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

                                   ----------

                                   FORM 10-K/A

                                 Amendment No. 1

                                   ----------

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                       OR

|_|   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

                               YDI Wireless, Inc.
             (Exact name of registrant as specified in its charter)

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

                                8000 Lee Highway
                             Falls Church, VA 22042
                    (Address of principal executive offices)

                                 (703) 205-0600
              (Registrant's telephone number, including area code)

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

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

                          Common Stock, $.01 Par Value
                              (Title of each class)

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

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

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |_| No |X|

      As of June 30, 2003, the aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant was
$15,365,470. Shares of common equity held by each of the registrant's directors
and officers on that date and by each person who beneficially owned 10% or more
of the outstanding common stock on that date have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes. The aggregate
market value has been computed based on a split-adjusted price per share of
$3.68, which is the price at which the common equity was last sold on June 30,
2003.

      As of February 13, 2004, the Company had 14,243,145 shares of common stock
outstanding.

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<PAGE>

                                EXPLANATORY NOTE

Overview

      This Amendment No. 1 to our Annual Report on Form 10-K for the year ended
December 31, 2003 initially filed with the Securities and Exchange Commission
("SEC") on February 20, 2004 (the "Originally Filed 10-K") is being filed to
reflect restatements of the following audited financial statements: consolidated
balance sheets of YDI Wireless, Inc. ("YDI") as of December 31, 2003 and of
Young Design, Inc. ("Young Design") as of December 31, 2002 and 2001;
consolidated statements of operations for the year ended December 31, 2003 (for
YDI) and 2002 and 2001 (for Young Design); consolidated statement of changes in
stockholders' equity for the year ended December 31, 2003 for YDI; and
consolidated statement of cash flows for the year ended December 31, 2003 (for
YDI) and 2002 and 2001 (for Young Design). Corresponding revisions have been
made in this Amendment No. 1 to other portions of the Originally Filed 10-K.

Summary of Revisions

      In general, these restatements reflect non-cash revisions in the
accounting for the combination of Young Design, Inc. ("Young Design") and
Telaxis Communications Corporation ("Telaxis") that occurred in April 2003. The
accounting for this transaction is complicated by the different legal and
accounting treatments of the transaction. From a legal perspective, Telaxis was
the acquiring company, Young Design became a wholly-owned subsidiary of Telaxis,
and Telaxis issued shares of its common stock to the former YDI stockholders.
However, from an accounting perspective, the combination was a reverse merger in
which Young Design was the acquiring company due to the former Young Design
stockholders owning approximately 70% of the combined company and other reasons.

      Some changes reflected in this Amendment No. 1 result from the different
treatment of the former Telaxis property and equipment that had been included in
the $2.5 million of property and equipment formerly shown on our December 31,
2003 balance sheet. Upon further consideration, that Telaxis amount has been
split into two categories - assets held for sale and property and equipment. The
estimated fair market value of the assets held for sale is now reflected on our
December 31, 2003 balance sheet as a current asset. The remaining Telaxis
property and equipment has been written off in accordance with SFAS No. 141 and
the negative goodwill associated with the combination reduced by a corresponding
amount. Because the assets were either reclassified as held for sale or written
off, the assets are not being depreciated and previously recorded depreciation
amounts have been reversed. The net change in operating results for the year was
an increase of $508,000. The net change in overall net income for the year was
an increase of $44,000.

      Other changes result from a change in the calculation of weighted average
shares of common stock outstanding. Previously, that calculation for fiscal year
2003 started with the 4,177,078 shares of stock held by the Telaxis stockholders
on January 1, 2003 and added the 9,375,000 shares issued to the former YDI
stockholders in April 2003. To better reflect the reverse merger of Young Design
and Telaxis, the starting share count has been revised to be the 9,375,000
shares of common stock held by the former Young Design stockholders with the
4,177,078 shares originally held by the Telaxis stockholders being added to the
outstanding share count in April 2003. Given these accounting changes, YDI's
weighted average shares outstanding in 2003 has increased. For the year ended
December 31, 2003, the effect was an increase of YDI's weighted average shares
outstanding to approximately 12.6 million from 10.9 million with a corresponding
decrease in earnings per share.

Amendments Made in this Amendment No. 1 and Other Documents

      This Amendment No. 1 amends and restates Item 1 of Part I, Items 6, 7, 8,
and 9A of Part II, and Item 15 of Part IV of the Originally Filed 10-K and,
except for such items and Exhibits 23.1, 23.2, 31.1, 31.2, and 32.1, no other
information in the Originally Filed 10-K is amended hereby. The explanatory
caption at the beginning of each item of this Amendment No. 1 sets forth the
general nature of the revisions to that item.

      We are concurrently filing Amendment No. 1 to our Quarterly Report on Form
10-Q for the quarter ended June 30, 2003, initially filed with the SEC on August
14, 2003, and Amendment No. 1 to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003, initially filed with the SEC on November 10,
2003. Amendment No. 1 to the second quarter Form 10-Q includes the following
restated financial statements, all of which are unaudited except as otherwise
noted: consolidated balance sheets of YDI as of June 30, 2003 and of Young


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Design as of December 31, 2002 (audited); consolidated statements of operations
for the three and six month periods ended June 30, 2003 (for YDI) and 2002 (for
Young Design); consolidated statement of changes in stockholders' equity for the
six month period ended June 30, 2003 for YDI; and consolidated statements of
cash flows for the six month period ended June 30, 2003 (for YDI) and 2002 (for
Young Design). Amendment No. 1 to the third quarter Form 10-Q includes the
following restated financial statements, all of which are unaudited except as
otherwise noted: consolidated balance sheets as of September 30, 2003 (for YDI)
and 2002 (for Young Design); consolidated statements of operations for the three
and nine month periods ended September 30, 2003 (for YDI) and 2002 (for Young
Design); consolidated statement of changes in stockholders' equity for the nine
month period ended September 30, 2003 for YDI; and consolidated statements of
cash flows for the nine month period ended September 30, 2003 (for YDI) and 2002
(for Young Design).

      For a discussion of events and developments subsequent to December 31,
2003, see our other filings with the SEC subsequent to December 31, 2003.


                                       3
<PAGE>

                                     PART I

      This Annual Report on Form 10-K contains forward-looking statements as
defined by federal securities laws. Forward-looking statements are predictions
that relate to future events or our future performance and are subject to known
and unknown risks, uncertainties, assumptions, and other factors that may cause
actual results, outcomes, levels of activity, performance, developments, or
achievements to be materially different from any future results, outcomes,
levels of activity, performance, developments, or achievements expressed,
anticipated, or implied by these forward-looking statements. Forward-looking
statements should be read in light of the cautionary statements and important
factors described in this Form 10-K, including Item 7--Management's Discussion
and Analysis of Financial Condition and Results of Operations--Safe Harbor for
Forward-Looking Statements. We undertake no obligation to update or revise any
forward-looking statement to reflect events, circumstances, or new information
after the date of this Form 10-K or to reflect the occurrence of unanticipated
or any other subsequent events.

Item 1. Business.

      The information set forth in this Item 1 has been revised to add minor
clarifying information. Apart from these revisions, this information does not
reflect events and developments subsequent to December 30, 2003.

Overview

      We provide broadband, or high-speed, wireless access products and access
cards both in the United States and internationally. Our systems enable service
providers, enterprises and governmental organizations to deliver high-speed data
connectivity enabling a broad range of applications. We believe our fixed
wireless systems address the growing need of our customers and end-users to
rapidly and cost effectively deploy high-speed communication networks. Our goal
is to offer reliable wireless data equipment with improved range, performance
and ease of use.

Recent Developments

      We are the result of a merger consummated on April 1, 2003 between Telaxis
Communications Corporation ("Telaxis") and Young Design, Inc. ("Young Design").
Telaxis was a publicly traded company that focused on developing high capacity
millimeter wave wireless products. Young Design was a privately held company
that developed, produced and sold wireless data products, primarily in microwave
frequencies. Subsequent to the merger, the company effected a 1 for 100 reverse
stock split followed by a 25 for 1 forward stock split, re-incorporated in
Delaware and changed its name to YDI Wireless, Inc. Young Design is treated as
the acquirer for accounting purposes and therefore, the historical information
is that of Young Design.

      Prior to its merger with Telaxis, Young Design had grown through a
combination of organic growth and acquisitions. In March 2003, Young Design
acquired certain assets and licensed technologies to permit it to manufacture
and sell the Link CX product. In May 2002, Young Design acquired certain assets
and licensed technology to permit it to manufacture and sell the Link EX, Link
4X and RAN products. In May 2001, Young Design purchased Zeus Wireless, Inc., a
manufacturer of low speed wireless data equipment.

      On October 30, 2003, we signed a definitive agreement to acquire Phazar
Corp ("Phazar") for 1.2 shares of our stock for each share of Phazar outstanding
and not held by us. At the time of signing the definitive agreement, we held
approximately 21% of Phazar. The transaction with Phazar is subject to the
approval of Phazar's shareholders. It is anticipated that the transaction will
be consummated in the first calendar quarter of 2004. Phazar designs,
manufactures and markets antenna systems, towers and communication accessories
worldwide. The United States government, military and civil agencies, as well as
prime contractors, represent Phazar's principal customers. Phazar's operations
are performed in Mineral Wells, Texas for customers throughout the country.

Industry Background

      We believe that there exists a significant need for bandwidth where
digital phone lines or fiber optic cable are either too expensive to deploy,
unavailable or inadequate to meet demand. This barrier is often referred to as
the "last mile" gap. Carriers typically have to overcome cost, time,
technological, and other barriers when trying to close the last mile gap.


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<PAGE>

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

      As a result of the capital expenditure reductions by fiber carriers, some
potential subscribers are looking elsewhere to satisfy their connectivity needs.
For example, enterprises are expected to increasingly turn to network
integrators to provide connectivity between their local area networks ("LANs")
and storage area networks ("SANs"), as their business conditions improve.
Cellular network operators are faced with similar connectivity issues when they
try to provide backhaul to connect their cellular telephone towers to the rest
of their networks. We expect this issue to intensify as subscribers demand
increasingly data-intensive mobile services. Overlaying all of these industry
trends is the current desire for increased network redundancy and reduced
vulnerability through duplicate and alternative communications paths, which can
often readily be provided with our products.

      Fixed Wireless Broadband

      Telecommunications carriers that do not have direct connectivity to the
end customer through an existing medium such as copper or cable cannot cost
effectively create a land line connection to that customer and are relegated to
reselling the existing connectivity, possibly with enhancements, in some form or
fashion. As a reseller, the telecommunications carrier is subjected to the
quality of service and support provided by the underlying operator of the
network. Extended range license-free fixed wireless broadband systems allow
telecommunications carriers to establish an alternative network that they can
own and control to enable them to offer superior connectivity head to head with
the incumbent service provider. Our products allow a telecommunications carrier
to offer broadband connectivity to markets where no broadband has been
previously deployed because it was not cost effective to offer broadband
connectivity using traditional landline solutions. Equally important, the use of
license-free spectrum permits a new entrant to rapidly and cost effectively
reach a new market of subscribers demanding broadband connectivity.

      Many small to medium sized ISPs (Internet Service Providers) have no other
viable means to offer high-speed Internet service to their customers other than
using the license-free radio bands. ISPs are increasingly offering wireless
broadband connectivity and are known as WISPs (Wireless Internet Service
Providers). Our point-to-multipoint systems have been deployed by over 1,000
WISPs and are currently serving tens of thousands of end customers, many of
which had no broadband access prior to the roll outs incorporating our
equipment.

      Rural Broadband

      In many rural areas of the country there is no DSL or cable TV service
available. Residential and business customers there typically only have
slow-speed dial-up access. Some use satellite links for broadband Internet
access, but its relatively slow up load speeds and extremely long latency does
not make it an ideal choice for high-speed wireless Internet. Many Internet
Service Providers now use the license-free radio bands to offer high-speed
wireless Internet to their rural dial-up customers. Our long-range
point-to-multipoint systems are well suited for these rural areas and towns
where there is no other viable broadband option.

      Public Hot Spots and Hot Zones

      A new form of wireless connectivity, which currently appears to be
experiencing substantial growth, is the proliferation of Hot Spots. Put simply,
a Hot Spot is a geographical area in which end users utilizing a WLAN (Wireless
LAN) card can access a broadband wireless connection for Internet connectivity.
The Hot Spot is usually offered by a telecommunications carrier for a fee or by
the local venue owner/operator for a fee or as an amenity. An increasing number
of Hot Spots permitting free public access are being deployed by a variety of
organizations. The advantages of Hot Spots are broadband connectivity, ease of
use, mobile operations and roaming capabilities. The primary disadvantage of Hot
Spots is that their effective range of less than 300 feet greatly limits the
benefit of a single Hot Spot and would require the deployment of a huge number
of Hot Spots to generate any meaningful level of coverage. To date, the
deployment of Hot Spots has been sporadic and is generally limited to high
traffic areas such as airports, convention centers, hotels and coffee shops.
This limited deployment has attracted limited attention from end-users who
require a broader area of coverage to widely adopt the service.


                                       5
<PAGE>

      We have been an industry leader in the concept of Hot Zones. A Hot Zone is
the functional equivalent of a Hot Spot except that it incorporates our
amplifier and high gain antenna technology to illuminate a dramatically larger
area of coverage than is covered by a traditional Hot Spot. For instance, rather
than providing a single coffee shop with wireless coverage by utilizing a Hot
Spot, a carrier could provide wireless coverage to a zone of several coffee
shops and restaurants by utilizing a Hot Zone. Also, since the deployment of Hot
Zones is more similar to the deployment of cellular telephone systems, we
believe that telecommunications carriers will migrate to Hot Zone deployments
rather than attempting to build out Hot Spots one building at a time. We believe
that the proliferation of Hot Zones will create a dramatic improvement in the
geographical footprint of Hot Spot type coverage which is required to increase
the acceptance and demand from end users.

      Cellular Backhaul

      We believe that the need for high-speed backhaul, the connections between
cellular telephone towers and the rest of the cellular telephone network, will
remain solid and even increase due to the increased capacity demands of existing
cellular deployments as well as the deployment of additional cellular systems.
The amount of data that needs to be backhauled from cellular systems should
increase significantly as 2.5G, 3G and other high-data-rate cellular systems are
developed and deployed and more data intensive applications are offered. We
believe that the backhaul data rates required for some individual cells will
exceed the capabilities of the land line T-1/E-1 connections that are typically
used today, thereby providing an attractive market for our Link CX product with
its 45 Mbps (Megabits per second) DS-3 capabilities.

      Private Enterprise Networks

      Business, government and institutional enterprise network deployments are
increasingly deploying high-speed connections between multiple buildings
occupied by the same or affiliated businesses or other enterprises in a campus
or business complex setting. Given that public fiber network carriers have
curtailed their capital spending programs, enterprises are turning to network
integrators to connect their LANs together. These integrators are motivated to
quickly and cost effectively deploy solutions and are very receptive to
considering alternative methods of providing connections - such as our products
- rather than just fiber optic cable. In addition, high-data-rate next
generation fixed wireless LAN systems such as IEEE 802.11a/b/g (several
different standards for wireless LAN interoperability) are creating additional
needs for LAN-to-LAN connectivity that could be met with our products, depending
upon the data rate required. The higher data rate capabilities within the LAN
are generating demand for higher speed connections between LANs such as our
FiberLeap(TM) product, with its Gigabit Ethernet (1.25 Gibabits per second) data
rates.

      The Desire for Redundancy and Reduced Vulnerability

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

YDI's Solution

      We believe that there exists a growing market to provide license-free
high-speed wireless connectivity. The advantage of utilizing license-free
spectrum is that the operator can deploy the necessary equipment without the
expense and time associated with acquiring a license. This allows for rapid
deployment as well as creating a more competitive landscape without the
artificial barriers associated with a license holder having a monopolistic hold
over a geographical area. There are several significant advantages of utilizing
wireless connectivity as opposed to traditional land-line solutions such as
copper, fiber, digital subscriber line (DSL) or cable modems. Wireless can be
very rapidly and selectively deployed at a much lower cost than traditional land
line solutions. This permits service providers to rapidly enter new market and
offer new services. Wireless is also well positioned to improve and grow over
time as applications dictate while many landline solutions are inherently
usually limited in bandwidth by the medium that they operate in. Finally, as
demonstrated by the rapid proliferation of cellular phones worldwide, users have
demonstrated a preference for the mobility and freedom of wireless systems.


                                       6
<PAGE>

      We try to provide the best price/performance ratio for our class of
products by, where possible, combining industry standardized wireless
communication equipment, such as 802.11b equipment, with enhanced range,
functionality and robustness. The goal is to provide higher quality products
that can be utilized under the demanding conditions required by large-scale
service providers while keeping the price of the equipment at a range that
permits a relatively rapid payback of investment by our customers. Because our
proprietary technology enables our systems to transmit over longer distances
than competing product designs, service providers, businesses and other
enterprises require fewer units to cover a specified area. As a result, they are
able to reduce both their initial and incremental capital expenditures for
network deployment.

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

      Markets which are benefiting from the use of our license-free wireless
equipment include:

      o     Service providers such as WISPs who utilize fixed wireless
            connectivity to offer broadband connectivity to their customers

      o     Telecommunications carriers that can utilize our products to offer
            enhanced services or to fill in gaps in their existing networks
            quickly and cost effectively

      o     Service providers or enterprises that need high speed connectivity
            between two or more points such as linking the LANs of two buildings

      o     Operators of Hot Spots who utilize our equipment to provide high
            speed mobile connectivity in high density areas such as airports,
            convention centers and downtown areas

      o     Government, military or emergency service providers who utilize our
            equipment in order to provide a rapidly deployable high speed data
            distribution system in the event that existing communication systems
            are inadequate or unavailable or as a redundant back up to their
            primary communication systems

      Our broadband wireless access systems have various disadvantages and
limitations. For example, the broadband wireless access industry is technology
intensive and requires us to continually develop new products or product
enhancements in order for us to remain competitive. In addition, in contrast to
mobile wireless access solutions, our systems require line-of-sight
installation, which often requires the end-user to obtain roof rights from third
parties. Since we focus primarily on license-free bands, our systems may also
experience problems due to radio signal interference, which may occur if
multiple wireless systems are operating on the same radio frequencies and in the
same geographic areas as our systems. Signal fade due to rain is a significant
limiting factor for the operation of our products that operate in the higher 24
GHz and 60 GHz frequencies. Certain aspects of our product line can be
substituted with off the shelf WLAN products. Such products are extremely low
cost and can either cause downward pressure on the prices that we can receive in
the market place for our products and, in some cases, even replace our products
entirely.

Strategy

      Our objective is to be a leading global provider of broadband wireless
access systems operating in the license-free frequencies. Our strategy to
accomplish this objective is to:

      Capitalize on our technology expertise to rapidly introduce new products.
Our team of engineers has multi-disciplinary technical capabilities, including
radio frequency technology spanning from microwave to millimeter waves as well
as digital, software and networking expertise. We believe integrating these
capabilities is highly complex, and we intend to continue to take advantage of
our technology expertise to introduce product enhancements and new products in a
rapid and cost effective manner. As systems become more complex and


                                       7
<PAGE>

sophisticated and particularly, as systems operate at higher data rates and
frequencies, we believe that it will become increasingly difficult for
organizations without our breadth of skills to be competitive in product
development.

      Leverage our direct sales model and direct relationship with our end
customers. Due to our direct sales model, we have relationships with many of our
end customers. As a result of this, we believe that we have closer and more
sustainable relationships and generate more product loyalty. In addition, by
maintaining direct contact with the end users we believe that we remain more
attuned to the limitations of existing technology and opportunities for new
product development. We plan to continue to offer synergistic products to our
existing customers and to expand our direct customer base.

