**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington, D.C.
      20549**






**FORM
      10-K**




x   
          **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934**


**For
      the fiscal year ended December 30, 2006**





**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 000-51958**


**NextWave
      Wireless Inc.**


(Exact
      name of registrant as specified in its charter)


**Delaware**
            **20-5361630**(State
                or other jurisdiction of
            (I.R.S.
                EmployerIncorporation
                or organization)
            Identification
                No.)**12670
                High Bluff Drive****San
                Diego, California**
            **92130**(Address
                of principal executive offices)
            (zip
                code)





Registrant’s
      telephone number, including area code: **** **(858)
      480-3100**





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





**Title
                of each class**
            
            **Name
                of each exchange on which registered**Common
                Stock, par value $0.001 per share
            
            NASDAQ
                Global Market




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





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.   Yes  oNo x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934.     Yes  o      No 
x





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





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.


Large
      Accelerated Filer  o     Accelerated
      Filer  oNon-Accelerated Filer
x





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




1




The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant on June 30, 2006 is not determinable, as shares of the registrant
      were not publicly traded as of June 30, 2006. The aggregate market value of
      the
      voting stock of the registrant on March 21, 2007 held by non-affiliates was
      approximately $439,244,442, based on the closing stock price as reported by
      the
      Nasdaq Global Market.*





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court.  Yes  x      No 
o





As
      of
      March 21, 2007, there were outstanding 84,470,085 shares of common stock of
      the
      registrant.





*
      Excludes the common stock held by executive officers, directors and holders
      of
      more than 10% of the common stock outstanding as of March 21, 2007. This
      calculation does not reflect a determination that such persons are affiliates
      for any other purposes.








**DOCUMENTS
      INCORPORATED BY REFERENCE**





Certain
      information contained in the Proxy Statement for the 2007 Annual Meeting of
      Stockholders of the registrant is incorporated by reference into Part III of
      this Form 10-K.







2




**FORM 10-K**




**NEXTWAVE
      WIRELESS INC.**


**Table
      of Contents**





**Item**
            
            **Page****PART
                I**1
            BUSINESS1A
            RISK
                FACTORS1B
            UNRESOLVED
                STAFF COMMENTS2
            PROPERTIES3
            LEGAL
                PROCEEDINGS4
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS**PART
                II**5
            MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES6
            SELECTED
                FINANCIAL DATA7
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS7A
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK8
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA9
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE9A
            CONTROLS
                AND PROCEDURES9B
            OTHER
                INFORMATION**PART
                III**10
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE REGISTRANT11
            EXECUTIVE
                COMPENSATION12
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS13
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**PART
                IV**15
            EXHIBITSSIGNATURES




3


**DISCLOSURE
      REGARDING FORWARD-LOOKING STATEMENTS**





This
      Annual Report on Form 10-K and other reports, documents and materials we will
      file with the Securities and Exchange Commission (the “SEC”) contain, or will
      contain, disclosures that are forward-looking statements that are subject to
      risks and uncertainties. All statements other than statements of historical
      facts are forward-looking statements. These statements, which represent our
      expectations or beliefs concerning various future events, may contain words
      such
      as “may,” “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” or other words of similar meaning in connection with any discussion
      of the timing and value of future results or future performance. These
      forward-looking statements are based on the current plans and expectations
      of
      our management and are subject to certain risks, uncertainties (some of which
      are beyond our control) and assumptions that could cause actual results to
      differ materially from historical results or those anticipated. These risks
      include, but are not limited to:




·
              our
                  limited relevant operating history;
 ·
                our
                    ability to remediate the material weakness in internal controls
                    over
                    financial reporting identified in connection with our restatement
                    of
                    revenues of our PacketVideo subsidiary;
 ·
              our
                  ability to manage growth or integrate recent or future
                  acquisitions;
 
 ·
              competition
                  from alternative wireless technologies and other technology
                  companies;
 
 ·
              our
                  ability to develop and commercialize mobile broadband products
                  and
                  technologies;
 
 ·
              the
                  ability of vendors to manufacture commercial WiMAX equipment and
                  devices;
 
 ·
              consumer
                  acceptance of WiMAX technology;
  ·
              PacketVideo’s
                  ability to grow its resources to support larger numbers of device
                  manufacturers and wireless
                  carriers;
 
 ·
              changes
                  in government regulations;
 
 ·
              changes
                  in capital requirements;
 
 ·
              any
                  loss of our key executive officers;
                  and
  ·
              the
                  other risks described under “Risk
                  Factors.”




There
      may
      also be other factors that cause our actual results to differ materially from
      the forward looking statements.





Because
      of these factors, we caution you that you should not place any undue reliance
      on
      any of our forward-looking statements. These forward-looking statements speak
      only as of the date of this annual report and you should understand that those
      statements are not guarantees of future performance or results. New risks and
      uncertainties arise from time to time, and it is impossible for us to predict
      those events or how they may affect us. Except as required by law, we have
      no
      duty to, and do not intend to publicly update or revise any forward-looking
      statements, whether as a result of new information, future events or
      otherwise.




4


**PART I**




**ITEM 1.**  **Business**





*In
      this Annual Report on Form 10-K, the words “NextWave”, the “Company”, “we”,
“our”, “ours”, and “us” refer to NextWave Wireless Inc. and, except as otherwise
      specified herein, to our subsidiaries. Our fiscal year ended on December 30,
      2006.*





**Business
      Overview**





We
      are an
      early-stage wireless technology company that develops next-generation mobile
      broadband and wireless multimedia products and technologies. Our products
      and technologies are designed to make wireless broadband faster, more reliable
      and more affordable. At present, our customers include many of the largest
      mobile handset and wireless service providers in the world.





We
      believe that wireless broadband represents the next logical step in the
      evolution of the Internet and that consumer demand for fully-mobile, wireless
      broadband service will transform the global wireless communications industry
      from one driven primarily by circuit-switched voice to one driven by IP-based
      broadband connectivity. Our business activities are focused on developing
      products, technologies and network solutions that provide consumers and
      businesses with affordable, high-speed, mobile access to the information and
      multimedia content they want.





Our
      wireless broadband products and technologies developed and marketed through
      our operating subsidiaries, each of which is focused on specific and critical
      links in the global mobile broadband ecosystem:





NextWave
      Broadband Inc. - A family of mobile broadband semiconductor products and network
      components based on WiMAX and Wi-Fi technologies, terminal device reference
      designs and network implementation services;





PacketVideo
      Corporation - Multimedia software applications for wireless handsets and other
      converged mobile devices; and





GO
      Networks, Inc. - Carrier-class, wide-area, mobile Wi-Fi systems.





***NextWave
      Broadband Inc*** .
      Our
      Advanced Technology Group, a division of NextWave Broadband Inc., is developing
      a family of mobile broadband semiconductor products based on WiMAX and Wi-Fi
      technologies, including multi-band RF chips and high performance digital
      baseband WiMAX chips. In addition, our Advanced Technology Group is developing
      wireless network components and a family of handset and media player reference
      designs to highlight the features of the Company’s subscriber station
      semiconductor products. The primary design objectives of the Advanced Technology
      Group’s products and technologies, which are intended to be sold or licensed to
      network infrastructure vendors, device manufacturers and service providers
      worldwide, are:


·
            Improve
                the performance of and economics of WiMAX and Wi-Fi networks and
                enhance
                their ability to cost-effectively handle the large volume of network
                traffic associated with bandwidth intensive, multimedia applications
                such
                as mobile television, video-on-demand, streaming hi-fidelity audio,
                two-way video telephony and real-time gaming;




·
            Improve
                the performance, power consumption and cost characteristics of mobile
                broadband enabled subscriber terminals; and




·
            Improve
                the degree of interoperability and integration between Wi-Fi and
                WiMAX
                systems for both Local Area Networks (LANs) and Wide Area Networks
                (WANs); 
 ·
            Improve
                the efficiencies, costs, performance of video and audio broadcast
                applications over WiMAX networks; and 
 ·
            Improve
                service provider economics and roaming capabilities by enabling WiMAX
                networks and WiMAX enabled devices to seamlessly operate across multiple
                frequency bands including the use of certain unlicensed
                bands. .
 Through
          our Network Solutions Group, also a division of NextWave Broadband, we
          intend to
          offer service provider customers a full array of network services, including
          RF
          and core network design services, network implementation and management
          services
          and back-office service solutions. To demonstrate the capabilities of our
          network service capabilities and our wireless broadband products, the Network
          Solutions Group is implementing a mobile WiMAX/Wi-Fi test site in Henderson,
          Nevada. We
          intend
          to utilize this test site to demonstrate our technical and product capabilities
          to wireless service providers, cable operators, Internet service providers
          and
          media/content companies, who are interested in deploying mobile WiMAX networks
          that operate on spectrum owned or leased by the Company in the U.S. and
          internationally while utilizing network and device equipment that incorporate
          our products and technologies. Our spectrum footprint in the U.S. covers
          a
          population of over 248 million people, or POPs, and includes many of the
          largest
          metropolitan areas in the country. In addition, NextWave Wireless has acquired
          nationwide spectrum in Germany through its majority-owned company, Inquam
          Broadband.


5




***PacketVideo
        Corporation*** .
        Through
        our PacketVideo subsidiary, we supply device-embedded multimedia software
        to
        many of the largest wireless handset manufacturers and wireless carriers
        in the
        world, who use it to transform a mobile phone into a feature-rich multimedia
        device that provides people the ability to stream, download and play video
        and
        music, receive live TV broadcasts and engage in two-way video telephony.
        PacketVideo’s software is compatible with virtually all network technologies,
        including CDMA and GSM. To date, more than 110 million PacketVideo powered
        phones have been shipped worldwide by companies such as Motorola, Samsung,
        LGE,
        Sony Ericsson, and Nokia. PacketVideo
        has been contracted by some of the largest carriers in the world, such as
        Verizon Wireless, Vodafone, NTT DoCoMo, Orange and T-Mobile to design and
        implement the embedded multimedia software capabilities contained in their
        handsets.
 
 PacketVideo
        has made investments in developing and acquiring a wide range of capabilities
        to
        provide its customers with solutions to support and accelerate digital media
        convergence within the home and office via mobile devices and consumer
        electronics that utilize PacketVideo’s device-embedded software and the
        communications protocols standardized by the Digital Living Network
        Alliance TM (DLNA TM ).
        An
        example is PacketVideo’s network-based PacketVideo Experience TM platform
        that provides for content search, discovery, organization and content
        delivery/sharing between devices connected to a private IP-based network
        on a
        one-on-one or one-to-many basis PacketVideo’s patented Digital Rights Management
        (DRM) capability, already serving many carriers globally, further provides
        for a
        flexible solution that protects the multimedia content used or shared by
        PacketVideo-enabled devices. We expect that the continued growth in global
        shipments of high-end handsets with multimedia capabilities, increasing demand
        for home/office digital media convergence, and the acceleration of global
        deployments of mobile broadband enabled networks will substantially expand
        the
        opportunity for PacketVideo to license its suite of multimedia software
        solutions to handset and consumer electronic device manufacturers, and service
        providers. In addition, we intend to leverage PacketVideo’s established market
        presence and unique software expertise to be a leading global provider of
        the
        next-generation of device-embedded software modules needed for the efficient
        capture, transmission and manipulation of multimedia content by fourth
        generation (4G) wireless broadband mobile devices.
  ***GO
          Networks, Inc*** .
          Through
          our GO Networks subsidiary, which we acquired in February 2007, we offer
          carrier-class mobile Wi-Fi network systems to commercial and municipal
          service
          providers worldwide. By utilizing advanced xRFTM adaptive beamforming smart
          antenna technology and a cellular-mesh Wi-Fi architecture, the GO Networks
          system is designed to deliver superior Wi-Fi coverage, performance, and
          economics and provide service providers with a cost-effective solution
          to
          support bandwidth intensive mobile broadband services such as video streaming,
          real-time gaming, web browsing, and other types of multimedia applications
          on a
          wide-area basis.
 
