | 4.01                    – 6.00 |   |                                       |   | 290,767 |   |   |   | 4.25 |   |   | $ | 4.98 |   |   |   | 94,099 |   |   | $ | 5.00 |   |
| $ over                    6.00                          |                                 |   |                                       | 95,322 |   |   |   | 2.59 |   |   | $ | 11.68 |   |   |   | 77,497 |   |   | $ | 12.82 |   |

**16.           Earnings      (Loss) per Share**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **December                      31,**                          |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **2006**                                                       |    |   | **2005** |   |   | **2004** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **(in                      thousands, except per share data)** |    |
| Numerator                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                           |    |   |   |   |   |   |   |
| Net                      loss                                                                                                                        |   | $                                                              | (23,163 | ) |   | $ | (11,160 | ) |   | $ | (1,346 | ) |
| Denominator                      – weighted average shares:                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                           |    |   |   |   |   |   |   |   |   |   |
| Denominator                      for basic earnings loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                           | 21,523  |   |   |   | 21,801 |   |   |   | 19,792 |   |
| Dilutive                      effect of stock                      options                                                                           |   | ** **                                                     | **-**   |   |   | ** ** | **-** |   |   |   | - |   |
| Denominator                      for diluted loss per                      share                                                                     |   |                                                           | 21,523  |   |   |   | 21,801 |   |   |   | 19,792 |   |
| Basic                      and diluted loss per                      share                                                                           |   | $                                                              | (1.08   | ) |   | $ | (0.51 | ) |   | $ | (0.07 | ) |

**17.           Concentrations**

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **%                      of Company Sales** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
| **Region**                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **2006**                                    |   |   | **2005** |   |   | **2004** |   |
| North                      America (US and                      Canada)                                                             |   |                                        | 48     | % |   |   | 65 | % |   |   | 82 | % |
| Latin                      America (Mexico, Central, South America, and Caribbean)                                                                                                                                                                                                                                                                                                                                                              |   |                                        | 9      | % |   |   | 8 | % |   |   | 4 | % |
| Asia                      Pacific (China, Taiwan, Japan, other Pacific territories, Australia,                      New                      Zealand)                                                                                                                                                                                                                                                                                           |   |                                        | 16     | % |   |   | 11 | % |   |   | 4 | % |
| Europe,                      Middle East and Africa (a.k.a. E.M.E.A.)                                                                                                                                                                                                                                                                                                                                                                           |   |                                        | 27     | % |   |   | 16 | % |   |   | 10 | % |

**18.           Related      Party Transactions**

**19.           Prior      Year Acquisition**

*Proxim*

----

| Cash                                                                                                                               |   | $      | 384    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Accounts                        receivable                                                                                         |   |   | 4,193  |   |
| Inventory                                                                                                                          |   |   | 4,976  |   |
| Other                        current                        assets                                                                 |   |   | 118    |   |
| Property                        and                        equipment                                                               |   |   | 3,483  |   |
| Other                        long term                        assets                                                               |   |   | 117    |   |
| Identifiable                        intangible                        assets                                                       |   |   | 14,800 |   |
| Goodwill                                                                                                                           |   |   | 1,567  |   |
| Accounts                        payable                                                                                            |   |   | (1,038 | )      |
| Other                        accrued                        liabilities                                                            |   |   | (4,300 | )      |
| Total                        adjusted purchase                        price                                                        |   | $      | 24,300 |   |

|                                                              |   | (in                      thousands) |   | Useful                      Life |
|-------------------------------------------------------------------|--------|-------------------------------------|--------|----------------------------------|
| Trademarks                      and trade names                   |   |                                | 2,100  |                             | Indefinite |
| Developed                      technology                         |   |                                | 5,600  |                             | 8                      years |
| Customer                      contracts and related relationships |   |                                | 7,100  |                             | 6                      years |
| Goodwill                                                          |   |                                | 1,567  |                             | Indefinite |

|                                            |   | (in                      thousands) |   | Remaining                      Useful Life |
|-------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------------|
| Trademarks                      and trade names |   |                                | 1,000  |                                       | Indefinite |
| Customer                      Related assets    |   |                                | 5,424  |                                       | 5                      years |
| Goodwill                                        |   |                                | 2,109  |                                       | Indefinite |