      Expand our sales efforts outside of the United States and establish
international channels of distribution. Currently approximately 74% of our
revenues are generated by the sale of products within the United States. We
believe that markets outside of the United States actually offer better market
potential than what exists inside the United States because there is
significantly less deployed communications infrastructure throughout much of the
world. While we have had limited success in our overseas efforts to date, we
believe that our products are competitive in the overseas markets. We believe
that results to date have been limited in some part due to our application of
our direct sales model into overseas markets. We believe that establishing
distribution channels may be a better system for offering our products in
overseas markets and have recently begun developing such distribution channels.
It is still too early for us to ascertain if the use of local distributors will
improve our overseas revenues.

      Expand through acquisitions. We intend to pursue acquisitions of
complementary businesses, technologies, products or services to expand our
presence in the broadband wireless access market. We are currently integrating
the millimeter back-haul products acquired as the result of the merger completed
on April 1, 2003 of Young Design, Inc. and Telaxis Communications Corporation.
Our Link EX, 4X and RAN and Link CX product lines are a result of technology
purchases from InterWAVE Communications in May 2002 and March 2003,
respectively.

Products

      We have two primary product lines: high-speed point-to-point products and
point-to-multipoint products. In 2003, point-to-point products accounted for
approximately 20% of our revenues and our point-to-multipoint products accounted
for approximately 80% of our revenues. Our best selling point-to-point products
are our Link CX and Link EX and our best selling point-to-multipoint product is
our EtherAnt II.

High-Speed Point-to-Point Products

      Point-to-point systems are used to bridge networks from one location to
another ("Bridging") or carry data traffic from remote locations to a service
provider's core network ("Backhaul"). Each of our point-to-point systems
consists of identical piece(s) of equipment deployed at each end of the desired
link. Each piece of equipment is first connected to an end-user's network by a
cable and a connector and the radio unit and antennas are positioned to have
clear line of sight to each other, usually on a rooftop or tower. All of our
point-to-point products are designed for the radio unit to be deployed as close
to the antenna as possible to minimize cable cost and loss of the radio signal
and, several units are available with an integrated antenna as an option to
maximize efficiency and ease of installation. The two antennas are then aimed at
one another to create a wireless connection between the two locations. By using
multiple systems, an operator can connect more than two locations to form a more
extensive network. Our products offer a variety of transmission speeds and radio
frequencies. The table below summarizes the features of our current products:

<TABLE>
<CAPTION>
           ---------------------------------------------------------------------------------
                PRODUCT NAME                    DATA RATE                     FREQUENCY
                ------------                    ---------                     ---------

           ---------------------------------------------------------------------------------
<S>                                       <C>                            <C>
           BRIB (Bridge in a Box)         4 Mbps half duplex             2.4 GHz
                                                                         11 Channels
           ---------------------------------------------------------------------------------
           BAIB (Backhaul in a Box)       4 Mbps half duplex             5.8 GHz
                                                                         13 channels
           ---------------------------------------------------------------------------------
           EtherLeap                      4 Mbps half duplex             24 GHz
                                                                         13 channels
           ---------------------------------------------------------------------------------
           Link EX                        8 Mbps full duplex             UNII (5.2/5.7 GHz)
                                             (16 Mbps aggregate)         8 channels
           ---------------------------------------------------------------------------------
           Link 4X                        Four (4) E-1 circuits          UNII (5.2/5.7 GHz)
                                                                         8 channels
           ---------------------------------------------------------------------------------
           Link CX                        45 Mbps full                   5.3 GHz or 5.7 GHz
                                             duplex/DS3                  2 channels
           ---------------------------------------------------------------------------------
           FiberLeap                      OC-3, OC-12 or 1.25            60 GHz
                                             Gbps full duplex
           ---------------------------------------------------------------------------------
</TABLE>


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<PAGE>

      BRIB, BAIB and EtherLeap. These point-to-point products have the same
central radio technology inside them and differ only in the frequency at which
they operate. All units utilize direct sequence spread spectrum (DSSS)
technology for improved interference resistance. These units are designed to be
pole mounted with data and power carried along a single line of weatherized
cable allowing for quick and easy deployment. These products all share the same
feature-rich radio management and monitoring software interface.

      The BRIB has a line of sight range of about 3 miles (longer range versions
are available) and is an excellent low cost solution for low density deployments
or for an enterprise connecting two buildings. The BAIB has a line of site range
of up to 50 miles and is widely used as a backhaul solution by WISPs who are
using 2.4 GHz for their point-to-multipoint last mile distribution and need to
use a different frequency for backhaul. The EtherLeap has a range of about 1 to
3 miles and is used primarily by organizations seeking a higher level of
security or interference resistance or in extremely radio frequency hostile
environment where the other licensee-free frequencies are all occupied.

      Link EX/Link 4X. The Link EX consists of a pole-mounted radio that gets
power and data from a single weatherized cable. The Link EX offers 8 Mbps full
duplex connectivity with a line-of-sight range of up to 10 miles. Full duplex
operation means that data is passed in both directions at the same time. This is
important in latency sensitive applications such as voice or streaming video
applications. The Link 4X incorporates a Link EX with an indoor unit that
channelizes the Link EX's data stream into four (4) E-1 channels for easy
integration into phone systems based upon European telco transmission standards.
The Link EX or 4X is used primarily by carriers with small to mid-size backhaul
needs.

      Link CX. The Link CX is primarily deployed to enable service providers,
businesses and other enterprises to expand or establish private networks by
bridging Internet and network traffic among multiple facilities. In addition,
the Link CX is also used to provide fiber extension and last mile access. The CX
has a line of sight range of up to 25 miles and offers extremely feature rich
management and monitoring capabilities.

      FiberLeap(TM). The FiberLeap(TM) is a compact, easily deployed product
operating in the 60 GHz millimeter-wave band between 57 GHz and 64 GHz. It
enables fiberless transmission of data, voice and video communication at
variable fiber optic data rates from OC-3 (155 Mbps) to OC-12 (622 Mbps) and
Ethernet traffic at speeds up to 1.25 Gbps full duplex. It is engineered to
provide link distances from 600 meters to 1,100 meters with 99.99% availability,
depending upon prevailing rainfall rates in the geographic regions where it will
be used.

      A FiberLeap(TM) product consists of two units, an outdoor access unit
(ODU) and an indoor unit (IDU) that is an interface panel. The outdoor unit
contains the transmitter, receiver, antenna, and other electronics for one end
of a link. The outdoor unit is a self-contained unit connecting to the indoor
unit with a single cable that incorporates fiber optic as well as power cables.

Point-to-multipoint products

      Our point-to-multipoint systems are designed to enable service providers,
businesses and other enterprises to address the last mile bottleneck. Our
systems enable service providers to cost-effectively connect end-users to a
central hub. Businesses, governmental agencies and other enterprises may also
use these systems to cost-effectively connect multiple facilities within their
private networks. Our point-to-multipoint systems permit cumulative connectivity
of up to 4 Mbps from a single base unit and can support hundreds of customers
from a single location. These systems can operate over distances of 10 miles or
more providing for extremely large areas of coverage.


                                       9
<PAGE>

Since our point-to-multipoint systems require line of sight to connect, actual
coverage is dictated by the ability to achieve actual line of sight from the
base site to the end customer's antenna.

      Our point-to-multipoint system are typically deployed in a hub and spoke
configuration consisting of (1) a single central base station, generally called
a WIPOP (Wireless Point of Presence) and (2) customer premise equipment (CPE)
located at each end-user's location. The WIPOP wirelessly connects to the remote
CPE. The WIPOP offers high-speed two-way data communications to each end-user
using a technique called time division duplexing (TDD). The WIPOP can operate in
2.4 GHz or 5.8 GHz frequencies, in various geographic configurations and can be
divided in discrete sectors to permit supporting hundreds of clients from a
single base station. The WIPOP is able to connect to the central office of a
service provider using land line connectivity or our point-to-point technology.

      Our most popular CPE, our EtherAnt-II product, transmits and receives data
between the end-user and the WIPOP. The EtherAnt-II is extremely easy to install
and uses a single weatherized Category 5 Ethernet cable carrying both data and
power to the pole-mounted antenna with integrated radio. Our proprietary
software allows for remote management and monitoring of an unlimited number of
EtherAnt-IIs from a single location.

Sales and Marketing

      We sell our products domestically and internationally to service
providers, government agencies, businesses and other enterprises directly
through our sales force and indirectly through distributors and value-added
resellers. We focus our marketing efforts on supporting our direct sales force,
distributors, value-added resellers and systems integrators. We also seek to
stimulate market demand by increasing brand awareness and educating potential
customers about the advantages of using our products. We regularly hold wireless
training seminars to introduce our customers and potential customers to the
technologies and theories behind wireless data communications.

      We focus primarily on the domestic market but have recently increased our
efforts to improve sales outside of the United States. In the United States we
primarily sell directly through our internal sales force but also work with
value added resellers (VARs) and system integrators/installers. Overseas, we
currently sell directly but we are increasing our number of international
distributors and VARs and we expect that indirect channels will become an
increasingly large portion of our international sales.

Customer Service

      We are committed to providing our customers with high levels of service
and support. We provide training, technical assistance and customer support on
the installation, management, use and testing of our products. We also provide a
12-month warranty for our systems and offer both in-warranty and out-of-warranty
repair services. Our repair center is staffed with technicians who work directly
with our quality assurance team to identify potential problems and repair
equipment.

Customers

      We have a very diversified base of customers and end-users consisting of
service providers, government agencies, businesses and other enterprises.
Although we have several long-term contracts with some of our larger customers,
most of our business is conducted with customers who expect delivery very
quickly after placing their orders with us. Although our business is not
strongly seasonal, we generally see a higher level of activity in the second and
third quarter of each year as warmer weather in the Northern Hemisphere makes
outdoor installations of our equipment easier. We typically see a relative
decline in our business in the fourth quarter of each year, particularly in the
month of December.

      In 2003, approximately 74% of our business was conducted in the United
States and approximately 26% percent was conducted outside of the United States,
including Canada which accounted for approximately 9.6% of our total business.
No customer accounted for more than 10% of our business in 2003. Our two largest
customers Enterasys Networks, Inc. and Verizon Communications accounted for
approximately 9.2% and 8.1%, respectively, of our business in 2003.


                                       10
<PAGE>

      Our firm backlog as of December 31, 2003 was approximately $1,175,000
which compares to $745,000 and $657,000 on December 31, 2002 and 2001,
respectively.

Research and Development

      Our research and development efforts are focused on improving the
functionality and performance of our existing products as well as developing new
products to meet the changing needs of our diverse base of customers and
end-users. We devote a substantial portion of our resources to developing new
products, enhancing existing products, expanding and improving our core wireless
technologies and strengthening our technological expertise. We are currently
pursuing the following research and development initiatives:

      o     Developing point-to-multipoint systems in different frequencies and
            with lower price points;

      o     Adapting our products to additional frequencies and interfaces; and

      o     Developing higher speed products.

      We are currently developing additional point-to-multipoint products,
including products offering data rates up to 54 Mbps and 5.8 GHz
point-to-multipoint systems. In addition, we are currently developing a 24 GHz
version of our Link CX and a fast Ethernet version of our FiberLeap. These
products under development will be additional solutions for last mile access,
cellar backhaul and campus and private networks.

      We devote a substantial portion of our resources to developing new
products, enhancing existing products, expanding and improving our core wireless
technologies and strengthening our technological expertise. We invested
approximately $1.7 million, $0.4 million and $0.4 million in research and
development activities in 2003, 2002, and 2001, respectively.

Manufacturing

      We outsource much of our manufacturing to a variety of contract
manufacturers. We complete the final assembly and testing of our products at our
Falls Church, Virginia facility and to a lesser extent, our Sunnyvale,
California facility. Our in-house manufacturing consists primarily of pilot
production, final product assembly and product testing. We have complete
manufacturing capabilities in our South Deerfield, Massachusetts facility
including automated pick and place equipment which we utilize for quick turn
projects, small production runs and pilot products. Our strategy is to outsource
manufacturing and procurement of component parts to manufacturers with the
expertise and ability to achieve the cost reductions associated with volume
manufacturing and to respond quickly to orders, while maintaining our quality
standards. This allows us to focus our internal resources on developing new
products.

      We depend on single or limited source suppliers for several key components
used in our products. Several of these components have recently been
discontinued by their manufacturers, and as a result, we have been forced to
purchase large quantities of sub-components for these products. We believe that
our current inventory of discontinued subcomponents is adequate for the expected
volume of products to be produced in the future; however if the required volume
of products exceeds expectations, we may be forced to find replacement parts or
redesign the products, which may add significantly to our costs. The most
significant discontinued key component is a de-modulation chip that is integral
to our new broadband radio product. We are in the process of re-designing the
product to replace the old part with a current generation de-modulator. We
believe that our current inventory of this discontinued subcomponent is adequate
for the expected volume of products to be produced in the future while the
redesign is occurring. Conversely, if the actual volume of products is less than
expected, we may end up holding inventories of sub-components that will not have
any value to us. As of December 31, 2003, our inventory and commitments for
large quantities of discontinued parts was less than $75,000, which has been
adequately reserved.

      Our WLAN products are currently dependent on Agere System's ("Agere") WLAN
division as our primary sources for proprietary 802.11 chips, modules and cards.
In addition, our Link EX, Link 4X, RAN and Link CX products all incorporate one
or more single source components. If, for any reason, a supplier fails to meet
our quantity or quality requirements, or stops selling components to us or our
contract manufacturers at commercially reasonable prices, we could experience
significant production delays and cost increases, as well as higher warranty
expenses and product reputation problems. Because the key components and
assemblies of our products are complex, difficult to manufacture and require
long lead times, we may have difficulty finding alternative suppliers to produce
our components and assemblies on a timely basis. We have experienced shortages
of some of these


                                       11
<PAGE>

components in the past, which delayed related revenue, and we may experience
shortages in the future. In addition, because the majority of our products have
a short sales cycle of between 30 and 90 days, we may have difficulty in making
accurate and reliable forecasts of product needs. As a result, we could
experience shortages in supply, which could delay or decrease revenue because
our customers may cancel their orders or choose a competitor for their future
needs.

      We have limited manufacturing capability and limited experience in large
scale or foreign manufacturing. There can be no assurance that we will be able
to develop or contract for additional manufacturing capacity on acceptable terms
on a timely basis. In addition, in order to compete successfully, we will need
to achieve significant product cost reductions. Although we intend to achieve
cost reductions through engineering improvements, production economies, and
manufacturing at lower cost locations, including outside the United States,
there can be no assurance that we will be able to do so. In order to remain
competitive, we must continue to introduce new products and processes into our
manufacturing environment, and there can be no assurance that any such new
products will not create obsolete inventories related to older products.

      We have been producing our Link CX and FiberLeap products for a relatively
short time. Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in developing industries,
particularly companies in relatively new and rapidly evolving markets. These
risks include:

      o     an evolving and unpredictable business model;

      o     uncertain acceptance of new products and services;

      o     competition; and

      o     challenges in managing growth.

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

Competition

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

      With our broadband products, we could be at a disadvantage to competitors,
particularly Alcatel, Business Networks AB, Alvarion (the result of the merger
of Breezecom and Floware), Ceragon Networks, Cisco Systems, Proxim and Stratex
Networks, which have broader distribution channels, brand recognition, extensive
patent portfolios and more diversified product lines. In addition, broadband
wireless access solutions compete with other high-speed solutions such as cable
modem technologies, satellite technologies, digital subscriber lines and fiber
optic cables. Many of these alternative technologies can take advantage of
existing installed infrastructure and have achieved significantly greater market
acceptance and penetration than broadband wireless access technologies. Other
factors that influence the choice between wireless and wire line products
include reliability and security, speed and volume capacity, cost effectiveness,
availability of sufficient frequencies and geographic suitability. We expect to
face increasing competitive pressures from both current and future technologies
in the broadband access market.

      We have extensive competition in our WLAN business, including without
limitation, Cisco (including LinkSys), D-Link, Enterasys Networks, Harris
Corporation, Intel Corporation, Intersil Corporation, Nokia Corporation, Proxim,
Symbol Technologies and 3Com Corporation. Additionally, numerous companies have
announced their intention to develop competing products in both the commercial
wireless and home networking markets, including several Asia-based companies
offering low-price IEEE 802.11a/b/g products. We could also face future
competition from companies that offer products which replace network adapters or
offer alternative


                                       12
<PAGE>

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

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

Intellectual Property

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

      In order to maintain the confidential nature of this technology, we have
chosen to protect it by generally limiting access to it, treating portions of it
as trade secrets and obtaining confidentiality or non-disclosure agreements from
persons who are given access to it. All of our employees have signed our
standard confidentiality agreement, which prohibits them from disclosing our
confidential information, technology developments and business practices, as
well as any confidential information entrusted to us by other parties.

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

Government Regulation

      Our products are subject to extensive telecommunications-based regulation
by the United States and foreign laws and international treaties.

      In the United States, we are subject to various Federal Communications
Commission, or FCC, rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio spectrum. Our
spread spectrum wireless products are certified for unlicensed operation in the
2.4 -- 2.4835 GHz, 5.15 -- 5.35 GHz, 5.725 -- 5.825 GHz, 24.05-24.25 GHz and
57.05-64 GHz frequency bands. Operation in these frequency bands is governed by
rules set forth in Part 15 of the FCC regulations. The Part 15 rules are
designed to minimize the probability of interference to other users of the
spectrum and, thus, accord Part 15 systems secondary status in the frequency. In
the event that there is interference between a primary user and a Part 15 user,
a higher priority user can require the Part 15 user to curtail transmissions
that create interference. In this regard, if users of our products experience
excessive interference from primary users, market acceptance of our products
could be adversely affected, which could materially and adversely affect our
business and operating results. The FCC, however, has established certain
standards that create an irrefutable presumption of noninterference for Part 15
users and we believe that our products comply with such requirements. There can
be no assurance that the occurrence of regulatory changes, including changes in
the allocation of available frequency spectrum, changes in the use of allocated
frequency spectrum, or modification to the standards establishing an irrefutable
presumption for unlicensed Part 15 users, would not significantly affect our
operations by rendering current products obsolete,


                                       13
<PAGE>

restricting the applications and markets served by our products or increasing
the opportunity for additional competition.

      Our products are also subject to regulatory requirements in international
markets and, therefore, we must monitor the development of spread spectrum and
other radio frequency regulations in certain countries that represent potential
markets for our products. We must conform our products to a variety of
regulatory requirements and protocols established to, among other things, avoid
interference among users of radio frequencies and to permit interconnection of
equipment. Each country has different regulations and a different regulatory
process. In order for our products to be used in some jurisdictions, regulatory
approval and, in some cases, specific country compliance testing and re-testing
may be required. In addition, domestic and international authorities continue to
regulate the allocation and auction of the radio frequency spectrum. These
regulations have a direct impact on us, because our licensed products can be
marketed only if permitted by suitable frequency allocations, auctions and
regulations. The implementation of these regulations may delay our end-users in
deploying their systems, which could, in turn, lead to delays in orders of our
products by our customers and end-users. The delays inherent in this regulatory
approval process may force us to reschedule, postpone or cancel the installation
of our products by our customers, which may result in significant reductions in
our sales.

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

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

      o     decrease the growth of the broadband wireless industry;

      o     hinder our ability to conduct business internationally;

      o     reduce our revenues;

      o     increase the costs and pricing of our products;

      o     increase our operating expenses; and

      o     expose us to significant liabilities.

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

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

Employees

      As of December 31, 2003, we had 98 employees, including 25 in
manufacturing, 31 in research and development, 24 in sales, marketing and
customer service and 18 in finance and administration. Since January 1, 2004 we
have terminated 16 people consisting of 2 in manufacturing, 10 in research and
development, 2 in sales, marketing and customer service, and 2 in finance and
administration. We are not a party to any collective bargaining agreement. We
believe that relations with our employees are good.