 We
          believe the breadth of products, technologies, spectrum assets and services
          offered by our various subsidiaries represents a unique platform to provide
          advanced wireless broadband solutions to the market. While
          our
          subsidiaries are intended to be operated as stand-alone businesses, we
          also
          expect them to provide synergistic value to each other and collectively
          drive
          accelerated market penetration and share of the wireless broadband market
          for
          the Company.


**Mobile
      Broadband Market**




The
        Internet has evolved into a global system that billions of people depend
        on
        every day. For many, the Internet has become an essential enabler of their
        business and personal lives and is the primary means by which they communicate
        and access information. We believe that a major driver of Internet usage is
        the
        rapidly growing adoption of DSL and cable/satellite broadband services that
        enable people to access the Internet at very high data speeds. Due to this
        broadband connectivity, dependency on the Internet is increasing rapidly.
        Millions of people now use the Internet as a major source for multimedia
        content
        such as music, movies and television, as a virtual store to purchase products
        and services, as a social networking and real-time gaming tool, and to engage
        in
        real-time, two-way voice, data, and video communications. However, while
        dependency on the Internet continues to grow, these types of critical Internet
        services and applications become inaccessible to most people whenever they
        leave
        their home or business. This is because widespread deployment of wireless
        networks capable of providing affordable mobile or nomadic wireless broadband
        service, with data rates and connection quality comparable to DSL and cable,
        has
        not yet occurred in the United States and most other
        countries.




We
      believe that market demand for mobile broadband services will transform the
      global wireless communications industry from one driven primarily by
      circuit-switched voice to one driven by IP based broadband connectivity. In
      addition, we believe that mobile broadband will do for the Internet what
      cellular technology has done for wireline telephony — extend
      high-speed connectivity outside the home or office and enable people to remain
      connected to the information and content they need, wherever they go. We call
      this “Wireless 2.0”. We are developing our products and technologies to help
      make “Wireless 2.0” a reality and to provide people the ability to use a
      next-generation mobile wireless device to:


·
              Remain
                  connected to their favorite music, movies and
                  television;
  ·
              Participate
                  in interactive, real-time gaming;
  ·
              Easily
                  establish high-speed connections to their desired web
                  content;
  ·
              Remotely
                  access their personal Digital Video Recorders and watch recorded
                  television;
  6
  ·
              Remotely
                  view real-time images from home or office security
                  cameras;
  ·
              Conduct
                  two-way video conferences;
  ·
              Capture,
                  transmit or receive high resolution digital photos or video to
                  friends,
                  family members, and business
                  associates;
 
 ·
              Engage
                  in a wide-range of multimedia shopping services customized via
                  location
                  based services;
  ·
              Conduct
                  a broad range of financial transactions;
  ·
              Make
                  “landline quality”, VoIP telephone calls;
                  and
  ·
                Participate
                    in social network activities with portable devices away from
                    home or
                    office.


While
      the
      mobile broadband transformation of the wireless communications market is still
      in an early stage of development, we believe it is already having a profound
      effect on service providers, network infrastructure manufacturers, device
      manufacturers and content distributors who will need to adapt their businesses
      to an industry model based on delivering mobile broadband services. Such
      adaptations will require network operators to make major investments in new
      wireless broadband network infrastructure equipment and technologies, will
      require the introduction of new classes of mobile broadband handsets, the
      development of next-generation device-embedded multimedia software and new
wireless
      communication technologiesto maximize the use of available spectrum. We
      intend to focus our business activities to capitalize on these market
      trends.




We
      believe that several factors are already beginning to drive global market demand
      for fourth generation (4G) mobile broadband services like mobile
      WiMAX:


·
              Increasing
                  global demand by mobile phone users for easy and affordable mobile
                  access
                  to the Internet and on-line multimedia content sources on a fully
                  mobile
                  basis;
  ·
              A
                  growing awareness of the limitations of existing third generation
                  (3G)
                  wireless networks;
  ·
              Broader
                  availability of high-quality, multimedia content available for
                  distribution over wireless
                  networks;
  ·
              Mandates
                  by public safety agencies for reliable mobile broadband
                  services;
  ·
              The
                  ability of wireless technologies such as WiMAX to serve as a
                  cost-effective way to deliver broadband to millions of homes in
                  the U.S.
                  and abroad with no or limited (e.g., dial-up) Internet connectivity;
                  and
  ·
              Increasing
                  market demand for fully integrated wireless local area network
                  (“LAN”)
                  and wide
                  area network (“WAN”)
solutionsthat
                  utilize both Wi-Fi and WiMAX technologies for converged devices,
                  appliances and consumer
                  electronics.
 