----

**20.           Quarterly      Financial Data – Unaudited**

| **Quarter****(unaudited)****(in                                  thousands, except per share data)** |   |
|------------------------------------------------------------------------------------------------------|--------|
| **2006**                                                                                             |   | **First** |   |   | **Second** |   |   | **Third** |   |   | **Fourth** |   |
| Revenue                                                                                              |   | $ | 18,536 |   |   | $ | 20,750 |   |   | $ | 17,876 |   |   | $ | 18,222 |   |
| Gross                                  profit                                                        |   |   | 7,641 |   |   |   | 8,688 |   |   |   | 6,569 |   |   |   | 8,239 |   |
| Net                                  income (loss)                                                   |   |   | (4,483 | ) |   |   | (2,985 | ) |   |   | (13,664 | ) |   |   | (2,031 | ) |
| Basic                                  and diluted earnings (loss) per share                         |   | $ | (0.21 | ) |   | $ | (0.14 | ) |   | $ | (0.63 | ) |   | $ | (0.09 | ) |

|                                                                                         |   |
|--------------------------------------------------------------------------------------------------------|--------|
| **Quarter****(unaudited)****(in                                    thousands, except per share data)** |   |
| **2005**                                                                                               |   | **First** |   |   | **Second** |   |   | **Third** |   |   | **Fourth** |   |
| Revenue                                                                                                |   | $ | 6,597 |   |   | $ | 7,165 |   |   | $ | 18,147 |   |   | $ | 27,073 |   |
| Gross                                    profit                                                        |   |   | 3,278 |   |   |   | 3,478 |   |   |   | 5,501 |   |   |   | 12,652 |   |
| Net                                    income (loss)                                                   |   |   | (970 | ) |   |   | (987 | ) |   |   | (10,013 | ) |   |   | 810 |   |
| Basic                                    and diluted earnings (loss) per share                         |   | $ | (0.04 | ) |   | $ | (0.04 | ) |   | $ | (0.47 | ) |   | $ | 0.04 |   |

**21.           Contingencies**

**IPO      Litigation**

----

*In re Initial Public Offering Securities Litigation*
*en banc*

**KarlNet**

----

**General**

----

**Schedule      II**

**Valuation      and Qualifying Accounts**

**For      The Years Ended December 31, 2006, 2005 and 2004**

**(in      thousands)**

|                                                        |   | **Balance                        at the****beginning                        of****the                        period** |   |   | **Additions** |   |   | **Deductions** |   |   | **Balance                        at the****end****of                        the****period** |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|----------------|--------|--------|---------------------------------------------------------------------------------------------|--------|
|                                                        |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |
| December                        31, 2004:                   |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |
| Allowance                        for uncollectible accounts |   | $                                                                                                                     | 205    |   |          | $      | 1,544  |           |   | $      | (1,159                                                                                      | )      |   | $ | 590 |   |
| Inventory                        allowance                  |   |                                                                                                                  | 200    |   |          |   | 400    |           |   |   | -                                                                                           |   |   |   | 600 |   |
| Deferred                        tax allowance               |   |                                                                                                                  | 127    |   |          |   | 1,387  |           |   |   | -                                                                                           |   |   |   | 1,514 |   |
|                                                        |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |   |   |   |   |
| December                        31, 2005:                   |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |   |   |   |   |
| Allowance                        for uncollectible accounts |   | $                                                                                                                     | 590    |   |          | $      | 9,245  |           |   | $      | (707                                                                                        | )      |   | $ | 9,128 |   |
| Inventory                        allowance                  |   |                                                                                                                  | 600    |   |          |   | 10,701 |           |   |   | (2,334                                                                                      | )      |   |   | 8,967 |   |
| Deferred                        tax allowance               |   |                                                                                                                  | 1,514  |   |          |   | 5,430  |           |   |   | -                                                                                           |   |   |   | 6,944 |   |
|                                                        |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |   |   |   |   |
| December                        31, 2006:                   |   |                                                                                                                  |   |   |          |   |   |           |   |   |                                                                                        |   |   |   |   |   |
| Allowance                        for uncollectible accounts |   | $                                                                                                                     | 9,128  |   |          | $      | (303   | )              |   | $      | (5,217                                                                                      | )      |   | $ | 3,608 |   |
| Inventory                        allowance                  |   |                                                                                                                  | 8,967  |   |          |   | 1,920  |           |   |   | (1,234                                                                                      | )      |   |   | 9,653 |   |
| Deferred                        tax allowance               |   |                                                                                                                  | 6,944  |   |          |   | 2,390  |           |   |   | -                                                                                           |   |   |   | 9,334 |   |