                                       14
<PAGE>

                                     PART II

Item 6. Selected Financial Data.

      The information set forth in this Item 6 has been revised to reflect the
restatements described in the Explanatory Note above. Apart from these
revisions, this information does not reflect events and developments subsequent
to December 31, 2003.

      The following selected historical consolidated financial data were derived
from YDI's historical financial statements. The financial statements for the
fiscal years ended December 31, 1999 and 2000 were audited by Reznick Fedder &
Silverman, independent accountants. The financial statements for the fiscal
years ended December 31, 2001 and 2002 were audited by Hoffman, Fitzgerald, &
Snyder, P.C., independent accountants. The financial statements for the fiscal
year ended December 31, 2003 were audited by BDO Seidman, LLP, independent
accountants. This information should be read in conjunction with YDI's
management discussion and analysis of financial condition and results of
operations and YDI's financial statements, including the related notes,
contained elsewhere in this form 10-K.

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                            --------------------------------------------------
                                                             1999       2000       2001       2002       2003
                                                            ------    -------    -------    -------    -------
                                                                (in thousands, except per share data)
<S>                                                         <C>       <C>        <C>        <C>        <C>
      Consolidated Statements of Operations Data:
         Revenue, net ...................................   $2,474    $13,046    $14,314    $20,304    $27,241
         Gross profit (loss) ............................    1,251      6,673      5,028      7,928     11,527
         Income (loss) from continuing operations .......      358      2,248        125        947        300
         Extraordinary item .............................       --         --         --         89      4,347
         Change in accounting ...........................       --         --         --        526         --
         Net income applicable to common stockholders ...      215      2,248        125      1,562      4,647
         Basic earnings per share from continuing
         operations .....................................     0.02       0.23       0.01       0.10       0.02
         Basic - Extraordinary gain .....................       --         --         --       0.01       0.35
         Basic - Change in accounting ...................       --         --         --       0.06         --
         Basic earnings per share .......................     0.02       0.23       0.01       0.17       0.37
         Diluted earnings per share from continuing
         operations .....................................     0.02       0.23       0.01       0.10       0.02
         Diluted - Extraordinary gain ...................       --         --         --       0.01       0.34
         Diluted - Change in accounting .................       --         --         --       0.06         --
         Diluted earnings per share .....................   $ 0.02    $  0.23    $  0.01    $  0.17    $  0.36
         Shares used in computing basic earnings
            per share(1) ................................    9,375      9,568      9,375      9,375     12,571
         Shares used in computing diluted
            earnings per share(1) .......................    9,375      9,568      9,375      9,375     12,841
</TABLE>

      (1)   Historical share count and related information in this Form 10-K has
            been revised to reflect the (a) 10,204.08 for 1 stock split
            implemented on September 26, 2002 and (b) net 1 for 4 reverse stock
            split implemented on July 9, 2003.

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                         --------------------------------------------------
                                                          1999       2000       2001       2002       2003
                                                         ------    -------    -------    -------    -------
                                                                          (in thousands)
<S>                                                      <C>       <C>        <C>        <C>        <C>
      Consolidated Balance Sheet Data:
         Cash and cash equivalents and short
            term investments .........................   $  340    $ 1,219    $ 1,133    $   939    $ 8,990
         Working capital .............................      569      2,793      2,111      2,946     12,577
         Total assets ................................      961      4,806      6,898      8,572     20,719
         Long-term obligations, less current
            portion ..................................       16         10      1,568      1,402      1,298
         Total stockholders' equity ..................   $  606    $ 2,870    $ 2,908    $ 4,508    $16,185
</TABLE>


                                       15
<PAGE>

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

      The Management's Discussion and Analysis of Financial Condition and
Results of Operations, or MD&A, set forth in this Item 7 has been revised to
reflect the restatements described in the Explanatory Note above, as well as to
incorporate certain conforming changes. Apart from these revisions, this MD&A
(including the safe harbor for forward-looking statements) does not reflect
events and developments subsequent to December 31, 2003.

Overview

      The financial results for the years ended December 31, 2003, 2002 and 2001
are presented in accordance with generally accepted accounting principles. We
are a designer and manufacturer of broadband wireless equipment and systems in
the licensed-free wireless products communications industry. These
point-to-point (PTP) and point-to-multipoint (PTM) systems are primarily used by
wireless operators to connect their base stations to other base stations and to
existing wire line networks. During 2002, we made a strategic decision to expand
our product suite to include high bandwidth PTP backhaul products that would
complement our 802.11(b) product offerings PTM. Therefore rather than design
such a product on our own, we purchased inventory of Link EX, Link 4X, and RAN
products and license rights to manufacture and sell these products. In line with
this decision, during March 2003 another opportunity became available to buy
inventory and license rights to manufacture and sell the Link CX which has even
higher bandwidth capabilities; thus giving us expanded sales growth within this
large product segment. Our PTP products primarily enable service providers,
businesses, and other enterprises to expand or establish private networks by
bridging data traffic among multiple facilities. In addition, we have developed
enhanced PTM systems that enable service providers, businesses, and other
enterprises to connect multiple facilities within a geographic area to a central
hub.

      On April 1, 2003, Telaxis Communications Corporation ("Telaxis") closed a
strategic combination transaction with Young Design, Inc., a privately-held
Virginia corporation ("Young Design"). In that transaction, Telaxis formed a
subsidiary that merged with and into Young Design and each outstanding share of
Young Design common stock was converted into the right to receive 2.5 shares of
Telaxis common stock. Telaxis was the continuing corporation, Telaxis
stockholders continued to hold Telaxis common stock following the transaction,
and Young Design became a wholly owned subsidiary of Telaxis. Telaxis also
started doing business as "YDI Wireless" following that combination.

      For accounting purposes, Young Design is treated as the acquirer since it
had voting control and majority representation on the Board of Directors after
the merger with Telaxis. In addition, it was the larger of the two entities and
had substantially greater operating revenue (Telaxis had virtually no revenue).
The financial statements presented are those of Young Design carried at
historical cost. The assets and liabilities of Telaxis had a fair value of $8.1
million as of April 1, 2003. The financial statements reflect the results of
operations of Telaxis from April 1, 2003. The cost of the acquisition consisted
of 4,177,078 shares of common stock and 695,976 options valued at $3.7 million
and acquisition costs of approximately $0.1 million. Accounting for the
transaction as a reverse merger resulted in an excess of net assets over book
value of $4.3 million. The valuation of the stock was based on the average
closing price for the five days preceding the acquisition.

      We continually invest in the development and introduction of wireless
products in the marketplace in an effort to provide customers with the best
price/performance ratio for license-free wireless communications. We believe
that our diverse and expanding customer base as well as our market and industry
experience makes us a strong competitor in the wireless communications market.
In addition, we are a very experienced designer of turnkey long distance
wireless systems for applications such as wireless Internet, wireless video,
wireless local area networks (LANs), wireless wide area networks (WANs), and
wireless virtual private networks (VPNs).

Critical Accounting Policies

      The preparation of our consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect: the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements; and the reported amounts of revenues and
expenses during the reporting periods. We are required to


                                       16
<PAGE>

make judgments and estimates about the effect of matters that are inherently
uncertain. Actual results could differ from our estimates. The most significant
areas involving our judgments and estimates are described below.

      Inventory Valuation

      Inventory is stated at the lower of cost or market, cost being determined
on a first-in, first-out basis. Provisions are made to reduce excess or obsolete
inventory to its estimated net realizable value. The process for evaluating the
value of excess and obsolete inventory often requires us to make subjective
judgments and estimates concerning future sales levels, quantities and prices at
which such inventory will be able to be sold in the normal course of business.
Accelerating the disposal process or incorrect estimates of future sales
potential may necessitate future adjustments to these provisions.

      Accounts Receivable Valuation

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

Result of Operations

Years Ended December 31, 2003 and 2002

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

                                                                Years Ended
                                                                December 31
                                                               --------------
                                                               2003      2002
                                                               ----      ----

            Sales .........................................     100%      100%
            Cost of sales .................................      58        61
                                                               ----      ----

            Gross profit ..................................      42        39
            Operating expenses
                Selling ...................................       8        12
                General and administrative ................      26        18
                Research and development ..................       6         2
                                                               ----      ----

                    Total operating expenses ..............      40        32
                                                               ----      ----

            Operating income ..............................       2         7
            Other income ..................................      --         1
            Income taxes ..................................      (1)       (4)

            Extraordinary gain and change in accounting ...      16         4
                                                               ----      ----

            Net Income ....................................      17%        8%
                                                               ====      ====

      Sales

      Sales for the year ended December 31, 2003 were $27.2 million as compared
to $20.3 million for the same period in 2002 for an increase of $6.9 million or
34%. The increase in sales is primarily due to the addition of two new large
customers, the introduction of new products and modification of our list prices
both upwards and downwards as market competition dictates. First, sales to
Enterasys resulted in about $2.5 million or 9.2% of revenue and sales to Verizon
resulted in about $2.2 million or 8.1% of revenue. Second, revenue for new
products amounted to just under $2.0 million or 7.4% of revenue. Finally, after
the modification of our list prices, as mentioned above, we realized an overall
increase in our revenue during 2003.

      Sales for 2004 and profitability will be impacted by the introduction of
our new "second generation" high bandwidth 5.8 GHz backhaul radio product with
DS-3 capacity (Link CX) and the addition of several more sales persons. We are
using the new products and additional personnel to improve penetration rates at
existing customers as well as attract new domestic customers and increasing our
focus into the international market. For the years


                                       17
<PAGE>

ending December 31, 2003 and 2002, international sales, excluding Canada, were
approximately 16% and 10%, respectively, of total sales. To enhance our
international sales presence, we intend to hire new personnel with international
experience and to have our products certified by in-country regulatory
authorities where we are focusing our efforts, such as those in the Asia
Pacific, Latin America, Europe, Middle East, and Africa.

      The challenges for 2004 will be to continue to expand our customer base to
replace any lost business through normal customer attrition and offset potential
declines in Verizon's and Enterasys' future orders. Finally, YDI's business
combination with Telaxis had no impact on our revenue in 2003 because Telaxis'
had virtually no revenue from its products in 2003 or 2002 due to lack of
customer demand. For 2004, we have not forecasted any significant revenue from
products designed by Telaxis.

      Cost of goods sold and gross profit

      Cost of goods sold and gross profit for the year ended December 31, 2003
were $15.7 million and $11.5 million, respectively. For the same period in 2002,
costs of goods sold and gross profit were $12.4 million and $7.9 million,
respectively. Gross profit, as a percentage of sales, for the years ended
December 31, 2003 and 2002 was 42% and 39%, respectively.

      In order of significance, during 2003, we introduced several new products
to the market and realized higher gross profit margins, the most significant
being our integrated two-channel "Hot Spot" access point product for the telco
market. This product resulted in a 0.6% improvement in our annual gross profit
from 2002. Other new product introductions, especially the Etherant-II, resulted
in an additional 1.0% improvement in our gross profit. Our modification of list
prices helped improve gross profit margin by an estimated 0.9%.

      Next, due to a large glut of excess inventory in the electronic component
industry, we were able to purchase large quantities of excess electronic
component parts in late 2000, 2001 and early 2002 at a significant discount. As
electronic component prices began to rebound in late 2002 and throughout 2003,
we were able to reduce our current year purchases as a result of our previous
purchases of surplus electronic parts, resulting in a 0.5% improvement of our
annual profit margin. The surplus parts previously purchased and discussed above
have been completely used during 2003.

      Even as we introduce new products to our customers in 2004, we believe
that our profit margins will be challenged because of the significant downward
pressure brought about by increased competition from the many new competitors
entering the wireless marketplace. Some competitors may use more favorable
pricing structures than us to try and gain immediate market share. We have seen
more examples of this behavior now than in past years. Maintaining our profit
margins continues to be one of our major goals. One of the best ways to maintain
profit margins is to have regular engineering design reviews of our high volume
products and implement any cost savings ideas or new designs that will help
reduce the cost to build our products. In addition, we are continually looking
for more cost effective contract manufacturers. When properly utilized, contract
manufacturers can bring significant production efficiencies by reducing labor
costs as well as material costs because of the large volumes of raw material
purchases larger contract manufacturers can negotiate. Finally, we will seek to
identify contract manufacturers who have "turnkey" manufacturing facilities
off-shore which can dramatically reduce our cost of goods sold and preserve our
gross profit margins. Despite these efforts, we may be unable to maintain our
margins in this highly competitive market.

      Sales and Marketing Expenses

      Selling and marketing expenses consist primarily of employee salaries and
associated costs for selling, marketing, and customer support. Selling and
marketing expenses decreased to $2.2 million for the year ended December 31,
2003 from $2.4 million for the year ended December 31, 2002, which is
approximately a $0.2 million or 8% decline. The relatively small decrease in
overall sales and marketing expenses is a combination of several offsetting
factors: (1) increased headcount of sales personnel to expand customer contacts,
(2) reduction of advertising, dues for professional associations and elimination
of attendance at trade shows which historically produced little in product sales
or company and brand awareness, and (3) establishment of a central travel
administrator position to ensure compliance with our travel and entertainment
guidelines. It is our goal to hire several more seasoned sales and marketing
personnel with both domestic as well as international experience in the wireless
market segment in 2004. Additionally, we are also looking to expand our
distributor channel during the fist half of 2004.


                                       18
<PAGE>

      General and Administrative Expenses

      General and administrative expenses consist primarily of employee
salaries, benefits and associated costs for information systems, finance, legal,
and administration of a public company. General and administrative expenses
increased to $7.1 million for the year ended December 31, 2003 from $3.6 million
for the year ended December 31, 2002 or 97%. The increase of approximately $3.5
million is made up of several significant expenses mostly attributable to Young
Design's business combination with Telaxis on April 1, 2003. In order of
magnitude are the following expense elements and their individual impact: (1)
salaries and fringes increased approximated $0.9 million, (2) Directors and
Officers insurance as well as property and casualty insurance increased
approximated $0.7 million, (3) additional rents, maintenance and utilities on
new facilities increased approximated $0.7 million, (4) professional, legal, and
accounting fees increased approximated $0.6 million, and (5) bad debt increased
approximately $0.3 million, but on significantly higher revenue. For 2003, bad
debt expense was 2.4% of revenue as compared to 1.8% for 2002. Management has
put in place procedures to monitor our expense categories to help reduce general
and administrative expenses for 2004.

      Research and Development Expenses

      Research and development expenses consist primarily of personnel salaries
and fringe benefits and related costs associated with our product development
efforts. These include costs for development of products and components, test
equipment and related facilities. Research and development expenses increased to
$1.7 million for the year ended December 31, 2003 from $0.4 million for the year
ended December 31, 2002, a $1.3 million increase or 325% year over year. The
increase in research and development from 2002 to 2003 was primarily
attributable to the addition of 17 research and development engineers amounting
to approximately $1.1 million, while the remainder was for the purchase of
additional prototype materials and other related support costs.

      Income Taxes

      Provision for income taxes for the year ended December 31, 2003 in the
amount of $0.3 million relates to (1) an increase in the valuation allowance
associated with the deferred tax assets of $0.4 million offset by (2) the tax
benefit from carrying back existing net operating losses to recover taxes
previously paid. As of December 31, 2003, we cannot accurately predict when
sufficient taxable income will be generated to justify recognition of deferred
tax assets without a valuation allowance. Provision for income taxes for the
year ended December 31, 2002 in the amount of $0.8 million relates to an
estimated effective tax rate of 42%.

      Extraordinary gain

      The extraordinary gain was due to the immediate recognition into income of
negative goodwill of $4.3 million related to the Telaxis combination in
accordance with SFAS No. 141.


                                       19
<PAGE>

Years Ended December 31, 2002 and 2001

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

                                                               Years Ended
                                                               December 31,
                                                              -------------
                                                              2002     2001
                                                              ----     ----

            Sales .........................................    100%     100%
            Cost of sales .................................     61       65
                                                              ----     ----

            Gross profit ..................................     39       35
            Operating expenses
                Selling ...................................     12       16
                General and administrative ................     18       17
                Research and development ..................      2        3
                                                              ----     ----

                    Total operating expenses ..............     32       36
                                                              ----     ----

            Operating income ..............................      7       (1)
            Other income ..................................      1        1
            Income taxes ..................................      4        1

            Extraordinary gain and change in accounting ...      4       --
                                                              ----     ----

            Net Income ....................................      8%       1%
                                                              ====     ====

      Sales

      Sales for the year ended December 31, 2002 were $20.3 million as compared
to $14.3 million for the same period in 2001 for an increase of $6.0 million or
42%. The increase in sales is attributed to a few significant factors; the
largest impact was from the addition of several new products. The most
significant new products were our first 5.3-5.8 GHz backhaul radio product (Link
EX) with high bandwidth capacity as well as the Link 4X which has four E-1
connectivity. Both of these products help complement our 802.11(b) product line
and fill a product void. These radio products and the peripheral equipment
required by these products helped us improve revenue year-to-year by over $2.0
million across our entire customer base. Also, the introduction of the new
backhaul product line helped us expand our market reach into the rural cellular
and rural local exchange carriers (LEC's). These new markets and related
customers allowed us to expand our revenue by nearly $0.8 million.

      In addition, during 2002 our two largest distributors increased their
purchases from us by nearly $2.0 million. There was a one-time purchase from the
Federal Aviation Administration (FAA) in the amount of $0.7 million. The
remainder of our revenue growth, $0.5 million, relates to the addition of other
new products and customers within our core Wireless Internet Service Provider
(WISP) customer base. We increased our international sales, excluding Canada,
from 5% to 10% during 2002 and emphasized letters of credit to minimize our
risks of collection.

      Cost of goods sold and gross profit

      Cost of goods sold and gross profit for the year ended December 31, 2002
were $12.4 million or 61% of revenues and $7.9 million or 39% of revenues,
respectively. For 2001, cost of goods sold and gross profit were $9.3 million or
65% of revenues and $5.0 million or 35% of revenues, respectively.

      During 2002, we enhanced our product margins by introducing new wireless
products, reducing the costs of our existing core products and changing our
manufacturing strategy to use more "turnkey" contract manufactures to build our
high volume products, rather than using "kitting" manufacturers as was the case
in 2001. A kitting manufacturer is a company that manufactures products using
raw materials supplied by us rather than purchasing the raw material for us. The
advantage of using "turnkey" contract manufacturer versus a "kitting" contract
manufacturer is the significant advantage of the turnkey's purchasing power for
component raw materials which accounted for as much as 90% of our total product
cost in 2002. This allowed us to improve our profit margins by 2.5%. Next, with
a large glut of excess inventory in the electronic component industry, we were
able to purchase large quantities of excess electronic component parts in late
2000, 2001 and early 2002 at a significant discount. As a result, we were able
to reduce our 2002 material purchases which were at higher prices, thus
resulting in a gross


                                       20
<PAGE>

margin improvement of 0.5% over the prior year. The remaining 1.0% increase in
year-over-year gross margin was attributable to our ongoing engineering design
review process for our existing products for implementation of cost reductions.

      Sales and Marketing Expenses

      Selling and marketing expenses consist primarily of employees' salaries
and associated costs for selling, marketing, and customer support. Selling and
marketing expenses remained unchanged at $2.4 million for the years ended
December 31, 2002 and 2001. While sales commissions increased by $0.2 million as
a result of increased sales, this was directly offset by a reduction in sales
headcount and related support costs amounting to $0.2 million.