 **IEEE
        802.16 WiMAX Standard**
  WiMAX
        is
        an acronym that stands for Worldwide Interoperability for Microwave Access
        and
        is a certification mark established by the WiMAX Forum for products that
        are
        compliant with the Institute of Electrical and Electronics Engineers (“IEEE”)
        802.16 set of standards. WiMAX, which has now become synonymous with the
        set of
        IEEE 802.16 standards, specifies an air interface for wireless Metropolitan
        Area
        Networks (MANs). Published in April of 2002, the original 802.16 standard
        specified equipment operating in the 10-66 GHz frequency band which required
        tall transmission towers and line-of-sight connectivity making the standard
        most
        suitable to provide high-bandwidth wireless backhaul services. Subsequently,
        the
        IEEE published a series of amendments to the standard to support lower radio
        frequencies below 2-11 GHz, to allow non line-of-sight connectivity, and
        to
        address interoperability issues. In 2004, the IEEE consolidated these amendments
        into a new standard called IEEE 802.16-2004 which is often referred to as
        IEEE
        802.16d.
  In
        December of 2005, the IEEE published the 802.16e amendment to the standard,
        often referred to as mobile WiMAX, which specified a system to support mobile
        broadband services via portable devices such as laptops, personal digital
        assistants (PDA), mobile phones, and other converged devices. The 802.16e
        amendment includes several enhancements to improve mobile system performance
        including support for inter-cell handoff, sleep modes to support low-power
        mobile devices and support for broadcast/multicast services. In parallel,
        in a
        coordinated effort with the IEEE and the WiMAX Forum, the Telecommunications
        Technology Association (“TTA”)
        in Korea
        developed WiBro, an 802.16-based standard, which includes support for mobility
        based on the 802.16e amendment. Efforts supported by TTA and IEEE 802.16
        to
        harmonize the WiBro standard with the IEEE 802.16e standard were
        successful.
  7
  Mobile
        WiMAX is one of several wireless air interface technologies that are currently
        being deployed or developed to enable the delivery of mobile broadband services
        to the market. These alternative technologies include CDMA2000, UMTS (Universal
        Mobile Telecommunications System) and 802.20 (Mobile-Fi). Some of these
        technologies, such as CDMA 2000 and UMTS, have already been deployed by major
        wireless carriers and have achieved significant levels of market penetration.
        We
        believe that mobile WiMAX will also become a major, global wireless broadband
        standard and will achieve a significant level of global adoption for the
        following reasons:
  ·
              Mobile
                  WiMAX enjoys broad support from wireless industry leaders. Members
                  of the
                  WiMAX Forum, an industry organization dedicated to promoting and
                  certifying WiMAX products, include Alcatel, AT&T, Bell Canada, British
                  Telecom, Broadcom, Cisco, Deutsche Telekom, Ericsson, Intel, Korea
                  Telecom, LG Electronics, Lucent, Motorola, NEC, Nokia, Nortel,
                  Samsung,
                  Siemens, Sprint Nextel and Texas
                  Instruments.
  ·
              Companies
                  such as Intel, who are interested in seeing mobile WiMAX integrated
                  into
                  laptops and other mobile computing platforms, are actively working
                  to
                  drive the market adoption of WiMAX and the deployment of WiMAX
                  networks.
  ·
              Domestic
                  and international support by network operators for WiMAX is growing.
                  To
                  date, WiMAX networks have been announced in the U.S. by Sprint-Nextel
                  and
                  Clearwire. In addition, numerous WiMAX networks have been announced
                  by
                  operators in Europe, Asia, South America, and the Middle East.
                  Activity is
                  under way within the ITU to include mobile WiMAX in the family
                  of IMT-2000
                  approved standards.
  ·
              Mobile
                  WiMAX economics, including network construction and operating costs,
                  are
                  expected to be competitive with those of alternative mobile broadband
                  technologies.
  ·
              Mobile
                  WiMAX incorporates quality of service capabilities that are required
                  to
                  efficiently handle quality-of-service dependent applications such
                  as VoIP
                  telephony, video conferencing and real-time, interactive
                  gaming.
  ·
              Mobile
                  WiMAX network performance, including the ability to handle the
                  high
                  volumes of traffic associated with mobile TV, mobile video-on-demand
                  and
                  video telephony are expected to be competitive with alternative
                  mobile
                  broadband technologies.
  **Competitive
        Strengths**
  ***A
        highly accomplished team of wireless technology
        professionals*** .
        Our
        technology development efforts are led by a team of highly accomplished
        engineering veterans with broad experience in the development of wireless
        communications technologies and solutions. Team members have led major
        development initiatives at leading technology companies, such as Intel,
        Motorola, Nokia, QUALCOMM and Texas Instruments. Together they have been
        instrumental in developing some of today’s dominant wireless technologies.
        Several members of our team, including our Chief Executive Officer, Allen
        Salmasi, played key roles at QUALCOMM in the development and successful
        commercialization of the CDMA wireless technology standard used worldwide
        today.
        Additional support for our technology development efforts if provided by
        the
        NextWave Technical Development Steering Committee which is comprised of some
        of
        the most accomplished individuals in the wireless industry, including Dr.
        Andrew
        Viterbi who co-founded QUALCOMM. In addition, our senior team has extensive
        experience in building and operating wireless networks for companies such
        as
        Airtouch, AT&T Wireless, McCaw Cellular, Nextel and SprintPCS.
  ***Attractive
          wireless spectrum portfolio, well-suited to support mobile
          broadband*** .
          To
          date, we have acquired licensed spectrum and entered into long-term leases
          that
          provide us with exclusive leasehold access to licensed spectrum throughout
          the
          U.S. Our spectrum portfolio covers approximately 248.9 million persons,
          or POPs,
          across the U.S., of which licenses covering 136.4 million POPs are covered
          by 20
          MHz or more of spectrum, and licenses covering an additional 98.7 million
          POPs
          are covered by at least 10 MHz of spectrum. In addition, a number of markets,
          including much of the New York metropolitan region, are covered by 30 MHz
          or
          more of spectrum. We believe that this spectrum footprint, which includes
          eight
          of the top ten Cellular Market Areas (“CMAs”) and 15 of the top 20 CMAs in the
          U.S., will be attractive to service providers who wish to offer 4G wireless
          broadband services. Our spectrum resides in the 2.3GHz WCS, 2.5GHz BRS/EBS,
          and
          1.7/2.1 GHz AWS bands and offers propagation and other characteristics
          suitable
          to support high-capacity, mobile broadband services.
 8
  On
          December 15, 2006, we acquired 3.5 GHz BWA spectrum in Germany. The
          acquisition includes 42MHz of spectrum in all service areas. The licenses
          vary
          widely in terms of population and geographic coverage, as Koln/Dusseldorf,
          Stuttgart/Karlbsruhe, Berlin/Brandenburg, Munster and Rhein/Main.
  In
          February 2007, Inquam Broadband participated in a
          spectrum auction in Switzerland to acquire a nationwide license, consisting
          of a
          42MHz wide license in the 3.5 GHz frequency band and covering 7.5 million
          POPs.
          On March 5, 2007, Inquam was advised that it has met the license requirements
          and that it will be awarded the license at the end of April at a price
          of
          $4.63  million, or $.015 per MHz POP.
 On
          March
          2, 2007 ,
          we
          acquired WCS spectrum in Canada. The acquisition includes 30MHz of spectrum
          in
          all service areas. The licenses vary widely in terms of population and
          geographic coverage, but include as Montreal, Ottawa, Edmonton, Quebec and
          Winnipeg.
 ***Unique
        combination of silicon, software, systems engineering and
        spectrum*** .
        We have
        assembled a unique combination of assets, including a world-class semiconductor
        design and wireless technology development team, one of the world’s leading
        providers of device-embedded multimedia software, a leading provider of
        carrier-class, mobile Wi-Fi network systems, an experienced network design
        and
        operations team, and an attractive portfolio of licensed spectrum in the
        U.S.
        and abroad. We believe that the combination of these assets offers us an
        advantageous position to develop and deliver our wireless broadband products
        and
        technologies to customers.
 ***Integrated
          business model*** .
          We
          believe that each of our operating subsidiaries represents an attractive
          standalone business. However, we believe that our business units are highly
          complementary to each other and together provide us with the ability to
          adapt
          our business model and allocate resources to maximize market share in a
          rapidly
          evolving industry
  ***Well
          established industry position*** .
          Our
          PacketVideo subsidiary has established strong commercial relationships
          with the
          wireless industry’s leading device manufacturers and network operators. Its
          customers include leading handset manufacturers such as LGE, Motorola,
          Nokia,
          Sony-Ericsson, and Samsung as well as some of the world’s largest network
          operators including NTT DoCoMo, Orange, T-Mobile and Verizon Wireless. While
          some of these customers have developed software solutions that overlap
          or
          augment certain PacketVideo software products, we believe that these
          relationships will be highly valuable as we pursue strategic partnerships
          and
          begin to market current and future products, technologies and network
          solutions.
  ***Extensive
        experience in building and operating wireless networks*** .
        Our
        senior team has extensive experience in building and operating wireless networks
        for companies such as Airtouch, AT&T Wireless, McCaw Cellular, Nextel and
        SprintPCS. Members of our Network Solutions Group have extensive experience
        in
        conducting field trials of numerous wireless broadband technologies and have
        led
        the development of a next-generation IP core network and back office system
        (“BOSS”) designed specifically to enable the delivery of highly-differentiated
        mobile broadband network services.
 ***Integrated
          WiMAX/Wi-Fi solutions*** .
          Our GO
          Networks subsidiary offers carrier-class, mobile Wi-Fi systems specifically
          designed for wide-area deployments. We believe that Wi-Fi and WiMAX are
          complementary technologies and that the most cost-effective solution to
          provide
          mobile broadband services on a wide-area basis is to often deploy hybrid
          networks that utilize both technologies since
          WiFi-enabled devices, including laptops, have been widely adopted by the
          mass
          consumer market .
          In
          addition, because GO Networks utilizes a cellular-mesh network architecture,
          we
          believe that GO Network customers represent opportunities for future Wi-Fi
          to
          WiMAX upgrades that utilize NextWave’s WiMAX products and technologies.
  **Business
        Strategy**
  Our
        strategy is to deliver a broad suite of technologically advanced wireless
        broadband products and solutions to mobile subscriber terminal and wireless
        network equipment manufacturers, wireless broadband service providers and
        consumer electronic product companies. Our focus includes:
  ***Develop
        the key elements of a mobile WiMAX system*** . ** We
        intend
        to develop the key elements of an end-to-end mobile WiMAX/Wi-Fi network solution
        that includes a family of WiMAX chipsets and network components. Our development
        activities are focused on both sides of the radio connection, which we believe
        will enable us to deliver a superior system solution to our customers. To
        date,
        we have made significant progress in our WiMAX development efforts and we
        expect
        to begin field testing elements of our chipset product line in 2007. These
        field
        testing activities will be part of a comprehensive technical field trial
        of our
        technologies in Henderson, Nevada. We expect to utilize this field trial
        to
        showcase the capabilities of our WiMAX/Wi-Fi technologies, and believe that
        the
        trial will be am important step towards successful commercialization of our
        family of WiMAX/Wi-Fi products.
  9
  ***Market
        our products and technologies to third parties*** .
        We
        intend to market our products and technologies worldwide to network equipment
        and device manufacturers and to wireless broadband service providers. We
        expect
        that our marketing efforts will benefit from growing worldwide demand for
        fully-mobile access to the Internet and the delivery of rich-media content
        to
        mobile devices. Similar to other wireless technologies, we believe that the
        sale
        or licensing of our chipsets, network components, software and device
        technologies will generate a long-term, recurring revenue stream for our
        company.
 ***Form
          strategic relationships with service providers who want to
          offer wireless broadband services*** .
          We
          intend to make our spectrum available to service providers looking to deploy
          next-generation wireless broadband networks that utilize our advanced products
          and technologies. Potential service providers include wireless service
          providers, cable operators, multimedia content distributors, applications
          service providers and Internet service providers. We believe that a model
          under
          which service providers can utilize our spectrum to offer advanced wireless
          broadband services will help accelerate sales of our mobile broadband products
          and technologies.
  ***Grow
            and extend PacketVideo’s multimedia software business*** *.* We
            believe that the number of multimedia enabled smartphones as a percentage
            of
            global handsets shipped annually will rise significantly over the next
            several
            years. We will seek to maintain PacketVideo’s strong position in this growing
            market through the growth and extension of its existing multimedia software
            business. At present, the primary competitors for PacketVideo’s multimedia
            software products are the internal multimedia design teams at the OEM
            handset
            manufacturers to whom PacketVideo markets its products and services.
            Furthermore, we believe that the deployment of mobile broadband networks
            will
            spawn the development of entire new categories of software applications
            that can
            take full advantage of the distinctive mobility features inherent in
            mobile
            broadband systems. While we expect the competition from the OEM internal
            multimedia design teams and other independent multimedia software providers
            to
            increase in the next few years, we expect PacketVideo will be able to
            leverage its
            PacketVideo Experience platform and DRM capabilities to fortify its position
            in
            the mobile wireless and converged broadband software business .
 
