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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM TO
 Commission File Number 000-29053
 PROXIM WIRELESS CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    04-2751645(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 1561 Buckeye Drive
Milpitas, CA 95035
(Address of principal executive offices)
 (408) 383-7600
(Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of each exchange on which registeredCommon stock, par value $.01 per share
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
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   DOCUMENTS INCORPORATED BY REFERENCE




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PROXIM WIRELESS CORPORATION
 ANNUAL REPORT ON FORM 10-K
 For the Fiscal Year Ended December 31, 2008
 Table of Contents
 PagePart IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    16Item 1B. Unresolved Staff Comments
    
    
    30Item 2. Properties
    
    
    31Item 3. Legal Proceedings
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    33Item 6. Selected Financial Data
    
    
    35Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    42Item 8. Financial Statements and Supplementary Data
    
    
    43Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    67Item 9A. Controls and Procedures
    
    
    68Item 9B. Other Information
    
    
    68Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    69Item 11. Executive Compensation
    
    
    69Item 12. Security Ownership or Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    69Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    69Item 14. Principal Accounting Fees and Services
    
    
    69Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    70EX-31.1EX-31.2EX-32.1
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PART I
  
 Item 1. Business.
 Overview
  ®
   
    
    Telaxis Communications Corporation  In April 2003, we (then a private company known
as Young Design, Inc.) acquired Telaxis, a publicly traded company focused on
developing high capacity millimeter wave wireless products, and thus became a publicly
traded company. Young Design, Inc. had developed, produced, and sold wireless data
products, primarily in microwave frequencies.
    
    KarlNet, Inc.  In May 2004, we acquired KarlNet, a pioneer and leader in software
development for operating and managing wireless networks.
    
    Terabeam Corporation  In June 2004, we acquired Terabeam Corporation, a developer
and provider of wireless fiber solutions using high frequency millimeter wave (60 GHz
radio frequency) and free space optics (transferring data through the air with light)
technologies which had raised a substantial amount of cash as a private company. In
addition to the cash and wireless fiber solutions, the Terabeam Corporation acquisition
provided us with the capability to pursue non-communication millimeter wave products
business (such as radar systems and sub-systems) from military and non-military
governmental and other customers through its Harmonix Division.
    
    Ricochet Networks  In June 2004, we acquired Ricochet Networks, Inc. Ricochet was
a wireless Internet service provider, originally formed to acquire certain assets from
the bankruptcy estate of
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Metricom, that operated the Ricochet® wireless network in the Denver and San Diego
metropolitan areas.
    
    Proxim Corporation  In July 2005, we acquired substantially all of the assets and
operations of Proxim Corporation (Old Proxim) from the bankruptcy estate of Old
Proxim. Old Proxim was the result of the merger between Western Multiplex Corporation
and Proxim, Inc. in March 2002. Both Western Multiplex and Proxim, Inc. were designers
and manufacturers of broadband wireless systems. In August 2002, Old Proxim acquired
Agere Systems 802.11 wireless local area network equipment business, including its
ORiNOCO® 802.11a and b product line.
   Industry Background and Markets
  Last Mile Access
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Security and Surveillance
  Enterprise Wireless LAN Networks
   ®
 Cellular Backhaul
  Increasing Acceptance and Demand to Carry Voice over Internet Protocol (VoIP)
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Strategy
  Capitalize on our technology expertise to introduce new products rapidly.
 Leverage our channels of distribution.
 Expand our sales efforts and sales outside of the United States.
 Capitalization of Assets.
 Products
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Broadband Wireless Access Products
   Tsunami MP.11.
   WiMAX. ®
  Wi-Fi Mesh.
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MeshMAX.
 Enterprise Wi-Fi Products
 ORiNOCO Access Points.
  ORiNOCO
Client Cards.
 Point-to-Point Products
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Lynx products.
 Tsunami products.
 Quickbridge 60250 product.
 GigaLink products.
  Technology
  Digital signal processing
technology.
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MAC.
 Networking
 System
software.
 Radio
frequency technology.
 Research and Development
  
    
    advancing our broadband mesh and MeshMAX systems;
    
    advancing our point-to-multipoint systems;
    
    advancing our point-to-point systems;
    
    adapting our products to additional frequencies and interfaces;
    
    developing higher speed products;
    
    designing our products for lower cost, outsourced manufacturing, assembly, and
testing.
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Sales and Marketing
       Customer Service
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Manufacturing
    
    
    an unpredictable customer demand environment;
    
    limited backlog;
    
    uncertain acceptance of new products and services;
    
    competition; and
    
    challenges in managing growth.
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Competition
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Intellectual Property
    
    
    a three-year supply agreement pursuant to which Agere originally agreed to supply
Old Proxim with chipsets, modules and cards at specified prices;
    
    a perpetual license originally enabling Old Proxim to use Agere technology related
to the wireless LAN equipment business; and
    
    a 7-1/2 year patent cross-license agreement for Old Proxims and Ageres respective
patent portfolios.
  
    
    PTP radio transmission and circuit design
    
    WLAN and Mesh Layer 2 MAC
    
    PMP and WLAN Layer 3 Routing
    
    PMP and WLAN Mobility
    
    Wireless LAN Switch
    
    Antenna Design
  Government Regulation
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
    
    decrease the growth of the broadband wireless industry;
    
    hinder our ability to conduct business internationally;
    
    reduce our revenues;
    
    affect the costs and pricing of our products;
    
    increase our operating expenses; and
    
    expose us to significant liabilities.
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Employees
  
 Item 1A. Risk Factors.
 General Overview
   Cautionary Statements
  
    
    We have been unable to increase our revenues and may be unable to grow our revenues
in the future.We have been unable to increase our revenues for a number of quarters
in a row despite being in what are perceived as expanding markets. This is having an
adverse impact on our business, financial condition, and relations with customers,
suppliers, employees, investors, and others. Our continued inability to increase our
revenues could have a material adverse affect on our ability to continue as a going
concern.
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
    
    We cannot predict whether we will be able to achieve profitability, which could
adversely affect our ability to continue as a going concern and our stock price.We
have not been profitable for the last three years. We have made no predictions
concerning our future profitability or lack of profitability. Our inability to achieve
profitability may affect our ability to continue as a going concern and cause the
market price of our stock to decline or prevent it from rising.
    
    We currently have limited capital resources, which could adversely impact our
operations, ability to grow our business, attractiveness as a supplier to customers,
attractiveness to investors, and viability as an ongoing company.We have a recent
history of unprofitable operations, and our capital resources have been declining and
are very limited. These factors could cause potential customers to question our
long-term viability as a supplier and thus decide not to purchase products from us.
Further, our limited capital resources could inhibit our ability to grow our business
because typically we have to pay our suppliers sooner than we receive payment from our
customers. These factors could cause potential investors to question our long-term
viability or believe that we will need to raise additional capital on terms more
favorable than a typical investor would obtain by simply buying our stock in the public
markets and thus decide not to purchase our stock. All these factors could have an
adverse impact on our operations, financial results, stock price, and viability as an
ongoing company.
    
    We have limited capital resources and our prospects for obtaining additional
financing, if required, are uncertain.Additional financing may not be available to us
in the future on acceptable terms or at all. If funds are not available, we may have
to delay, scale back, or terminate business or product lines or our sales and
marketing, research and development, acquisition, or manufacturing programs. Our
inability to obtain capital could seriously damage our business, operating results,
financial condition, viability as an ongoing company, and cause our stock price to
decline.
    
    Our common stock may be delisted from the Nasdaq Capital Market, which could
adversely affect our business and relations with employees, customers, and others.Our
common stock is currently traded on the Nasdaq Capital Market. We do not currently
comply with the continued listing requirements of that market and thus our stock may be
delisted from that market. Some of the requirements we dont meet have been suspended
by Nasdaq through April 20, 2009. We may receive grace periods to try to regain
compliance with some or all of the current deficiencies. There can be no assurance
that we will be able to achieve compliance with these continued listing requirements at
all or within any grace periods we receive. Any actions we might take to regain
compliance (such as a reverse stock split) may have adverse effects on us, such as
adverse reaction from employees, investors and financial markets in general, adverse
publicity, and adverse reactions from customers. Should our stock be delisted from the
Nasdaq Capital Market, we may apply to have our stock traded on the Over-The-Counter
Bulletin Board or the Pink Sheets. There can be no assurance that our common stock
would be timely admitted for trading on those markets. These alternatives may result
in a less liquid and less transparent market available for existing and potential
stockholders to buy and sell shares of our stock and could further depress the price of
our stock.
    
    We have engaged an investment bank to assist us with the exploration of strategic
alternatives, but there can be no certainty as to whether any strategic transaction
will occur or the terms of any such transaction. In light of the unsolicited
expressions of interest received by us, we engaged an investment banker to assist us
with exploring strategic alternatives. These alternatives may include a sale of the
company or some, substantially all, or all of the assets of the company. However,
there can be no certainty as to whether any strategic or other actions might be
undertaken following this engagement; the type, structure, timing, and terms of any
such potential actions; the level of interest of third parties in pursuing any possible
transactions; the time and costs required to consider possible strategic and other
transactions and other corporate actions; management, affiliate, and board interest in
and distraction due to considering these matters; and reactions, either positive or
negative, of investors, competitors, customers, employees, and others to our engaging
investment bankers and to any specific strategic alternative or opportunity selected by
us.
    
    We may raise additional capital on terms that we or our stockholders find onerous,
which could adversely affect our financial results and stock price.In the future, we
may be able to raise additional debt or equity capital only on terms that we find
onerous. Alternatively, some of our stockholders may find the terms of our capital
arrangements to be onerous. We may also obtain funds
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through arrangements with partners or others that may require us to relinquish rights to
certain of our technologies or potential products or other assets. The terms of our
capital arrangements or the perceived onerous nature of those arrangements could
adversely affect our financial results and stock price.
    
    We may sell or otherwise dispose of portions of our business and assets for
strategic reasons or to raise capital, which could adversely affect our business,
financial results, and relationships.As we analyze our company, strategic direction,
and capital requirements, we may decide to sell some of our product lines, intellectual
property, or other assets. We may decide to do so for a variety of reasons, including
to raise capital, to focus on certain portions of our current business, and to reduce
our expenses. Any such decisions could adversely impact our relationships with
customers, employees, investors, and others for a variety of reasons depending on the
actual decisions made. For example, it may be perceived that such decisions are due to
our questionable financial viability. It may be perceived that we have decided to
dispose of certain product lines that some people may believe have more potential than
others. Any such decisions and related consequences could have an adverse impact on
our business, financial results, and relationships with third parties.
    
    Our lower stock price and weaker financial condition may make it harder to attract
and retain qualified employees.Our lower stock price, resulting decreased incentive
impact of stock options, difficulties in growing our revenue, lower cash levels, and
general weaker financial condition may make it harder for us to retain our current
employees in light of other employment opportunities that may be available to them. In
addition, those same factors may make it harder for us to attract new employees. These
difficulties may be exacerbated in our international locations, including our
Hyderabad, India research and development center, which are located further from our
headquarters. Our inability to retain current employees and attract new employees
could have a material adverse impact on our business, financial condition, and
relationships with third parties.
    
    The current economic downturn is having a significant adverse impact on our business
due in part to our being a smaller, younger company.The overall economic climate in
the United States and many other parts of the world is in a downturn. This downturn
has resulted in our customers having less capital available from capital markets, and
less willingness to spend internal capital, to purchase equipments such as ours. As a
result, potential customers may be less willing to spend their limited budgets on
products from us, a relatively small, young company that may not survive the leaner
economic times. Also, it may be causing customers to pay us slower. Because we do not
have the financial resources or name recognition of larger companies, this economic
cycle may adversely affect the growth and stability of our business and our financial
condition and results of operations.
    
    The broadband wireless equipment industry in which we principally operate is
intensely competitive which could negatively impact our financial results.The
telecommunications equipment industry in which we operate is intensely competitive.
Most of our products are intended for outdoor broadband wireless networks (generally
our broadband wireless access and point-to-point products) or indoor wireless networks
(generally our enterprise Wi-Fi products). Competition is intense in this industry for
a number of reasons. For example, there are relatively few barriers to entry in this
market. Also, this industry has attracted substantial media and other attention in
recent months in part due to the ability of this equipment to provide broadband
Internet connectivity simply, quickly, and efficiently. These same reasons, among
others, have caused a number of companies to develop products that compete (or could be
viewed as competing) with ours. This large number of companies offering products that
may be perceived to be similar or even interchangeable with our products can have the
effect of reducing the prices at which we are able to sell our products. In turn, this
can reduce our gross margins and negatively impact our general financial results.
    