      General and Administrative Expenses

      General and administrative expenses consist primarily of employee
salaries, benefits and associated costs for information systems, finance, legal,
and administration. General and administrative expenses increased to $3.6
million for the year ended December 31, 2002 from $2.4 million for the year
ended December 31, 2001 or 54%. The increase of $1.2 million is largely
attributable to our decision to expand our executive and senior management team
with the hiring of an experienced Chief Financial Officer, Director of
Operations, Director of Materials Control, Purchasing Manager and other critical
positions required to handle our growth. All other general and administrative
expenses were closely monitored, resulting in nearly no increase from 2001 to
2002.

      Research and Development Expenses

      Research and development expenses consist primarily of personnel and
related costs associated with our new product development efforts. These include
costs for development of products and components, test equipment and related
facilities. Research and development expenses remained unchanged for 2002 and
2001 at $0.4 million.

      Other Income

      The increase of $218,000 in other income from December 31, 2002 compared
to December 31, 2001 was primarily due to a $564,000 one-time gain from the
cancellation of a contract with a Japanese company which expired in August 2002.
This gain was offset for the most part by the loss incurred in writing off an
unconsolidated subsidiary that went out of business during 2002 and a reduction
in interest expense from year-to-year.

      Income Taxes

      The effective tax rate in 2002 was 42% compared to an income tax benefit
in 2001. The effective tax rate exceeded the statutory state and federal rates
of 38% due to the impact of certain non-taxable income and expense items. The
income tax benefit in 2001 relates to the recognition of deferred tax assets
based on the expectation of taxable income in 2002 (which did occur).

Liquidity and Capital Resources

      At December 31, 2003, we had cash and cash equivalents of $9.0 million.
For the year ended December 31, 2003, cash used by operations was $0.2 million.
We currently are meeting all of our working capital needs through internally
generated cash from operations. We do this through active cash management such
as matching our Days Payable Outstanding (DPO) with our Days Sales Outstanding
(DSO). Currently, both DPO and DSO are between 31 and 33 days. In addition,
approximately 25 - 30% of our sales are paid prior to shipment, by credit card,
wire transfer, or letter of credit, which increases cash flow and decreases
credit risk and bad debt expense. We see no immediate requirement over the next
twelve months for external financing to fund our day-to-day normal operations,
which includes sales and marketing, research and development and general and
administrative expenses on our core business.

      For the year ended December 31, 2003, cash provided by investing
activities was $6.7 million. The increase in cash relates primarily to the $7.4
million of cash from the Telaxis combination and $0.4 million in proceeds from
the sale of assets held for sale. This was offset by net purchases of securities
in the amount of $0.5 million and the purchase of intangibles in the amount of
$0.6 million.


                                       21
<PAGE>

      Cash provided by financing activities was $1.5 million for the year ended
December 31, 2003. We issued 500,000 shares of stock for net proceeds of $1.9
million in December 2003. It is anticipated that these funds will be used in
future strategic acquisitions as the wireless industry continues to consolidate.
In addition, current and former employees exercised stock options and accounted
for $0.2 million in proceeds. Net debt repayments accounted for a use of $0.6
million.

      Our long-term financing requirements depend upon our growth strategy,
which relates primarily to our desire to increase revenue both domestically as
well as internationally. One of the biggest obstacles to success is bringing new
products to the market in a timely fashion. The new products or product lines
may be designed and developed internally, but often it is more cost effective to
acquire product offerings from competitors to reduce the time to market factor.
Our current funding levels may have to be supplemented through our existing bank
line of credit ( $2 million), new bank debt financing, public debt or equity
offerings, or other means, depending upon our desired rate of future growth.

      In 2000, Telaxis accrued the remaining lease obligation for office space
in Texas when it determined it would not occupy the space. We reduce the accrued
liability as we make monthly lease payments. As December 31, 2003, the remaining
lease liability is $0.2 million.

      Debt, Covenant Compliance and Liquidity

      We have a $2.0 million line of credit with Bank of America. We have not
used this line of credit as of December 31, 2003. This line of credit is
collateralized by a $2.0 million Certificate of Deposit.

      We have the following contractual obligations and commercial commitments
as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                Payments due by period
                                             -----------------------------------------------------------
                                                        Less than       1 -3         4 - 5       After 5
                                              Total       1 year        years        years        years
                                             ------     ---------      ------       ------       -------
<S>                                          <C>          <C>          <C>          <C>          <C>
Line of credit .......................       $   --       $   --       $   --       $   --       $   --
                                             ======       ======       ======       ======       ======

<CAPTION>
                                                    Payments due by period (numbers in thousands)
                                             -----------------------------------------------------------
                                                        Less than       1 -3         4 - 5       After 5
                                              Total       1 year        years        years        years
                                             ------     ---------      ------       ------       -------
<S>                                          <C>          <C>          <C>          <C>          <C>
Operating leases - buildings .........       $3,133       $  624       $1,234       $  619       $  656
Notes payable ........................        1,406          108          342          228          728
Operating leases - equipment .........          105          105           --           --           --
Employment Contracts .................          689          689           --           --           --
                                             ------       ------       ------       ------       ------
Total contractual cash obligations ...       $5,333       $1,526       $1,576       $  847       $1,384
                                             ======       ======       ======       ======       ======
</TABLE>

      The above table includes the $1.4 million of principal for the Merry
Fields' mortgage and the lease payments from YDI to Merry Fields. The lease
payments are the source of cash for Merry Fields to repay the mortgage. The
mortgage is the responsibility of Merry Fields; however, we guarantee full
payment of this mortgage.

      Impact of Recently Issued Accounting Standards

      In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". The Interpretation states that a guarantor is required
to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The Company adopted the
Interpretation on December 31, 2002.

      In January 2003, the FASB issued FIN 46 "Consolidation of Variable
Interest Entities". The Interpretation addresses consolidation by business
enterprises of variable interest entities and provides guidance on the
identification of variable interest entities that are subject to consolidation
requirements by a business enterprise. A variable interest entity subject to
consolidation requirements is an entity that does not have sufficient equity at
risk


                                       22
<PAGE>

to finance its operations without additional support from third parties and the
equity investors in the entity lack certain characteristics of a controlling
financial interest as defined in the guidance. Currently the Company does not
believe that adoption of FIN 46 will have an impact on its financial statements.

      In April 2003, the FASB issued Statement No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." The Statement amends
Statement 133 for decisions made by the Derivatives Implementation Group, in
particular the meaning of an initial net investment, the meaning of underlying
and the characteristics of a derivative that contains financing components.
Currently, YDI has no derivative financial instruments and, therefore, believes
that adoption of the Statement will have no effect on its financial statements.

      In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." The
Statement requires that the issuer classify certain instruments as liabilities,
rather than equity, or so-called mezzanine equity. Currently, YDI has no
financial instruments that come under the scope of the Statement and, therefore,
believes that adoption of the new Statement will have no impact on its financial
statements.

Disclosures About Market Risk

      The following discusses our exposure to market risks related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are exposed to risks and
uncertainties, many of which are out of our control. Actual results could vary
materially as a result of a number of factors, including those discussed below
in "Safe Harbor for Forward-Looking Statements."

      As of December 31, 2003, we had cash and cash equivalents of $9.0 million.
All these funds are on deposit in short-term accounts with two national banking
organizations. Therefore, we do not perceive significant down side exposure
should interest rates go even lower. However, if interest rates were to
increase, we would expect to realize a corresponding benefit. The primary risk
to loss of principal is the fact that these balances are only insured by the
Federal Deposit Insurance Corporation up to $100,000 per bank. At December 31,
2003, the uninsured portion totaled approximately $8.8 million. We guarantee the
Merry Fields, LLC debt. The interest rate on the loan is fixed. Therefore
fluctuations in interest rates would not impact the financial statements.

      As of December 31, 2003, we have $2.0 million invested in Phazar common
stock. The carrying value of our investment is subject to fluctuation in the
market price. Market prices are subject to fluctuation and, consequently, the
amount realized in the subsequent sale of an investment may significantly differ
from the reported market value. Fluctuation in the market price of a security
may result from perceived changes in the underlying economic characteristics of
the investee, the relative price of alternative investments and general market
conditions. Furthermore, amounts realized in the sale of a particular security
may be affected by the relative quantity of the security being sold. As stated
in the notes to the financial statements, we have a definitive agreement to
merge with Phazar. The carrying value of the investment may be adversely
affected should the merger not be completed. However, fluctuation in the market
price of Phazar will not impact the operations of the Company.

      In the past three years, all sales to international customers were
denominated in United States dollars and, accordingly, we were not exposed to
foreign currency exchange rate risks.

Safe Harbor for Forward-Looking Statements

      General Overview

      This Annual Report on Form 10-K contains forward-looking statements as
defined by federal securities laws which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, intentions, projections, developments, future
events, performance or products, underlying assumptions and other statements
which are other than statements of historical facts. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expects," "intends," "plans," "anticipates," "contemplates,"
"believes," "estimates," "predicts," "projects," and other similar terminology
or the negative of these terms. From time to time, we may publish or otherwise
make available forward-looking statements of this nature. All such
forward-looking statements, whether written or oral, and whether made by us or
on our behalf, are expressly qualified by the cautionary statements described in
this Form 10-K, including those set forth below, and


                                       23
<PAGE>

any other cautionary statements which may accompany the forward-looking
statements. In addition, we undertake no obligation to update or revise any
forward-looking statement to reflect events, circumstances, or new information
after the date of this Form 10-K or to reflect the occurrence of unanticipated
or any other subsequent events, and we disclaim any such obligation.

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

      Cautionary Statements

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

      Cautionary Statements relating to Contemplated Merger with Phazar

o     Our contemplated merger with Phazar may not be completed due to the
      conditions to completion set forth in the merger agreement. On October 30,
      2003, we announced a definitive merger agreement to acquire Phazar Corp.
      There can be no assurance whatsoever that this acquisition or any other
      combination transaction between us and Phazar will be consummated.
      Completion of this merger is subject to a number of conditions set forth
      in the merger agreement, including:

      o     obtaining the approval of Phazar's stockholders,

      o     having the registration statement relating to the shares we would
            issue in the merger to the Phazar stockholders declared effective by
            the Securities and Exchange Commission,

      o     obtaining all necessary state "blue sky" law and other approvals,
            waivers, consents, or exemptions,

      o     having less than 10% of Phazar's stockholders able to exercise
            dissenters' rights after the Phazar stockholders meeting,

      o     continued accuracy of the representations and warranties contained
            in the merger agreement, and

      o     there being no material adverse change to the properties, assets,
            financial condition, or results of operations of us or Phazar.

      There can be no assurance that these conditions to closing will be
      satisfied. If the conditions are not satisfied and/or waived, the merger
      will not occur or will be delayed and we may lose some or all of the
      intended benefits of the merger.

o     We and Phazar may waive one or more of the conditions to the merger
      without resoliciting stockholder approval for the merger. Each of the
      conditions to our and Phazar's obligations to complete the merger may be
      waived, in whole or in part, to the extent permitted by applicable law, by
      us and Phazar. If the board of directors of Phazar determines a waiver is
      not sufficiently material to warrant resolicitation of the Phazar
      stockholders, they will have the discretion to complete the merger without
      seeking further stockholder approval.

o     Our contemplated merger with Phazar may be terminated due to lack of
      completion within the time period set forth in the merger agreement. Our
      merger agreement with Phazar provides that either we or Phazar can
      terminate that agreement without penalty if the merger is not completed by
      April 1, 2004 (so long as the terminating party has not breached the
      agreement). There can be no assurance that we will be


                                       24
<PAGE>

      able to complete the merger by April 1, 2004. As a result, either party
      may be able to terminate the agreement on and after April 2, 2004. If the
      merger agreement is terminated, the merger would not occur and we would
      lose the intended benefits of the merger.

o     Failure to complete the merger with Phazar could cause our stock price to
      decline. If the merger is not completed for any reason, our stock price
      may decline. For example, our stock price could decline because the
      current market price may reflect a market assumption that the merger will
      be completed and the profitable Phazar operations will be added to our
      current operations. As another example, the stock price could decline
      because the failure of this merger to close could cast doubt on our
      ability to execute on our stated strategy of growing our business by
      selected acquisitions and business combinations.

o     Sales of our products could be inhibited if the pending merger with Phazar
      disrupts customer or partner relationships. The pending merger may have
      the effect of disrupting customer or partner relationships. Our customers
      or potential customers may delay or alter their buying patterns during the
      pendency of, and following, the merger. By increasing the breadth of our
      business, the merger may make it more difficult for us to enter into
      relationships with customers and strategic partners, some of whom may view
      the combined company as a more direct competitor than us as a stand-alone
      company. Any significant delay or reduction in orders for our products
      could cause sales of our products to decline.

o     We may not realize the intended benefits of the merger with Phazar, which
      may have a material adverse effect on our business and financial
      condition. The combined company will need to overcome significant
      challenges in order to realize any benefits or synergies from the merger,
      including integrating the operations of the two companies, retaining
      existing customers of both companies and attracting additional customers,
      retaining strategic partners of each company and attracting new strategic
      partners, and creating uniform standards, controls, procedures, policies,
      and information systems. These processes may be difficult, unpredictable,
      and costly.

      For example, our headquarters location in Falls Church, Virginia and
      Phazar's location in Mineral Wells, Texas could make it harder to
      integrate the companies given the geographic distance between the
      facilities and possible cultural differences in the different parts of the
      country. This geographic separation may also make it harder to efficiently
      achieve the desired use of Phazar's facilities for manufacturing,
      servicing, and supporting our current products and customers. Further, the
      two companies currently use different internal financial accounting
      systems which may be difficult to integrate. Also, the Phazar sales
      personnel are used to selling to primarily governmental buyers while our
      sales personnel are used to selling to primarily commercial buyers. It may
      be difficult to integrate these different sales styles and approaches and
      to achieve sales synergies from combining the companies. Our products and
      Phazar's products generally address different segments of the wireless
      communications market and may require different skills and capabilities
      for marketing, sales, and customer support. As a result, the combined
      company may not realize significant benefits from combining the product
      lines. There can be no assurance that we would be able to sell our current
      products to Phazar's current customers or vice versa. There may also be
      adverse impacts on the existing sales forces' abilities to sell their
      existing products.

      The combined company may not succeed in addressing these risks or any
      other problems encountered in connection with the merger. If we cannot
      successfully integrate the companies' operations, products, and personnel,
      we may not realize the expected benefits of the merger, which could
      adversely affect the combined company's business and financial condition.

o     Integrating our operations with Phazar's may divert management's attention
      away from the day-to-day operations of the combined company. Integration
      of our operations, products, and personnel may place a significant burden
      on management and the internal resources of the combined company. For
      example, our headquarters are located in Falls Church, Virginia while
      Phazar is located in Mineral Wells, Texas. This geographic separation
      means that our management may have to spend more time traveling. Also, our
      management and other personnel will need to spend time reconciling the
      different employee benefits that we and Phazar offer to our employees and
      possible cultural differences. Further, we will need to integrate
      financial reporting systems, inventory systems, quality systems, and
      ordering procedures, among other items, or enable the continued separate
      operation of some or all of these functions. The diversion of management's
      time and attention and any difficulties encountered in the transition and
      integration process could harm the combined company's business.


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<PAGE>

o     The merger with Phazar may cause us to lose key employees, which could
      diminish the benefits of the transaction to us. To be successful and
      achieve the intended benefits of the merger, we must retain, assimilate,
      and motivate executives and other key employees, including those in
      managerial, technical, sales, and marketing. We expect to need the skills
      of Phazar employees to continue to sell, manufacture, and support the
      Phazar products, which are different from our current products. Also, the
      typical Phazar customers are governmental, a type of customer with which
      we have little experience. We would like to benefit from the experience
      and relationships that the Phazar sales personnel have developed in
      working with this type of customer. Some employees may find that the total
      or specific benefits offered to them by the combined company are less than
      they previously enjoyed. Employee retention may also be challenging after
      the merger due to possible cultural conflicts between the companies and
      because employees of us and Phazar will likely experience uncertainty
      about their future role with the combined company until strategies with
      regard to the combined company are announced or executed. As a result of
      these factors, employees may not remain with the combined company. If a
      significant number of employees depart, the company's business will
      suffer.

o     The merger with Phazar will result in significant costs, whether or not it
      is completed. Our transaction costs for the merger are estimated at
      approximately $120,000. These costs are expected to consist primarily of
      fees for attorneys, accountants, and financial printers, as well as filing
      fees and mailing costs. Most of these costs will be incurred whether or
      not the merger is completed. In addition, if the merger agreement is
      terminated under specified circumstances relating to superior acquisition
      proposals, either party may be obligated to pay a $300,000 termination
      fee.

o     The market price of our common stock may decline as a result of the merger
      with Phazar. The market price of our common stock after the merger with
      Phazar may decline as a result of the merger for a number of reasons,
      including the combined company being an unprofitable combination of two
      formerly profitable companies, the combined company having more stock in
      its public float than the current limited amount in our public float, our
      inability to address the integration challenges described above in a
      timely and efficient manner, and if we do not achieve the intended or
      perceived benefits of the merger, including those that we have discussed
      publicly such as broader product offerings, customer diversification, and
      broader operating capabilities, as rapidly or to the extent anticipated by
      financial analysts, industry analysts, or investors.

      Cautionary Statements relating to Our Business and Operations

o     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.
      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.

o     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. Consummation of the
      proposed settlement is conditioned upon, among other things, negotiating,
      executing, and filing with the court final settlement documents and final
      approval by the court. Given the number of


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<PAGE>

      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.

o     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. 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 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.

o     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
      declined. Telecommunication equipment markets specifically have
      experienced a severe downturn. This downturn has resulted in our customers
      having less capital available from capital markets, and less willingness
      to spend internal capital, to purchase equipments such as ours. As a
      result, potential customers may be less willing to spend their limited
      budgets on products from us, a relatively small, young company that may
      not survive the economic downturn. Because we do not have the financial
      resources or name recognition of larger companies, this downturn may
      adversely affect the growth and stability of our business and our
      financial condition and results of operations.

o     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.

o     Given the relatively small size of many 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. Many
      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.

o     The WLAN 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 in a portion of the
      telecommunications equipment industry generally referred to as WLAN.
      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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<PAGE>

o     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 Proxim, Alvarion, Cisco, Alcatel, Stratex Networks, Ceragon,
      Nokia, Samsung, and Harris Corporation. Additionally, our FiberLeapTM
      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.

o     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. Most 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 not significant barriers to entry into
      a number of markets we serve. This lack of 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 Vivato, Trapeze, Colubris Networks, and Trango
      Broadband.

o     We may experience difficulty in distinguishing our products from other
      WLAN products which may reduce our sales and gross margins. We believe
      that some products in the Wi-Fi 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 operating range of 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, 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.

o     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 products in our WLAN 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.

o     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 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.

o     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, the majority of products we sell are based on the IEEE
      802.11b standard. We believe products are being developed based on the
      IEEE 802.11a/b/g and 802.16 standards which may have advantages over
      products based on the IEEE 802.11b products, such as greater data
      transmission capabilities and longer range.