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

**Item      9A.   Controls and Procedures.**

*Disclosure      controls and procedures*

*Internal      control over financial reporting*

----

*Changes      in internal control over financial reporting*

**Item      9B.  Other Information.**

----

**PART      III**

**Item      10.   Directors and Executive Officers of the      Registrant.**

**Code      of Ethics**

**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.    Principal Accountant Fees and      Services**

----

**PART      IV**

**Item      15.    Exhibits and Financial Statement      Schedules.**

|   | 1. | Financial                Statements |
|--------|----|-------------------------------------|

|   | 2. | Financial                Statement Schedule |
|--------|----|---------------------------------------------|

|   | 3. | Exhibits |
|--------|----|----------|

----

**SIGNATURES**

|                                                 | TERABEAM,                      INC. |
|------------------------------------------------------|-------------------------------------|
|                                                 |                                |   |
| Date:  March                      30, 2007 | By:                                 | /s/                      Robert E.                      Fitzgerald       |
|                                                 |                                | Robert                      E. Fitzgerald, |
|                                                 |                                | Chief                      Executive Officer |
|                                                 |                                |   |

| **Signature**                                   |   | **Title**                                                       | **Date**                              |
|-------------------------------------------------|--------|-----------------------------------------------------------------|---------------------------------------|
|  /s/                  Robert E. Fitzgerald |   |  Chief                  Executive Officer and Director     |  March                  30, 2007 |
| Robert                  E. Fitzgerald           |   | *(principal                  executive officer)*                |                                  |
|  /s/                  Brian J. Sereda      |   |  Chief                  Financial Officer and Treasurer    |  March                  30, 2007 |
| Brian                  J. Sereda                |   | *(principal                  financial and accounting officer)* |                                  |
|  /s/                  Daniel A. Saginario  |   |  Chairman                  of the Board of Directors       |  March                  30, 2007 |
| Daniel                  A. Saginario            |   |                                                            |                                  |
|  /s/                  John W. Gerdelman    |   |  Director                                                  |  March                  30, 2007 |
| John                  W. Gerdelman              |   |                                                            |                                  |
|  /s/                  Pankaj Manglik       |   |  Director                                                  |  March                  30, 2007 |
| Pankaj                  Manglik                 |   |                                                            |                                  |
|  /s/                  Robert A. Wiedemer   |   |  Director                                                  |  March                  30, 2007 |
| Robert                  A. Wiedemer             |   |                                                            |                                  |