    We face substantial competition from a number of larger companies with substantially
greater resources and longer operating histories, and we may not be able to compete
effectively.Many of our competitors or perceived competitors offer a variety of
competitive products and services and some may offer broader telecommunications product
lines. Many of these companies have greater customer recognition, installed bases,
financial resources, and sales, production, marketing, manufacturing, engineering, and
other capabilities than we do. Especially in these turbulent economic times, these
larger companies may be more successful in obtaining customers.
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
    
    We also face competition from private and start-up companies given the limited
barriers to entry in our business.We also face actual and potential competition from
start-up and other private companies that are developing and marketing new commercial
products and services. Many of the products we sell are based on standards established
by the Institute of Electrical and Electronics Engineers (IEEE) that require
interoperability. Also, there are not substantial technical development difficulties,
manufacturing difficulties, prohibitive intellectual property rights, or high business
start-up costs that may create greater barriers to entry in other businesses. As a
result, there are limited barriers to entry into a number of markets we serve. This
lack of significant barriers and the perceived attractiveness of some of these markets,
among other reasons, have resulted in private companies entering these markets.
    
    We may experience difficulty in differentiating our products from other broadband
wireless products which may reduce our sales and gross margins.We believe that some
products in the broadband wireless equipment business in which we primarily operate
have become commodities in which there is intense price competition, and we believe
that trend will continue and intensify. We need to carefully and clearly distinguish
our products from competing products and technologies that may be able to provide
wireless broadband access or connectivity. Failure to distinguish our products for our
customers, investors, and others could hinder market acceptance of our products, delay
our obtaining customers for our products, force reductions in contemplated sales prices
of our products, and reduce our overall sales and gross margins. This ability to
distinguish is becoming more important as we try to introduce more feature-rich
products at higher prices.
    
    Potential customers may view price as the primary differentiator between our
products and products of our competitors, which could reduce the price at which we can
sell our products and negatively impact our financial results.Because many products
in our broadband wireless equipment business have to comply with specific public
standards, at times potential customers may perceive there to be little other than
price to differentiate our products from products of a competitor. This intense
customer focus on pricing can have the effect of reducing the prices at which we are
able to sell our products. In turn, this can reduce our gross margins and negatively
impact our general financial results.
    
    Alternative broadband connectivity technologies may have advantages over our
products and make our products less attractive to customers.A number of competing
technologies may be able to provide high-speed, broadband access or connectivity.
These competing technologies include digital subscriber lines, hybrid fiber coaxial
cable, fiber optic cable, T-1/E-1 and other high-speed wire, laser (also known as free
space optics), satellite, and other mesh wireless, point-to-multipoint wireless, and
point-to-point wireless technologies. Some of these technologies may have advantages
over our products, such as lower cost, greater range, better security, and greater
current market acceptance.
    
    New broadband connectivity technologies may be developed that have advantages over
our products and make our products less attractive to customers.New products or new
technologies may be developed that supplant or provide lower-cost or better performing
alternatives to our products. These new products, including new products we introduce,
could reduce the sales of our existing products.
    
    The actual or potential availability of new broadband connectivity technologies
could cause our customers to delay buying decisions.We operate in a business where
there is rapid technological change, and new standards, products, and technologies are
continually introduced to the market in actual or conceptual form. These new products
or technologies may have or appear or be described to have advantages over our products
or other products then currently available. Even though actual products may not be
available until some (perhaps indefinite) time after initial introduction of the
conceptual standard, product, or technology, the possibility of obtaining these new
products could cause potential customers to delay their decision to buy products such
as ours. This delay could adversely impact our business, financial condition, and
results of operations.
    
    The costs of developing products to operate in accordance with these new broadband
connectivity technologies would be substantial and could adversely affect our operating
results.As a well-known supplier of broadband wireless equipment, we are expected to
provide products on the cutting-edge of technology. This means supplying products
operating in accordance with new
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broadband connectivity technologies. Developing these products is a time-consuming and
expensive process. These costs could adversely affect our operating results.
Alternatively, if we do not develop new products, customers may view us as not
maintaining our technological leadership so be unwilling to purchase products from us.
    
    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.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 while
networking based providers prefer ethernet interfaces and data rates. If we are unable
to satisfy one or more of the requirements of our current and prospective customers, we
may lose, or fail to gain, meaningful market share.
    
    We may not develop products for the portions of the broadband connectivity and
access markets that grow.Predicting which segments of the broadband connectivity and
access markets will develop and at what rate these markets will grow and in what
geographic locations 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.
    
    Our sales may decline if we are unable to keep pace with rapid technological changes
and industry standards.Our ability to succeed in our competitive market will depend
upon successful development, introduction, and sale of new products and enhancements on
a timely and cost-effective basis in response to changing customer requirements and
competitors product developments. We may not be successful in selecting, developing,
manufacturing, and marketing new products or enhancements which could adversely affect
our sales. Our customers may believe that we are not investing sufficiently in
research and development to maintain a strong pipeline of new products and therefore
decide not to purchase current products from us.
    
    We believe that the prices for our products will decline over time which could hurt
our financial results.We believe that average selling prices for our products will
tend to decline from the point at which a product is initially priced and marketed.
Reasons for this decline may include the maturation of such products, the effect of
volume price discounts in existing and future contracts, technology changes, and the
intensification of competition, including from lower-cost foreign suppliers. This
price decline could hurt our financial results.
    
    The expected price decline of our products will hurt our financial results unless we
are able to offset those declines with cost savings or new product introductions.We
will attempt to offset expected price declines of our products by reducing our product
costs and non-product costs and by introducing new products with higher gross margins.
If we are unable to offset declining selling prices by reducing direct materials and
manufacturing expenses, our gross margins will decline. If we cannot develop new
products in a timely manner or we fail to achieve increased sales of new products at
higher gross margins, our revenue and gross margins may decline.
    
    Our plans to continue to introduce new products will require capital and other
investments that may not be recovered.We devote significant resources to the
development and marketing of new products and technologies and expect to continue to do
so. These investments include facilities, equipment, inventory, personnel, and other
items to develop and produce these products and to provide marketing, sales, service
and support, and administration organizations to service and support these products.
We anticipate many of these commitments and expenditures would be made in advance of
realization of increased sales, which may not occur. If sales do not increase as
expected, our gross margins and general financial performance would be adversely
affected.
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
    
    Our financial results have fluctuated significantly, and we expect the fluctuations
will continue for a variety of reasons, many of which are out of our control.Our
quarterly financial results have fluctuated significantly for a number of reasons
including our acquisitions of the assets of Proxim Corporation in July 2005; Terabeam
Corporation, Ricochet Networks, Inc., and KarlNet, Inc. in the second quarter of 2004;
the combination of Telaxis and Young Design in April 2003; our limited long-term
commitments from customers; the receipt of significant customer orders from time to
time; timing of obtaining customers for any new products we may introduce; the mix of
our product sales; our manufacturing capacity constraints and our ability to fulfill
orders; our inability to obtain components in the quantities we need; new product
introductions by us or by our competitors; seasonal factors that may affect capital
spending by customers; and general economic conditions. We expect that many of these
and other factors will continue to affect our business and will cause our financial
results to fluctuate in the future.
    
    Our past acquisition and disposition activity contributes to the difficulty in
predicting our future financial performance.We have engaged in a number of strategic
activities over the years which have at times substantially changed the business and
operations of the company. These acquisitions and dispositions have caused our
financial results to fluctuate, sometimes dramatically. These past transactions and
potential future acquisition or disposition activity could contribute to fluctuations
in our financial results and to difficulties in predicting our financial performance.
    
    We may not achieve the contemplated benefits of any acquisition we make which could
materially and adversely affect our business.We may not be able to achieve the
expected synergies and other benefits of any acquisitions we make at all or to the
extent and in the time periods expected. We may not be able to integrate the
operations in a cost-effective, timely manner without material liabilities or loss of
desired employees, suppliers, or customers. Our management may be distracted from our
core business due to the acquisition. The expected cost savings from the transaction
may not be fully realized or may take longer to realize than expected. The time and
costs required to integrate, establish, manage, and operate the operations we acquire
may be greater than we anticipated. Our investors, competitors, customers, suppliers,
employees, and others may react negatively to the acquisition. We may make
acquisitions in business areas in which we have little experience operating so may not
fully benefit from the acquisition. We may face unexpected difficulties, costs, and
delays in implementing common internal controls, disclosure controls, systems, and
procedures, including financial accounting systems, particularly in light of the
enhanced scrutiny given to those items in the current environment. Addition of these
operations may increase the difficulty for us, financial analysts, and others to
predict the combined companys future business and financial performance. These
factors may cause us to want or need to raise additional debt or equity capital, which,
if available at all, may be on terms deemed undesirable by investors, customers,
suppliers, employees, or others. These factors could materially and adversely affect
our business, perception in our market, and financial results. Should these factors
materially and adversely affect our business, it could result in a material impairment
charge to write-down goodwill.
    
    Our past acquisitions and dispositions have exposed us to risks and liabilities,
which could have a material adverse affect on our business.We have been and may be
further exposed to lawsuits, risks, liabilities, or obligations imposed on or
threatened against us arising from the various acquisition and disposition activities
we have undertaken. For example, we believe that Symbol Technologies, Inc. commenced
its lawsuit against us as a result of our acquiring Proxim Corporations operations.
Our acquisition of Terabeam Corporation exposed us to a substantial number of leases
for unused facilities, not all of which have been resolved to date. Under our
agreement to buy KarlNet, Inc., we agreed to pay up to an additional $2.5 million if
certain conditions were met. Although it is our position that none of that amount is
owed, we have received a letter from sellers demanding payment of a portion of this
amount. These contingencies and risks could result in obligations and liabilities for
us, which could have a material adverse affect on our business.
    
    The fact that we receive few long-term purchase commitments from customers
contributes to the difficulty in predicting our future financial performance.Due to
the nature of our products and customers, we generally have a very short time between
receiving an order and shipping the order. Few of our customers provide us with
long-term purchase commitments. As a result, we generally have a relatively low
backlog and have limited visibility of sales going forward. This lack of visibility
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contributes to the difficulty in predicting our future financial performance by us,
financial analysts, and investors.
    
    The fact that we receive few long-term purchase commitments from customers
contributes to our inventory risk which could adversely affect our financial results.
Due to the nature of our products and customers, we generally have a very short time
between receiving an order and shipping the order. Few of our customers provide us
with long-term purchase commitments. As a result, we generally have limited visibility
of sales going forward. However, our customers generally demand relatively quick
delivery of products. This means that we have to estimate product demand. If we
under-estimate demand, we may lose sales. If we over-estimate demand, we may end up
with having to take charges for excess and/or obsolete inventory or have to pay
substantial amounts to cancel orders with our suppliers, both of which we have had to
do in the past. These factors could adversely affect our financial results.
    
    Receipt of significant customer orders have caused our financial results to
fluctuate and contribute to the difficulty in predicting our future financial
performance.At times, we have received significant orders from customers that have
caused our financial results to fluctuate. We expect that at times we may get similar
significant orders in the future which could cause significant fluctuations in sales,
gross margins, and operating results. These fluctuations contribute to the difficulty
in predicting our future financial performance by us, financial analysts, and
investors.
    
    Changes in stock option accounting rules have adversely impacted our reported
operating results and may adversely affect our competitiveness in the employee
marketplace.We have adopted FASB Statement No. 123R (SFAS 123R), Share-Based
Payment, as our accounting method for stock options for accounting periods beginning
January 1, 2006 and after. SFAS 123R requires that all share-based payments to all
employees, including grants of employee stock options, are to be included in the
financial statements based on their fair values. The adoption of SFAS 123R and
resulting charges on our financial statements have significantly reduced our operating
and net income, and we expect will continue to do so. These charges may result in our
having operating and net losses rather than operating and net profits. As a result of
adopting the changes specified in SFAS 123R, it could negatively impact our use of
employee stock plans to reward employees, putting us at a competitive disadvantage in
attracting and retaining key employees.
    
    Our indirect sales model makes us dependent on third party distributors and
resellers, which could adversely impact our financial results and reputation.Most of
our products are sold through both domestic and international distributors and
resellers. These distributors and resellers carry and sell products from other
suppliers in addition to our own. We expect to continue to engage additional
distributors and resellers to sell our products. Use of distributors and resellers
makes us dependent, to a large extent, on those third parties who will have the
relationships with the end customers. We may not be successful in attracting qualified
distributors and resellers. Use of these distributors and resellers could cause
significant fluctuation in and adversely impact our future revenue and operating
results due to price, extended payment term, and other concessions demanded by our
distributors, our limited relationships with actual end-users of our products, the time
and costs associated with maintaining our distributor and reseller relationships, the
time and costs associated with engaging new distributors and resellers, the possibility
that they may give other suppliers products priority over our own, the possibility of
channel and price conflict, the possibility of customer confusion and customer
dissatisfaction, and potential accounting, operational, and financial results problems
if they build excess inventory.
    