 ***Grow
            our GO Networks mobile Wi-Fi business*** .
            We
            believe that the worldwide market for wide-area, mobile Wi-Fi networks
            will
            continue to grow and intend to pursue these opportunities by offering
            customers
            our advanced GO Networks Wi-Fi system. Because the GO Networks system
            utilizes a
            cellular-type architecture, we believe it can be upgraded to a hybrid
            Wi-Fi/WiMAX solution at a total cost of ownership below that of competing
            Wi-Fi
            network solutions and intend to leverage this advantage in the marketplace.
 ***Identify
        and pursue acquisitions and investments to accelerate and improve the
        development of our end-to-end wireless broadband
        solutions*** .
        We
        believe there are a number of companies participating in the WiMAX technology,
        wireless broadband and wireless multimedia sectors that could be attractive
        acquisition or investment candidates. We continue to monitor these opportunities
        and may pursue those which we believe will enhance our capabilities and product
        offerings.
  ***Acquire
        additional wireless spectrum to complement our existing
        portfolio*** .
        We
        believe that expanding our spectrum footprint will make our
        spectrum more attractive to service providers. As such, we are actively
        evaluating spectrum acquisition and leasing opportunities and will pursue
        those
        which allow us to obtain complementary spectrum at prices that we believe
        to be
        attractive. We also believe that there may exist opportunities to obtain
        additional spectrum internationally which we will continue to
        monitor.
  10
  **Our
        Products and Technologies**
  ***WiMAX***  **/Wi-Fi
        Semiconductors**
  Based
        in
        San Diego, California, our Advanced Technology Group (ATG), a division of
        our
        NextWave Broadband subsidiary, is creating a family of semiconductor products,
        based on WiMAX and WiFi technology, to enhance the capabilities and economics
        of
        fixed and mobile WiMAX/Wi-Fi networks. These low-power, high-performance
        semiconductor products are intended to enable fixed and mobile WiMAX/Wi-Fi
        networks to more efficiently handle bandwidth-intensive and quality-of-service
        dependent applications such as mobile television, VoIP telephony, streaming
        audio and video, video conferencing and real-time gaming. While these
        semiconductor products will include special features to allow them to fully
        utilize NextWave’s licensed spectrum (BRS/EBS, WCS, AWS), they are also being
        designed to operate on frequency bands most often allocated for mobile broadband
        use on a global basis.
 The
          Advanced Technology Group is comprised of approximately 238 employees and full-time equivalent contractors and is led by a highly
          accomplished team of veteran engineers with broad experience in the development
          of advanced wireless communications technologies and products, such as
          digital
          baseband Application Specific Integrated Circuits (“ASICs”), radio frequency
          technologies including multi-band Radio-Frequency Integrated Circuits (“RFICs”),
          advanced antenna systems, software defined radios (SDRs), and mobile terminal
          designs. Advanced Technology Group team members have led major technology
          development initiatives at companies such as Intel, Motorola, Nokia, QUALCOMM
          and Texas Instruments and have been instrumental in developing some of
          today’s
          dominant wireless technologies including CDMA. In addition, several key
          members
          of our technical team were leading contributors to the 802.16 family of
          standards
 We
        believe that to fully optimize mobile WiMAX for the efficient delivery of
        bandwidth-intensive multimedia applications requires a system approach that
        encompasses all of the key elements of the WiMAX air interface. By adopting
        this
        approach, we expect to offer network infrastructure and device manufacturers
        a
        comprehensive suite of products including low-power WiMAX digital baseband
        ASICs
        and multi-band RFICs, software defined radio platforms and terminal device
        reference designs.
 To
          develop its semiconductor products, ATG has organized its engineering resources
          into several product development groups including: a) RFIC engineering
          and
          design team; b) digital baseband engineering team; c) systems engineering
          team;
          and c) BTS radio product group. In addition, ATG has established a large
          team of
          system engineers to create an end-to-end system that integrates the products
          and
          technologies developed by its various product teams. These development
          activities are designed to produce an integrated platform of paired RF
          and
          baseband chipset families that will allow mobile device and network equipment
          manufacturers to design a variety of products using NextWave silicon products.
  ·
            Digital
                  Baseband ASICs:
                  An ASIC is an integrated circuit or chip customized for a specific
                  purpose. Our family of WiMAX/Wi-Fi based digital baseband ASICs
                  under
                  development represent the core of our system architecture. Our
                  first
                  baseband WiMAX ASIC, the NW1100, is currently in the final stages
                  of
                  development and the final description of the circuit is expected
                  to be
                  sent to manufacture in Q3 2007. This ASIC includes many of the
                  enhancements that have been developed by ATG engineers and is designed
                  to
                  showcase and validate these innovations.. The family of baseband
                  ASIC that
                  ATG is developing include a wide array of interfaces to accommodate
                  a wide
                  range of device types including mobile handsets, PDAs, mobile PC
                  cards,
                  USB devices, and CPE modems. For this reason, ATG is also creating
                  a
                  family of device reference designs, including those for handsets
                  and media
                  players, that will highlight the features of its WiMAX ASIC
                  products. 
 ·
            Radio
                Frequency Integrated Circuits (RFICs):
                An RFIC is part of the front-end of a radio system that receives
                a radio
                frequency signal, converts it to a lower frequency and modifies it
                for
                further processing. Designed to utilize multiple spectral bands to
                improve
                performance and flexibility, our RFICs are part of an advanced radio
                frequency subsystem that is matched to our family of baseband ASICs
                and is
                expected to enable a mobile device to operate over a wide range of
                operational frequencies without sacrificing overall performance.
                We
                believe that enabling WiMAX to operate over multiple frequency bands
                will
                significantly improve the economics of WiMAX network deployments
                for the
                following reasons:  -
              WiMAX
                  network operators will have the ability to assemble a licensed
                  spectrum
                  footprint using multiple frequency bands as opposed to having to
                  acquire
                  scarce spectrum in a single frequency
                  band;
  -
              carriers
                  will have the ability to address network coverage and capacity
                  issues via
                  the acquisition of low-cost spectrum as opposed to costly cell
                  splitting;
  11
  -
              the
                  ability of frequency-agile WiMAX devices to roam between multiple
                  WiMAX
                  networks will be facilitated; and
 -
                A
                    single chipset family capable of addressing markets worldwide
                    will permit
                    economies of scale and result in lower device costs.
  Our
            initial multi-band RFIC, the NW1200, was sent to manufacture in late
            2006.
            Sample chips
            have undergone successful testing and evaluation. Additional testing
            will take
            place in combination with our NW1100 baseband WiMAX ACIS when available. The
            NW1200 RFIC operates in the 2.3-2.8 GHz and 3.3-3.8 GHz frequency bands
            and is
            designed for Time Division Duplexing (“TDD”) operation. The NW 2200 RFIC,
            currently under development, is expected to operate in the same frequency
            bands
            as the NW 1100, but will also support the AWS band (1.7-2.1 GHz) and
            will
            operate in frequency division duplex (“FDD”) mode. Both RFICs are designed to
            support WiMAX and Wi-Fi and are optimized to operate with the NextWave
            family of
            baseband WiMAX ASICS.
 ·
            Pico
                  Base Transceiver Station (BTS): A BTS, also known as a wireless
                  base
                  station, includes equipment needed to transmit and receive radio
                  signals
                  (transceiver) to and from subscriber devices, antennas, and the
                  electronics required to communicate with other network elements.
                  Unlike a
                  conventional BTS which can provide radio coverage over a radius
                  of several
                  miles, a pico BTS is much smaller in size and is intended to provide
                  low-cost capacity and coverage relief in very small geographic
                  areas.
                  NextWave is currently in the design phase of silicon products to
                  support a
                  PicoBTS/Access point product family. This design is currently being
                  implemented in field-programmable gate array (“FPGA”) form and will be
                  field tested later this year. 
 **PacketVideo
        Multimedia Software Products**
  Based
        in
        San Diego, our PacketVideo subsidiary has approximately 387 employees and
        full-time equivalent contractors and is a global provider of embedded multimedia
        software products for mobile devices. PacketVideo was formed as a Delaware
        corporation in August 1998 and was privately held prior to its acquisition
        by
        NextWave in July 2005.
  PacketVideo’s
          software, which it licenses to the world’s leading mobile device manufacturers
          and wireless carriers, transforms a mobile phone or other mobile device
          into a
          feature-rich multimedia device that allows people to stream, download,
          and play
          video and music, receive live TV, or engage in two way video telephony.
          PacketVideo’s innovations and engineering leadership have led to breakthroughs
          in content encoding, content delivery systems, and advanced multimedia-enabled
          handset development around the world.
  For
          mobile device manufacturers, shorter product cycles and increasing demand
          for
          advanced technologies are driving collaboration with third party solution
          providers, such as PacketVideo, to aid their product development. We believe
          that PacketVideo’s technical capabilities and depth of knowledge are key reasons
          why PacketVideo has been chosen by the world’s largest device manufacturers and
          wireless carriers to help them quickly develop and introduce new multimedia
          enabled handsets and multimedia services to the market. Over one hundred
          million
          handsets containing PacketVideo software have been shipped worldwide by
          device
          manufacturers including LGE, Motorola, Nokia and Samsung. In addition,
          PacketVideo provides multimedia software solutions to some of the world’s
          largest wireless carriers including NTT DoCoMo, Orange, T-Mobile and Verizon
          Wireless. According to IDC, high-end mobile phones and converged mobile
          devices
          represented 20% of all mobile phones shipped in 2005. This percentage is
          expected to increase to 45% of the more than one billion handsets forecasted
          to
          be shipped in 2008. We
          believe that this trend, combined with forthcoming software from PacketVideo
          that contains major enhancements, will enable PacketVideo to maintain its
          strong
          market share position.
 PacketVideo’s
        current suite of device embedded software solutions are based on a modular
        architecture to enable rapid integration with the industry’s leading hardware
        platforms and operating systems.
 
 PacketVideo
        Multimedia Framework .
        PacketVideo’s core software product powers the playback of video and music in
        millions of mobile phone handsets worldwide. The PacketVideo Multimedia
        Framework is an embedded client with modular options to enable the downloading,
        streaming, and playback of content files based on all major media formats.
        PacketVideo Multimedia Framework codec modules include: WMA 9/10/Pro, WMV
        9,
        AAC, HE-AAC, HE-AAC V2, AVC/H.264, MPEG-4, Real Audio, Real Video, MP3, MP3
        PRO,
        AMR and WB-AMR.
  PacketVideo
        Connect .
        PacketVideo Connect is a family of customizable software products that
        auto-detect and link popular devices through the home, allowing end-users
        to
        share and enjoy all kinds of mobile-multimedia content on the devices of
        their
        choice. The PacketVideo Connect server is certified by the Digital Living
        Network Alliance (DLNA), a consortium of more than 300 consumer electronics
        and
        technology companies. The software is interoperable with hundreds of other
        DLNA-certified home electronic and mobile devices.
  12
  PacketVideo
        Mobile TV Solutions .
        PacketVideo’s mobile TV solutions enable mobile broadcast TV. Features include
        live streaming TV, video-on-demand, high-performance multimedia codecs,
        picture-in-picture, personal video recorder, fast channel changing, and support
        for PacketVideo or third-party Electronic Service Guide
 
 PacketVideo
        Multimedia Communications .
        PacketVideo's two-way video telephony software solution is 324M-compliant
        real-time video telephony—for two-way voice and video conversations and video
        conferencing. Features include picture-in-picture, call recording option,
        Push-to-Talk (VOIP support) and SIP support for push-to-view.
 
 PacketVideo
        Imaging Solutions .
        PacketVideo's advanced imaging engine renders photos, organizes albums and
        edits
        pictures, all on the handset. PacketVideo’s imaging technology significantly
        improves the user experience with rapid access to images created by the mobile
        device’s camera, with the additional benefit of highly optimized memory. In
        addition, the software enables users to record their own audio, video and
        digital photos directly on the handset.
  PacketVideo
          Digital Rights Management (“DRM”) Solutions .
          A
          mobile implementation of content protection and business rules for commercial
          media consumption. DRM types supported include: WindowsMedia DRM, OMA 1.0
          and
          2.0, SDC - Java DRM, and NDSF. In addition, PacketVideo
          owns, and is further developing SDC - Java DRM.
  PacketVideo
        Experience Application .
        PacketVideo Experience is a mobile web 2.0 media services application designed
        to add value to a mobile operator’s existing content delivery services by
        managing and serving data about media content, rather than the media payload.
        It
        is designed to enable a personalized music entertainment experience for users
        based on their personal preferences:
 
 The
        introduction of affordable, high-speed Internet service via DSL and cable
        broadband provided software developers with a unique opportunity to develop
        entire new categories of software applications. Many of these applications
        focused on the capture, manipulation, and transmission of multimedia content
        such as music, images, and video. Several, such as iTunes, Windows Media
        Player,
        Google Video, and peer-to-peer applications such as BitTorrent have achieved
        extremely high levels of popularity and, in some cases, spawned businesses
        with
        market valuations that exceed those of the companies that actually provide
        broadband connections to end-users. We believe that a similar opportunity
        to
        develop innovative software applications, optimized for the mobile environment,
        exists with the wide scale introduction of affordable mobile broadband
        services.
 The
          emergence of mobile broadband will necessitate the development of new categories
          of software applications optimized to take full advantage of the distinctive
          mobility features inherent in mobile broadband systems. To be successful,
          developers of these new software applications must accommodate the complexities
          (e.g., variable connection rates) and unique capabilities (e.g., mobile
          positioning) associated with wireless broadband and will need to overcome
          mobile
          device (e.g., smartphones) design restrictions such as limited memory,
          power
          limitation and on-board processing capabilities. In addition, mobile application
          software developers will need to fully understand underlying 4G wireless
          broadband network technologies such as WiMAX to ensure optimal performance
          of
          their multimedia software applications in a challenging wireless environment.
          We
          expect that global deployments of mobile broadband networks will create
          a unique
          opportunity for software developers such as PacketVideo to create innovative
          multimedia software applications and server platforms optimized for the
          mobile
          and converged media environment.
  We
        believe that PacketVideo is well positioned to help develop these types of
        next-generation, mobile broadband software applications for the following
        reasons:
  ·
              PacketVideo
                  is already a global provider of device embedded, mobile multimedia
                  software and has broad experience in developing software for memory
                  and
                  processor limited mobile devices.
  ·
              As
                  part of NextWave, PacketVideo will have full access to the company’s
                  extensive mobile broadband technology development activities and
                  will be
                  able to develop new multimedia software applications that take
                  full
                  advantage of the unique capabilities we are designing into our
                  products
                  and technologies.
  ·
              Unlike
                  the aforementioned PC software environment, there are no dominant
                  mobile
                  device operating systems and, in fact, over two dozen such operating
                  systems are currently in use by mobile handset manufacturers worldwide.
                  PacketVideo’s software has been engineered to work with virtually all of
                  the most popular mobile device operating systems in use today.
                  By
                  maintaining this flexible approach, we believe that PacketVideo’s next
                  generation of mobile broadband software will be well-positioned
                  to enjoy
                  continued wide scale industry
                  adoption.
  ***GO
        Networks Mobile Broadband Wireless Network Systems***
  13
  Based
        in
        Mountain View, CA, with a major technology development center located in
        Tel
        Aviv, Israel, our GO Networks subsidiary has approximately 67 employees and
        provides commercial and municipal service providers with high-performance
        mobile
        Wi-Fi systems. As noted above, GO Networks, inclusive of these employees,
        was
        acquired in February 2007.
 
 GO
        Networks’ Mobile Broadband Wireless system combines xRF TM smart-antenna technology with a cellular-mesh Wi-FI architecture to provide
        commercial and municipal service providers with a cost-effective solution
        to
        support bandwidth-intensive mobile broadband services such as video streaming,
        real-time gaming, video telephony and other types of multimedia applications.
 
 xRF
        Adaptive Beamforming Smart Antenna Technology :
        GO
        Networks’ xRF adaptive smart-antenna technology is based on a patent-pending
        implementation of adaptive beamforming and smart-antenna signal processing
        algorithms and is one of the industry’s only smart-antenna implementations
        designed for cellular-mesh Wi-Fi solutions.
 