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o     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.

o     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.

o     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.

o     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.

o     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.

o     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.

o     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 the combination of Telaxis
      and Young Design in April


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      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.

o     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.
      However, the combined company's balance sheet at the end of the second
      quarter 2003 was stronger given the addition of the Telaxis assets. 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.

o     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, we generally have a very
      short time between receiving an order and shipping the order. Very 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.

o     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 a large order that was fulfilled in the third quarter
      of 2003 that contributed positively to the financial results of that
      quarter. We expect that at times we will 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.

o     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. In the
      third and fourth quarters of 2003, we were 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
      the fourth quarter of 2003 and may have a negative impact on our revenue
      and financial results for the first quarter of 2004. 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.

o     We cannot predict whether we will continue as a profitable company, which
      could adversely affect our ability to continue as a going concern and our
      stock price. We announced profitable financial results for our two most
      recently completed financial quarters. However, we may not be profitable
      in the future. Our revenue declined substantially in the fourth quarter of
      2003 from our revenue in the third quarter of 2003. We have made no
      predictions concerning our future profitability or lack of profitability.
      Our failure to maintain profitability may affect our ability to continue
      as a going concern and cause the market price of our stock to decline or
      prevent it from rising.

o     Our business depends 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.

o     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


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<PAGE>

      personnel, many of who would be difficult to replace. 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. To date, we generally have not
      experienced significant difficulty in attracting and retaining qualified
      personnel, but there can be no assurance we will not experience difficulty
      in the future.

o     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.

o     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 were to
      become unable to perform his responsibilities due to illness, injury,
      termination of service, or other reasons. Loss of the services of our
      Chief Executive Officer 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 due to
      uncertainty and responsibility transition issues.

o     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 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.

o     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.

o     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. For example, in
      the third and fourth quarters of 2003, we were unable to obtain sufficient
      components to manufacture certain of our products. 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.

o     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.

o     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


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      alternative sources, a significant amount of time could be required to
      receive an adequate flow of components from the alternative source.

o     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.

o     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.

o     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
      inventory 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.
      To date, we do not believe that we have materially over-estimated or
      under-estimated our inventory requirements.

o     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.

o     Difficulties in reducing our operating expenses could harm our results of
      operations. A material portion of our operating expenses is fixed. For
      example, approximately $1.1 million of our $2.7 million in operating
      expenses in the fourth quarter of 2003 (approximately 40%) were fixed
      expenses. We expect this percentage to increase in 2004. 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.

o     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.

o     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


                                       32
<PAGE>

      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.

o     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.

o     Our international business activities expose us to a number of risks not
      present in our United States operations, which we have little experience
      addressing. Our international business activities may carry additional
      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 little 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.

o     Because of international sales and operations, we may be exposed to
      currency risk that could adversely affect our financial condition and
      results of operations. Some of our sales to date have been made to
      customers located outside the United States, and we expect that some of
      our future sales will continue to be 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.

o     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.

o     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 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.

o     Governmental regulation affecting markets in which we compete or products
      we make could adversely affect our business and results of operations.
      Radio communications 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 and incur substantial costs to bring our products into
      compliance.


                                       33
<PAGE>

o     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.

o     Changes in governmental regulation could adversely affect our competitive
      position. Governmental laws and regulations applicable to our products
      evolve and change frequently. These changes could hurt our competitive
      position. For example, a point we often use in marketing our 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 recently proposed
      regulations that would 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. This could
      adversely affect our competitive position.

o     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.

o     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, 2003, no one customer accounted for
      more than 10% of our sales. However, we did have a number of substantial
      customers. 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.

o     Our failure or inability to protect our intellectual property could
      adversely affect our business and operations, particularly in our 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 this business, which in general has lower barriers to
      entry than other businesses.

o     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. 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.

o     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.


                                       34
<PAGE>

o     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. Any
      litigation could result in substantial cost and divert the attention of
      our management, which could harm our operating results and future
      operations.

o     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 generally do not protect much of our intellectual property. 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.

o     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.

      Risks Relating to Capital Markets and Our Stock

o     Our common stock is currently traded on the OTC Bulletin Board, which may
      provide lower liquidity and depress or hinder the price increase of our
      stock. Our common stock is currently quoted for trading on the OTC
      Bulletin Board of the National Association of Securities Dealers, Inc.
      This market for our common stock may be a less liquid market for existing
      and potential stockholders to trade shares of stock than other markets.
      Companies, such as us, whose stock is traded on this market may be
      perceived as less attractive simply because they are traded on this
      market. For example, some investors, including institutional investors,
      may have investment guidelines that prohibit investing in common stock
      traded on the OTC Bulletin Board. These factors relating to the OTC
      Bulletin Board could have an adverse affect on the trading price of our
      stock.

o     Because our common stock is traded on the OTC Bulletin Board, the penny
      stock rules could reduce trading in our stock and depress or hinder the
      price increase of our stock. SEC regulations generally define a "penny
      stock" to be any equity security that has a market price or exercise price
      of less than $5.00 per share. Shares listed on the Nasdaq National Market,
      the Nasdaq SmallCap Market, or a national exchange are excluded from this
      definition. For transactions covered by these rules, broker-dealers must
      make a special suitability determination for the purchase of the
      securities and must have received the purchaser's written consent to the
      transaction prior to the purchase. Additionally, for any transaction
      involving a penny stock, the rules generally require the delivery, prior
      to the transaction, of a risk disclosure document mandated by the SEC
      relating to the penny stock market. The broker-dealer is also subject to
      additional sales practice requirements. Consequently, the penny stock
      rules may restrict the ability and desire of broker-dealers to sell our
      common stock and may affect the ability of holders to sell our common
      stock in the secondary market and the price at which a holder can sell our
      common stock.

o     Our application to have our common stock traded on the Nasdaq SmallCap
      Market may not be approved, which could cause our stock price to decline.
      We have applied to have our common stock listed for trading on the Nasdaq
      SmallCap Market. While we believe we meet the criteria for that listing,
      there can be no assurance that our listing application will be approved or
      that our stock will begin trading


                                       35
<PAGE>

      on the Nasdaq SmallCap Market. The price of our common stock could decline
      if our application is not approved as the current price may reflect
      investors' expectations that our application will be approved.

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

      o     Our financial performance and results

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

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

      o     Announcements by our customers

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

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

      o     The announcement of our filing an application to list our common
            stock on the Nasdaq SmallCap Market

      o     The introduction of new products by us

      o     The financial performance of our competitors

      o     The introduction of new products by our competitors

      o     General conditions of the financial markets

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

o     Over a majority of our common stock is owned by two persons, which reduces
      the influence of our other stockholders and could adversely affect our
      stock price. Two persons, Concorde Equity, LLC and Michael F. Young,
      currently own over 60% of our outstanding common stock. Concorde Equity is
      an investment company controlled by Robert E. Fitzgerald, a board member
      and our Chief Executive Officer. Mr. Young is a board member and our
      President and Chief Technical Officer. This majority ownership means that,
      as a matter of Delaware corporate law, Concorde Equity and Mr. Young
      generally will be able to approve or reject actions and proposals on
      behalf of our stockholders regardless of how any other stockholder votes.
      Concorde Equity and Mr. Young could act either by vote at a meeting or by
      written consent delivered to us, subject to compliance with applicable
      securities regulations. For example, this majority ownership means that
      Messrs. Fitzgerald and Young, acting together without any other
      stockholder, could approve or reject most offers to acquire us. Another
      example is that Messrs. Fitzgerald and Young, acting together without any
      other stockholder, could elect or reject each member of our board of
      directors. Therefore, our other stockholders will have a limited ability
      to affect or influence decisions made by our stockholders. This majority
      control and actions taken by the two holders of majority control could
      result in a lower stock price than if our common stock was widely held
      without any significant holders.

o     Registration of the restricted stock held by our two major stockholders
      could cause our stock price to fall. Two stockholders, Concorde Equity and
      Mr. Young, owned 5,165,817 and 4,209,183, respectively, shares of our
      common stock on February 13, 2004, which together constituted
      approximately 66% of our outstanding common stock on that date. Concorde
      Equity and Mr. Young 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 substantial
      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 will
      enable this stock to be sold with much less restriction. This registration
      and potential sale of large amounts of our common stock could cause our
      stock price to fall or prevent it from increasing.

o     Future actual or potential stock sales by our two major stockholders could
      cause our stock price to fall. Two stockholders, Concorde Equity and Mr.
      Young, owned approximately 66% of our outstanding common stock on February
      13, 2004. Actual or potential sales of this stock by Concorde Equity and
      Mr. Young could cause our stock price to fall or prevent it from
      increasing for numerous reasons. For example, a substantial amount of our
      common stock becoming available (or being perceived to become available)
      for sale in the public market could cause the market price of our common
      stock to fall or prevent it from increasing, particularly given the
      relatively low trading volumes of our stock. Also, actual or potential


                                       36
<PAGE>

      sales by these two stockholders could be viewed negatively by other
      investors because the two major stockholders are our senior executives or
      controlled by one of our senior executives.

o     Future actual or potential sales of the stock we privately issued in
      December 2003 could cause our stock price to fall. On December 8, 2003, we
      issued 500,000 shares of our common stock in a private placement to a
      single accredited investor. We also agreed to file a registration
      statement covering those shares with the SEC no later than the earlier of
      March 8, 2004 or thirty days after our common stock begins trading on the
      Nasdaq SmallCap Market or the Nasdaq National Market. There can be no
      assurance as to when or if our common stock will begin trading on the
      Nasdaq SmallCap Market or the Nasdaq National Market. This registration,
      or the anticipation of this registration, could cause our stock price to
      fall or prevent it from increasing. Also, 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.

o     Future actual or potential sales of the stock we privately issued prior to
      the initial public offering of our common stock in February 2000 could
      cause our stock price to fall. We believe that a number of our pre-IPO
      stockholders continue to hold their shares, and those stockholders may
      decide to sell their 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.

o     Future actual or potential sales of the stock we issue upon exercise of
      stock options could cause our stock price to fall. As of February 13,
      2004, we had options outstanding to buy approximately 893,654 shares of
      our common stock and may grant options or other stock grants relating to
      an additional approximately 442,299 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.

o     Future actual or potential sales of the stock we issue upon exercise of
      stock warrants could cause our stock price to fall. On February 13, 2004,
      we had warrants outstanding to purchase approximately 389,626 shares of
      our common stock at a purchase price of $2.08 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.

o     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.
      The last sale price of our common stock on the OTC Bulletin Board on
      December 8, 2003 was $4.75 per share.

o     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.


                                       37
<PAGE>

o     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
      Phazar 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, and financial condition and cause
      our stock price to decline.

o     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 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.

      Possible Implications of Cautionary Statements

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

Item 8. Financial Statements and Supplementary Data.

      The information set forth in this Item 8 has been revised to reflect the
restatements described in the Explanatory Note above. Apart from these
revisions, this information does not reflect events and developments subsequent
to December 31, 2003.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
Independent Auditors' Reports ............................................   39
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets ..............................................   41
Consolidated Statements of Operations ....................................   42
Consolidated Statement of Changes in Stockholders' Equity ................   43
Consolidated Statements of Cash Flows ....................................   44
Notes to Consolidated Financial Statements ...............................   45
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts ..........................   63


                                       38
<PAGE>

INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS
YDI Wireless, Inc. and Subsidiaries
Falls Church, Virginia

We have audited the accompanying consolidated balance sheet of YDI Wireless,
Inc. and subsidiaries, (the "Company") as of December 31, 2003, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of YDI Wireless, Inc.
and subsidiaries as of December 31, 2003 and the results of their operations and
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

As more fully described in Note 19, the Company has restated its financial
statements to adjust the accounting for the reverse acquisition with Telaxis
Communications Corporation.


/s/ BDO Seidman, LLP

Bethesda, Maryland
January 23, 2004 (Except for Note 19, as to which the date is March 16, 2004)


                                       39
<PAGE>

INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS
   YDI WIRELESS, INC. AND SUBSIDIARIES (formerly YOUNG DESIGN, INC. AND
   SUBSIDIARIES)
      Falls Church, Virginia

We have audited the accompanying consolidated balance sheets of YDI WIRELESS,
INC. AND SUBSIDIARIES (formerly YOUNG DESIGN, INC. AND SUBSIDIARIES), (the
"Company") as of December 31, 2002 and 2001, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. We also have audited the related financial statement Schedule
II for the years ended December 31, 2002 and 2001. These consolidated financial
statements and financial statement Schedule II are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement Schedule II based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of YDI WIRELESS, INC.
AND SUBSIDIARIES (formerly YOUNG DESIGN, INC. AND SUBSIDIARIES) as of December
31, 2002 and 2001 and the results of its operations and cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement
Schedule II for the years ended December 31, 2002 and 2001, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

As described in Note 2 to the financial statements, during 2002 the Company
changed its method of accounting for the excess of acquired net assets over
cost.


/s/ Hoffman, Fitzgerald and Snyder, P.C.

McLean, Virginia
February 10, 2003
(July 9, 2003 as to Note 2)


                                       40
<PAGE>

                               YDI WIRELESS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                            YDI              Young
                                                                                       Wireless, Inc.     Design, Inc.
                                                                                       --------------     ------------
                                                                                                 December 31,
                                                                                       -------------------------------
                                                                                             2003             2002
                                                                                           -------          -------
<S>                                                                                        <C>              <C>
Assets
Current assets:
   Cash and cash equivalents ........................................................      $ 8,990          $   939
   Accounts receivable, net .........................................................        2,511            1,686
   Refundable income taxes ..........................................................          226               --
   Inventory ........................................................................        3,134            2,386
   Investment securities - trading ..................................................           --                4
   Deferred tax asset ...............................................................           --              142
   Assets held for sale .............................................................          790               --
   Prepaid expenses .................................................................          162              451
                                                                                           -------          -------

        Total current assets ........................................................       15,813            5,608

Property and equipment, net .........................................................        1,747            1,823

Other Assets:
   Investment in unconsolidated subsidiaries ........................................           --               36
   Investment securities - available-for-sale .......................................        2,627              841
   Intangible assets, net ...........................................................          483                9
   Deferred tax asset ...............................................................           --              245
   Deposits .........................................................................           49               10
                                                                                           -------          -------

        Total other assets ..........................................................        3,159            1,141
                                                                                           -------          -------

        Total assets ................................................................      $20,719          $ 8,572
                                                                                           =======          =======

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable and accrued expenses ............................................      $ 3,023          $ 2,158
   Current maturities of notes payable ..............................................          213              495
   Current deposit - non-refundable .................................................           --                9
                                                                                           -------          -------

        Total current liabilities ...................................................        3,236            2,662

Notes payable, net of current maturities ............................................        1,298            1,402
                                                                                           -------          -------

        Total liabilities ...........................................................        4,534            4,064

Commitments and contingencies .......................................................           --               --

Stockholders' Equity
   Preferred stock, $0.01 par value; authorized 4,500,000, none issued at
     December 31, 2003; none authorized, none issued at December 31, 2002 ...........           --               --
   Common stock, $0.01 par value, 100,000,000 shares authorized, 14,179,882 and
     9,375,000 issued and outstanding at December 31, 2003 and 2002, respectively ...          142               94
   Additional paid-in capital .......................................................        6,173              357
   Retained earnings ................................................................        8,673            4,066
   Accumulated other comprehensive income:
     Net unrealized gain/(loss) on available-for-sale securities ....................        1,197               (9)
                                                                                           -------          -------

        Total stockholders' equity ..................................................       16,185            4,508
                                                                                           -------          -------

        Total liabilities and stockholders' equity ..................................      $20,719          $ 8,572
                                                                                           =======          =======
</TABLE>

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


                                       41
<PAGE>

                               YDI WIRELESS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                           YDI Wireless,        Young Design,        Young Design,
                                                                                Inc.                 Inc.                 Inc.
                                                                           -------------        -------------        -------------
                                                                                                December 31,
                                                                           ------------------------------------------------------
                                                                               2003                 2002                 2001
                                                                           ------------         ------------         ------------
<S>                                                                        <C>                  <C>                  <C>
Revenues .............................................................     $     27,241         $     20,304         $     14,314

Cost of goods sold ...................................................           15,714               12,376                9,286
                                                                           ------------         ------------         ------------

    Gross profit .....................................................           11,527                7,928                5,028

Operating expenses:
    Selling costs ....................................................            2,204                2,366                2,322
    General and administrative .......................................            7,090                3,640                2,365
    Research and development .........................................            1,704                  424                  371
                                                                           ------------         ------------         ------------

        Total operating expenses .....................................           10,998                6,430                5,058
                                                                           ------------         ------------         ------------

Operating income (loss) ..............................................              529                1,498                  (30)

Other income (expenses):
    Interest income ..................................................              128                   22                   56
    Interest expense .................................................             (149)                (131)                (173)
    Equity method loss from unconsolidated subsidiaries ..............               --                 (181)                 (44)
    Contract cancellation income .....................................               --                  564                   --
    Other income (expenses) ..........................................               53                  (10)                 207
                                                                           ------------         ------------         ------------

        Total other income (expenses) ................................               32                  264                   46
                                                                           ------------         ------------         ------------

Income before income taxes, extraordinary gain, cumulative effect
    of accounting change, and minority interests .....................              561                1,762                   16

    Provision (benefit) for income taxes .............................              261                  752                  (78)
                                                                           ------------         ------------         ------------

Income (loss) before extraordinary gain, cumulative effect of
     accounting change, and minority interests .......................              300                1,010                   94

Extraordinary gain (net of income taxes of $0) .......................            4,347                   89                   --

Cumulative effect of accounting change (net of income taxes of $0) ...               --                  526                   --
                                                                           ------------         ------------         ------------

Income before minority interests .....................................            4,647                1,625                   94

    Minority interests in (gains) losses of subsidiaries .............               --                  (63)                  31
                                                                           ------------         ------------         ------------

Net income ...........................................................     $      4,647         $      1,562         $        125
                                                                           ============         ============         ============

Weighted average shares - basic ......................................       12,570,845            9,375,000            9,375,000
                                                                           ============         ============         ============

    EPS, basic .......................................................     $       0.37         $       0.17         $       0.01
                                                                           ============         ============         ============

Weighted average shares - diluted ....................................       12,840,969            9,375,000            9,375,000
                                                                           ============         ============         ============

    EPS, diluted .....................................................     $       0.36         $       0.17         $       0.01
                                                                           ============         ============         ============

Pro forma amounts assuming the new accounting method is
    applied retroactively:

Income (loss) before income taxes, extraordinary gain,
    cumulative effect of accounting change and minority interests ....     $        300         $      1,010         $        (57)
                                                                           ============         ============         ============

Net income ...........................................................     $      4,647         $      1,123         $        565
                                                                           ============         ============         ============

Weighted average shares - basic ......................................       12,570,845            9,375,000            9,375,000
                                                                           ============         ============         ============

    EPS, basic .......................................................     $       0.37         $       0.12         $       0.06
                                                                           ============         ============         ============

Weighted average shares - diluted ....................................       12,840,969            9,375,000            9,375,000
                                                                           ============         ============         ============

    EPS, diluted .....................................................     $       0.36         $       0.12         $       0.06
                                                                           ============         ============         ============
</TABLE>

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


                                       42
<PAGE>

                               YDI WIRELESS, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                   Common Stock            Additional                      Other
                                            --------------------------      Paid-in        Retained    Comprehensive
                                               Shares         Amount        Capital        Earnings    (Loss) Income      Total
                                            -----------    -----------    -----------    -----------   -------------   -----------
<S>                                          <C>           <C>            <C>            <C>            <C>            <C>
Balance at December 31, 2000 ............     9,566,328    $        96    $       345    $     2,429    $        --    $     2,870
Purchase of Common Stock ................      (191,328)            (2)           (14)            --             --            (16)
Increase in equity from sale of shares ..            --             --             46             --             --             46
Distributions to Merry Fields' members ..            --             --             --            (50)            --            (50)
Consolidation of Merry Fields as of
    January 1, 2001 .....................            --             --            (20)            --             --            (20)
Comprehensive income:
   Net income ...........................            --             --             --            125             --            125
   Unrealized gain on investments .......            --             --             --             --            (47)           (47)
                                            -----------    -----------    -----------    -----------    -----------    -----------

   Total comprehensive income ...........            --             --             --            125            (47)            78
                                            -----------    -----------    -----------    -----------    -----------    -----------

Balances, December 31, 2001 .............     9,375,000    $        94    $       357    $     2,504    $       (47)   $     2,908

Comprehensive income:
   Net income ...........................            --             --             --          1,562             --          1,562
   Unrealized gain on investments .......            --             --             --             --             38             38
                                            -----------    -----------    -----------    -----------    -----------    -----------