    We have a limited number of distributors so any decrease in business from them could
cause a decline in our revenue.The loss of business from any of our distributors or
the delay of significant orders from our distributors could significantly reduce our
revenue, even if it is only temporary. We do not have long-term contracts with our
distributors. Our ability to accurately forecast our revenue hinges on the timing and
size of future purchase orders taken by our distributors. Any reduction in revenue or
in our ability to collect that revenue from customers could have a materially adverse
affect on our operating results and financial condition.
    
    We may be unsuccessful in our efforts to obtain larger customers, and these efforts
could adversely impact our current business.We are trying to expand our customer base
by obtaining
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larger customers. Our efforts may not be successful. For example, larger customers may
not want to deploy products like many of ours that operate in unlicensed frequencies or
they may seek products with feature sets that are different from what we offer. Our
efforts could adversely impact our current business due to diversion of efforts and
attention, our current customers not being pleased by our customer expansion efforts,
and other reasons.
    
    Our business depends in part on continued demand for broadband connectivity and
access.The future success of our business is dependent in part upon the continued and
increasing demand for high-speed, broadband connectivity and access, particularly with
regard to the Internet, and for high-speed telecommunications products. The markets
for such services may not grow at all or as expected.
    
    We depend on our senior employees who are extensively involved in many aspects of
our business, and our business would likely be harmed if we lose their services and
cannot hire additional qualified personnel.Particularly because we are a small
company, our future operating results depend in significant part upon the continued
contributions of senior management and key sales and technical personnel, many of who
would be difficult to replace if their services become unavailable to us due to death,
illness, or other reasons. Future operating results also depend upon the ability to
attract and retain qualified management, sales, and technical personnel. Competition
for these personnel is intense, and we may not be successful in attracting or retaining
them. Only a limited number of persons with the requisite skills to serve in these
positions may exist, and it may be difficult for us to hire the skilled personnel we
need. We have experienced difficulty in attracting, hiring, and retaining experienced
sales personnel with the right blend of skills for our company, and we may experience
difficulty with other types of personnel in the future.
    
    We have no key-man life insurance on any of our executive officers or other
employees.Loss of the services of any of our key executive officers or other key
employees could have a material adverse effect on our business, financial condition,
and results of operations. The lack of key man insurance means that we would receive
no insurance proceeds to buffer any such adverse effects.
    
    We do not currently have a succession plan in place.We currently do not have a
succession plan in place if our chief executive officer or other senior personnel were
to become unable to perform their responsibilities due to illness, injury, termination
of service, or other reasons. Loss of the services of our chief executive officer or
other senior personnel could have a material adverse effect on our business, financial
condition, and results of operations. Lack of a succession plan could exacerbate our
difficulties in overcoming the issues created by the loss of services of our chief
executive officer or other senior personnel due to uncertainty and responsibility
transition issues.
    
    Our limited internal manufacturing capacity may be insufficient to meet customers
desires for our products, which could harm our sales and damage our reputation.Our
internal manufacturing capacity, by design, is limited. At times, we have been unable
to deliver certain internally-manufactured products as quickly and in the quantities
that customers desire. These inabilities could damage relationships with customers and
have a material adverse effect on our reputation, business, financial condition, and
results of operations.
    
    Our limited internal manufacturing capacity makes us dependent on contract
manufacturers, which could harm our sales and damage our reputation.Our internal
manufacturing capacity, by design, is limited. We currently expect to rely on domestic
and international contract manufacturers to provide manufacturing of our complete
products, components, and subassemblies. Our failure to obtain satisfactory
performance from any contract manufacturers could cause us to fail to meet customer
requirements, lose sales, and expose us to product quality issues. For example, a
recent decision by one of our contract manufacturers to transition manufacturing to
China has had a negative impact on our ability to obtain quality product in the
quantities and at the times desired. In turn, this could damage relationships with
customers and have a material adverse effect on our reputation, business, financial
condition, and results of operations.
    
    We may be unable to engage contract manufacturers to manufacture our products which
could force us to increase our internal manufacturing capacity.The technical nature
of our products, the wide variety of our products, and the current uncertainty and
historical fluctuation in our business may make contract manufacturers unwilling or
reluctant to manufacture products for us at all or on
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acceptable terms. It may be difficult and time-consuming to engage a third-party
manufacturer or manufacturers. If we are unable to engage a third-party manufacturer or
manufacturers, we may have to increase our internal manufacturing capability. We may be
unable to do so at all or without significant expense.
    
    Interruptions in our manufacturing operations could have an adverse effect on our
revenue.Any interruption in our manufacturing operations could cause our product
supply to be interrupted or lose market opportunities and have an adverse affect on our
revenue, customer relationships, and operating results. Interruptions could result
from introduction of new products or processes; timing, language, cultural, and other
issues arising from the use of contract manufacturers located outside the U.S.;
terminations of relationship with manufacturers; not producing products at adequate
capacity; delays in shipments of our products due to changes in demand; or insufficient
quality or quantity of products.
    
    Because many of our components or products are provided by limited or single-source
suppliers, we may not be able to obtain sufficient quantities to meet our business
needs.Many of the components, subassemblies, and services necessary for the
manufacture of our systems are obtained from a sole supplier or a limited group of
suppliers. We generally do not have any committed long-term supply agreements with
these vendors. We have from time to time experienced an inability to obtain an
adequate supply of required components and subassemblies. Our inability to obtain
these components in the quantities and at the times we desire could halt production,
reduce our ability to meet customer demands, and reduce our sales.
    
    Because many of our components or products are provided by limited or single-source
suppliers, we may not be able to obtain sufficient quantities at prices to make our
products profitably.Many of the components, subassemblies, and services necessary for
the manufacture of our systems are obtained from a sole supplier or a limited group of
suppliers. Our inability to obtain these items at the prices we desire could hurt our
sales and lower our margins.
    
    Because many of our components or products are provided by limited or single-source
suppliers, we may have to purchase extra inventory that ultimately may not be used.
Many of the components, subassemblies, and services necessary for the manufacture of
our systems are obtained from a sole supplier or a limited group of suppliers. A
supplier may decide to end the manufacture of a product and provide us with an
opportunity to make a last-time buy of the product. In that situation, we have to
estimate our future needs for that product. If we underestimate, we would have an
insufficient supply to manufacture our products. If we overestimate, we may end up
purchasing inventory that is not used or becomes obsolete and that ultimately we have
to write off. That loss could adversely affect our financial results.
    
    Our inability to receive sufficient quantities of limited or single source
components or products could make us develop alternative sources, which could reduce
our sales and may be time consuming and expensive if it can be done at all.In the
event of a reduction or interruption in the supply of a key component, we may have to
develop alternative sources for the component. We may not be able to locate an
alternative supplier of certain products or components at all or at acceptable prices.
Our inability to develop alternative sources for components could result in delays or
reductions in product shipments, increase our costs, and reduce or eliminate our profit
margins. Even if we are successful at developing alternative sources, a significant
amount of time could be required to receive an adequate flow of components from the
alternative source.
    
    Our inability to receive sufficient quantities of limited or single source
components or products could make us reconfigure our products, which could reduce our
sales and may be time consuming and expensive if it can be done at all.In the event
of a reduction or interruption in the supply of a key component, we may have to
reconfigure our products to work with different components. Reconfiguration of our
products to adapt to new components could entail substantial time and expense. We may
be unable to reconfigure our products to work with new components. Even if we are
successful at reconfiguring our products, a significant amount of time could be
required to receive an adequate flow of replacement components.
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
    
    Our reliance on limited or single-source suppliers makes us vulnerable to
difficulties at those suppliers.The production of our products is vulnerable to
production difficulties, quality variations, work stoppages, acts of God such as
weather and fire, and other events beyond our control at our suppliers. All of these
events could adversely affect the cost and timely delivery of our products.
    
    Failure to maintain adequate levels of inventory could result in a reduction or
delay in sales and harm our results of operations.In a competitive industry such as
the wireless telecommunications equipment industry, the ability to effect prompt
turnaround and delivery on customer orders can make the difference in maintaining an
ongoing relationship with our customers. This competitive market condition requires us
to keep some inventory of certain products on hand to meet such market demands. Given
the variability of customer requirements and purchasing power, it is difficult to
predict the amount of inventory needed to satisfy demand. If we over- or
under-estimate inventory requirements to fulfill customer needs, our results of
operations could be adversely affected. If market conditions change swiftly, it may
not be possible to terminate purchasing contracts in a timely fashion to prevent
excessive inventory increases. In particular, increases in inventory could materially
adversely affect operations if such inventory is ultimately not used or becomes
obsolete.
    
    Difficulties in reducing our operating expenses could harm our results of
operations.A material portion of our operating expenses is fixed. If we experience a
material reduction or delay in sales, we may find it difficult to reduce our operating
expenses on a timely basis. Difficulties of this nature would adversely affect our
financial condition and harm our operating results.
    
    We typically permit flexible purchase order changes that may adversely affect our
margins and operating results.We have typically permitted purchase orders to be
modified or canceled with limited or no penalties. Any inability or failure to reduce
actual costs or cancel supplier and contract manufacturing commitments in response to a
customer modification or cancellation could adversely affect our gross margins and
operating results.
    
    Our business and financial results could be adversely affected by warranty claims.
Products as complex as ours frequently contain undetected errors or defects, especially
when first introduced or when new versions are released. This is especially a concern
for us given our anticipated continuing introduction of new products. The occurrence
of such errors or defects could result in products being returned under warranty for
repair or replacement with us having to bear the associated expense. Although we
maintain what we believe to be appropriate overall warranty reserves based on
historical repair occurrences, an unanticipated high repair occurrence related to a
specific product or number of products could make the reserves inadequate at any
specific time and adversely affect our financial results.
    
    Our business and financial condition could be adversely affected by product
liability claims.Products as complex as ours frequently contain undetected errors or
defects, especially when first introduced or when new versions are released. This is
especially a concern for us given our anticipated continuing introduction of new
products. The occurrence of such errors or defects could result in product liability
claims being brought against us. Although we have not had any material product
liability claims brought against us to date, such claims may be brought in the future
and could adversely affect our financial results.
    
    Our international business activities expose us to a number of risks not present in
our United States operations, which we have limited experience addressing.Our
international business activities may carry additional costs, risks and difficulties,
including complying with complex foreign laws and treaties applicable to doing business
and selling our products in other countries; availability of suitable export financing;
timing and availability of export licenses; tariffs and other trade barriers;
difficulties in staffing and managing foreign operations; difficulties in complying
with foreign customs and general ways of doing business; and political and economic
instability which may be more pronounced in less-developed areas. We have limited
experience in facing many of these issues and may not be able to address the issues in
a manner to enable us to expand our international sales and operations.
    
    Because of international sales and operations, we may be exposed to currency risk
that could adversely affect our financial condition and results of operations.A
significant portion of our sales
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are made to customers located 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.
    
    Given the extent of our international operations, the decline in the value of the
dollar has increased our expenses.We have significant international operations and
employees located in countries outside the United States. Often salaries of those
employees and other expenses of our international operations are paid in local currency
of the those countries. The decline in the value of the dollar relative to the value
of many currencies of other countries has had the impact of increasing the net expense
to us of our international operations. Given the relatively fixed nature of these
expenses, it is difficult to reduce these expenses quickly. Continued decline in the
value of the dollar will continue to increase the net expense of our international
operations. These increased expenses can adversely affect our results of operations
and overall financial condition.
    
    The laws and legal systems of foreign governments may limit our ability to enforce
our rights against our customers.Our customer purchase and other agreements may be
governed by foreign laws, which may differ significantly from United States laws.
Also, the court systems and procedures in foreign countries may differ significantly
from United States courts. Therefore, we may be limited in our ability to collect our
accounts receivable, to enforce our other rights under such agreements, and to collect
damages, if awarded.
    
    Lack of relationships in foreign countries may limit our ability to expand our
international operations and sales.In many cases, regulatory authorities in foreign
countries own or strictly regulate local telephone companies. Established
relationships between government-owned or government-controlled telephone companies and
their traditional indigenous suppliers of telecommunications equipment often limit
access to those markets. The successful expansion of our international operations in
some markets will depend in part on our ability to form and maintain strong
relationships with established companies providing communication services and equipment
or other local partners in those regions. The failure to establish regional or local
relationships could limit our ability to successfully market or sell our products in
international markets and expand our international operations.
    