 On
        the
        receive side, xRF technology is designed to address the challenges of multipath
        (where a transmitted signal follows several propagation paths towards the
        receiver, causing time delay and delay spread that results in higher bit
        error
        rates and degraded performance) by constructively combining phase shifted
        signals received through reflections, resulting in significant improvements
        to
        the signal-to-noise ratio (SNR), particularly in multipath-prone
        non-line-of-sight (NLOS) scenarios.
  On
          the
          transmit side, xRF technology focuses radio energy towards the Wi-Fi client,
          effectively reducing the amount of multipath the client’s receiver is exposed to
          and increasing the system’s range and throughput. The xRF technology allows GO
          Networks’ Mobile Broadband Wireless base stations to comply with point-to-point
          rules and operate at a transmit power much higher than conventional Wi-Fi
          systems, resulting in improvements to range, capacity and throughput in
          the
          coverage area.
 GO
        Networks’ xRF technology is also one of the industry’s only smart antenna
        technology that operates in a multi-channel access solution and supports
        both
        sectored and omni-directional base stations. xRF technology powers GO Networks’
single access channel pico base station and the multi-channel micro base
        station
        which transmits and receives over two simultaneous, non-synchronous 802.11
        channels.
  Cellular-Mesh
          Wi-Fi :
          GO
          Networks Mobile Broadband Wireless cellular-mesh Wi-Fi architecture combines
          cellular-style radio and mesh networking architecture. This architecture
          uses a
          meshed combination of “micro” and “pico” Wi-Fi base stations to provide
          cost-effective Wi-Fi coverage. Mobile Broadband Wireless 2000 series micro
          base
          stations are used to provide top-down micro-cellular Wi-Fi coverage while
          Mobile
          Broadband Wireless 1000 series pico base stations provide complementary
          street-level Wi-Fi coverage. Mesh
          networking can significantly reduce the costs associated with operating
          wide-area Wi-Fi networks, enable cost-effective street-level coverage,
          and
          simplify network configuration and reconfiguration.
 
 The
        GO
        Networks’ Mobile Broadband Wireless system is comprised of the following network
        elements:
 
 ·
            WLS
                2100 Micro Cellular-Mesh Wi-Fi Sector Base Station:
                The WLS 2100 is a 120 degree multi-radio sector panel designed for
                easy
                installation on building sides, rooftops, towers and utility poles.
                The
                WLS 2100 is equipped with two xRF-enabled 802.11 b/g access radios
                and a
                separate 802.11a channel for beamformed
                user access andhigh-performance mesh backhaul. 
 ·
            WLP
                1100 Pico Cellular-Mesh Wi-Fi- Base Station:
                The WLP 1100 is an omni-directional multi-radio weather-proof unit
                intended for street-level pole/utility pole Wi-Fi applications. The
                WLP
                1100 is equipped with one xRF-powered 802.11 b/g access radio and
                a
                separate 802.11a channel for beamformed
                user access andhigh-performance mesh networking and backhaul. 
 ·
            MBW
                EMS/NMS Platform:
                The MBW EMS/NMS platform offers a sophisticated set of management
                tools
                for element management as well as network-wide performance monitoring
                and
                management. From the MBW EMS/NMS console, operators can proactively
                monitor network and RF performance and dynamically reconfigure their
                Wi-Fi
                infrastructure, at the access point level or network-wide, to meet
                varying
                RF environments, network conditions, traffic and user loads. 
 **Network
        Services & Solutions**
  Based
          in
          Henderson, Nevada, our Network Solutions Group, a part of our NextWave
          Broadband
          subsidiary, intends to offer a full suite of network design and implementation
          services to wireless service providers, including RF and core network design
          service, network optimization and operation services, and back-office
          application services. NSG is currently developing a WiMAX/Wi-Fi field test
          in
          Henderson, Nevada, to showcase its network support services and the company’s
          wireless broadband products and technologies to service providers seeking
          to
          deploy next-generation networks. We intend to make our spectrum available
          to
          service providers looking to individually or jointly deploy next-generation
          wireless broadband networks that utilize our advanced products and technologies.
          Potential service providers include wireless service providers, cable operators,
          multimedia content distributors, applications service providers and Internet
          service providers. We believe that a model under which service providers
          can
          utilize our spectrum to offer advanced wireless broadband services will
          help
          accelerate sales of our mobile broadband products and
          technologiesn.
  14
  Our
        Network Solutions Group intends to offer participating service providers
        with
        the following network design and implementation services:
  ·
              RF
                  design;
  ·
              Network
                  construction;
  ·
              Network
                  optimization;
  ·
              Network
                  operations center implementation;
  ·
              IP
                  core network including security
                  integration;
  ·
              Core
                  network integration;
  ·
              Billing
                  and operational support systems;
  ·
              Customer
                  support systems; and
  ·
              Network
                  operations and maintenance, including Network Management Systems
                  (NMS).
  Our
          Network Solutions Group has approximately 65 employees and full-time equivalent
          contractors with extensive backgrounds in building and operating wireless
          networks and in designing and implementing back-office systems. Members
          of the
          Network Solutions Group have built and operated wireless networks for companies
          such as AirTouch, AT&T Wireless, McCaw Cellular, Nextel and SprintPCS. Since
          2003, our Network Solutions Group’s engineers have been operating a test-bed
          facility in Henderson, Nevada, to evaluate the capabilities of various
          wireless
          technologies including various Wi-Fi products, 1xEV-DO, TD-CDMA and Flash-OFDM.
          These technical evaluations included in-depth assessments of key performance
          criteria including link budgets, spectral efficiencies, service quality,
          data
          rates, connection reliability, mobile capabilities, data link security
          and
          cost-per-bit economics.
 In
        parallel to its technology assessment initiatives, our Network Solutions
        Group
        has designed an advanced IP core network designed to support end-to-end IP
        connectivity, reduce IP core network costs, and quickly enable new services.
        During the same period, our Network Solutions Group also completed the design
        and has begun implementation of an advanced back-office system architecture
        consisting of billing, operational support systems (e.g., Mediation, LDAP
        and
        RADIUS) and customer care systems and has designed a network operations center
        that will enable our Network Solutions Group to efficiently monitor the
        performance of its managed networks.
 
 **Las
        Vegas Test Site**
  To
        demonstrate the features and capabilities of our WiMAX and Wi-Fi technologies,
        our Network Solutions Group is developing a mobile WiMAX/Wi-Fi test site
        in
        Henderson, Nevada that will utilize our licensed spectrum and is expected
        to
        become operational in 2007. We intend to use this test site to demonstrate
        the
        performance of our integrated WiMAX and Wi-Fi mobile broadband technologies
        and
        our advanced IP core and back-office systems. We plan to further develop
        this
        test site with vendor partners and service providers and believe that
        the test site will be an important step towards successful commercialization
        of
        our WiMAX/Wi-Fi products and technologies. In addition, to accelerate industry
        development of WiMAX technologies, we intend to make our test site facilities
        available to others in the WiMAX industry for the purpose of conducting product
        evaluations and compatibility testing.
  15
  We
        believe that Las Vegas represents an ideal location for testing, developing
        and
        evaluating a mobile WiMAX/Wi-Fi test site for a number of reasons,
        including:
  ·
              Las
                  Vegas is one of the fastest growing metropolitan areas in the country,
                  with demographics that are conducive gauging customer
                  acceptability;
  ·
              Existing
                  tower inventory and flexible zoning procedures will reduce the
                  time
                  required to deploy a network;
  ·
              As
                  the current operational headquarters for our Network Service Group,
                  most
                  of our network engineering and resources needed to design, build,
                  and
                  operate a mobile WiMAX/Wi-Fi network are already located in the
                  market;
                  and
  ·
              Las
                  Vegas represents a highly attractive market
                  for potential service provider
                  customers.
  **Spectrum
        Portfolio**
  ***Domestic
        Spectrum Summary***
  To
          date,
          we have acquired spectrum and entered into long-term leases that provide
          us with
          exclusive leasehold access to licensed spectrum throughout the U.S. We
          have
          compiled a spectrum portfolio covering approximately 248.9 million persons,
          or
          POPs, across the country, and we will continue to identify and acquire
          complementary spectrum to add to our portfolio. We have 20 MHz or more
          of
          spectrum covering 136.4 million POPs, and 10MHz of spectrum covering an
          additional 98.7 million POPs. In a number of markets, including much of
          the New
          York metropolitan area, we have 30 MHz or more of spectrum. We are focused
          on
          acquiring authorizations to use licensed spectrum in the top 100 U.S. markets,
          which have population densities and demographics most suitable to drive
          adoption
          of wireless broadband. We also have acquired licenses to use spectrum in
          smaller
          markets and plan to continue to acquire licenses in these markets to improve
          our
          overall coverage footprint.
 To
        date,
        we have focused our efforts on obtaining licenses or other rights to use
        2.3 GHz
        Wireless Communication Service (“WCS”) spectrum, 2.5 GHz Broadband Radio Service
        (“BRS”) and 2.5 GHz Educational Broadband Service (“EBS”) spectrum. We also
        acquired 154 licenses in the 1.7GHz/2.1GHz band, known as the Advanced Wireless
        Service (“AWS”) spectrum. We believe these spectrum bands are suitable for the
        deployment of mobile WiMAX networks and we are engineering our products and
        technologies to take advantage of the acquired licenses. We believe that
        additional spectrum bands also are attractive for the deployment of mobile
        WiMAX
        networks and, in the future, we may obtain spectrum in those bands and
        investigate ways to use unlicensed spectrum alongside our existing spectrum
        holdings to strengthen our network operations.
 
 Summary
        information about our current spectrum holdings in the United States is set
        forth below.
  Type
                    of Spectrum
 **MEA**
                
                **MEA
                    Name**
                **POPs
                    (mm)**
                
                **BRS/EBS**
                **WCS**
                **AWS**
                **Top
                    Covered CMAs within MEA (POP Rank)**1
                
                Boston
                9.5
                
                
                x
                x
                *Boston
                    (9), Providence (50)*2
                
                New
                    York City
                31.9
                
                x
                x
                x
                *New
                    York (2), Hartford (40)*3
                
                Buffalo
                1.5
                
                
                x
                
                *Buffalo
                    (42), Chautauqua (113)*4
                
                Philadelphia
                8.8
                
                x
                x
                x
                *Philadelphia
                    (5), Wilmington (75)*5
                
                Washington
                0.8
                
                
                
                x
                *Virginia
                    10 - Frederick (218)*6
                
                Richmond
                1.4
                
                
                
                x
                *Highland
                    (261), Roanoke (267)*7
                
                Charlotte-Greensboro-Greenville-Raleigh
                7.0
                
                
                
                x
                *Greenville
                    (68), Columbia SC (89)*8
                
                Atlanta
                4.6
                
                
                
                x
                *Chattanooga
                    (107), Augusta (115)*9
                
                Jacksonville
                2.8
                
                
                x
                x
                *Jacksonville
                    (39), Tallahassee (184)*10
                
                Tampa-St.
                    Petersburg-Orlando
                2.1
                
                
                
                x
                *Florida
                    4 - Citrus (85), Sarasota (159)*11
                
                Miami
                1.2
                
                
                
                x
                *Fort
                    Myers (99), Florida 1 - Collier
                    (168)*
  16
  12
                
                Pittsburgh
                2.8
                
                
                
                x
                *Pittsburgh
                    (22), Johnstown (283)*13
                
                Cincinnati-Dayton
                1.2
                
                
                
                x
                *Huntington
                    (188), Charleston (255)*14
                
                Columbus
                0.7
                
                
                
                x
                *Ohio
                    6 - Morrow (106), Ohio 9 -Ross (259)*15
                
                Cleveland
                5.2
                
                
                x
                x
                *Cleveland
                    (25), Akron (73)*16
                