----

**EXHIBIT      INDEX**

| **Exhibit****Number** | **Description                    of Document**                                                                                                                                                                                                                    |   |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 2.1                   | Asset                    Purchase Agreement by and between the Registrant and Proxim Corporation,                    Proxim Wireless Networks, Inc., and Proxim International Holdings,                    Inc.                    dated as of July 18, 2005 (1)  |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 2.2                   | Agreement                    and Plan of Merger by and among the Registrant, T-Rex Acquisition                    Corporation, and Terabeam Corporation dated as of April 14, 2004                    (2)                                                         |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 2.3                   | Agreement                    and Plan of Merger by and among the Registrant, KFire Merger                    Corporation,                    KarlNet, Inc., Douglas J. Karl, and Elise L. Karl dated as of                    May 13, 2004                    (3) |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 2.4                   | Agreement                    and Plan of Merger by and between Telaxis Communications Corporation                    and                    Young Design, Inc. dated as of March 17, 2003 (4)                                                                     |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 2.5                   | Agreement                    and Plan of Merger and Reincorporation by and between Telaxis                    Communications Corporation and YDI Wireless, Inc. dated as of                    June 23,                    2003 (5)                               |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 3.1                   | Certificate                    of Incorporation of the Registrant as filed with the Delaware                    Secretary of                    State on May 5, 2003 (6)                                                                                          |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 3.2                   | Certificate                    of Merger of Telaxis Communications Corporation with and into                    YDI                    Wireless, Inc. as filed with the Delaware Secretary of State                    on July 7,                    2003 (6)     |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 3.3                   | Certificate                    of Ownership and Merger as filed with the Delaware Secretary                    of State on                    November 3, 2005 (7)                                                                                                |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 3.4                   | By-laws                    of the Registrant (6)                                                                                                                                                                                                                  |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 4.1                   | Form                    of certificate evidencing ownership of common stock of the Registrant                    (8)                                                                                                                                              |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 4.2                   | Rights                    Agreement by and between the Registrant and Registrar and Transfer                    Company, as Rights Agent dated as of May 18, 2001 (9)                                                                                             |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 4.3                   | Amendment                    No. 1 to Rights Agreement by and between the Registrant and Registrar                    and                    Transfer Company, as Rights Agent dated as of September 9, 2002                    (10)                              |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 4.4                   | Amendment                    No. 2 to Rights Agreement by and between the Registrant and Registrar                    and                    Transfer Company, as Rights Agent dated as of March 17, 2003                    (4)                                  |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 4.5                   | Amendment                    No. 3 to Rights Agreement by and between the Registrant and Registrar                    and                    Transfer Company, as Rights Agent dated as of May 15, 2003                    (6)                                    |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.1*                 | 1996                    Stock Plan of the Registrant (11)                                                                                                                                                                                                         |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.2*                 | Amendment                    No. 1 to 1996 Stock Plan of the Registrant (12)                                                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.3*                 | 1997                    Stock Plan of the Registrant (11)                                                                                                                                                                                                         |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.4*                 | Amendment                    No. 1 to 1997 Stock Plan of the Registrant (12)                                                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.5*                 | 1999                    Stock Plan of the Registrant (11)                                                                                                                                                                                                         |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.6*                 | Amendment                    No. 1 to 1999 Stock Plan of the Registrant (12)                                                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.7*                 | 2001                    Nonqualified Stock Plan of the Registrant (13)                                                                                                                                                                                            |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.8*                 | Amendment                    No. 1 to 2001 Nonqualified Stock Plan of the Registrant                    (12)                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.9*                 | Young                    Design, Inc. 2002 Stock Incentive Plan (14)                                                                                                                                                                                              |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.10*                | 2004                    Stock Plan of the Registrant (12)                                                                                                                                                                                                         |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.11*                | Amendment                    No. 1 to 2004 Stock Plan of the Registrant (15)                                                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.12*                | Amendment                    No. 2 to 2004 Stock Plan of the Registrant (16)                                                                                                                                                                                      |   |
|                  |                                                                                                                                                                                                                                                              |   |
| 10.13*                | Form                    of Non-Qualified Stock Option Agreement to be issued to Directors                    of the                    Registrant upon Initial Election or Appointment to Board of Directors                    (17)                              |   |
|                  |                                                                                                                                                                                                                                                              |   |

----

| **Exhibit****Number** | **Description                of Document** |   |
|-----------------------|--------------------------------------------|--------|