    Governmental regulation affecting markets in which we compete or products we make or
services we offer could adversely affect our business and results of operations.Radio
communications and services are extensively regulated by the United States and foreign
governments as well as by international treaties. To operate in a jurisdiction, we
must obtain regulatory approval for our products and comply with differing and evolving
standards and regulations. The delays inherent in this approval process may cause the
cancellation, postponement, or rescheduling of the installation of communications
systems by us and our customers. The failure to comply with regulations in a
jurisdiction could result in the suspension or cessation of our ability to operate in
that jurisdiction. New regulations or changes in the interpretation of existing
regulations could require us to modify our products or services and incur substantial
costs to bring our products or services into compliance.
    
    Our products typically require regulatory approval before they can be commercially
deployed.Our products must typically receive regulatory approvals before they can be
commercially deployed. As a result, customers may require that we obtain these
approvals before buying or agreeing to buy our products. Obtaining these approvals can
be a long, expensive process. Delays in obtaining the necessary approvals could hinder
market acceptance of our products, delay sales of our products, and adversely affect
our ability to market those products.
    
    New regulations could have an adverse impact on our ability to supply products and
our financial results. New regulations could be enacted that adversely impact our
business. New regulations such as these may disrupt our supply of components needed to
supply our products at the times and in the quantities desired by our customers. They
may also require that we revise the design of some of our products and have some of our
products re-qualified with our customers or regulatory
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agencies. The new regulations may increase the costs of supplying products. These
results could adversely impact our product supply capabilities, relationships with
customers, and financial results.
    
    Changes in governmental regulation could adversely affect our competitive position.
Governmental laws and regulations applicable to our products and services evolve and
change frequently. These changes could hurt our competitive position, particularly if
the changes have more impact on us than our competitors.
    
    At time we rely on a limited number of customers for a material portion of our
sales, which exposes us to risks relating to the loss of sales and credit risk.For
the year ended December 31, 2008, only one unrelated customer accounted for more than
10% of our sales. In addition, we have a number of other substantial customers. We
are currently attempting to increase our number of substantial customers which could
increase our customer concentration risks. Our ability to maintain or increase our
sales in the future will depend in part upon our ability to obtain additional orders
from these customers. Our customer concentration also results in concentration of
credit risk. An acquisition of one of our significant customers could cause any
current orders to be delayed or canceled and no new orders being placed with us and
could further concentrate our customer base. Adverse developments such as these with
our significant customers could adversely impact our sales and financial results.
    
    The continuing uncertainty in the telecommunications industry has caused us to
maintain tight credit limits, which may be adversely affecting our sales.Many of our
potential customers have faced or are facing financial difficulties due to the
industry-wide uncertainty and depressed conditions. As a result, we have maintained
what we believe to be stringent policies concerning the extension of credit to
potential customers. We believe that these tight credit policies may be limiting our
sales. As a result, we may loosen our credit policies, which may increase our sales
but may also increase the likelihood of having bad debts from customers who cant or
wont pay.
    
    Given the relatively small size of some of our customers, they may not be able to
pay for the products they purchase from us in the time period we expect or at all.We
are subject to credit risk in the form of trade accounts receivable. We could face
difficulties in receiving payment in accordance with our typical policies allowing
payment within 30 days, although we have granted longer terms to some customers. Some
of our customers are new and smaller service providers which do not have the financial
resources of existing, larger service providers. Any delay, inability, or refusal to
pay for purchases of our products may materially adversely affect our business.
Difficulties of this nature have occurred in the past, and we believe they will likely
occur in the future.
    
    Our failure or inability to protect our intellectual property could adversely affect
our business and operations, particularly in our equipment business which has otherwise
relatively low barriers to entry.Our ability to compete depends in part on our
ability to protect our intellectual property. The steps we have taken to protect our
technology may be inadequate to prevent misappropriation of our technology and
processes. Existing trade secret, trademark, and copyright laws offer only limited
protection. Our patents could be invalidated or circumvented. Inability or failure to
protect our intellectual property could remove a barrier to a competitor entering our
broadband wireless equipment business, which in general has lower barriers to entry
than other businesses.
    
    Laws of foreign countries where we do business may provide less intellectual
property protection for our products, which could adversely affect our ability to
compete in our price-sensitive business.The laws of certain foreign countries in
which our products are or may be developed, manufactured, or sold may provide less
protection for the intellectual property contained in our products. We may not seek to
obtain patents and other forms of intellectual property rights in certain foreign
countries to the same extent we seek United States patents and other forms of
intellectual property protection, which could reduce our international protection.
This may make the possibility of piracy of our technology and products more likely.
This piracy could result in cheaper copies of our products being available on the
market, which could adversely affect our business and financial results.
    
    Our intellectual property rights do not prevent other companies from developing
similar technology, which could be superior to ours.Other companies could develop
products that use
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similar and perhaps superior technology. This technology could be developed in a way to
not violate or infringe our intellectual property rights. As a result, our intellectual
property rights provide no assurance that competing and perhaps superior products wont
be developed, even if we are able to protect our intellectual property rights.
    
    We may engage in litigation to protect our intellectual property, which could be
costly, long, and distracting even if ultimately successful.If we believe our
intellectual property rights are being infringed, we may commence litigation or take
other actions to enforce our patents, protect our trade secrets and know-how, or
determine the scope and validity of the patents or intellectual property rights of
others. There can be no assurance that we would be successful in any such litigation.
Further, any lawsuits we commence would increase the likelihood of counterclaims being
brought against us by the companies we sue. Any litigation could result in substantial
cost and divert the attention of our management, which could harm our operating results
and future operations.
    
    Much of our material intellectual property is not protected by patents, which may
reduce the extent to which we can protect our intellectual property.We rely primarily
on trade secret laws, confidentiality procedures, patents, copyrights, trademarks, and
licensing arrangements to protect our intellectual property. While we do have a number
of patents, the patents alone do not provide significant protection for much of our
intellectual property used in our current equipment products. A significant portion of
our proprietary technology is know-how, and employees with know-how may depart before
transferring their know-how to other employees. The fact that much of our intellectual
property is not covered by patents could reduce the extent to which we can protect our
rights in that intellectual property.
    
    Our products and operations could infringe on the intellectual property rights of
others, which could have an adverse impact on our business.We would have to address
any such infringements by seeking licenses, altering our products, or no longer selling
the products. Any licenses we may be required to seek may be expensive or otherwise
onerous. Similarly, changing our products may be costly, time-consuming, and
impractical and could detract from the value of our products. A party making a claim
of infringement could secure a judgment against us that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that could
prevent us from selling our products. Any claim of infringement by a third party also
could cause us to incur substantial costs defending against the claim, even if the
claim is invalid, and could distract the attention of our management. Any of these
events could seriously harm our business.
    
    Intellectual property litigation has adversely impacted our financial results.
Since 2006, we have been sued twice for purportedly infringing a third partys
intellectual property. The costs of defending those lawsuits and the costs of
performing the settlements of those lawsuits have adversely affected our financial
results and will continue to adversely affect our results. Additionally, our
willingness to settle these claims brought against us may increase the likelihood that
other companies will commence similar claims against us.
    
    Compliance with governmental regulations, such as Section 404 of the Sarbanes-Oxley
Act, has increased our costs and impacted our financial results and could continue to
do so.Increasing amounts of time and resources are being spent on complying with
ever-changing governmental regulations and public disclosure requirements.
Specifically, Section 404 of the Sarbanes-Oxley Act currently requires that management
and independent public accountants review and evaluate annually internal control
systems of companies subject to that section and attest to their effectiveness. We are
not currently subject to the auditor review portions of Section 404. However, in
anticipation of becoming subject to that section, we have begun our compliance efforts
and are expending related time and costs. The costs and time required to become
Section 404 compliant could be substantial, even assuming we are completely successful.
In addition, even before becoming subject to Section 404, we are being billed
significantly increased independent auditor fees, we believe largely due to the
Sarbanes-Oxley Act and other regulations. Compliance with the Sarbanes-Oxley Act and
other regulations could cause us to increase our legal, accounting, other personnel,
and other costs as more time and personnel would be needed to help maintain compliance.
These costs of compliance could adversely impact our financial results.
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
    
    We are a defendant in pending stockholder litigation that could materially and
adversely affect our business.We are a party to four purported securities class
action lawsuits. These lawsuits relate to the underwriters alleged unlawful
activities in connection with our initial public offering in February 2000. An
agreement-in-principle has been reached to resolve this litigation. There can be no
assurance whether the parties will agree on the definitive terms of the settlement and
whether that settlement ultimately will be approved in the judicial process.
Accordingly, we cannot predict the outcome. Defending lawsuits of this nature can be a
lengthy and expensive process, and we may not prevail. Even if we prevail or the
action is settled, the costs associated with these lawsuits could be substantial. In
addition, these lawsuits could have other material adverse impacts on us, such as
management distraction, adverse publicity, and adverse reaction from the financial
markets, from our customers, or from actual or potential strategic partners. The
difficulties and uncertainties relating to these lawsuits very likely may be increased
and complicated because of the large number of pending similar cases and other parties
involved. The outcome of these lawsuits could materially compromise our ability to
continue to operate our business.
    
    Proceeds under our directors and officers insurance policies may be unavailable or
insufficient to cover our exposure arising from the pending stockholder litigation.We
have a total of $15 million in directors and officers insurance coverage applicable to
this pending stockholder litigation. We currently believe that this insurance coverage
would be sufficient to cover our exposure arising from that litigation and the proposed
agreement-in-principle to settle the litigation. However, the insurance proceeds may
be unavailable if the companies issuing those policies experience financial
difficulties or are otherwise unable or unwilling to pay under those policies. Also,
there can be no assurance that proceeds under those policies would be sufficient to
cover our exposure arising from this litigation.
    
    Our stock price has been volatile and may continue to be volatile.The market price
of our common stock has been volatile and is likely to remain volatile. Some of the
reasons for the volatility are within our control, but many are beyond our control and
unrelated to our operating performance. We believe the following factors, among
others, have contributed to our stock price volatility:
 o
    
    Our financial performance and resultso
    
    Announcements by us concerning our relationships with our existing or new customerso
    
    Announcements by us concerning our completed and contemplated
acquisitions and other strategic plans and activitieso
    
    Announcements by our customerso
    
    The relatively low number of shares of our stock that trade on an average dayo
    
    The introduction of new products by uso
    
    The financial performance of our competitorso
    
    The introduction of new products by our competitorso
    
    Other announcements by our competitorso
    
    General conditions of the financial markets
  
    
    One stockholder owns a significant beneficial interest in our common stock and has
other relationships which could allow him to influence matters requiring stockholder
approval and our business in general.As of March 13, 2009, we believe that Lloyd I.
Miller, III, directly and indirectly, controlled approximately 15% of our outstanding
common stock. In addition, on that date, Mr. Miller held warrants to acquire another
approximately 5% of our outstanding common stock (albeit at exercise prices higher than
the price at which our common stock closed on the Nasdaq Capital Market on that date).
Mr. Miller also lent money to the company in July 2008 and has rights as a creditor
pursuant to the related lending transaction. Finally, Mr. Miller recommended that two
of our current four independent members of our board of directors be elected to the
board. As a result of his stock ownership, Mr. Miller may be able to exert influence
over actions which require stockholder approval, for example, certain types of changes
in control or amendments to our certificate of
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incorporation. Also, because of his other relationships with the company, Mr. Miller
may be able to exert influence over other corporate decisions and our business in
general.
    
    Future actual or potential stock sales by Lloyd I. Miller, III could cause our stock
price to fall.Mr. Miller controlled approximately 15% of our outstanding common stock
on March 13, 2009. Because Mr. Miller owns directly or indirectly more than 10% of our
outstanding common stock, any sales or distributions by Mr. Miller are required to be
reported publicly shortly after they occur. Actual or potential sales of this stock by
Mr. Miller could cause our stock price to fall or prevent it from increasing for
numerous reasons. For example, a substantial amount of our common stock becoming
available (or being perceived to become available) for sale in the public market could
cause the market price of our common stock to fall or prevent it from increasing,
particularly given the relatively low trading volumes of our stock. Also, Mr. Miller
recommended that two people be placed on our current board of directors so sales by Mr.
Miller could be viewed as being based on knowledge gained from those directors.
    
    Future actual or potential sales of the stock we issue upon exercise of stock
options could cause our stock price to fall.As of February 27, 2009, we had options
outstanding to buy approximately 2,145,990 shares of our common stock and may grant
options or other stock grants relating to an additional approximately 2,596,014 shares
of our common stock. 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.
    
    If we acquire other companies or product lines by issuing stock, the result may be
dilutive to existing stockholders.We may acquire other companies, businesses, and
product lines in the future and may issue shares of our stock in connection with any
such acquisitions. Any such issuances could significantly dilute the holdings of our
current stockholders, particularly given the lower current trading price of our common
stock.
    