   Total comprehensive income ...........            --             --             --          1,562             38          1,600
                                            -----------    -----------    -----------    -----------    -----------    -----------

Balances, December 31, 2002 .............     9,375,000    $        94    $       357    $     4,066    $        (9)   $     4,508

Merger with Telaxis .....................     4,177,078             42          3,697             --             --          3,739
Exercise of stock options and warrants ..       127,804              1            218             --             --            219
Issuance of common stock, net of costs ..       500,000              5          1,901                                        1,906
Distribution to Merry Fields members ....            --             --             --            (40)            --            (40)
Comprehensive income:
   Net income ...........................            --             --             --          4,647                         4,647
   Unrealized gain on investments .......            --             --             --             --          1,206          1,206
                                            -----------    -----------    -----------    -----------    -----------    -----------

     Total comprehensive income .........            --             --             --          4,647          1,206          5,853
                                            -----------    -----------    -----------    -----------    -----------    -----------

Balances, December 31, 2003 .............    14,179,882    $       142    $     6,173    $     8,673    $     1,197    $    16,185
                                            ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

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


                                       43
<PAGE>

                               YDI WIRELESS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               FOR THE YEARS ENDED
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                   YDI Wireless,   Young Design,   Young Design,
                                                                                        Inc.           Inc.             Inc.
                                                                                   -------------   -------------   -------------
                                                                                                    December 31,
                                                                                   ---------------------------------------------
                                                                                        2003            2002            2001
                                                                                      -------         -------         -------
<S>                                                                                   <C>             <C>             <C>
Cash flows from operating activities:
   Net income ................................................................        $ 4,647         $ 1,562         $   125
      Depreciation and amortization ..........................................            183             131             104
      Loss on disposal of property and equipment .............................             24              --              --
      Realized (gain) loss on trading and available-for-sale securities ......            (92)              4              (9)
      Loss on write-down of investment in unconsolidated subsidiary ..........             36              --              --
      Equity method loss from unconsolidated subsidiaries ....................             --             181              44
      Unrealized gain (loss) on sale of assets or trading securities .........             --              --             (43)
      Amortization of excess of acquired net assets over cost ................             --              --            (150)
      Cumulative effect of accounting change .................................             --            (526)             --
      Loss on write down of assets held for sale .............................            200              --              --
      Deferred income tax ....................................................            387             580             (78)
      Extraordinary gain .....................................................         (4,347)            (89)             --
      Changes in assets and liabilities affecting operations:
        Accounts receivable, net .............................................           (825)           (805)            543
        Inventory ............................................................           (748)           (794)            851
        Deposits .............................................................            (21)             (3)             (1)
        Prepaid expenses .....................................................            697            (432)             70
        Refundable income taxes ..............................................           (226)             --              --
        Accounts payable and accrued expenses ................................            (71)            886             413
        Income taxes payable .................................................             --              --          (1,315)
        Contract deposit - nonrefundable .....................................             --            (551)             (8)
        Customer order deposits ..............................................             (9)             --            (114)
        Minority interests ...................................................             --              63             (31)
                                                                                      -------         -------         -------

              Net cash provided by (used in) operating activities ............           (165)            207             401
                                                                                      -------         -------         -------

Cash flows from investing activities:
   Proceeds on disposal of property and equipment ............................             10              --              --
   Purchase of securities ....................................................           (726)           (686)           (456)
   Purchase of property and equipment ........................................            (30)            (16)           (348)
   Purchase of intangible assets .............................................           (585)             --             (25)
   Sale of securities ........................................................            242              11             143
   Sale of assets held for sale ..............................................            415              --              47
   Cash received with purchase of Telaxis ....................................          7,421              --              --
   Cash received with purchase of Zeus .......................................             --              --              38
   Cash received with consolidation of Merry Fields ..........................             --              --              31
   Advances to affiliate .....................................................             --              --             207
                                                                                      -------         -------         -------

        Net cash (used in) provided by investing activities ..................          6,747            (691)           (363)
                                                                                      -------         -------         -------

Cash flows from financing activities:
   Distributions to Merry Fields members .....................................            (40)             --             (50)
   Exercise of stock options .................................................            219              --              --
   Issuance of common stock ..................................................          1,906              --              --
   Repurchase of common stock ................................................             --              --             (16)
   Payment of security deposit ...............................................             --              --            (240)
   Issuance of notes payable .................................................            500           2,336             967
   Repayment of notes payable ................................................         (1,116)         (2,046)           (784)
                                                                                      -------         -------         -------

        Net cash provided by (used in) financing activities ..................          1,469             290            (123)
                                                                                      -------         -------         -------

Net increase (decrease) in cash ..............................................          8,051            (194)            (85)
Cash, beginning of period ....................................................            939           1,133           1,218
                                                                                      -------         -------         -------

Cash, end of period ..........................................................        $ 8,990         $   939         $ 1,133
                                                                                      =======         =======         =======

Supplemental disclosure of cash flow information:
   Cash paid for interest ....................................................        $   149         $   130         $   173
                                                                                      =======         =======         =======
   Income taxes paid .........................................................        $    90         $   163         $ 1,315
                                                                                      =======         =======         =======
   Assets acquired with liabilities in Zeus purchase .........................        $    --         $    --         $ 1,643
                                                                                      =======         =======         =======
   Stock issued in Telaxis merger ............................................        $ 3,739         $    --         $    --
                                                                                      =======         =======         =======
   Non-cash assets received with Merry Fields consolidation ..................        $    --         $    --         $ 1,597
                                                                                      =======         =======         =======
</TABLE>

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


                                       44
<PAGE>

                               YDI WIRELESS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization

      Young Design, Inc. ("Young Design") was incorporated under the laws of the
Commonwealth of Virginia on February 28, 1986 to engage in the business of
manufacturing and selling equipment for use in transmission of data access on a
wireless basis. Young Design operates in one business segment. Young Design has
its headquarters in Falls Church, Virginia.

      Go Wireless Data, Inc ("Go Wireless") was incorporated under the laws of
the State of Delaware as of March 17, 2000 to engage in the business of the sale
of equipment for the use in transmission of data and internet access on a
wireless basis. On February 28, 2001 Go Wireless merged with Young Design and
ceased operations as a separate company.

      Zeus Wireless, Inc. ("Zeus") was formed under the laws of the State of
California. Zeus was a developer and manufacturer of 2.4 GHz transceivers
providing mission critical wireless data connectivity. In May 2001, Young Design
purchased ownership of 83.5% of the outstanding voting stock of Zeus for a
nominal amount of cash. The acquisition has been accounted for under the
purchase method. The assets and liabilities of Zeus on May 4, 2001 were as
follows (in thousands):

            Cash ..........................................        $ 31
            Deferred tax assets ...........................         896
            Inventory .....................................         586
            Non-cash assets ...............................         168
            Accounts payable and accrued expenses .........         379
            Nonrefundable contract deposit ................         568
            Excess of acquired net assets over cost .......        $677

      The consolidated statement of operations for 2001 includes the operations
of Zeus from May 4, 2001 through December 31, 2001. The excess of acquired net
assets over cost as of December 31, 2001 was $526,000 and was entirely
written-off during 2002.

      In August 2002, a majority of Zeus' shareholders approved a reverse stock
split of 1,500,000 to 1. In September 2002, Young Design paid cash for all
fractional shares plus the remainder of common stock it did not own thus
increasing its ownership to 100% of the outstanding voting stock of Zeus for a
nominal amount of cash. The excess of acquired net assets over cost for the
increase in ownership interest was approximately $89,000, and has been recorded
as an extraordinary gain.

      Merry Fields, LLC ("Merry Fields") was formed by certain shareholders of
Young Design under the laws of the State of Delaware on August 11, 2000. Merry
Fields owns the property and land leased to Young Design for its principal
operations. In accordance with FIN 46, Merry Fields, LLC is a Variable Interest
Entity and therefore, Merry Fields is consolidated with YDI Wireless, Inc.

      On April 1, 2003, Young Design completed a strategic combination
transaction (the "combination") with Telaxis Communications Corporation
("Telaxis"), pursuant to a definitive strategic combination agreement. Pursuant
to the terms of that agreement, Telaxis formed a subsidiary, WFWL Acquisition
Subsidiary, that merged with and into Young Design and Telaxis issued new shares
of its common stock to the stockholders of Young Design. As of the date of the
combination, Telaxis was a Massachusetts corporation. On July 9, 2003, Telaxis
reincorporated into Delaware and changed its name to YDI Wireless, Inc. ("YDI
Wireless" or the "Company").

      For financial reporting purposes, Young Design was treated as the
acquiring company and the transaction was accounted for as a reverse merger. In
addition, Young Design had substantially more revenue (Telaxis had


                                       45
<PAGE>

virtually no operating revenue). Young Design had voting control and majority
representation on the Board of Directors after the merger with Telaxis. The
financial statements contained herein are those of Young Design carried forward
at historical cost.

2.    Summary of Significant Accounting Policies

      Use of Estimates

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

      Principles of Consolidation

      The consolidated financial statements include the accounts of YDI Wireless
and its wholly owned subsidiaries and also Merry Fields, a consolidated
affiliate. Merry Fields is a Variable Interest Entity and is consolidated with
YDI Wireless, Inc. All significant inter-company balances and transactions have
been eliminated in consolidation.

      Asset Impairment

      The Company periodically evaluates the carrying value of long-lived assets
when events and circumstances warrant such a review. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such asset is separately identifiable and is less than the carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. The Company has evaluated all of
its long-term legal obligations under certain leases and determined that it does
not have any significant obligations upon the retirement of these obligations.

      Cash and Cash Equivalents

      The Company considers cash on hand, deposits in banks, money market
accounts and investments with an original maturity of three months or less to be
cash or cash equivalents.

      Investments

      In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Debt and Equity Securities", securities are
classified into three categories: held-to-maturity, available-for-sale, and
trading. Because the Company holds certain securities principally for the
purpose of selling them in the near future, they are classified on the balance
sheet as trading securities. As a result, the securities are carried at fair
value and realized and unrealized gains and losses are included in the
consolidated statements of operations. Securities available-for-sale are
reported at fair value. Any unrealized gain or loss, net of applicable income
taxes, is reported as a separate addition to or reduction from stockholders'
equity as other comprehensive income. Investment income includes realized and
unrealized gains and losses on investments, interest and dividends.

      Investments - Equity Method

      Investments in common stock, generally at privately held companies, are
accounted for under the equity or cost method based on the Company's ownership
interest and degree of control or influence. Generally, the Company uses the
equity method when the Company's ownership interest is 20% or greater.

      Accounts Receivable

      The Company provides an allowance to account for amounts, if any, of its
accounts receivable, which are considered uncollectible. The Company bases its
assessment of the allowance for doubtful accounts on historical losses and
current economic conditions. Accounts receivable are determined to be past due
based on a contractual


                                       46
<PAGE>

term of 30 days. The Company's accounts receivable are unsecured. The allowance
for doubtful accounts was approximately $205,000 and $185,000 as of December 31,
2003 and 2002, respectively.

      Inventory

      Inventory consists of electronic components and finished goods and is
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method.

      Property and Equipment

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

      Intangible Assets

      Intangible assets subject to amortization are substantially all associated
with intellectual property. Amortization is computed using the straight-line
method over three years, which is the estimated useful life, based on the
Company's assessment of technological obsolescence, of the respective assets.
Amortization expense for the years ended December 31, 2003, 2002, and 2001
totaled approximately $111,000, $11,000, and $5,000 respectively.

      Income Taxes

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

      Merry Fields is a limited liability company and is taxed as a partnership.
Accordingly, for Merry Fields, items of income, deductions, expenses and credits
pass through directly to its members and are reported on their tax returns.

      Revenue Recognition

      The Company recognizes revenue when a formal purchase commitment has been
received, shipment has been made to the customer, collection is probable and, if
contractually required, a customer's acceptance has been received.

      Excess of Acquired Net Assets Over Cost

      The excess of acquired net assets over cost, recognized in income in 2002,
resulted from the acquisition of Zeus in 2001. The acquisition was accounted for
using the purchase method of accounting and the purchase price was allocated to
the assets purchased and the liabilities assumed based on the estimated fair
values at the date of the acquisition. The Company recognized $526,000 of excess
acquired net assets over cost during 2002 in accordance with SFAS No. 141,
"Business Combinations."

      The excess of acquired net assets over cost, recognized in 2003, resulted
from the acquisition of Telaxis. The acquisition was accounted for using the
purchase method of accounting and the purchase price was allocated to the assets
purchased and the liabilities assumed based on the estimated fair values at the
date of the acquisition. The Company recognized the entire $4,347,000 of excess
acquired net assets over cost as an extraordinary gain in the second quarter
2003 in accordance with SFAS No. 141, "Business Combinations" in conjunction
with completing the acquisition on April 1, 2003.

      Research and Development

      Research and development costs are expensed as incurred.


                                       47
<PAGE>

      Stock based compensation

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 provides for
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. The Company
continues to account for its stock-based employee compensation plans under the
recognition and measurement principles of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. APB No. 25 provides that compensation expense relative to a
company's employee stock options is measured based on the intrinsic value of the
stock options at the measurement date. Effective for interim periods beginning
after December 15, 2002, SFAS No. 148 also requires disclosure of pro-forma
results on a quarterly basis as if the Company had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation."

      The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"), but applied the intrinsic value method set forth in
Accounting Principles Board Opinion No. 25. No compensation expense has been
recognized in connection with options, as all options have been granted with an
exercise price equal the fair value of the Company's common stock on the date of
grant. The fair value of each option grant has been estimated as of the date of
grant using the Black-Scholes options pricing model with the following weighted
average assumptions for 2003 and 2002: risk-free interest rate of 2.37% and
2.21%, expected life of 5 years, volatility 284% and 101% and dividend rate of
zero percent, respectively. Using these assumptions, the fair value of the stock
options granted in 2003 and 2002 was $0.96 and $1.21, respectively, which would
be amortized as compensation expense over the vesting period of the options.

      If the Company had elected to recognize compensation expense based on the
fair value at the grant dates, consistent with the method prescribed by SFAS No.
123, net income per share would have been changed to the pro forma amount
indicated below:

<TABLE>
<CAPTION>
         (in thousands, except per share amounts)                               December 31,
                                                                         ------------------------
                                                                            2003          2002
                                                                         ----------    ----------
<S>                                                                      <C>           <C>
         Net Income attributable to common stockholders, as
             reported: ..............................................    $    4,647    $    1,562
         Less: Total stock based employee compensation expense
             determined under the fair value based method for all
             awards .................................................         1,129           185
                                                                         ----------    ----------

         Pro forma net income attributable to common
             stockholders ...........................................    $    3,518    $    1,377
                                                                         ==========    ==========

         Basic net income per common share, as reported .............    $     0.37    $     0.17
                                                                         ==========    ==========
         Basic net income per common share, pro forma ...............    $     0.28    $     0.15
                                                                         ==========    ==========
         Diluted net income per common share, as reported ...........    $     0.36    $     0.17
                                                                         ==========    ==========
         Diluted net income per common share, pro forma .............    $     0.27    $     0.15
                                                                         ==========    ==========
</TABLE>

      Advertising costs

      Advertising costs are expensed when incurred. Advertising expense totaled
approximately $9,000, $23,000 and $30,000 for 2003, 2002 and 2001, respectively.

      Shipping and Handling Costs

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


                                       48
<PAGE>

      Comprehensive Income

      The Company reports comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income." During the years ended December 31, 2003, 2002
and 2001, the Company had approximately $1,206,000, $38,000 and $(47,000),
respectively, of unrealized gains (losses) on available-for-sale investments,
net of income taxes of $0, $26,000 and $31,000.

      Corporate Structural Changes

      The number of shares and earnings per share has been restated to reflect
the following splits.

      On July 9, 2003, Telaxis effected a reverse 1-for-100 split of its
outstanding common stock, a forward 25-for-1 split of its common stock
outstanding after the reverse stock split, the reincorporation of Telaxis from
Massachusetts to Delaware, and the change of its corporate name to "YDI
Wireless, Inc."

      No fractional shares were issued as a result of the reverse stock split.
Fractional shares held by any stockholder with less than 100 shares in its
account were cashed out at a price of $0.954 for each share outstanding before
the reverse stock split, which is based on the average trading prices of the
Company's common stock on the Over-the-Counter Bulletin Board for the 20 trading
days ended on July 9, 2003. Due to this fractional share treatment, 39,976
pre-split shares were cancelled for approximately $38,000. The effect of the
stock splits has been reflected for all periods presented.

      No fractional shares were issued as a result of the forward stock split.
Any stockholder who was entitled to a fractional share after the forward stock
split had that stockholder's holdings rounded up to the next whole share. The
Company issued 96 shares to these shareholders in the aggregate.

      On December 8, 2003, the Company completed a private placement of 500,000
shares of Common Stock to a single accredited investor at $4.10 per share. The
closing market price on the date of sale was $4.75. The net proceeds to the
Company, after placement agent fees and expenses, were approximately $1,906,000.

      Fair value of Financial Instruments

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

      Recent Accounting Pronouncements

      In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". The Interpretation states that a guarantor is required
to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The Company adopted the
Interpretation on December 31, 2002.

      In January 2003, the FASB issued FIN 46 "Consolidation of Variable
Interest Entities". The Interpretation addresses consolidation by business
enterprises of variable interest entities and provides guidance on the
identification of variable interest entities that are subject to consolidation
requirements by a business enterprise. A variable interest entity subject to
consolidation requirements is an entity that does not have sufficient equity at
risk to finance its operations without additional support from third parties and
the equity investors in the entity lack certain characteristics of a controlling
financial interest as defined in the guidance. Merry Fields, LLC is a Variable
Interest Entity, therefore Merry Fields is consolidated with YDI Wireless, Inc.
Previously, Merry Fields was consolidated in 2001 based on EITF 90-15. Currently
the Company does not believe that adoption of FIN 46 will have an impact on its
financial statements.


                                       49
<PAGE>

      In April 2003, the FASB issued Statement No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." The Statement amends
Statement 133 for decisions made by the Derivatives Implementation Group, in
particular the meaning of an initial net investment, the meaning of underlying
and characteristics of a derivative that contains financing components.
Currently, the Company has no derivative financial instruments and, therefore,
believes that adoption of the Statement will have no effect on its financial
statements.

      In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." The
Statement requires that the issuer classify certain instruments as liabilities,
rather than equity, or so-called mezzanine equity. Currently, the Company has no
financial instruments that come under the scope of the Statement and, therefore,
believe that adoption of the new Statement will have no impact on its financial
statements.

      In June 2001, the Financial Accounting Standards Board approved SFAS No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and other Intangible
Assets." SFAS No. 141 addresses financial accounting and reporting for business
combinations. All business combinations in the scope of this statement will be
accounted for using the purchase method of accounting. The provisions of SFAS
No. 141 apply to all business combinations initiated after June 30, 2001, and
business combinations accounted for by the purchase method for which the date of
acquisition is July 1, 2001, or later. SFAS No. 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets.
Under this statement, goodwill will no longer be amortized but will be tested
for impairment at least annually at the reporting unit level. Goodwill will be
tested for impairment on an interim basis if an event occurs or circumstances
change that would more-likely-than-not reduce the fair value of a reporting unit
below its carrying value. Intangible assets which remain subject to amortization
will be reviewed for impairment in accordance with SFAS No. 142. The provisions
of SFAS No. 142 are required to be applied starting with fiscal years beginning
after December 15, 2001.

      Due to SFAS No. 141, the Company recognized $526,000 as a result of this
change of accounting principal in the 2002 consolidated financial statements for
the unamortized balance of the excess of acquired net assets over cost.