| 10.14* | Form                  of Non-Qualified Stock Option Agreement to be issued to Incumbent                  Directors of the Registrant on an Annual Basis (17)                                                                                                              |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                                                                                                                                                                                      |   |
| 10.15* | Form                  of Incentive Stock Option Agreement for Executive Officers                  (18)                                                                                                                                                                    |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.16* | Form                  of Indemnification Agreement, a substantially similar version of                  which was                  entered between the Registrant and each of Messrs. Fitzgerald,                  Saginario,                  Wiedemer, and Renauld (19) |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.17* | Policy                  Statement Concerning the Compensation of Directors of the Registrant                  who                  are not Insiders, dated February 9, 2005 (17)                                                                                          |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.18* | Employment                  Agreement between the Registrant and Robert E. Fitzgerald dated                  as of                  February 9, 2005 (17)                                                                                                                 |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.19* | Non-Qualified                  Stock Option Agreement between the Registrant and Robert E. Fitzgerald                  dated as of February 9, 2005 (17)                                                                                                                  |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.20* | Employment                  Agreement between the Registrant and Pankaj Manglik dated May 19,                  2006                  (16)                                                                                                                                 |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.21* | Form                  of Incentive Stock Option Agreement between the Registrant and                  Pankaj                  Manglik dated as of May 19, 2006 (16)                                                                                                       |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.22* | Letter                  Employment Agreement between the Registrant and Brian J. Sereda                  dated                  August 2, 2006 (18)                                                                                                                       |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.23* | Employment                  Agreement by and between the Registrant and David L. Renauld dated                  as of                  December 19, 2000 (20)                                                                                                             |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.24* | Amendment                  1 to Employment Agreement by and between the Registrant and David                  L.                  Renauld dated as of August 29, 2002 (21)                                                                                                |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.25* | Amendment                  2 to Employment Agreement by and between the Registrant and David                  L.                  Renauld dated as of January 24, 2003 (22)                                                                                               |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.26* | Letter                  Employment Agreement between the Registrant and Len Eisenstein                  dated May                  24, 2006 (23)                                                                                                                          |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.27* | Employment                  Agreement by and between the Registrant and David F. Olson dated                  July 27,                  2005 (24)                                                                                                                         |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.28* | Amended                  and Restated Employment Agreement by and between Proxim Wireless                  Corporation and David F. Olson and consented to by the Registrant,                  dated                  December 8, 2005 (25)                               |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.29* | Employment                  Agreement by and between Proxim Wireless Corporation and Geoff                  Smith dated                  December 8, 2005 (25)                                                                                                            |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.30  | Secured                  Promissory Note from KarlNet, Inc. in favor of the Registrant dated                  May                  13, 2004 (3)                                                                                                                           |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.31  | Security                  Agreement between KarlNet, Inc. and the Registrant dated as of                  May 13,                  2004 (3)                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.32  | Lease                  Agreement by and between Young Design, Inc. and Merry Fields, LLC                  dated as                  of August 24, 2000 (6)                                                                                                                |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.33  | Office                  Lease by and between Ricochet Networks, Inc. and 1400 Glenarm Place                  Venture dated as of February 1, 2005, with related Guaranty by                  the                  Registrant in favor of 1400 Glenarm Place Venture (26)  |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.34  | Intellectual                  Property Agreement by and between Agere Systems, Inc. and Proxim                  Corporation dated August 5, 2002 (24)                                                                                                                     |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.35  | Patent                  License Agreement by and between Agere Systems Guardian Corporation,                  Agere                  Systems, Inc. and Proxim Corporation dated August 5, 2002                  (24)                                                      |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.36  | Supply                  Agreement by and between Agere Systems, Inc. and Proxim Corporation                  dated                  August 5, 2002 (24)                                                                                                                   |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.37  | Lease,                  dated as of May 10, 2005, by and between CarrAmerica Realty Operating                  Partnership, L.P. and Proxim Corporation (27)                                                                                                              |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.38  | First                  Amendment to Lease by and between the Registrant and CarrAmerica                  Realty                  Operating Partnership, L.P. dated as of October 31, 2005                  (8)                                                            |   |
|   |                                                                                                                                                                                                                                                                      |   |
| 10.39  | Lease                  Agreement by and between the Registrant and Adom Realty Trust dated                  October 7, 2005 (28)                                                                                                                                          |   |
|   |                                                                                                                                                                                                                                                                      |   |

----

| **Exhibit****Number** | **Description                of Document** |   |
|-----------------------|--------------------------------------------|--------|

| 10.40  | Settlement                  Agreement between the Registrant and Symbol Technologies, Inc.                  (29)                                                                                                                                                              |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                                                                                                                                                                                          |   |
| 21.1   | Subsidiaries                  of the Registrant                                                                                                                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 23.1   | Consent                  of Fitzgerald, Snyder & Co., P.C.                                                                                                                                                                                                                |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 31.1   | Certification                  of Chief Executive Officer Pursuant to Rule 13a-14(a)                                                                                                                                                                                          |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 31.2   | Certification                  of Chief Financial Officer Pursuant to Rule 13a-14(a)                                                                                                                                                                                          |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 32.1   | Certification                  Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley                  Act of                  2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of                  Title 18 of                  the United States Code) |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 99.1   | Form                  of Noncompetition Agreement, a substantially similar version of                  which was                  entered between the Registrant and each of Douglas J. Karl and                  Elise L.                  Karl dated as of May 13, 2004 (3) |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 99.2   | Stock                  Purchase Agreement by and between the Registrant and Ricochet Investments,                  LLC dated as of June 25, 2004 (30)                                                                                                                         |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 99.3   | Non-Competition                  and Confidentiality Agreement by and among Victor Mitchell, Ricochet                  Networks, Inc., and the Registrant dated as of June 25, 2004                  (30)                                                                     |   |
|   |                                                                                                                                                                                                                                                                          |   |
| 99.4   | Guarantee                  from Victor Mitchell in favor of the Registrant dated as of June                  25, 2004                  (30)                                                                                                                                   |   |

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