    If we raise additional capital by issuing stock, the result may be dilutive to
existing stockholders.Our board of directors may decide to issue additional equity
securities in many situations without the need for any stockholder vote. Given the
recent prices for our common stock, significant dilution to our stockholders could
result if we raise additional funds by issuing equity securities. Further, these
issuances may also involve issuing stock at a price per share below the current trading
prices.
    
    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. In particular, we have 4.5 million shares of blank check
preferred stock which the board could issue, in many cases without any stockholder
vote. The board could establish voting rights, dividend rights, liquidation rights,
conversion rights, and other rights and preferences of this preferred stock senior and
better than the rights associated with our common stock.
 Possible Implications of Cautionary Statements
  
 Item 1B. Unresolved Staff Comments.
  30




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Item 2. Properties.
        
 Item 3. Legal Proceedings.
 IPO Litigation
   31




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General
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  32




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##### Table of Contents



PART II
 
 Item 5. Market for
Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
 Market Information
  Proxim Common StockHigh
    
    Low2007First Quarter
    
    $
    2.50
    
    
    $
    1.86Second Quarter
    
    $
    2.95
    
    
    $
    1.92Third Quarter
    
    $
    2.36
    
    
    $
    1.54Fourth Quarter
    
    $
    1.58
    
    
    $
    0.812008First Quarter
    
    $
    1.18
    
    
    $
    0.59Second Quarter
    
    $
    0.84
    
    
    $
    0.51Third Quarter
    
    $
    0.65
    
    
    $
    0.32Fourth Quarter
    
    $
    0.39
    
    
    $
    0.10
  Equity Compensation Plan Information
  Number of securitiesto be issued upon
    
    Weighted-average
    
    Number of securities remainingexercise of
    
    exercise price of
    
    available for future issuanceoutstanding options,
    
    outstanding options,
    
    under equity compensationwarrants and rights
    
    warrants and rights(b)
    
    plans (excluding securitiesPlan category
    
    (a) (1)
    
    (1)
    
    reflected in column(a)) (c)Equity compensation
plans approved by
security holders
    
    
    2,789,449
    
    
    $
    2.70
    
    
    
    1,983,555
    (2)Equity compensation
plans not approved
by security holders
    
    
    15,000
    
    
    $
    2.12
    
    
    
    Total
    
    
    2,804,449
    
    
    $
    2.70
    
    
    
    1,983,555
 
 (1)
    
    This column does not reflect the warrants outstanding on December 31, 2008 to purchase
1,250,000 shares of our common stock at an exercise price of $0.53 per share that we issued in
connection with a lending transaction in July 2008.(2)
    
    Consists of shares available for future issuance under our 2004 Stock Plan. 33




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34




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Item 6. Selected Financial Data.
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
    ®
  Critical Accounting Policies
   Revenue Recognition
  35




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##### Table of Contents



1.
    
    The price is fixed and determinable at the date of sale;2.
    
    The buyers payment obligation is not contingent on resale;3.
    
    The buyers payment obligation would not be changed in the event of theft or
physical damage of the product;4.
    
    The buyer acquiring the product for resale has economic substance apart from
that provided by the seller;5.
    
    The seller does not have significant obligations for future resale of the
product; and6.
    
    The amount of future returns can be reasonably estimated.
      Accounts Receivable Valuation
  36




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Inventory Valuation
  Capitalized Software
 Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
 Warranty Provision
  Valuation of Stock-based Awards
   37




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Result of Operations
 Comparison of Fiscal Year 2008 and 2007
  2008
    
    2007Annual% of
    
    
    
    
    
    Dollar
    
    AnnualNet
    
    % of Net
    
    Change (in
    
    %Revenue
    
    Revenue
    
    000s)
    
    ChangeNet revenues
    
    
    100
    %
    
    
    100
    %
    
    $
    (12,938
    )
    
    
    (21
    )%Cost of sales
    
    
    58
    
    
    
    57
    
    
    
    (6,549
    )
    
    
    (19
    )Gross profit
    
    
    42
    
    
    
    43
    
    
    
    (6,389
    )
    
    
    (24
    )Operating expenses:Selling and marketing expense
    
    
    35
    
    
    
    33
    
    
    
    (3,121
    )
    
    
    (15
    )Restructuring and impairment costs
    
    
    
    
    
    
    13
    
    
    
    (8,234
    )
    
    
    (100
    )General and administrative
    
    
    24
    
    
    
    20
    
    
    
    (387
    )
    
    
    (3
    )Research and development expense
    
    
    8
    
    
    
    10
    
    
    
    (2,146
    )
    
    
    (36
    )Total operating expenses
    
    
    67
    
    
    
    76
    
    
    
    (13,888
    )
    
    
    (30
    )Operating income (loss)
    
    
    (25
    )
    
    
    (33
    )
    
    
    7,499
    
    
    
    38Other income (expense)
    
    
    
    
    
    
    5
    
    
    
    (2,890
    )
    
    
    (103
    )Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    13Income (loss) from continuing
operations
    
    
    (25
    )
    
    
    (28
    )
    
    
    4,585
    
    
    
    27Income (loss) from discontinuing
operations
    
    
    5
    
    
    
    (3
    )
    
    
    4,434
    
    
    
    216Net income (loss)
    
    
    (20
    )%
    
    
    (31
    )%
    
    $
    9,019
    
    
    
    47
 Sales
   Cost of goods sold and gross profit
  Sales and Marketing Expenses
  38




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Restructuring charges related to the impairment of goodwill and purchased intangibles
  General and Administrative Expenses
  Research and Development Expenses
  Other income (expenses)
  39




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Comparison of Fiscal Year 2007 and 2006
  December 31,2007
    
    2006
    
    
    
    
    
    Annual% of Net
    
    % of Net
    
    Annual Dollar
    
    %Revenue
    
    Revenue
    
    Change (in 000s)
    
    ChangeNet revenues
    
    
    100
    %
    
    
    100
    %
    
    $
    (6,224
    )
    
    
    (9
    )%Cost of sales
    
    
    57
    
    
    
    58
    
    
    
    (4,525
    )
    
    
    (11
    )Gross profit
    
    
    43
    
    
    
    42
    
    
    
    (1,699
    )
    
    
    (6
    )Operating expenses:
    
    
    
    
    
    
    Selling and marketing expense
    
    
    33
    
    
    
    26
    
    
    
    2,484
    
    
    
    14Restructuring and impairment costs
    
    
    13
    
    
    
    13
    
    
    
    (756
    )
    
    
    (8
    )General and administrative
    
    
    20
    
    
    
    17
    
    
    
    587
    
    
    
    5Research and development expense
    
    
    10
    
    
    
    19
    
    
    
    (7,118
    )
    
    
    (55
    )Total operating expenses
    
    
    76
    
    
    
    75
    
    
    
    (4,803
    )
    
    
    (9
    )Operating income (loss)
    
    
    (33
    )
    
    
    (33
    )
    
    
    3,104
    
    
    
    (14
    )Other income (expense)
    
    
    5
    
    
    
    1
    
    
    
    2,281
    
    
    
    428Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (116
    )
    
    
    171Income (loss) from continuing
operations
    
    
    (28
    )
    
    
    (32
    )
    
    
    5,269
    
    
    
    (24
    )Income (loss) from discontinuing
operations
    
    
    (3
    )
    
    
    (1
    )
    
    
    (1,170
    )
    
    
    (133
    )Net income (loss)
    
    
    (31
    )%
    
    
    (33
    )%
    
    
    4,099
    
    
    
    18
    %
    Cost of goods sold and gross profit
  Sales and Marketing Expenses
  Restructuring charges related to realignment of business groups
  Restructuring charges related to the impairment of goodwill and purchased intangibles
  40




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General and Administrative Expenses
  Research and Development Expenses
  Other income (expenses)
  Adoption of FAS 123R
   Liquidity and Capital Resources
 General
   41




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Contractual Obligations
  Recently Issued Accounting Standards
  
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
  42




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Item 8. Financial Statements and Supplementary Data.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    44CONSOLIDATED FINANCIAL STATEMENTS:Consolidated Balance Sheets
    
    
    46Consolidated Statements of Operations
    
    
    47Consolidated Statement of Changes in Stockholders Equity
    
    
    48Consolidated Statements of Cash Flows
    
    
    49Notes to Consolidated Financial Statements
    
    
    50Schedule II
 Valuation and Qualifying Accounts
    
    
    67
 43




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Report of Independent Registered Public Accounting Firm
 
     
 44




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Report of  Independent Registered Public Accounting Firm
 
    /s/
Fitzgerald, Co., CPAs, P.C.
 
 45




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PROXIM WIRELESS CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 December 31,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,092
    
    
    $
    6,329Accounts
receivable, net of allowance for doubtful accounts, returns and
discounts of $2,132 for 2008 and $2,044 for 2007 respectively
    
    
    4,084
    
    
    
    9,326Inventory
    
    
    3,947
    
    
    
    5,753Prepaid expenses
    
    
    1,613
    
    
    
    1,029Assets held for sale
    
    
    
    
    
    
    2,085Total current assets
    
    
    14,736
    
    
    
    24,522Property and equipment, net
    
    
    2,658
    
    
    
    2,532Other Assets:Restricted cash
    
    
    77
    
    
    
    76Intangible assets, net
    
    
    6,479
    
    
    
    8,542Deposits and prepaid expenses
    
    
    387
    
    
    
    239Assets held for sale
    
    
    
    
    
    
    499Total other assets
    
    
    6,943
    
    
    
    8,857Total assets
    
    $
    24,337
    
    
    $
    36,410Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    8,100
    
    
    $
    12,752Line of credit payable
    
    
    1,500
    
    
    
    Deferred revenue
    
    
    1,649
    
    
    
    3,687License
agreement payable - current maturities
    
    
    1,023
    
    
    
    1,065Liabilities- Assets held for sale
    
    
    
    
    
    
    232Total current liabilities
    
    
    12,272
    
    
    
    17,736License agreement payable, net of current maturities
    
    
    
    
    
    
    1,023Deferred revenue, net of current
    
    
    474
    
    
    
    314Notes payable, net of discount
    
    
    2,616
    
    
    
    Other long term liabilities
    
    
    305
    
    
    
    Total liabilities
    
    
    15,667
    
    
    
    19,073Commitments and contingenciesStockholders EquityPreferred stock, $0.01 par value; authorized
4,500,000, none issued at December 31, 2008 and
December 31, 2007
    
    
    
    
    
    
    Common stock, $0.01 par value, 100,000,000 shares
authorized, 23,519,069 issued and outstanding at
December 31, 2008 and December 31, 2007
    
    
    235
    
    
    
    235Additional paid-in capital
    
    
    64,829
    
    
    
    63,451Accumulated deficit
    
    
    (56,394
    )
    
    
    (46,349
    )Total stockholders equity
    
    
    8,670
    
    
    
    17,337Total liabilities and stockholders equity
    
    $
    24,337
    
    
    $
    36,410
  46




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PROXIM WIRELESS CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 For the Years Ended December 31,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    49,007
    
    
    $
    61,945
    
    
    $
    68,169Cost of goods sold
    
    
    28,582
    
    
    
    32,664
    
    
    
    38,154Restructuring provision for excess and obsolete inventory
    
    
    
    
    
    
    2,467
    
    
    
    1,502Gross profit
    
    
    20,425
    
    
    
    26,814
    
    
    
    28,513Operating expenses:Selling costs
    
    
    17,031
    
    
    
    20,152
    
    
    
    17,668Restructuring Charges
    
    
    
    
    
    
    91
    
    
    
    116Restructuring charges for impairment of intangible
assets and goodwill
    
    
    
    
    
    
    8,143
    
    
    
    8,874General and administrative
    
    
    11,746
    
    
    
    12,133
    
    
    
    11,546Research and development
    
    
    3,793
    
    
    
    5,939
    
    
    
    13,057Total operating expenses
    
    
    32,570
    
    
    
    46,458
    
    
    
    51,261Operating loss
    
    
    (12,145
    )
    
    
    (19,644
    )
    
    
    (22,748
    )Other income (expenses):Interest income
    
    
    37
    
    
    
    208
    
    
    
    368Interest expense
    
    
    (493
    )
    
    
    (126
    )
    
    
    (190
    )Other income (expense)
    
    
    (165
    )
    
    
    271
    
    
    
    355Gain on sale of assets
    
    
    545
    
    
    
    2,461
    
    
    
    Total other income (expenses)
    
    
    (76
    )
    
    
    2,814
    
    
    
    533Loss from continuing operations before income tax
    
    
    (12,221
    )
    
    
    (16,830
    )
    
    
    (22,215
    )Benefit( Provision) for income taxes
    
    
    (208
    )
    
    
    (184
    )
    
    
    (68
    )Loss from continuing operations
    
    $
    (12,429
    )
    