3.    Inventory

      (in thousands)                                     December 31,
                                                      -------------------
                                                        2003        2002
                                                      -------     -------
      Raw Materials ..............................    $   574     $   502
      Work in process ............................         26           9
      Finished goods .............................      2,734       2,051
                                                      -------     -------
                                                        3,334       2,562
      Allowance for excess and obsolescence ......       (200)       (176)
                                                      -------     -------
      Net Inventory ..............................    $ 3,134     $ 2,386
                                                      =======     =======

4.    Investment Securities - Trading

      The Company holds the following investments classified as trading with a
fair market value as follows as of December 31,:

      (in thousands)                                       2003       2002
                                                          -----      -----
      Equity securities ............................      $  --      $   4
                                                          =====      =====

      The net gains (losses) on trading securities included in earnings are as
follows:

      (in thousands)                             2003      2002       2001
                                                -----     -----      -----
      Equity securities ...................     $  --     $  (4)     $   9
                                                =====     =====      =====


                                       50
<PAGE>

      Proceeds from the sale of trading securities were $0, $11,000, and
$143,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

5.    Investment Securities - Available-For-Sale

      The Company owned 199,618 unregistered shares and 270,632 registered
shares as of December 31, 2003 and 184,618 unregistered shares and 238,893
registered shares as of December 31, 2002 of Phazar Corporation. In addition,
the Company owned 72,800 registered shares of RF Industries as of December 31,
2002.

      In September 2000, the Company purchased 2,000,000 shares of common stock
in Spectrum Access, Inc. ("Spectrum"). In exchange for the shares, the Company
granted the use of the Company's broadcasting space in the Falls Church tower,
as well as providing selected equipment and training to Spectrum. As of December
31, 2003 and 2002, the Company's ownership interest of approximately 11 percent
has been valued at $10,500.

                                                  December 31,
                                  ---------------------------------------------
            (in thousands)                2003                     2002
                                  ---------------------   ---------------------
                                               Carrying                Carrying
                                  Cost Basis    Value     Cost Basis    Value
                                  ----------   --------   ----------   --------

      Fixed income ...........      $  600      $  609      $   --      $   --
      Spectrum ...............          10          10          10          10
      RF Industries ..........          --          --         145         153
      Phazar .................         794       2,008         700         678
                                    ------      ------      ------      ------
                                    $1,404      $2,627      $  855      $  841
                                    ======      ======      ======      ======

      The net gains (losses) on available-for-sale securities included in
earnings are as follows:

      (in thousands)                      2003          2002          2001
                                         -----         -----         -----
      Equity securities ........         $  92         $  --         $  --
                                         =====         =====         =====

      Proceeds from the sale of available-for-sale securities were $242,000, $0,
and $0 for the years ended December 31, 2003, 2002, and 2001, respectively.

6.    Investment in Unconsolidated Subsidiaries

      During 2002, the Company purchased an ownership interest of approximately
30% of "Excurro" and accounted for the investment under the equity method. This
investment was fully written off during 2003.

      (in thousands)                               December 31,
                                    ------------------------------------------
                                            2003                  2002
                                    --------------------  --------------------
                                                Carrying              Carrying
                                    Cost Basis   Value    Cost Basis   Value
                                    ----------  --------  ----------  --------
      Excurro ....................      $50       $--        $50        $36
                                        ===       ===        ===        ===


                                       51
<PAGE>

7.    Property and Equipment

      Property and equipment consisted of the following (in thousands):

      (in thousands)                                      December 31,
                                                      -------------------
                                                        2003        2002
                                                      -------     -------
      Land .......................................    $   522     $   521
      Building and improvements ..................      1,377       1,377
      Automobiles ................................         22          37
      Furniture and equipment ....................         --          96
      Lab equipment ..............................        146         133
                                                      -------     -------
                                                        2,067       2,164
              Less: accumulated depreciation .....       (320)       (341)
                                                      -------     -------
      Property and equipment, net ................    $ 1,747     $ 1,823
                                                      =======     =======

      Depreciation expense totaled approximately $72,000, $120,000, and $99,000,
respectively for the periods ended December 31, 2003, 2002, and 2001.

8.    Income Taxes

      (in thousands)                                   December 31,
                                                -------------------------
                                                 2003      2002      2001
                                                -----     -----     -----

      Current tax (benefit) expense
           Federal .........................    $(112)    $ 145     $  --
           State ...........................      (14)       27        --
                                                -----     -----     -----
                                                 (126)      172        --
                                                -----     -----     -----
      Deferred tax expense (benefit)
           Federal .........................      344       489       (70)
           State ...........................       43        91        (8)
                                                -----     -----     -----
                                                  387       580       (78)
                                                -----     -----     -----
                                                $ 261     $ 752     $ (78)
                                                =====     =====     =====

      The components of the net deferred tax assets (liabilities) at December
31, 2002 and 2001 are as follows (in thousands):

                                                                  December 31,
                                                                ---------------
                                                                 2003      2002
                                                                -----     -----
      Current net deferred tax assets (liabilities):
           Allowance for doubtful accounts .................    $  82     $  70
           Inventory valuation allowance ...................       80        67
           Unrealized (gain) loss on investments ...........     (482)        5
           Accruals .......................................       270        --
           Net operating loss carryforwards ................      177        --
                                                                -----     -----
                                                                  127       142
      Valuation allowance ..................................     (127)       --
                                                                -----     -----
                                                                $  --     $ 142
                                                                =====     =====

      Non-current net deferred tax assets (liabilities):
           Start up costs ..................................    $  --     $ 118
           Accruals ........................................       93        --
           Depreciable assets ..............................      (93)      127
                                                                -----     -----
                                                                   --       245
      Valuation allowance ..................................       --        --
                                                                -----     -----
                                                                $  --     $ 245
                                                                =====     =====


                                       52
<PAGE>

      The provision for income taxes is different from that which would be
obtained by applying the statutory Federal income tax rate to income before
income taxes, extraordinary gain, cumulative effect of accounting change and
minority interests. The items causing this difference are as follows:

<TABLE>
<CAPTION>
      (in thousands)                                       2003      2002      2001
                                                          -----     -----     -----
<S>                                                       <C>       <C>       <C>
      Tax expense (benefit) at U.S. statutory rate ...    $ 191     $ 599     $   5
      State income taxes .............................       22        70         1
      Equity method loss .............................       --        69        17
      Amortization/recognition of negative goodwill ..       --        --       (57)
      Merry Fields, LLC income .......................      (49)      (28)      (13)
      Change in valuation allowance ..................      127        --        --
      Other differences ..............................      (30)       42       (31)
                                                          -----     -----     -----
      Provision (benefit) for income taxes ...........    $ 261     $ 752     $ (78)
                                                          =====     =====     =====
</TABLE>

      The income tax expense for the year ended December 31, 2003 primarily
relates to the increase in the valuation allowance associated with the deferred
tax assets since the Company cannot accurately predict when the Company will
generate taxable income to utilize these assets. The income tax expense for the
year ended December 31, 2002 relates primarily to effective marginal tax rate of
42%. The Company has approximately $0.4 million in net operating losses
available through 2018.

9.    Notes Payable

      Notes payable consisted of the following at December 31:

<TABLE>
<CAPTION>
      (in thousands)                                                                2003      2002
                                                                                   ------    ------
<S>                                                                                 <C>       <C>
         In May 2002, Young Design executed a $750,000 note
         payable with a financial institution related to the bulk
         purchase of inventory. The note was non-interest bearing
         and required four (4) calendar quarter payments of
         $187,500 through June 30, 2003 .......................................    $   --    $  375

         In May 2002, Merry Fields executed a loan consolidation and
         refinance agreement with a financial institution for a term loan
         of $1,565,374 collateralized by the building and land with a book
         value of $1,527,362 in Falls Church, Virginia. The loan requires
         monthly payments of $18,781 consisting of principal and interest
         The loan bears interest at 7.34% per annum and matures
         on May 31, 2012 ......................................................     1,406     1,522

         In December 2003, the Company executed a $2.0 million line of
         credit with a financial institution. This line of credit is
         collateralized by a $2.0 million certificate of deposit. The line
         of credit bears interest at the prime rate and interest is
         due monthly ..........................................................        --        --

      Other ...................................................................       105        --
                                                                                   ------    ------
                                                                                    1,511     1,897
                 Current portion ..............................................       213       495
                                                                                   ------    ------
                                                                                   $1,298    $1,402
                                                                                   ======    ======
</TABLE>


                                       53
<PAGE>

                  2004 .......................          $  213
                  2005 .......................             113
                  2006 .......................             122
                  2007 .......................             133
                  2008 .......................             145
                  Thereafter .................             785
                                                        ------
                                                        $1,511
                                                        ======

10.   Commitments and Contingencies

      Leases

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

      In August 2000, Merry Fields executed a lease agreement with Young Design
for the lease of the building in Falls Church, Virginia. The lease commenced on
January 1, 2001 and terminates on December 31, 2010. The lease provides for base
monthly rent payments of $20,625 with a 3% fixed annual increase after the base
year. All intercompany rental income and expense under the lease agreement have
been eliminated in consolidation.

      Rent expense, excluding rent paid to Merry Fields, for the years ended
December 31, 2003, 2002, and 2001 was approximately $463,000, $151,000, and
$160,000, respectively.

      Schedule of Commercial Commitments

      Aggregate maturities of the operating leases, exclusive of the Merry
Fields lease, are as follows as of December 31, 2003.

                  2004 .......................          $  580
                  2005 .......................             429
                  2006 .......................             429
                  2007 .......................             258
                  2008 .......................             258
                  Thereafter .................             258
                                                        ------
                                                        $2,212
                                                        ======

11.   401(k) - Retirement Plan

      The Company has a 401(k) retirement plan covering all employees who meet
certain minimum eligibility requirements. Each year employees can elect to defer
the lesser of 15% of earned compensation or the maximum amount permitted by the
Internal Revenue Code. The Company makes contributions to the plan at its
discretion. The Company made no contribution to the plan for the periods ended
December 31, 2003, 2002, or 2001.

12.   Stockholders Equity

      The warrant and option numbers shown in this footnote reflect the
adjustments to those warrants and options due to the April 1, 2003 combination
of Young Design and Telaxis and the reverse/forward stock splits effected on
July 9, 2003.


                                       54
<PAGE>

Stock Warrants

      All warrants were issued by Telaxis in conjunction with several debt
offerings prior to its initial public offering.

      During September 1996, Telaxis issued $3 million of debt and 429,525
warrants. The underlying debt all converted into Telaxis preferred stock in
November 1997. Of the warrants issued, 367,470 remain outstanding as of December
31, 2003

      During 1999, Telaxis issued $2.4 million of debt and 103,995 warrants. The
underlying debt was repaid or exchanged for shares of Telaxis preferred stock.
Of the warrants issued, 23,949 remain outstanding as of December 31, 2003.

      The Company has issued warrants for its common stock as follows:

<TABLE>
<CAPTION>
                                                         Warrants Outstanding
                                                  ----------------------------------
                                                                         Per Unit
                                                  Number of Shares    Exercise Right
                                                  ----------------    --------------
<S>                                                   <C>              <C>
      Outstanding December 31, 2002 ........               --          $         --

           Telaxis warrants ................          432,318          $2.08 - 8.64
           Warrants exercised ..............           18,498          $       2.08
           Warrants expired/canceled .......           22,401          $2.08 - 8.64
                                                      -------          ------------

      Outstanding December 31, 2003 ........          391,419          $       2.08
                                                      =======          ============
</TABLE>

                              Expiration Date                 Number of Warrants
                        ----------------------------          ------------------
                        September 2006 .............                298,033
                        July 2007 ..................                 93,386

Stock Options Issued

      The Company has stock option plans that provide for the granting of
options to employees, directors, and consultants. The plans permit the granting
of options to purchase a maximum of 1,397,543 shares of common stock at various
prices and require that the options be exercisable at the prices and at the
times as determined by the Board of Directors, not to exceed ten years from date
of issuance. As of December 31, 2003, 627,814 options are available for issuance
under these plans.


                                       55
<PAGE>

      A summary of the option activity is as follows:

                                                     Options Outstanding
                                              ---------------------------------
                                                                    Per Share
                                              Number of Shares   Exercise Price
                                              ----------------   --------------

      Outstanding December 31, 2000 ....                --       $           --
           Options granted .............                --       $           --
           Options exercised ...........                --       $           --
           Options expired/canceled ....                --       $           --
                                                  --------       --------------

      Outstanding December 31, 2001 ....                --       $           --
           Options granted .............           446,875       $1.60
           Options exercised ...........                --       $           --
           Options expired/canceled ....            (2,187)      $1.60
                                                  --------       --------------

      Outstanding December 31, 2002 ....           444,688       $1.60
           Telaxis options .............           695,976       $1.60 - 161.00
           Options granted .............            66,250       $0.92 - 5.30
           Options exercised ...........          (121,151)      $1.52 - 4.00
           Options expired/canceled ....          (316,034)      $1.60 - 161.00
                                                  --------       --------------
      Outstanding December 31, 2003 ....           769,729       $0.92 - 161.00
                                                  ========       ==============

      A summary of the stock options outstanding and exercisable as of December
31, 2003 is as follows:

<TABLE>
<CAPTION>
                    Options Outstanding                           Options Exercisable
      -----------------------------------------------      --------------------------------
                                            Weighted
                                            Average
         Weighted                           Remaining         Weighted
         Average             Number           Life             Average             Number
      Exercise Price       Outstanding       (years)       Exercise Price       Outstanding
      -----------------------------------------------      --------------------------------
<S>                          <C>               <C>          <C>                   <C>
       $0.00 - 2.00          307,600           4.5          $0.00 - 2.00          223,661

       $2.01 - 4.00          288,981           6.5          $2.01 - 4.00          281,988

       $4.01 - 6.00           70,321           7.6          $4.01 - 6.00           57,794

       $  over 6.00          102,827           6.0          $  over 6.00          101,084
      -------------------------------------------------------------------------------------
</TABLE>


                                       56
<PAGE>

13.   Earnings per share:

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                            -------------------------------------------
                                                                                2003            2002            2001
                                                                            -----------     -----------     -----------
<S>                                                                         <C>             <C>             <C>
      Numerator (in thousands)
        Income from continuing operations .............................     $       300     $       947     $       125

        Extraordinary item ............................................           4,347              89              --

        Change in accounting ..........................................              --             526              --
                                                                            -----------     -----------     -----------
        Net income ....................................................     $     4,647     $     1,562     $       125
                                                                            ===========     ===========     ===========

      Denominator - weighted average shares:

        Denominator for basic earnings per share ......................      12,570,845       9,375,000       9,375,000

        Dilutive effect of stock options ..............................         270,124              --              --
                                                                            -----------     -----------     -----------

        Denominator for diluted earnings per share ....................      12,840,969       9,375,000       9,375,000
                                                                            ===========     ===========     ===========

        Basic earnings per share from continuing operations ...........     $      0.02     $      0.10     $      0.01

        Basic earnings per share - Extraordinary item .................     $      0.35     $      0.01     $        --

        Basic earnings per share - change in accounting ...............     $        --     $      0.06     $        --
                                                                            -----------     -----------     -----------

        Basic earnings per share ......................................     $      0.37     $      0.17     $      0.01
                                                                            ===========     ===========     ===========

        Diluted earnings (loss) per share before
         extraordinary item and change in accounting ..................     $      0.02     $      0.10     $      0.01

        Diluted earnings per share- Extraordinary item ................     $      0.34            0.01              --

        Diluted earnings per share- Extraordinary item and
         change in accounting .........................................     $        --     $      0.06     $        --
                                                                            -----------     -----------     -----------
        Diluted earnings per share ....................................     $      0.36     $      0.17     $      0.01
                                                                            ===========     ===========     ===========
</TABLE>

14.   Concentrations

      The Company maintains its cash, cash equivalent, and restricted cash
balances in several banks. The balances are insured by the Federal Deposit
Insurance Corporation up to $100,000 per bank. At December 31, 2003, and 2002,
the uninsured portion totaled approximately $8.8 million and $839,000,
respectively.

      As of December 31, 2002, accounts receivable from two customers totaled
approximately $477,000, which represents 28% of total accounts receivable. As of
December 31, 2003, no customers owed more than 10% of the total accounts
receivable.

      During the years ended December 31, 2003, 2002, and 2001, no customers
accounted for more than 10% of sales.

      For the years ended December 31, 2003, 2002, and 2001 sales to customers
outside of the United States and Canada accounted for approximately 16%, 10%,
and 5%, respectively. The Company has no assets or employees located outside of
the United States.


                                       57
<PAGE>

<TABLE>
<CAPTION>
                                                         % of Company Sales
                                                        --------------------
                         Region                         2003    2002    2001
      ----------------------------------------------    ----    ----    ----
<S>                                                      <C>     <C>     <C>
      North America (US and Canada) ................     84%     90%     95%

      Latin America (Mexico, Central, South
        America, and Caribbean) ....................      7%      4%      2%

      Asia Pacific (China, Taiwan, Japan, other
        Pacific territories, Australia, New
        Zealand) ...................................      2%      1%      0%

      Europe (Western, Eastern, Russia) ............      3%      2%      1%

      Middle East and Africa (a.k.a. E.M.E.A.) .....      4%      3%      2%
</TABLE>

15.   Acquisition

      The following describes the acquisition of Telaxis by Young Design
completed on April 1, 2003.

      On April 1, 2003, Young Design merged with Telaxis. For financial
reporting purposes, Young Design was treated as the acquiring company and the
transaction was accounted for as a reverse merger. Young Design had voting
control and majority representation on the Board of Directors after the merger
with Telaxis. In addition, Young Design had substantially more operating assets
and revenue (Telaxis had virtually no operating revenue). Young Design merged
with Telaxis for various strategic reasons including the fact that Telaxis was a
publicly traded vehicle providing a potential source of capital and liquidity.
For accounting purposes, Young Design is treated as the acquirer since it was
the larger of the two entities and had significantly greater operating revenue.

      The cost of the April 1, 2003 acquisition consisted of 4,177,078 shares of
common stock and 695,976 options valued at $3.7 million and acquisition costs of
approximately $0.1 million. On April 1, 2003, Telaxis had net assets with a fair
market value of $8.1 million. Accounting for the transaction as a reverse merger
resulted in an excess of net assets over book value of $4.3 million. The assets
and liabilities of Telaxis were recorded at fair value under the purchase method
of accounting. As the fair value of the assets acquired exceeded the purchase
price, the long -lived assets were reduced to zero and negative goodwill was
recorded. The valuation of the stock was based on the average closing price for
the five days preceding the announcement of the acquisition.

      Unaudited pro forma results of operations for the two years ended December
31, 2003 and 2002 are included below. Such pro forma information assumes that
the above acquisition had occurred as of January 1, 2003 and 2002, respectively.
This summary is not necessarily indicative of what the Company's results of
operations would have been if the Company had been a combined entity during such
periods, nor does it purport to represent results of operations for any future
periods.

      (in thousands)                                     (unaudited)
                                                        December 31,
                                                   ----------------------
                                                     2003          2002
                                                   --------      --------
      Revenue ................................     $ 27,246      $ 20,357
      Net loss ...............................     $ (2,464)     $(10,902)
                                                   ========      ========
         Net loss per common share - basic
           and diluted .......................     $  (0.22)     $  (1.38)
                                                   ========      ========

      Telaxis condensed Balance Sheet at fair market value.