                Detroit
                11.0
                
                
                x
                
                *Detroit
                    (7), Grand Rapids (60)*17
                
                Milwaukee
                5.2
                
                
                x
                
                *Milwaukee
                    (33), Madison (117)*18
                
                Chicago
                14.2
                
                
                x
                x
                *Chicago
                    (3), Gary (80)*19
                
                Indianapolis
                2.7
                
                
                
                x
                *Indianapolis
                    (31), Indiana 6 - Randolph (302)*20
                
                Minneapolis-St.
                    Paul
                7.0
                
                
                x
                
                *Minneapolis
                    - St. Paul (14), Hubbard (202)*21
                
                Des
                    Moines-Quad Cities
                2.9
                
                
                x
                
                *Des
                    Moines (108), Davenport (161)*22
                
                Knoxville
                1.4
                
                
                
                x
                *Knoxville
                    (86), Jonson City (110)*23
                
                Louisville-Lexington-Evansville
                2.0
                
                
                
                x
                *Louisville
                    (51), Kentucky 3 - Meade (167)*24
                
                Birmingham
                0.9
                
                
                
                x
                *Montgomery
                    (166), Butler (288)*25
                
                Nashville
                1.0
                
                
                
                x
                *Tennessee
                    3 - Macon (144), Clarksville (311)*26
                
                Memphis-Jackson
                1.6
                
                
                
                x
                *Tennessee
                    5 - Fayette (143), Tenn. 1 - Lake (181)*27
                
                New
                    Orleans-Baton Rouge
                2.0
                
                
                
                x
                *New
                    Orleans (41), Mobile (91)*28
                
                Little
                    Rock
                2.8
                
                
                
                x
                *Little
                    Rock (84), Fayetteville (158)*29
                
                Kansas
                    City
                3.3
                
                
                x
                
                *Kansas
                    City (26), Topeka (317)*30
                
                St.
                    Louis
                5.0
                
                
                x
                x
                *St.
                    Louis (18), Illinois 8 - Washington (173)*31
                
                Houston
                7.3
                
                
                x
                x
                *Houston
                    (6), Louisiana 5 - Beauregard (137)*32
                
                Dallas-Fort
                    Worth
                12.8
                
                x
                x
                x
                *Dallas-Fort
                    Worth (4), Austin (36)*33
                
                Denver
                5.4
                
                
                x
                
                *Denver
                    - Boulder (17), Colorado Springs (87)*34
                
                Omaha
                1.8
                
                
                x
                
                *Omaha
                    (72), Lincoln (228)*35
                
                Wichita
                1.2
                
                
                x
                x
                *Wichita
                    (94), Kansas 14 - Reno (387)*36
                
                Tulsa
                1.4
                
                
                x
                x
                *Tulsa
                    (58), Oklahoma 4 - Nowata (309)*37
                
                Oklahoma
                    City
                1.9
                
                
                x
                x
                *Oklahoma
                    City (46), Oklahoma 6 - Seminole (289)*38
                
                San
                    Antonio
                4.1
                
                
                x
                
                *San
                    Antonio (27), McAllen (77)*39
                
                El
                    Paso-Albuquerque
                2.7
                
                x
                x
                x
                *EL
                    Paso (71), Albuquerque (74)*40
                
                Phoenix
                5.6
                
                
                x
                
                *Phoenix
                    (13), Tucson (53)*41
                
                Spokane-Billings
                2.1
                
                
                x
                x
                *Spokane
                    (120), Idaho 1 - Boundary (212)*42
                
                Salt
                    Lake City
                3.5
                
                
                x
                x
                *Salt
                    Lake City (34), Provo (128)*43
                
                San
                    Francisco-Oakland-San Jose
                15.0
                
                
                x
                x
                *San
                    Francisco (12), Sacramento (24)*44
                
                Los
                    Angeles-San Diego
                24.9
                
                x
                x
                x
                *Los
                    Angeles (1), San Diego (15)*45
                
                Portland
                4.0
                
                
                x
                x
                *Portland
                    (23), Salem (147)*46
                
                Seattle
                5.1
                
                
                x
                
                *Seattle
                    (20), Tacoma (69)*47
                
                Alaska
                0.6
                
                
                
                x
                *Anchorage
                    (215), Alaska 2 - Bethel (377)*48
                
                Hawaii
                1.3
                
                
                x
                
                *Honolulu
                    (55), Hawaii 3 - Hawaii (415)*49
                
                Puerto
                    Rico and U.S. Virgin Islands
                3.8
                
                
                
                x
                *San
                    Juan (21), Puerto Rico 2 - Adjuntas (209)***Total
                    (excluding overlaps)**
                **248.9
                    (approx)**
                
                **x**
                **x**
                **x**
  (1)
              WCS
                  licenses are assigned by the FCC according to MEAs or REAGs (see
                  further
                  explanation below in “WCS Spectrum”). MEAs are named for the largest
                  metropolitan area contained within the licensed geographic service
                  area.
                  An MEA is significantly larger than the metropolitan area for which
                  it is
                  named. REAGs are named for the geographic region the license
                  covers.
  17
  (2)
              Our
                  AWS,WCS and BRS spectrum is held directly through FCC licenses.
                  Our EBS
                  spectrum has been leased on a long-term basis from current license
                  holders.
  (3)
              AWS
                  licenses are assigned by the FCC according to REAGs, EAs, or CMAs
                  (see
                  further explanation below in “AWS
                  Spectrum”).
  (4)
              We
                  lease EBS spectrum from multiple parties in the greater New York,
                  NY
                  metropolitan area, including geographic areas in New York, New
                  Jersey and
                  Connecticut. These leases give us access to different amounts of
                  spectrum
                  in specific parts of the market area. The term of these leases
                  range from
                  20 to up to 60 years when their renewal options are
                  included.
 
 (5)
              We
                  lease EBS spectrum from The Orange Catholic Foundation in the Los
                  Angeles,
                  CA (Orange County) area. This lease has an initial 10 year term
                  and
                  contains five renewal options for 10 years each to extend the term
                  of the
                  lease.(6)
              The
                  source for our POP figure is derived from 2006 composite data contained
                  in
                  databases managed by Applied Geographic Solutions Inc. of Newbury
                  Park CA.
                  Except for Puerto Rico which is derived from 2000 census
                  figures.
  ***WCS
        Spectrum***
  We
        have
        acquired WCS spectrum from third parties pursuant to privately negotiated
        purchase agreements. The 2.3 GHz WCS band is divided into four frequency
        blocks,
        A through D. Blocks A and B have 10MHz of spectrum each and blocks C and
        D have
        5 MHz each. We have acquired WCS licenses in the A, B, C and D frequency
        blocks.
        The WCS A and B blocks are licensed in 52 individual geographic regions covering
        the United States, including the Gulf of Mexico, and are called Major Economic
        Areas (MEA). The WCS C and D blocks are licensed in six larger geographic
        regions, also covering the United States and are called Regional Economic
        Area
        Groupings (“REAGs”). Both MEAs and REAGs are of various sizes in terms of
        population and geographic coverage.
  WCS
        licenses are allocated by the FCC for “flexible use.” This means that the
        spectrum can be used to provide any type of fixed, portable, mobile (except
        aeronautical mobile) or radiolocation services to individuals and businesses,
        including the wireless broadband services we intend to offer. Any such offerings
        are subject to compliance with technical rules in Part 27, Title 47 of the
        Code
        of Federal Regulations, as well as any applicable border treaties or agreements
        governing operations near the Canadian and Mexican borders.
 
 NextWave’s
        Canadian WCS licenses are held by our Canadian subsidiary, 4253311 Canada
        Inc. The licenses carry a 10 year license term with a renewal expectancy
        of an
        additional 10 years. Because the licenses were issued by Industry Canada
        through
        two separate auctions, 63 licenses have an expiration date of November of
        2014,
        while 25 licenses have an expiration date of April of 2015. The licenses
        are
“radiocommunication user” licenses and cannot be used to provide service for
        compensation before the licenses are converted to either “radiocommunication
        service provider” licenses or “radiocommunication carrier” licenses. Conversion
        of the licenses will require compliance with Canadian ownership and control
        restrictions. In addition, each Canadian WCS license is subject to a 5 year
        usage implementation requirement, demonstrating that the spectrum is being
        put
        to use at a level that is acceptable to Industry Canada. Again, because the
        licenses were issued at two different times, there are two different
        implementation deadlines, November of 2009 for 63 licenses, and April of
        2010
        for the other 25 licenses.
  ***BRS
        and EBS Spectrum***
  We
        have
        acquired BRS spectrum licenses from third parties pursuant to privately
        negotiated purchase agreements. In the future, licenses for vacant BRS spectrum
        may also be obtained through third parties and FCC auctions. Rights to lease
        and
        use EBS spectrum are acquired by commercial interests like us from educational
        entities through privately negotiated lease agreements. Our long-term leases
        make available to us exclusive leasehold access to the leased EBS spectrum
        for a
        total period of time ranging from 20 to up to 60 years when renewal options
        are
        included. On April 27, 2006, the FCC released new rules governing EBS lease
        terms. EBS licensees are now permitted to enter into lease agreements with
        a
        maximum term of 30 years; lease agreements with terms longer than 15 years
        must
        contain a “right of review” by the EBS licensee every five years beginning in
        year 15.
 
 Under
        current regulations, after giving effect to an FCC-mandated transition of
        the
        spectrum to a new band configuration, which must be complete by October 19,
        2010
        (barring disputes in the transition process), the total spectrum bandwidth
        licensed by the FCC for EBS and BRS spectrum is 194 MHz. Approximately 75%
        of
        this spectrum is licensed for the EBS and 25% is licensed for the BRS. Under
        FCC
        rules, regulations and policies (“FCC rules”), up to 95% of the spectrum
        dedicated to each EBS license can be leased for commercial purposes subject
        to
        compliance with FCC rules. After transitioning the EBS and BRS spectrum to
        the
        new band plan, individual channels and channel groups of EBS and BRS spectrum
        will range from 5.5 MHz to 23.5 MHz of spectrum. Most, but not all, EBS and
        BRS
        channel “groups” contain four channels and 23.5 MHz of spectrum.
  18
  Until
          1996, BRS spectrum was licensed according to Geographic Service Areas with
          a
          35-mile radius. These “incumbent” licenses continue to exist today. In 1996, the
          FCC conducted an auction and assigned licenses for available BRS spectrum
          according to Basic Trading Areas or BTAs of various sizes. These BTA licenses
          were granted subject to the prior rights of the incumbent BRS license holders.
          We have acquired licenses from incumbent BRS licensees, licensed for 35-mile
          Geographic Service Areas. We may in the future acquire BRS spectrum licensed
          for
          BTAs.
 EBS
        spectrum is licensed only for Geographic Service Areas with a 35-mile radius.
        In
        the future, vacant EBS spectrum may be assigned by BTAs, or some other licensing
        construct chosen by the FCC. EBS spectrum is licensed exclusively to accredited
        educational institutions, governmental organizations engaged in the formal
        education of enrolled students (e.g., school districts), and nonprofit
        organizations whose purposes are educational.
  The
        FCC’s
        rules for BRS and EBS spectrum were substantially revised in 2004 to provide
        more flexibility in how the spectrum is licensed and used; proceedings to
        revise
        the rules continue today. Use of the spectrum has evolved to include fixed
        and
        mobile, digital, two-way systems capable of providing high-speed, high-capacity
        broadband service, including two-way Internet access service via low-power,
        cellularized communication systems and single-cell high-power systems. On
        April
        27, 2006, the FCC released additional orders to reform FCC rules related
        to BRS
        and EBS spectrum. Although these new, amended rules became effective on July
        19,
        2006, they are subject to petitions for reconsideration, which seek to modify
        some of these amendments. For a more detailed description of these new rules,
        see “Government Regulation - BRS/EBS License Conditions.”
  ***AWS
        Spectrum***
  We
        acquired 154 AWS licenses in FCC Auction No. 66. The FCC granted AWS spectrum
        pursuant to Economic Area (“EA”) licenses, REAG licenses and CMA licenses. The
        AWS auction involved a total of 1,122 licenses: 36 REAG licenses, 352 EA
        licenses, and 734 CMA licenses. EA, REAG and CMA licenses vary widely in
        terms
        of population and geographic coverage.
 