    $
    (17,014
    )
    
    $
    (22,283
    )Discontinued OperationsIncome (Loss) from operations of discontinued
component -net of income tax
    
    
    (37
    )
    
    
    (1,469
    )
    
    
    (880
    )Gain (loss) on sale of discontinued component-net of
income tax
    
    
    2,421
    
    
    
    (581
    )
    
    
    Income
(Loss) from discontinued operations, net of
income taxes
    
    $
    2,384
    
    
    $
    (2,050
    )
    
    $
    (880
    )Net income (loss)
    
    $
    (10,045
    )
    
    $
    (19,064
    )
    
    $
    (23,163
    )Weighted average number of shares-basic and diluted used
in computing net earnings (loss) per share
    
    
    23,519
    
    
    
    23,278
    
    
    
    21,523Basic and diluted net earnings (loss) per share:Continuing operations
    
    $
    (0.53
    )
    
    $
    (0.73
    )
    
    $
    (1.04
    )Discontinued Operations
    
    $
    0.10
    
    
    $
    (0.09
    )
    
    $
    (0.04
    )Total
    
    $
    (0.43
    )
    
    $
    (0.82
    )
    
    $
    (1.08
    )
 See accompanying notes to consolidated financial statements.
 47




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PROXIM WIRELESS CORPORATION
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands, except share data)
 AccumulatedAdditional
    
    
    Retained
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Earnings
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    (Loss) Income
    
    
    TotalBalances, December 31, 2005
    
    
    21,446,217
    
    
    
    214
    
    
    
    56,638
    
    
    
    (4,122
    )
    
    
    (12
    )
    
    
    52,718Exercise of stock options and
warrants
    
    
    106,355
    
    
    
    2
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    81Stock based compensation
    
    
    
    
    
    
    
    
    
    
    1,259
    
    
    
    
    
    
    
    
    
    
    
    1,259Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,163
    )
    
    
    
    
    
    
    (23,163
    )Unrealized gain (loss) on
investments, net of
reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )
    
    
    (61
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,163
    )
    
    
    (61
    )
    
    
    (23,224
    )Balances, December 31, 2006
    
    
    21,552,572
    
    
    
    216
    
    
    
    57,976
    
    
    
    (27,285
    )
    
    
    (73
    )
    
    
    30,834Exercise of stock options and
warrants
    
    
    1,797
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Common stock issued
    
    
    4,300,000
    
    
    
    43
    
    
    
    7,425
    
    
    
    
    
    
    
    
    
    
    
    7,468Common stock retired
    
    
    (2,335,300
    )
    
    
    (24
    )
    
    
    (3,946
    )
    
    
    
    
    
    
    
    
    
    
    (3,970
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    1,993
    
    
    
    
    
    
    
    
    
    
    
    1,993Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,064
    )
    
    
    
    
    
    
    (19,064
    )Unrealized gain (loss) on
investments, net of
reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    73Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,064
    )
    
    
    73
    
    
    
    (18,991
    )Balances, December 31, 2007
    
    
    23,519,069
    
    
    
    235
    
    
    
    63,451
    
    
    
    (46,349
    )
    
    $
    
    
    
    
    17,337Exercise of stock options and
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Common stock issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Common stock retired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Stock based compensation
    
    
    
    
    
    
    
    
    
    
    932
    
    
    
    
    
    
    
    
    
    
    
    932Issuance of detachable warrant
    
    
    
    
    
    
    
    
    
    
    446
    
    
    
    
    
    
    
    
    
    
    
    446Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,045
    )
    
    
    
    
    
    
    (10,045
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,045
    )
    
    
    
    
    
    
    (10,045
    )Balances, December 31, 2008
    
    
    23,519,069
    
    
    
    235
    
    
    
    64,829
    
    
    
    (56,394
    )
    
    $
    
    
    
    
    8,670
 See accompanying notes to consolidated financial statements.
 48




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PROXIM WIRELESS CORPRATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 For The Years Ended December 312008
    
    
    2007
    
    
    2006Cash Flows from Operating ActivitiesNet Loss
    
    $
    (10,045
    )
    
    $
    (19,064
    )
    
    $
    (23,163
    )Adjustments to reconcile net loss to net cash provided by (used in)Operating activitiesDepreciation and amortization
    
    
    3,116
    
    
    
    3,886
    
    
    
    5,106Loss (gain) on disposal/write off of available-for-sale securities
    
    
    
    
    
    
    (99
    )
    
    
    32Bad debt allowance
    
    
    527
    
    
    
    244
    
    
    
    95Inventory allowance
    
    
    484
    
    
    
    754
    
    
    
    (1,190
    )Stock based compensation
    
    
    932
    
    
    
    1,993
    
    
    
    1,259Restructuring charge for impairment of intangible assets
    
    
    
    
    
    
    220
    
    
    
    8,874Restructuring provision for excess and obsolete inventory
    
    
    
    
    
    
    2,467
    
    
    
    1,502Restructuring provision for impairment of goodwill
    
    
    
    
    
    
    7,922
    
    
    
    Amortization of debt discount
    
    
    62
    
    
    
    
    
    
    
    (Gain) loss on sale of assets
    
    
    (545
    )
    
    
    (2,461
    )
    
    
    (Gain) loss on sale of discontinued operations
    
    
    (2,421
    )
    
    
    581
    
    
    
    Changes in assets and liabilities affecting operations:Accounts receivable
    
    
    5,399
    
    
    
    (4,715
    )
    
    
    2,699Inventory
    
    
    734
    
    
    
    (766
    )
    
    
    (758
    )Prepaid expense and other current assets
    
    
    166
    
    
    
    172
    
    
    
    (201
    )Other non-current assets
    
    
    (148
    )
    
    
    1
    
    
    
    357Accounts payable and accrued expenses
    
    
    (5,088
    )
    
    
    (806
    )
    
    
    (1,805
    )Deferred Revenue
    
    
    (1,878
    )
    
    
    1,803
    
    
    
    (305
    )Other liabilities
    
    
    305
    
    
    
    
    
    
    
    Net cash provided by (used in) operating activities
    
    
    (8,401
    )
    
    
    (7,868
    )
    
    
    (7,498
    )Cash Flows from Investing Activities:Release of restricted cash
    
    
    
    
    
    
    
    
    
    
    5,000Purchase of property and equipment
    
    
    (193
    )
    
    
    (978
    )
    
    
    (445
    )Investment in capitalized software
    
    
    (1,207
    )
    
    
    (788
    )
    
    
    Proceeds from the sale of securities
    
    
    
    
    
    
    340
    
    
    
    Proceeds from sale of intangible assets
    
    
    850
    
    
    
    2,500
    
    
    
    Proceeds from sale of discontinued operations, net of cash expense
    
    
    4,279
    
    
    
    200
    
    
    
    Net cash provided by (used in) investing activities
    
    
    3,729
    
    
    
    1,274
    
    
    
    4,555Cash Flows from Financing Activities:Retirement of common stock
    
    
    
    
    
    
    (3,970
    )
    
    
    Issuance of common stock
    
    
    
    
    
    
    7,468
    
    
    
    Exercise of stock options and warrants
    
    
    
    
    
    
    3
    
    
    
    81Proceeds from line of credit
    
    
    3,000
    
    
    
    
    
    
    
    Principal payments on loan obligations
    
    
    (1,500
    )
    
    
    
    
    
    
    Proceeds from note issuance
    
    
    3,000
    
    
    
    
    
    
    
    Repayment of license agreement payable
    
    
    (1,065
    )
    
    
    (868
    )
    
    
    (981
    )Net cash provided by (used in) financing activities
    
    
    3,435
    
    
    
    2,633
    
    
    
    (900
    )Net change in cash and cash equivalents
    
    
    (1,237
    )
    
    
    (3,961
    )
    
    
    (3,843
    )Cash and cash equivalents at beginning of period
    
    
    6,329
    
    
    
    10,290
    
    
    
    14,133Cash and cash equivalents at end of period
    
    $
    5,092
    
    
    $
    6,329
    
    
    $
    10,290Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    404
    
    
    $
    126
    
    
    $
    119Income taxes paid
    
    $
    361
    
    
    $
    196
    
    
    $
    68
 See accompanying notes to consolidated financial statements.
 49




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##### Table of Contents



PROXIM WIRELESS CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization
  2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Revenue Recognition
  1.
    
    The price is fixed and determinable at the date of sale;2.
    
    The buyers payment obligation is not contingent on resale;3.
    
    The buyers payment obligation would not be changed in the event of theft or
physical damage of the product;
 50




---



##### Table of Contents



4.
    
    The buyer acquiring the product for resale has economic substance apart from
that provided by the seller;5.
    
    The seller does not have significant obligations for future resale of the
product; and6.
    
    The amount of future returns can be reasonably estimated.
      Cash and Cash Equivalents
  Accounts Receivable Valuation
  51




---



##### Table of Contents



Inventory Valuation
  Warranty Provision
  Property and Equipment
  Intangible Assets
  Capitalized Software
 Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
 52




---



##### Table of Contents



Income Taxes
   Stock based compensation
  Per Share Amounts
 Earnings per Share
  Advertising
  Shipping and Handling Costs
  53




---



##### Table of Contents



Fair Values of Financial Instruments
 The Fair Value Option for Financial Assets and Financial
Liabilities
 Recent Accounting Pronouncements
 Determining whether an instrument (or an
Embedded Feature) is index to an Entitys own Stock. The meaning of Indexed to a Companys Own Stock
 Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)
   54




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##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statements, an amendment of Accounting Research Bulletin (ARB) No. 51.
  3. Inventory
 Inventory consisted of the following (in thousands):
 December 31,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    1,354
    
    
    $
    5,920Work in process
    
    
    728
    
    
    
    328Finished goods
    
    
    3,927
    
    
    
    6,607$
    6,009
    
    
    $
    12,855Allowance for excess and obsolescence
    
    
    (2,062
    )
    
    
    (7,102
    )Net Inventory
    
    $
    3,947
    
    
    $
    5,753
 4. Intangible Assets
  Schedule of Non-amortizable Assets:
 December 31,
    
    
    December 31,2008
    
    
    2007(in thousands)Trade names  indefinite useful life
    
    $
    780
    
    
    $
    780$
    780
    
    
    $
    780
 55




---



##### Table of Contents



December 31,
    
    
    December 31,2008
    
    
    2007(in thousands)Patents, customer relationships
and other technologies with
identifiable useful lives
    
    $
    10,455
    
    
    $
    10,653Less: accumulated amortization
    
    
    (4,756
    )
    
    
    (2,891
    )Amortized intangible assets, net
    
    $
    5,699
    
    
    $
    7,762
   Year
    
    Amount2009
    
    $
    1,7362010
    
    
    1,6012011
    
    
    1,1082012
    
    
    4182013
    
    
    4182014
    
    
    418
 5. Property and equipment
  December 31,2008
    
    
    2007Leasehold Improvement
    
    $
    307
    
    
    $
    580Capitalized Software
    
    
    2,811
    
    
    
    1,663Equipment
    
    
    3,630
    
    
    
    3,884$
    6,748
    
    
    $
    6,127Less: accumulated depreciation
    
    
    (4,090
    )
    
    
    (3,595
    )Property and equipment, net
    
    $
    2,658
    
    
    $
    2,532
  56




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##### Table of Contents



6. Allowance for Product Warranty Costs
  Product Warrant Cost2008
    
    
    2007Balance at January 1,
    
    $
    697
    
    
    $
    1,102Settlements
    
    
    (180
    )
    
    
    (433
    )Adjustment to one year warranty term
    
    
    0
    
    
    
    (539
    )Other provision adjustments
    
    
    44
    
    
    
    567Balance as of December 31
    
    $
    561
    
    
    $
    697
 7. Patent License Agreement  License Agreement Payable
   8. Security Agreement -Line of Credit
    9. Long Term Debt- Related Party
   57




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##### Table of Contents



10. Income Taxes
  December 31,2008
    
    
    2007
    
    
    2006Current tax expense (benefit)Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    26
    
    
    
    6
    
    
    
    68Foreign
    
    
    182
    
    
    
    178
    
    
    
    $
    208
    
    
    $
    184
    
    
    $
    68Deferred tax expense (benefit)Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Total Deferred
    
    
    
    
    
    
    
    
    
    
    Total Provision
    
    $
    208
    
    
    $
    184
    
    
    $
    68
 58




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##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006Tax expense (benefit) at U.S. statutory rate
    
    $
    (3,443
    )
    
    $
    (6,608
    )
    
    $
    (8,107
    )State income taxes
    
    
    17
    
    
    
    6
    
    
    
    (927
    )Change in valuation allowance
    
    
    3,250
    
    
    
    3,236
    
    
    
    1,917Permanent tax differences
    
    
    197
    
    
    