            (in thousands)                               April 1, 2003
                                                         -------------
            Cash and cash equivalents .................     $ 7,421
            Property and equipment (held for sale) ....       1,405
            Other assets ..............................         426
            Liabilities ...............................      (1,166)
                                                            -------
            Net assets acquired .......................     $ 8,086
                                                            =======


                                       58
<PAGE>

16.   Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
                                                          Quarter

                                           (in thousands, except per share data)
-----------------------------------------------------------------------------------------------------------------------
2003                                                                      First       Second       Third        Fourth
--------------------------------------------------------------------     --------    --------     --------     --------
<S>                                                                      <C>         <C>          <C>          <C>
Revenue ............................................................     $ 6,436     $ 7,229      $ 8,029      $ 5,547

Gross profit .......................................................       1,998       2,268        4,288        2,973

Income (loss) from continuing operations ...........................         106        (815)       1,053          (44)

Extraordinary gain .................................................          --       4,347           --           --

Net income .........................................................         106       3,532        1,053          (44)

Basic earnings per share from continuing operations ................        0.01       (0.06)        0.08         0.00

Basic earnings per share - extraordinary item ......................          --        0.32           --           --

Basic earnings per share ...........................................        0.01        0.26         0.08         0.00

Diluted earnings per share from continuing operations ..............        0.01       (0.06)        0.07         0.00

Diluted earnings per share - extraordinary item ....................          --        0.32           --           --

Diluted earnings per share .........................................     $  0.01     $  0.26      $  0.07      $  0.00
-----------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                          Quarter

                                           (in thousands, except per share data)
-----------------------------------------------------------------------------------------------------------------------
2002                                                                      First       Second       Third        Fourth
--------------------------------------------------------------------     --------    --------     --------     --------
<S>                                                                      <C>         <C>          <C>          <C>
Revenue ............................................................     $ 5,010     $ 4,870      $ 5,139      $ 5,285

Gross profit .......................................................       1,723       1,694        1,920        2,591

Income from continuing operations ..................................         158         359           (4)         434

Extraordinary gain .................................................          --          --           --           89

Change in accounting ...............................................          --          --           --          526

Net income (loss) ..................................................         158         359           (4)       1,049

Basic and diluted earnings per share from continuing operations ....        0.02        0.04         0.00         0.04

Basic and diluted earnings per share - extraordinary gain ..........          --          --           --         0.01

Basic and diluted earnings per share - change in accounting ........          --          --           --         0.06

Basic and diluted earnings per share ...............................     $  0.02     $  0.04      $  0.00      $  0.11
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

17.   Contingencies

      During the period from June 12 to September 13, 2001, four purported
securities class action lawsuits were filed against Telaxis in the U.S. District
Court for the Southern District of New York, Katz v. Telaxis Communications
Corporation et al., Kucera v. Telaxis Communications Corporation et al.,
Paquette v. Telaxis Communications Corporation et al., and Inglis v. Telaxis
Communications Corporation et al. The lawsuits also named one or more of the
underwriters in the Telaxis initial public offering and certain of its officers
and directors.


                                       59
<PAGE>

On April 19, 2002, the plaintiffs filed a single consolidated amended complaint
which supersedes the individual complaints originally filed. The amended
complaint alleges, among other things, violations of the registration and
antifraud provisions of the federal securities laws due to alleged statements in
and omissions from the Telaxis initial public offering registration statement
concerning the underwriters' alleged activities in connection with the
underwriting of Telaxis' shares to the public. The amended complaint seeks,
among other things, unspecified damages and costs associated with the
litigation. These lawsuits have been assigned along with, we understand,
approximately 1,000 other lawsuits making substantially similar allegations
against approximately 300 other publicly-traded companies and their public
offering underwriters to a single federal judge in the U.S. District Court for
the Southern District of New York for consolidated pre-trial purposes. The
Company believes the claims against it are without merit and have defended the
litigation vigorously. The litigation process is inherently uncertain, however,
and there can be no assurance that the outcome of these claims will be
favorable.

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

      In June 2003, the Company elected to participate in a proposed settlement
agreement with the plaintiffs in this litigation. This decision was made by a
special independent committee of the Company's board of directors. The Company
understands that a large majority of the other issuer defendants have also
elected to participate in this settlement. If ultimately approved by the court,
this proposed settlement would result in a dismissal, with prejudice, of all
claims in the litigation against the Company and against the other issuer
defendants who elect to participate in the proposed settlement, together with
the current or former officers and directors of participating issuers who were
named as individual defendants. The proposed settlement does not provide for the
resolution of any claims against the underwriter defendants. The proposed
settlement provides that the insurers of the participating issuer defendants
will guarantee that the plaintiffs in the cases brought against the
participating issuer defendants will recover at least $1 billion. This means
there will be no monetary obligation to the plaintiffs if they recover $1
billion or more from the underwriter defendants. In addition, the Company and
the other participating issuer defendants will be required to assign to the
plaintiffs certain claims that the participating issuer defendants may have
against the underwriters of their IPOs.

      The proposed settlement contemplates that any amounts necessary to fund
the guarantee contained in the settlement or settlement-related expenses would
come from participating issuers' directors and officers liability insurance
policy proceeds as opposed to funds of the participating issuer defendants
themselves. A participating issuer defendant could be required to contribute to
the costs of the settlement if that issuer's insurance coverage were
insufficient to pay that issuer's allocable share of the settlement costs.
Therefore, the potential exposure of each participating issuer defendant should
decrease as the number of participating issuer defendants increases. The Company
currently expects that its insurance proceeds will be sufficient for these
purposes and that it will not otherwise be required to contribute to the
proposed settlement.

      Consummation of the proposed settlement is conditioned upon, among other
things, negotiating, executing, and filing with the court final settlement
documents and final approval by the court. If the proposed settlement described
above is not consummated, the Company intends to continue to defend the
litigation vigorously. Moreover, if the proposed settlement is not consummated,
the Company believes that the underwriters may have an obligation to indemnify
the Company for the legal fees and other costs of defending these suits. While
there can be no assurance as to the ultimate outcome of these proceedings, the
Company currently believes that the final result of these actions will have no
material effect on the Company's consolidated financial condition, results of
operations, or cash flows.


                                       60
<PAGE>

18.   Proposed Merger

      On October 31, 2003 YDI signed a definitive merger agreement to acquire
Phazar Corp (Nasdaq:ANTP). Under the terms of the agreement, Phazar stockholders
will receive 1.2 shares of YDI common stock for each share of Phazar common
stock. This exchange ratio will not be adjusted for changes in the price of
either YDI common stock or Phazar common stock. Based on shares currently
outstanding, YDI stockholders would own approximately 87% of the combined entity
and Phazar stockholders would own approximately 13%. One member of Phazar's
board of directors will join YDI's board of directors. The agreement is subject
to the approval of Phazar shareholders and other conditions set forth in the
merger agreement. YDI expects to complete the acquisition prior to March 31,
2004.

19.   Revision to the financial statements

      The Company previously depreciated certain assets, acquired in the reverse
merger with Telaxis, as held for sale and did not considered the selling costs
in the determination of the fair market value of the assets held for sale. The
financial statements have been adjusted to decrease the fair market value for
the $400,000 estimated costs to sell as of April 1, 2003, the date of the
reverse merger, and to reverse the depreciation expense of $708,000 related to
those assets. Additionally, management determined that an impairment charge of
$200,000 was required at December 31, 2003 to record the remaining assets at
their current fair market value less costs to sell. The impact of these
adjustments was to increase income from operations by $508,000, to decrease
other income by $64,000 (representing the reversal of the gain on the sale of
certain of these assets) and to decrease the extra-ordinary gain by $400,000.


                                       61
<PAGE>

               Report of Independent Certified Public Accountants
                         On Financial Statement Schedule

YDI Wireless, Inc.

The audit referred to in our report to YDI Wireless, Inc. dated January 23, 2004
which is contained in Item 8 of this Form 10-K, includes the audit of the
financial statement schedule listed in the accompanying index for the period
ended December 31, 2003. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion of the
financial statement schedule based on our audit.

In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.

BDO Seidman, LLP

Bethesda, Maryland
January 23, 2004


                                       62
<PAGE>

                                   Schedule II

                              Valuation Allowances

              For the years ended December 31, 2003, 2002 and 2001

                                 (in thousands)

<TABLE>
<CAPTION>
                                               Balance at the
                                                beginning of                               Balance at the end
                                                   period       Additions      Deductions    of the period
                                               --------------   ---------      ----------  ------------------
<S>                                                <C>            <C>            <C>             <C>
December 31, 2001:
  Allowance for uncollectible accounts ...         $   --         $   71         $   --          $   71
  Inventory allowance ....................             89            175             --             264
  Deferred tax allowance .................             --             --             --              --
                                                   ------         ------         ------          ------

December 31, 2002:
  Allowance for uncollectible accounts ...         $   71         $  384         $ (270)         $  185
  Inventory allowance ....................            264             11            (99)            176
  Deferred tax allowance .................             --             --             --              --
                                                   ------         ------         ------          ------

December 31, 2003:
  Allowance for uncollectible accounts ...         $  185         $  544         $ (524)         $  205
  Inventory allowance ....................            176             24             --             200
  Deferred tax allowance .................             --          2,143             --           2,143
                                                   ------         ------         ------          ------
</TABLE>

Item 9A. Controls and Procedures.

      The information set forth in this Item 9A has been revised to reflect the
restatements described in the Explanatory Note above. Apart from these
revisions, this information does not reflect events and developments subsequent
to December 31, 2003.

      Evaluation of Disclosure Controls and Procedures

      Based on their evaluation as of December 31, 2003, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) were effective as of that date to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC's rules and forms.

      The restatements reflected in this Amendment No. 1 to Form 10-Q result
from revised guidance received from YDI's independent accountants BDO Seidman
LLP.  As such, the restatements do not change the conclusion of our Chief
Executive Officer and Chief Financial Officer concerning our disclosure controls
and procedures set forth above.

      Changes in internal control over financial reporting

      There was no change in our internal control over financial reporting
during our fourth fiscal quarter ended December 31, 2003 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.


                                       63
<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

      The information set forth in this Item 15 has not been revised to reflect
events and developments subsequent to December 31, 2003 except for Exhibits
23.1, 23.2, 31.1, 31.2, and 32.1.

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

            1. Financial Statements

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

            2. Financial Statement Schedule

      Schedule II--Valuation and Qualifying Accounts

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

            3. Exhibits

      See Index of Exhibits.

      (b) Reports on Form 8-K

      On October 21, 2003, we filed a report on Form 8-K to report a press
release relating to the earnings announcement for the third quarter ending
September 30, 2003.

      On November 5, 2003, we filed a report on Form 8-K to report that we had
signed an agreement to merge with Phazar Corp.

      On December 10, 2003, we filed a report on Form 8-K to report that we had
issued 500,000 shares of our common stock in a private placement to a single
accredited investor.


                                       64
<PAGE>

                                   SIGNATURES

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

                                        YDI WIRELESS, INC.


                                        By:      /s/ Robert E. Fitzgerald
                                           -------------------------------------
                                                   Robert E. Fitzgerald,
                                                  Chief Executive Officer

Date: March 25, 2004

      Each person whose signature appears below hereby constitutes and appoints
Robert E. Fitzgerald and Patrick L. Milton his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his own name, place and stead, in any and all capacities, to sign any and all
further amendments to the annual report on Form 10-K filed with the Securities
and Exchange Commission on February 20, 2004 and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing as
he could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute may lawfully do or cause to be done
by virtue hereof.

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

<TABLE>
<CAPTION>
       Signature                               Title                            Date
       ---------                               -----                            ----
<S>                             <C>                                        <C>

/s/ Robert E. Fitzgerald        Chief Executive Officer and Director       March 25, 2004
-----------------------------   (principal executive officer)
Robert E. Fitzgerald


/s/ Patrick L. Milton           Chief Financial Officer and Treasurer      March 25, 2004
-----------------------------   (principal financial and accounting
Patrick L. Milton               officer)


/s/ Carol B. Armitage           Chairperson of the Board of Directors      March 25, 2004
-----------------------------
Carol B. Armitage


/s/ Ralph Peluso                Director                                   March 25, 2004
-----------------------------
Ralph Peluso


/s/ Gordon D. Poole             Director                                   March 25, 2004
-----------------------------
Gordon D. Poole


/s/ Daniel A. Saginario         Director                                   March 25, 2004
-----------------------------
Daniel A. Saginario


/s/ Robert A. Wiedemer          Director                                   March 25, 2004
-----------------------------
Robert A. Wiedemer


/s/ Michael F. Young            Director                                   March 25, 2004
-----------------------------
Michael F. Young
</TABLE>


                                       65
<PAGE>

                                INDEX OF EXHIBITS

Exhibit
 Number                          Description of Document

 2.1        Agreement and Plan of Merger by and among the Registrant, Stun
            Acquisition Corporation, and Phazar Corp dated as of October 30,
            2003 (1)

 3.1        Certificate of Incorporation of the Registrant as filed with the
            Delaware Secretary of State on May 5, 2003 (2)

 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 (2)

 3.3        By-laws of the Registrant (2)

 4.1        Form of certificate evidencing ownership of common stock of the
            Registrant (2)

 4.2        Rights Agreement by and between the Registrant and Registrar and
            Transfer Company, as Rights Agent dated as of May 18, 2001 (3)

 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 (4)

 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 (5)

 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*       Incentive Stock Option Plan of 1986 of the Registrant (7)

10.2*       1987 Stock Plan of the Registrant (7)

10.3*       1988 Stock Plan of the Registrant (7)

10.4*       1996 Stock Plan of the Registrant (7)

10.5*       1997 Stock Plan of the Registrant (7)

10.6*       1999 Stock Plan of the Registrant (7)

10.7*       2001 Nonqualified Stock Plan of the Registrant (8)

10.8*       Young Design, Inc. 2002 Stock Incentive Plan (9)

10.9*       Form of Indemnification Agreement, a substantially similar version
            of which was entered between the Registrant and each of its officers
            and directors (10)

10.10       Agreement and Plan of Merger by and between Telaxis Communications
            Corporation and Young Design, Inc. dated as of March 17, 2003 (5)

10.11       Agreement and Plan of Merger and Reincorporation by and between
            Telaxis Communications Corporation and YDI Wireless, Inc. dated as
            of June 23, 2003 (11)

10.12*      Employment Agreement by and between Young Design, Inc. and Robert E.
            Fitzgerald dated as of March 1, 1999 (6)

10.13*      Employment Agreement by and between Young Design, Inc. and Michael
            F. Young dated as of March 1, 1999 (6)

10.14*      Employment Agreement by and between the Registrant and John L.
            Youngblood dated as of December 19, 2000 (12)

10.15*      Amendment 1 to Employment Agreement by and between the Registrant
            and John L. Youngblood dated as of January 24, 2003 (13)

10.16*      Separation Agreement and General Release by and between the
            Registrant and John L. Youngblood dated October 1, 2003 (14)


                                       66
<PAGE>

Exhibit
 Number                          Description of Document

10.17*      Employment Agreement by and between the Registrant and Dennis C.
            Stempel dated as of December 19, 2000 (12)

10.18*      Amendment 1 to Employment Agreement by and between the Registrant
            and Dennis C. Stempel dated as of August 29, 2002 (15)

10.19*      Amendment 2 to Employment Agreement by and between the Registrant
            and Dennis C. Stempel dated as of January 24, 2003 (13)

10.20*      Separation Agreement and General Release by and between the
            Registrant and Dennis C. Stempel dated September 15, 2003 (14)

10.21*      Employment Agreement by and between the Registrant and David L.
            Renauld dated as of December 19, 2000 (12)

10.22*      Amendment 1 to Employment Agreement by and between the Registrant
            and David L. Renauld dated as of August 29, 2002 (15)

10.23*      Amendment 2 to Employment Agreement by and between the Registrant
            and David L. Renauld dated as of January 24, 2003 (13)

10.24*      Employment Agreement by and between the Registrant and Kenneth R.
            Wood dated as of December 19, 2000 (12)

10.25*      Amendment 1 to Employment Agreement by and between the Registrant
            and Kenneth R. Wood dated as of January 24, 2003 (13)

10.26*      Employment Agreement by and between the Registrant and Stephen L.
            Ward dated as of July 17, 2001 (8)

10.27*      Letter agreement by and between the Registrant and Stephen L. Ward
            dated January 9, 2003 (13)

10.28       Lease Agreement by and between Young Design, Inc. and Merry Fields,
            LLC dated as of August 24, 2000 (6)

10.29       Lease by and between the Registrant and O'Leary-Vincunas LLC dated
            November 1, 2000 (12)

10.30       First Amendment to Lease by and between the Registrant and
            O'Leary-Vincunas LLC dated January 20, 2003 (13)

10.31       Indemnification Agreement by and among the Registrant, Merry Fields,
            LLC, Concorde Equity, LLC, and Michael F. Young dated as of March
            17, 2003 (5)

10.32       Fourth Amended and Restated Registration Rights Agreement dated
            September 17, 1999 (16)

10.33       Registration Rights Agreement by and between the Registrant and
            Boston Federal Savings Bank dated August 20, 1999 (7)

10.34       Purchase Agreement by and between the Registrant and Massachusetts
            Technology Development Corporation dated June 1988 (16)

10.35       First Amendment to the Purchase Agreement by and between the
            Registrant and Massachusetts Technology Development Corporation
            dated December 28, 1988 (17)

10.36       Second Amendment to the Purchase Agreement by and between the
            Registrant and Massachusetts Technology Development Corporation
            dated June 17, 1999 (17)

10.37       Stock Purchase Agreement by and between the Registrant and MTB
            Investment Advisors, Inc. dated as of December 5, 2003 (18)

14.1        Statement of Business Conduct and Code of Ethics of the Registrant

16.1        Letter from Hoffman, Fitzgerald & Snyder, P.C. to the Securities and
            Exchange Commission, dated February 19, 2004

21.1        Subsidiaries of the Registrant

23.1        Consent of BDO Seidman, LLP, Independent Accountants (19)


                                       67
<PAGE>

Exhibit
 Number                          Description of Document

23.2        Consent of Hoffman, Fitzgerald & Snyder, P.C., Independent
            Accountants (19)

31.1        Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
            (19)

31.2        Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
            (19)

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) (19)

99.1        Investor Agreement by and between the Registrant and Concorde
            Equity, LLC dated as of March 17, 2003 (5)

99.2        Investor Agreement by and between the Registrant and Michael F.
            Young dated as of March 17, 2003 (5)

----------
All non-marked exhibits listed above were filed with the Form 10-K filed with
the SEC on February 20, 2004.

*     Management contract or compensatory plan.

      (1)   Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on November 5, 2003.

      (2)   Incorporated herein by reference to the same-numbered exhibit to
            Form 10-Q filed with the SEC on August 14, 2003.

      (3)   Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on May 21, 2001.

      (4)   Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on September 12, 2002.

      (5)   Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on March 20, 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 S-1 filed
            with the SEC on September 27, 1999 (File No. 333-87885).

      (8)   Incorporated herein by reference to the exhibits to Form 10-Q filed
            with the SEC on August 10, 2001.

      (9)   Incorporated herein by reference to the exhibits to Form S-8 filed
            with the SEC on April 11, 2003 (File No. 333-104481).

      (10)  Incorporated herein by reference to the exhibits to Form 10-Q filed
            with the Commission on November 14, 2000.

      (11)  Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on July 16, 2003.

      (12)  Incorporated herein by reference to the exhibits to Form 10-K filed
            with the SEC on March 28, 2001.

      (13)  Incorporated herein by reference to the exhibits to Form 10-K filed
            with the SEC on March 31, 2003.

      (14)  Incorporated herein by reference to the exhibits to Form 10-Q filed
            with the SEC on November 10, 2003.

      (15)  Incorporated herein by reference to the exhibits to Form 10-Q filed
            with the SEC on November 14, 2002.

      (16)  Incorporated herein by reference to the exhibits to Amendment No. 1
            to Form S-1 filed with the SEC on October 15, 1999 (File No.
            333-87885).

      (17)  Incorporated herein by reference to the exhibits to Amendment No. 2
            to Form S-1 filed with the SEC on December 21, 1999 (File No.
            333-87885).

      (18)  Incorporated herein by reference to the exhibits to Form 8-K filed
            with the SEC on December 10, 2003.

      (19)  Filed herewith.


                                       68