 In
        terms
        of spectral size, the AWS spectrum is divided into six spectrum block, A
        through
        F. There are three 10 MHz blocks, each consisting of paired 5 MHz channels,
        and
        three 20 MHz blocks, each consisting of paired 10 MHz channels. We have acquired
        both 20 MHz and 10 MHz licenses.
  AWS
        licenses are allocated by the FCC for “flexible use.” This means that the
        spectrum can be used to provide any type of fixed, portable or mobile services
        to individuals and businesses, including the wireless broadband services
        we
        intend to offer. Any such offerings are subject to compliance with technical
        rules in Part 27, Title 47 of the Code of Federal Regulations as well as
        any
        applicable border treaties or agreement governing operations near the Canadian
        and Mexican borders.
 
 On
        December 15, 2006, we acquired 3.5 GHz BWA spectrum in Germany. The
        acquisition includes 42MHz of spectrum in all service areas. The licenses
        vary
        widely in terms of population and geographic coverage, but include major
        cities,
        such as Koln/Dusseldorf, Stuttgart/Karlbsruhe, Berlin/Brandenburg, Munster
        and
        Rhein/Main.
 
 On
        March
        2, 2007 ,
        we
        acquired WCS spectrum in Canada. The acquisition includes 30MHz of spectrum
        in
        all service areas. The licenses vary widely in terms of population and
        geographic coverage, but include major cities, such as Montreal, Ottawa,
        Edmonton, Quebec and Winnipeg.
 
 **International
        Investments**
  We
          have
          made international investments to leverage our development activities and
          to
          potentially serve as a vehicle to market our WiMAX products in international
          markets. These investments include a 51% interest in Inquam Broadband,
          a joint
          venture based in Germany that has acquired nationwide spectrum licenses
          in
          Germany, and a 33% interest in Hughes Systique, an offshore software development
          company located in India. In addition, we have opened a liaison office
          in Korea,
          the location of the world’s first commercial metropolitan-area wireless
          broadband network.
  **Inquam
        Broadband**
  19
  We
        acquired 51% of the equity of Inquam Broadband Limited, a Cayman Islands
        corporation, for $1.6 million and have agreed to provide additional funding
        up
        to 1.4 million Euros ($1.7 million at December 30, 2006), of which $1.1 million
        has been funded through December 30, 2006. Inquam Broadband was formed in
        January 2006 as a joint venture with Inquam-BMR GP, a private investment
        partnership. Through Inquam Broadband, we have broadband telecommunications
        assets in Germany and, subject to final regulatory action,  Switzerland.
        Under a separate note agreement established for the purpose of funding Inquam
        Broadband’s bids at wireless spectrum auctions in Germany and Switzerland, we
        loaned to a wholly-owned subsidiary of Inquam Broadband up to 17.6 million
        Euros
        and 7.1 million Swiss Francs ($28.9 million at December 30, 2006), of which
        $22.7 million was outstanding at December 30, 2006. Inquam Broadband and
        its
        subsidiary have not yet conducted any significant operating
        activities.
  In
        connection with the formation of Inquam Broadband, we received an option
        to
        acquire a 51% equity interest in Inquam Deutschland GmbH for an exercise
        price
        of 9.7 million Euros ($12.7 million at December 30, 2006), subject to certain
        adjustments. Inquam Deutschland, an affiliate of Inquam-BMR GP, holds a
        nationwide spectrum award of 2x1.25 MHz from the German telecommunications
        regulatory agency. Our option to purchase 51% of Inquam Deutschland expires
        on
        the later of April 18, 2007 and the 12th
        business day following the announcement of the outcome of the Swiss auction
        described below. At any time prior to the expiration of our option,
        Inquam-BMR GP has the right to purchase an interest between 25% and 49% in
        the
        note agreement described above, at which time both Inquam-BMR GP’s and
        NextWave’s note interests would simultaneously convert into ordinary shares of
        Inquam Broadband on a pro rata basis. In lieu of this right and at any time
        prior to the expiration of the option, Inquam-BMR GP has the right to require
        NextWave to purchase all shares then held by Inquam-BMR GP for 1,000 Euros
        per
        share ($2.1 million at December 30, 2006). In the event that Inquam-BMR GP
        does
        not exercise either of these rights prior to the expiration of NextWave’s option
        in April 2007, NextWave must elect to either convert the note into shares
        of
        Inquam Broadband equal to the note amount divided by 1,000 or purchase all
        Inquam Broadband shares then held by Inquam-BMR GP for 1,000 Euros per share
        ($2.1 million at December 30, 2006). Inquam Broadband may implement and operate
        a pilot network in Cologne, Germany, together with Netcologne, using the
        existing spectrum in Inquam Deutschland.
  In
          December 2006, Inquam Broadband Holdings Ltd, a subsidiary of **** Inquam
          Broadband was declared the winner of 28 Broadband Wireless Access (BWA)
          licenses, covering 100% of the Federal Republic of Germany, with an
          estimated population of 83 million, in the BWA spectrum auction conducted
          by BNetzA, the German regulatory authority for telecommunications. Inquam
          Broadband acquired the 42 MHz wide licenses, located in the 3.5 GHz frequency
          band, at a cost of $23.1 million or approximately seven tenths of a cent
          per
          MHz-POP. In February 2007, Inquam Broadband participated in a spectrum
          auction
          in Switzerland. We are currently awaiting notification from the Federal
          Office
          of Communication in Switzerland, which will determine if the license will
          be
          granted to Inquam Broadband for the minimum concession.
 **Hughes
        Systique**
  In
          October 2005, we acquired a 33% equity interest in Hughes Systique Corporation
          (“HSC”) for $4.5 million. The remaining equity is owned by Hughes
          Communications, Inc., the parent company of Hughes Network Systems, and
          the
          employees of HSC. Formed in 2005, HSC is an offshore software development
          company that specializes in providing software development services to
          the
          telecommunications industry using engineers and software developers in
          India.
          The President and CEO of HSC, Pradeep Kaul, has more than 33 years of experience
          in the wireless industry, including as an executive at Hughes Network Systems,
          and previously formed a successful offshore development company that was
          sold to
          Flextronics International. We entered into the relationship with HSC to
          facilitate and expedite the development of software modules and applications
          required in connection with our broadband development activities. In
          October 2005, we also entered into a 24-month service agreement with HSC
          pursuant to which we have agreed to contract for a minimum level of programmers
          during the term of the agreement. This agreement was amended in December
          2006,
          extending the term through June 2009.
 **Korea
        Liaison Office**
  In
        January 2006, we obtained the necessary governmental approvals to open a
        corporate liaison office in Korea limited to five employees. Our country
        manager, Dr. Hyock Jo Kwon, was President and CEO of Shinsegi Telecom Company,
        which launched the world’s first commercial wireless network based on CDMA
        technology. Our Korea liaison office occupies leased office space in Seoul’s
        Korea Stock Exchange Building. The goal of the office is to establish, develop
        and pursue mutually beneficial business opportunities and technology
        relationships in wireless communications with Korean corporations and research
        organizations addressing advance wireless products and services for global
        markets.
  Korea
          has
          become a global leader in the wireless broadband industry. Korea Telecom
          is
          currently deploying the world’s first mobile broadband network based on the
          WiBro standard. WiBro, developed by Korea’s Electronics and Telecommunications
          Research Institute (ETRI) and Korean wireless equipment manufacturers,
          has been
          harmonized with the IEEE 802.16e standard. South Korea’s Telecommunications
          Technology Association (TTA) was recently named as the world’s second WiMAX
          Forum certification laboratory to provide testing and certifying services
          for
          WiMAX.
 20
  **Sales
        and Marketing**
  **WiMAX** ** ***/*** **Wi-Fi
        Semiconductors and Network Products**
  We
          intend
          to market our family of WiMAX/Wi-Fi semiconductors, software, and network
          products to network infrastructure and device manufacturers as well as
          network
          operators worldwide. We plan to utilize a direct sales organization and
          third-party outlets to sell our products and will utilize third-party sales
          representatives and stocking distributors as additional channels to market
          our
          chipsets. In addition, we also intend to utilize a direct sales organization
          and
          third-party outlets to market and/or license our network products and
          technologies to network infrastructure manufacturers who intend to market
          WiMAX/Wi-Fi network equipment to wireless broadband service
          providers.
  We
        intend
        to promote industry awareness of our products and technologies via the
        deployment of our Las Vegas test site, and through industry trade shows,
        public
        relations initiatives, trade advertising and our company web site. In addition,
        we intend to actively work with leading trade publications and industry analysts
        to educate potential customers on the benefits of our products and
        technologies.
  **WiMAX**  **Network
        Services**
  We
          intend
          to provide network design and implementation services to service providers
          who
          will build and operate wireless broadband networks that utilize our technologies
          and/or spectrum. Because our network services will be provided in connection
          with our product sales, we do not envision the need to develop a separate
          sales
          channel to market our network services.
 **Multimedia
        Software Products**
  Our
        PacketVideo subsidiary utilizes a team of strategic account managers to market
        its multimedia software products to device manufacturers and service provider
        customers in North America, Asia and Europe. At present, PacketVideo’s customers
        include BenQ-Siemens, Fujitsu, LGE, Mitsubishi, Motorola, NEC, Nokia, Orange,
        Panasonic, Samsung, Sanyo, Sony-Ericsson, T-Mobile and Verizon
        Wireless.
  To
        promote its suite of software products and services, PacketVideo exhibits
        at
        high-profile wireless trade events including 3GSM World Congress, CTIA, and
        CTIA
        Wireless IT & Entertainment.
 
 **Wi-Fi
        Network Products**
  Our
          GO
          Networks subsidiary markets it products and services to service providers,
          carriers, and municipalities through a direct sales force and through local
          system integrators on a worldwide basis. At present, GO Networks’ primary
          markets are North America, Europe, the Middle East, and Africa. Secondary
          markets include the Asia-Pacific, and Central/Latin America. GO Networks
          is in
          discussions with strategic partners and OEM vendors that would integrate
          GO
          Networks products into their portfolio of wireless network
          solutions.
 GO
        Networks intends to generate market awareness and promote its products through
        print and internet advertising, press and analyst outreach initiatives,
        publication of technical, educational and business articles in industry
        magazines, and participation in tradeshows, conferences and technology
        seminars.
 
 ***Geographic
        Breakdown of Revenues***
  During
        the year ended December 30, 2006, we generated $16.5 million of revenues
        (68%)
        in the United States, $4.6 million (19%) in Japan, $2.5 million (10%) in
        Europe
        and $0.7 million (3%) in other regions of the world.
 