    
    
    
    
    7,185Non deductible impairment charges
    
    
    
    
    
    
    2,850
    
    
    
    Non deductible stock compensation expense
    
    
    244
    
    
    
    698
    
    
    
    Other differences
    
    
    (57
    )
    
    
    2
    
    
    
    Provision (benefit) for income taxes
    
    $
    208
    
    
    $
    184
    
    
    $
    68
  December 31,2008
    
    
    2007Deferred Tax Asset:Stock compensation
    
    $
    300
    
    
    
    Inventory valuation allowance
    
    
    900
    
    
    
    1,200Allowance for bad debt
    
    
    1,800
    
    
    
    1,100Accruals
    
    
    1,600
    
    
    
    1,300Total Deferred Tax Assets
    
    
    4,600
    
    
    
    3,600Valuation allowance
    
    
    (4,600
    )
    
    
    (3,600
    )Net Deferred Tax Assets
    
    $
    
    
    
    $
    Long Term Deferred Tax Assets:Federal and State Net Operating Loss
    
    
    15,100
    
    
    
    8,700Intangible and depreciable assets
    
    
    1,000
    
    
    
    200Valuation allowance
    
    
    (16,100
    )
    
    
    (8,900
    )Net deferred tax asset (liabilities)
    
    $
    
    
    
    $
    
    59




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##### Table of Contents



Accounting for Uncertainty in Income Taxes
  11. Commitments and Contingencies
 Leases
   
 2009
 

2010
 

2011
 

2012
 


2013
 

    Total$1,587
    
    
$1,537
    
    
$1,080
    
    

$977
    
    
$821
    


    $6,002
 Purchase Commitments:
 ®
 60




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##### Table of Contents



12. 401(k)  Retirement Plan
  13. Stockholders Equity
 Stock Warrants
  Expirationnumber of
    
    date of
    
    term (in
    
    Expected Term
    
    risk-freeWarrants
    
    shares
    
    issuance
    
    Years)
    
    (in Years)
    
    interest rate
    
    volatilityOriginal Issuance
    
    
    925,000
    
    
    
    7/19/2007
    
    
    
    5
    
    
    
    4
    
    
    
    3.23
    %
    
    
    80
    %Replacement Issuance
    
    
    925,000
    
    
    
    7/25/2008
    
    
    
    10
    
    
    
    10
    
    
    
    4.13
    %
    
    
    120
    %Additional Issuance
    
    
    325,000
    
    
    
    7/25/2008
    
    
    
    10
    
    
    
    10
    
    
    
    4.13
    %
    
    
    120
    %
  Warrants OutstandingPer ShareNumber of Shares
    
    
    Exercise PriceOutstanding December 31, 2005
    
    
    438,470
    
    
    $
    0.40 - 5.68Warrants issued
    
    
    
    
    
    $
    Warrants exercised
    
    
    (69,287
    )
    
    $
    2.08 - 2.27Warrants expired/canceled
    
    
    (215,806
    )
    
    $
    2.08 - 5.68Outstanding December 31, 2006
    
    
    153,377
    
    
    $
    0.40 - 2.27Warrants issued
    
    
    2,150,000
    
    
    $
    2.45Warrants exercised
    
    
    
    
    
    $
    Warrants anti-dilution adjustment
    
    
    3,244
    
    
    $
    Warrants expired/canceled
    
    
    (1,326,621
    )
    
    $
    2.02 - 2.45Outstanding December 31, 2007
    
    
    980,000
    
    
    $
    0.40 - 2.45Warrants issued
    
    
    1,250,000
    
    
    $
    0.53Warrants exercised
    
    
    
    
    
    $
    Warrants expired/canceled
    
    
    (980,000
    )
    
    $
    0.40 - 2.45Outstanding December 31, 2008
    
    
    1,250,000
    
    
    $
    0.53
 61




---



##### Table of Contents



Expiration Date
    
    Number of Warrants2018
    
    
    1,250,000
 Stock Options Issued
   Options OutstandingNumber of
    
    
    Per ShareShares
    
    
    Exercise PriceOutstanding December 31, 2005
    
    
    2,043,046
    
    
    $
    0.92 - 161.00Options granted
    
    
    1,118,750
    
    
    $
    1.81 - 5.06Options exercised
    
    
    (37,068
    )
    
    $
    1.60 - 4.00Options expired/canceled
    
    
    (532,636
    )
    
    $
    1.32 - 17.88Outstanding December 31, 2006
    
    
    2,592,092
    
    
    $
    0.92 - 161.00Options granted
    
    
    1,154,350
    
    
    $
    1.07 - 3.96Options exercised
    
    
    (1,797
    )
    
    $
    1.60Options expired/canceled
    
    
    (573,430
    )
    
    $
    1.44 - 6.35Outstanding December 31, 2007
    
    
    3,171,215
    
    
    $
    0.92 - 161.00Options granted
    
    
    557,100
    
    
    $
    0.18 - 0.84Options exercised
    
    
    
    
    
    $
    Options expired/canceled
    
    
    (923,866
    )
    
    $
    0.38 - 6.35Outstanding December 31, 2008
    
    
    2,804,449
    
    
    $
    0.18 - 161.00
 62




---



##### Table of Contents



Options Outstanding
    
        
        
    
    Options ExercisableNumber
    
    
    Weighted
    
    
    Weighted
    
    
    NumberOutstanding
    
    
    Average
    
    
    Average
    
    
    Exercisable
    
    
    WeightedRange of
    
    
    As of
    
    
    Remaining
    
    
    Exercise
    
    
    As of
    
    
    AverageExercise Prices
    
    
    12/31/08
    
    
    Contractual
    
    
    Price
    
    
    12/31/08
    
    
    Exercise Price$0.18  -  $0.82
    
    
    
    
    451,500
    
    
    
    4.38
    
    
    $
    0.62
    
    
    
    145,000
    
    
    $
    0.68$0.84  -  $1.44
    
    
    
    
    424,270
    
    
    
    3.76
    
    
    
    1.24
    
    
    
    145,380
    
    
    
    1.27$1.63  -  $2.31
    
    
    
    
    304,305
    
    
    
    3.17
    
    
    
    2.09
    
    
    
    188,474
    
    
    
    2.10$2.4  -    $2.47
    
    
    
    
    121,250
    
    
    
    1.58
    
    
    
    2.44
    
    
    
    116,797
    
    
    
    2.44$2.53  -  $2.53
    
    
    
    
    300,000
    
    
    
    2.38
    
    
    
    2.53
    
    
    
    149,995
    
    
    
    2.53$2.72  -  $3
    
    
    
    
    248,000
    
    
    
    1.39
    
    
    
    2.76
    
    
    
    247,575
    
    
    
    2.75$3.34  -  $3.34
    
    
    
    
    500,000
    
    
    
    0.13
    
    
    
    3.34
    
    
    
    500,000
    
    
    
    3.34$3.76  -  $5.06
    
    
    
    
    374,335
    
    
    
    2.24
    
    
    
    4.60
    
    
    
    215,668
    
    
    
    4.57$5.3  -    $114
    
    
    
    
    80,289
    
    
    
    1.16
    
    
    
    11.51
    
    
    
    80,289
    
    
    
    11.51$161  -   $161
    
    
    
    
    500
    
    
    
    1.30
    
    
    
    161.00
    
    
    
    500
    
    
    
    161.002,804,449
    
    
    
    2.42
    
    
    $
    2.70
    
    
    
    1,789,677
    
    
    $
    3.18
  December 31,2008
    
    2007
    
    2006Expected volatility
    
    
    80%-86
    %
    
    
    157% - 240
    %
    
    
    250% - 284
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Expected term (in years)
    
    
    2.5-4.0
    
    
    
    2.5 - 4.0
    
    
    
    4Risk-free rate
    
    
    2.3%- 2.9
    %
    
    
    4.3 % - 4.8
    %
    
    
    4.5 % - 5.0
    %
       14. Concentrations
  63




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##### Table of Contents



15. Related Party Transactions
    16. Discontinued Operations
  ®
  ®
 64




---



##### Table of Contents



December 31,
    
    
    December 31,(in thousands)
    
    2008
    
    
    2007Current AssetsAccounts
receivable, net
    
    
    
    
    
    $
    684Inventory
    
    
    
    
    
    
    1,401Total
Current Assets
    
    
    
    
    
    
    2,085Other Assets:Property, and equipment, net
    
    
    
    
    
    
    10Intangible assets, net
    
    
    
    
    
    
    473Deposits and
prepaid expenses
    
    
    
    
    
    
    16Total Other
Assets
    
    
    
    
    
    
    499Current LiabilitiesAccounts
Payable
    
    
    
    
    
    
    232
  December
    
    
    December
    
    
    December(in thousands)
    
    31,2008
    
    
    31,2007
    
    
    31,2006Revenue from discontinued operations
    
    $
    2,279
    
    
    $
    6,516
    
    
    $
    7,215Income (Loss) from operations of
discontinued component -net of income tax
    
    
    (37
    )
    
    
    (1,469
    )
    
    
    (880
    )Gain (loss) on sale of discontinued
component-net of income tax
    
    
    2,421
    
    
    
    (581
    )
    
    
    Net Gain (loss) from discontinued operations
    
    $
    2,384
    
    
    $
    (2,050
    )
    
    $
    (880
    )
  12 Months ended Dec 31 2007
    
    
    12 Months ended Dec 31 2006As
    
    
    
    
    
    
    
    
    
    
    As
    
    
    As(in thousands)
    
    Reported
    
    
    As Reclassed
    
    
    Change
    
    
    Reported
    
    
    Reclassed
    
    
    ChangeRevenue
    
    $
    66,280
    
    
    $
    61,945
    
    
    $
    (4,335
    )
    
    $
    72,707
    
    
    $
    68,169
    
    
    $
    (4,538
    )Cost of goods sold
    
    
    34,844
    
    
    
    32,664
    
    
    
    2,180
    
    
    
    40,560
    
    
    
    38,154
    
    
    
    2,406Gross Margin
    
    
    28,969
    
    
    
    26,814
    
    
    
    (2,155
    )
    
    
    30,645
    
    
    
    28,513
    
    
    
    (2,132
    )Operating expenses
    
    
    48,997
    
    
    
    46,458
    
    
    
    (2,539
    )
    
    
    52,425
    
    
    
    51,261
    
    
    
    (1,164
    )Net Income (Continued Operations)
    
    $
    (17,398
    )
    
    $
    (17,014
    )
    
    $
    384
    
    
    $
    (21,315
    )
    
    $
    (22,283
    )
    
    $
    (968
    )Net Income (Discontinued
Operations)
    
    $
    (1,666
    )
    
    $
    (2,050
    )
    
    $
    (384
    )
    
    $
    (1,848
    )
    
    $
    (880
    )
    
    $
    968
 65




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##### Table of Contents



17. Segment Information
  For the Years Ended December 31,Revenue by Region
    
    2008
    
    % of Sale
    
    2007
    
    % of Sale
    
    2006
    
    % of Sale(in thousands)USA
    
    $
    18,117
    
    
    
    37
    %
    
    $
    25,416
    
    
    
    41
    %
    
    $
    25,999
    
    
    
    38
    %Europe, Middle East, Africa
    
    
    17,234
    
    
    
    35
    %
    
    
    20,378
    
    
    
    33
    %
    
    
    20,358
    
    
    
    30
    %Asia Pacific
    
    
    9,064
    
    
    
    18
    %
    
    
    10,409
    
    
    
    17
    %
    
    
    12,360
    
    
    
    18
    %Canada & Latin America
    
    
    4,592
    
    
    
    10
    %
    
    
    5,742
    
    
    
    9
    %
    
    
    9,452
    
    
    
    14
    %All Regions Total
    
    $
    49,007
    
    
    
    100
    %
    
    $
    61,945
    
    
    
    100
    %
    
    $
    68,169
    
    
    
    100
    %
 18. Subsequent Events
  66




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##### Table of Contents



Schedule II
Valuation and Qualifying Accounts
For The Years Ended December 31, 2008 and 2007
(in thousands)
 Balance at the
    
    
    
    
    
    
    
    
    
    
    Balance at thebeginning of
    
    
    
    
    
    
    
    
    
    
    end of theperiod
    
    
    Additions
    
    
    Deductions
    
    
    periodDecember 31, 2007Allowance for
uncollectible
accounts, returns and
discounts
    
    $
    3,608
    
    
    $
    6,524
    
    
    $
    (8,088
    )
    
    $
    2,044Inventory allowance
    
    
    9,653
    
    
    
    3,221
    
    
    
    (5,375
    )
    
    
    7,499Deferred tax allowance
    
    
    8,861
    
    
    
    3,639
    
    
    
    
    
    
    
    12,500December 31, 2008Allowance for
uncollectible
accounts, returns and
discounts
    
    $
    2,044
    
    
    $
    7,225
    
    
    $
    (6,873
    )
    
    $
    2,396Inventory allowance
    
    
    7,499
    
    
    
    85
    
    
    
    (5,522
    )
    
    
    2,062Deferred tax allowance
    
    
    12,500
    
    
    
    8,200
    
    
    
    
    
    
    
    20,700
 
 Item 9. Changes in and Disagreements with Current and Predecessor Accountants on Accounting and
Financial Disclosure.
   67




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Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
   Changes in Internal Control over Financial Reporting
  Important Considerations
  
 Item 9B. Other Information.
  68




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  Code of Ethics
 http://ir.proxim.com/documentdisplay.cfm?DocumentID=3994
 
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
   
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
  69




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
         70




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##### Table of Contents



SIGNATURES
  PROXIM WIRELESS CORPORATIONDate:  March 30, 2009
    By:
    /s/ Pankaj S. ManglikPankaj S. Manglik,Chief Executive Officer   Signature
    
    Title
    
    Date/s/ Pankaj S. Manglik

Pankaj S. Manglik
    
    Chief Executive
Officer, President,
and Director
(principal
executive officer)
    
    March 30, 2009/s/ Thomas S. Twerdahl

Thomas S. Twerdahl
    
    Interim Chief
Financial Officer
and Treasurer
(principal
financial and
accounting officer)
    
    March 30, 2009/s/ Alan B. Howe
    
    Director
    
    March 30, 2009Alan B. Howe/s/ John W. Gerdelman
    
    Director
    
    March 30, 2009John W. Gerdelman/s/ J. Michael Gullard
    
    Director
    
    March 30, 2009J. Michael
Gullard/s/ Robert A. Wiedemer
    
    Director
    
    March 30, 2009Robert A. Wiedemer




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document2.1
    
    Asset Purchase Agreement, dated as of August 29, 2008, by and among the Registrant, Terabeam
Corporation, Renaissance Electronics Corp., and HXI, LLC (1)2.2
    
    Agreement and Plan of Merger by and among the Registrant, KFire Merger Corporation, KarlNet, Inc.,
Douglas J. Karl, and Elise L. Karl dated as of May 13, 2004 (2)3.1
    
    Certificate of Incorporation of the Registrant as filed with the Delaware Secretary of State on
May 5, 2003 (3)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 (3)3.3
    
    Certificate of Ownership and Merger as filed with the Delaware Secretary of State on November 3,
2005 (4)3.4
    
    Certificate of Ownership and Merger as filed with the Delaware Secretary of State on September 4,
2007 (5)3.5
    
    By-laws of the Registrant (3)3.6
    
    Amendment 1 to By-laws of Registrant (6)4.1
    
    Form of certificate evidencing ownership of common stock of the Registrant (7)4.2
    
    Rights Agreement by and between the Registrant and Registrar and Transfer Company, as Rights Agent
dated as of May 18, 2001 (8)4.3
    
    Amendment No. 1 to Rights Agreement by and between the Registrant and Registrar and Transfer
Company, as Rights Agent dated as of September 9, 2002 (9)4.4
    
    Amendment No. 2 to Rights Agreement by and between the Registrant and Registrar and Transfer
Company, as Rights Agent dated as of March 17, 2003 (10)4.5
    
    Amendment No. 3 to Rights Agreement by and between the Registrant and Registrar and Transfer
Company, as Rights Agent dated as of May 15, 2003 (4)10.1*
    
    1996 Stock Plan of the Registrant (11)10.2*
    
    Amendment No. 1 to 1996 Stock Plan of the Registrant (12)10.3*
    
    1997 Stock Plan of the Registrant (11)10.4*
    
    Amendment No. 1 to 1997 Stock Plan of the Registrant (12)10.5*
    
    1999 Stock Plan of the Registrant (11)10.6*
    
    Amendment No. 1 to 1999 Stock Plan of the Registrant (12)10.7*
    
    2001 Nonqualified Stock Plan of the Registrant (13)10.8*
    
    Amendment No. 1 to 2001 Nonqualified Stock Plan of the Registrant (12)10.9*
    
    2004 Stock Plan of the Registrant (12)10.10*
    
    Amendment No. 1 to 2004 Stock Plan of the Registrant (14)10.11*
    
    Amendment No. 2 to 2004 Stock Plan of the Registrant (15)10.12*
    
    Amendment No. 3 to 2004 Stock Plan of the Registrant (16)10.13*
    
    Form of Non-Qualified Stock Option Agreement to be issued to Directors of the Registrant upon
Initial Election or Appointment to Board of Directors (17)




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ExhibitNumber
    
    Description of Document10.14*
    
    Form of Non-Qualified Stock Option Agreement to be issued to Incumbent Directors of the Registrant
on an Annual Basis (17)10.15*
    
    Form of Incentive Stock Option Agreement for Executive Officers (18)10.16*
    
    Form of Indemnification Agreement, a substantially similar version of which was entered between
the Registrant and each of Messrs. Wiedemer and Renauld (19)10.17*
    
    Policy Statement Concerning the Compensation of Directors of the Registrant who are not Insiders,
dated February 9, 2005 (17)10.18*
    
    Employment Agreement between the Registrant and Pankaj S. Manglik dated as of January 16, 2008 (20)10.19*
    
    Form of Incentive Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of
May 19, 2006 (16)10.20*
    
    Non-Qualified Stock Option Agreement between the Registrant and Pankaj S. Manglik dated as of
January 28, 2008 (21)10.21*
    
    Amended and Restated Employment Agreement between the Registrant and David L. Renauld dated as of
October 25, 2007 (22)10.22*
    
    Letter Employment Agreement between the Registrant and Thomas S. Twerdahl dated October 9, 2008
(23)10.23*
    
    Employment Agreement by and between Proxim Wireless Corporation and Geoff Smith dated December 8,
2005 (24)10.24*
    
    Employment Agreement between the Registrant and Robert E. Fitzgerald dated as of February 9, 2005
(17)10.25*
    
    Non-Qualified Stock Option Agreement between the Registrant and Robert E. Fitzgerald dated as of
February 9, 2005 (17)10.26*
    
    Separation Agreement and Release between the Registrant and Robert E. Fitzgerald dated as of
February 25, 2008 (25)10.27
    
    Secured Promissory Note from KarlNet, Inc. in favor of the Registrant dated May 13, 2004 (2)10.28
    
    Security Agreement between KarlNet, Inc. and the Registrant dated as of May 13, 2004 (2)10.29
    
    Lease Agreement by and between Young Design, Inc. and Merry Fields, LLC dated as of August 24,
2000 (3)10.30
    
    Intellectual Property Agreement by and between Agere Systems, Inc. and Proxim Corporation dated
August 5, 2002 (26)10.31
    
    Patent License Agreement by and between Agere Systems Guardian Corporation, Agere Systems, Inc.
and Proxim Corporation dated August 5, 2002 (26)10.32
    
    Supply Agreement by and between Agere Systems, Inc. and Proxim Corporation dated August 5, 2002
(26)10.33
    
    Lease, dated as of May 10, 2005, by and between CarrAmerica Realty Operating Partnership, L.P. and
Proxim Corporation (27)




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.34
    
    First Amendment to Lease by and between the Registrant and CarrAmerica Realty Operating
Partnership, L.P. dated as of October 31, 2005 (28)10.35
    
    Lease dated April 15, 2008 by and between OA Oakcreek, LLC and the Registrant together with First
Addendum to Lease also dated April 15, 2008 (29)10.36
    
    Lease Agreement by and between the Registrant and Adom Realty Trust dated October 7, 2005 (30)10.37
    
    Assignment and Assumption of Lease, dated as of August 29, 2008, between the Registrant and
Renaissance Electronics Corp. and HXI, LLC and consented to by Adom Realty Trust (1)10.38
    
    Settlement Agreement between the Registrant and Symbol Technologies, Inc. dated as of February 24,
2006 (31)10.39
    
    Purchase Agreement dated as of July 19, 2007 among the Registrant and each investor named therein
(32)10.40
    
    Registration Rights Agreement dated as of July 23, 2007 among the Registrant and each investor
named therein (32)10.41
    
    Form of warrant issued July 23, 2007 (32)10.42
    
    Purchase and Release Agreement dated as of November 1, 2007 among the Registrant and SRB Greenway
Capital (Q.P.), L.P., SRB Greenway Capital, L.P., and SRB Greenway Offshore Operating Fund, L.P.
and Steven R. Becker (33)10.43
    
    Purchase and Release Agreement dated as of November 2, 2007 among the Registrant and Clarion
Capital Corporation, Clarion World Offshore Fund, Ltd., The Amended & Restated Declaration of
Trust of Morton A. Cohen, Dated May 9, 2005, and Shaker Investments Tower, L.P. and Morton A.
Cohen and Edward Hemmelgarn (33)10.44
    
    Loan and Security Agreement, dated as of March 28, 2008, between Comerica Bank and the Registrant
(34)10.45
    
    First Amendment to Loan and Security Agreement, dated as of August 13, 2008, between Comerica Bank
and the Registrant (35)10.46
    
    Second Amendment to Loan and Security Agreement, dated as of September 26, 2008, between Comerica
Bank and the Registrant (36)10.47
    
    Securities Purchase Agreement, dated as of July 25, 2008, between the Registrant and Lloyd I.
Miller, III and Milfam II L.P. (37)10.48
    
    Form of Promissory Note dated July 25, 2008, a substantially similar version of which was issued
by the Registrant in favor of each of Lloyd I. Miller, III and Milfam II L.P. (37)10.49
    
    Form of Warrant dated July 25, 2008, a substantially similar version of which was issued by the
Registrant to each of Lloyd I. Miller, III and Milfam II L.P. (37)10.50
    
    Loan and Security Agreement, dated as of March 6, 2009, between Bridge Bank, N.A. and the
Registrant (38)10.51*
    
    Letter Agreement dated January 15, 2009, a substantially similar version of which was entered into
between the Registrant and, inter alia, Pankaj Manglik, David Renauld, and Thomas Twerdahl (39)21.1
    
    Subsidiaries of the Registrant (7)31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)32.1
    
    Certification Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
(subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)




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ExhibitNumber
    
    Description of Document99.1
    
    Form of Noncompetition Agreement, a substantially similar version of which was entered between the
Registrant and each of Douglas J. Karl and Elise L. Karl dated as of May 13, 2004 (2)99.2
    
    Asset Purchase Agreement dated as of July 31, 2007 between Ricochet Networks, Inc. and Civitas
Wireless Solutions, LLC and joined in by Judi A. Evans (40)99.3
    
    Intellectual Property Transfer and License Agreement dated as of July 31, 2007 between the
Registrant and Civitas Wireless Solutions, LLC (40)99.4
    
    License Agreement dated as of July 31, 2007 between the Registrant and Civitas Wireless Solutions,
LLC (40)
 
 All non-marked exhibits are filed herewith.*
    
    Management contract or compensatory plan.(1)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 4,
2008.(2)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 20, 2004.(3)
    
    Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 14,
2003.(4)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on November 4,
2005.(5)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 6,
2007.(6)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 29, 2007.(7)
    
    Incorporated herein by reference to the exhibits to Form 10-K filed with the SEC on March 28, 2008.(8)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 21, 2001.(9)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 12,
2002.(10)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on March 20, 2003.(11)
    
    Incorporated herein by reference to the exhibits to Form S-1 filed with the SEC on September 27,
1999 (File No. 333-87885).(12)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on September 15,
2004.(13)
    
    Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 10,
2001.(14)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 27, 2005.(15)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 25, 2006.(16)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 28, 2008.(17)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 15,
2005.(18)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 4, 2006.(19)
    
    Incorporated herein by reference to the exhibits to Form 10-Q filed with the Commission on
November 14, 2000.(20)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on January 16,
2008.(21)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 1,
2008.(22)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 30,
2007.(23)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 14,
2008.(24)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on December 12,
2005.(25)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 28,
2008.(26)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 2, 2005.(27)
    
    Incorporated herein by reference to the exhibits to Form 10-Q filed with the SEC on August 15,
2005.(28)
    
    Incorporated herein by reference to the exhibits to Form 10-K filed with the SEC on March 30, 2006.




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##### Table of Contents



(29)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on May 1, 2008.(30)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 26,
2005.(31)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on February 28,
2006.(32)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 24, 2007.(33)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on November 6,
2007.(34)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on April 3, 2008.(35)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 14, 2008.(36)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on October 2, 2008.(37)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on July 29, 2008.(38)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on March 12, 2009.(39)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on January 21,
2009.(40)
    
    Incorporated herein by reference to the exhibits to Form 8-K filed with the SEC on August 6, 2007.