 For
        the
        period from inception (April 13, 2005) to December 31, 2005, we generated
        $1.9
        million of revenues (45%) in the United States, $1.3 million (32%) in Japan,
        $0.6 million (13%) in Europe and $0.4 million (10%) in other regions of the
        world.
  21
 
 **Competition**
  **Advanced
        Technology Group**
  We
        expect
        the market for our WiMAX products to be highly competitive and expect that
        competition will increase in the future. The principal competitive factors
        include:
  ·
              Industry
                  adoption of wireless standards that compete with mobile WiMAX;
                  and
  ·
              Mobile
                  WiMAX semiconductors and related products offered by our
                  competitors.
  Competing
        Wireless Broadband Standards
  Mobile
        WiMAX will compete with third generation (3G), CDMA based wireless technologies
        and fourth generation (4G), Orthogonal Frequency Division Multiple Access
        (OFDMA) based wireless air-interface technologies that are intended to provide
        mobile broadband services to the market. Major alternative wireless broadband
        technologies include:
  CDMA2000:
        CDMA2000 is a registered trademark of the Telecommunications Industry
        Association and describes a family of 3G mobile telecommunications standards
        based on the 3GPP2 telecommunications specification. CDMA2000 includes the
        1xEV-DO standards which have achieved high levels of industry support in
        the
        United States and abroad, including nationwide deployments by Verizon Wireless
        and Sprint Nextel. It is expected that CDMA2000 may be harmonized with the
        802.20 Mobile Broadband Wireless Access OFDMA that is currently under
        development.
  UMTS:
        Universal Mobile Telecommunications System (UMTS) is a 3G wireless technology,
        based on the 3GPP specification, that uses W-CDMA (Wideband - Code Division
        Multiple Access) as its underlying air-interface standard. UMTS has achieved
        a
        high level of industry acceptance and has the support of some of the largest
        GSM
        wireless network operators in the world. To enhance network performance,
        UMTS
        network operators are currently deploying a new WCDMA protocol called High
        Speed
        Downlink Packet Access (HSDPA) that is expected to significantly improve
        downstream network data rates. In the future, it is expected that network
        operators will also deploy High Speed Uplink Packet Access (HSUPA) that is
        expected to significantly improve upstream network data rates. In addition,
        LTE,
        or Long Term Evolution, is the trade name for research and development work
        that
        is underway to identify future OFDMA technologies and capabilities needed
        to
        help ensure that 3GPP remains a highly competitive technology in the
        future.
  As
        providers of mobile WiMAX product and technologies, we may compete indirectly
        with some or all of well-established, international companies that are engaged
        in the development, manufacture and sale of products and technologies that
        support alternative wireless broadband standards, including Alcatel, Ericsson,
        Huawei, LGE, Lucent, Motorola, Nokia, Nortel, QUALCOMM, Samsung and
        Siemens.
  Competing
        WiMAX Products and Technology Providers
  We
        will
        be competing with numerous companies that are developing or marketing WiMAX
        products and technologies that will directly compete with our products and
        technologies including Beceem, Fujitsu, Intel, Motorola, Nortel, RunCom,
        Samsung, Sequans and WaveSat. Some of these companies have significantly
        greater
        financial, technical development, marketing and other resources than we do,
        are
        already marketing commercial WiMAX semiconductor products, and have established
        a significant time to market advantage. In addition, we expect additional
        competition to emerge in the WiMAX semiconductor and components market from
        well-established companies, such as Broadcom and Samsung.
  22
  **Multimedia
        Software Products**
  At
        present, the primary competitors for PacketVideo’s multimedia software products
        are the internal multimedia design teams at the OEM handset manufacturers
        to
        whom PacketVideo markets its products and services. Importantly, these OEMs
        represent some of PacketVideo’s largest customers. In addition several
        companies, including Flextronics/Emuzed, Hantro, Nextreaming, Philips Software,
        Sasken and Thin Multimedia also currently provide software products and services
        that directly or indirectly compete with PacketVideo. As the market for embedded
        multimedia software evolves, we anticipate that additional competitors may
        emerge including Apple Computer, Real Networks and OpenWave.
  **Wi-Fi
        Network Systems**
 
 GO
        Networks competition ranges from small and medium size companies such as
        Tropos
        Networks, Strix Systems, and Belair Networks to large-scale systems suppliers
        such as Cisco, Motorola, and Nortel. Some of these companies have significantly
        greater financial, technical development, and marketing resources than GO
        Networks, are already marketing carrier-class Wi-Fi systems, and have
        established a significant time-to-market advantage.
 
 **Intellectual
        Property**
  In
        order
        to protect our proprietary rights in our products and technologies, we rely
        primarily upon a combination of patent, trademark, trade secret and copyright
        law as well as confidentiality, non-disclosure and assignment of inventions
        agreements. We have six U.S. patents, one of which is the subject of extensive
        foreign filing. We have fifty-five patent applications pending in the United
        States as well as four U.S. provisional patent applications. We have nine
        pending intent-to-use U.S. trademark applications as well as four U.S. trademark
        registrations and one service mark registration. There are numerous foreign
        trademark applications as well as numerous foreign registrations. Due to
        the
        early development stage of our WiMAX technology development business, our
        registered PacketVideo trademark is the only trademark that is currently
        material to our business.
  In
        addition, we have typically entered into nondisclosure, confidentiality and
        assignment of inventions agreements with our employees, consultants and with
        some of our suppliers and customers who have access to sensitive information.
        We
        cannot assure you that the steps taken by us to protect our proprietary rights
        will be adequate to prevent misappropriation of our technology or independent
        development and/or the sale by others of products with features based upon,
        or
        otherwise similar to, those of our products.
  Given
          the
          rapid pace of technological development in the communications industry,
          we also
          cannot assure you that our products do not or will not infringe on existing
          or
          future proprietary rights of others. Specifically, more than 30 companies
          have
          submitted letters of assurance related to IEEE Standard 802.16 and amendments
          stating that they may hold or control patents or patent applications, the
          use of
          which would be unavoidable to create a compliant implementation of either
          mandatory or optional portions of the standard. In such letters, the patent
          holder typically asserts that it is prepared to grant a license to its
          essential
          IP to an unrestricted number of applicants on a worldwide, non-discriminatory
          or
“demonstrably free of unfair discrimination” basis and on reasonable terms and
          conditions. If any companies asserting that they hold or control patents
          or
          patent applications necessary to implement mobile WiMAX do not submit letters
          of
          assurance, or state in such letters that they do not expect to grant licenses,
          this could have an adverse effect on the implementation of mobile WiMAX
          networks
          and the sale of our mobile WiMAX products and technologies. In addition,
          we can
          not be certain of the validity of the patents or patent applications asserted
          in
          the letters of assurance submitted to date, or the terms of any licenses
          which
          may be demanded by the holders of such patents or patent applications. If
          we are
          required to pay substantial license fees to any company (s) not participating
          in
          the process defined by 802.16 intellectual property committee for any “finished”
mobile WiMAX products, this could adversely affect the profitability of
          these
          products.
  Although
        we believe that our technology has been independently developed and that
        none of
        our intellectual property infringes on the rights of others, we cannot assure
        you that third parties will not assert infringement claims against us or
        seek an
        injunction on the sale of any of our products in the future. If an infringement
        were found to exist, we may attempt to acquire the requisite licenses or
        rights
        to use such technology or intellectual property. However, we cannot assure
        you
        that such licenses or rights could be obtained on terms that would not have
        a
        material adverse effect on us, if at all.
  23
  We
          license and will continue to seek licenses to certain technologies from
          others
          for use in connection with some of our products and technologies. While
          none of
          our current license agreements are material at the time of this 10-K Form,
          the
          inability to obtain such licenses or loss of these licenses could impair
          our
          ability to develop and market finished products to end-users. **** If
          we are
          unable to obtain or maintain the licenses that we need, we may be unable
          to
          develop and market our products or processes, or we may need to obtain
          substitute technologies of lower quality or performance characteristics
          or at
          greater cost.
  **Participation
        in the WiMAX Standardization Process**
  The
        standardization of a wireless broadband technology such as WiMAX is driven
        by
        professional associations consisting of experts employed by companies who
        have
        an interest in developing the relevant technology. We believe that our
        participation in these associations is important in order to influence the
        development of standards and in order to keep up to date with the latest
        technological developments in our industry.
  The
        most
        important technological standards in our industry are developed by the Institute
        of Electrical and Electronics Engineers (IEEE). WiMAX is based on the IEEE
        standard 802.16e for broadband wireless access. The 802.16e mobile WiMAX
        standard is the latest generation of the IEEE 802.16 Air Interface standard,
        which is the state-of-the-art standard for wireless multimedia distribution.
        It
        was initially designed for multimedia distribution for outdoor fixed broadband
        wireless access (BWA) markets where it addresses the “Last Mile” problem for the
        extension of fiber, cable and DSL networks. It takes the best features from
        earlier proprietary wireless access systems and combines them to provide
        a
        flexible wireless network solution capable of meeting the most stringent
        requirements for reliable multimedia communications.
  NextWave
          has actively participated in the development of the IEEE 802.16 standard.
          Ken
          Stanwood, Executive Vice President of Technical and Standards Development,
          has
          participated in IEEE 802.16 from the very start, and is responsible for
          much of
          the core Media Access Control (MAC) layer technology in the standard. He
          recently finished a three year term as vice chair of IEEE 802.16. In addition,
          Dr. Roger Marks, Senior Vice President - Industry Relations of our Advanced
          Technology Group, currently serves as chairman of IEEE 802.16. Many additional
          NextWave personnel support the process as task group officers and
          participants.
  Even
        with
        the development of the IEEE 802.16 standard, the interoperability of wireless
        broadband devices and networks is not guaranteed. For example, two vendors
        could
        pick the same profile but implement it differently. Acknowledging that risk,
        the
        companies involved in the development of IEEE 802.16 decided to create another
        voluntary industry organization, known as the WiMAX Forum that would certify
        devices and technologies that meet a uniform standard. In April 2001, the
        WiMAX
        Forum was established, with Mr. Stanwood as one of the founders. The WiMAX
        Forum
        creates and monitors the test specifications for wireless broadband systems
        and
        components based on the IEEE 802.16 standard.
  The
        WiMAX
        Forum now has hundreds of industry participants as members, including AT&T,
        Cisco, Intel, Motorola, Nokia, Nortel and Samsung. The WiMAX Forum is in
        the
        process of certifying fixed WirelessMAN-OFDM systems through independent
        laboratory conformance testing and plug-fests. Plug-fests are events at which
        participating companies have the opportunity to test and demonstrate the
        interoperability of their products based on a set of standards. The WiMAX
        Forum
        is embarking on test specifications and plug-fests for WirelessMAN-OFDMA
        scalable OFDMA mobile systems, commonly referred to as 802.16e
        systems.
  In
        parallel with efforts by the IEEE and the WiMAX Forum, the Telecommunications
        Technology Association (TTA) in Korea developed WiBro, an 802.16-based standard,
        which emphasizes support for mobility based on the 802.16e amendment. Efforts
        supported by TTA and IEEE 802.16 to harmonize the WiBro standard with the
        IEEE
        802.16e standard were successful. WiBro was converted from a wireless standard
        to a service requiring WiMAX certified equipment in the 2.3 GHz
        band.
  **Government
        Regulation**
  **Overview**
  24
  Communications
        industry regulation changes rapidly, and such changes could adversely impact
        us.
        The following discussion describes some of the major communications-related
        regulations that affect us, but numerous other substantive areas of regulation
        not discussed here also may influence our business.
  Communications
        services are regulated to varying degrees at the federal level by the Federal
        Communications Commission (“FCC”) and at the state level by public utilities
        commissions (“PUCs”). NextWave’s suite of wireless broadband products and
        services is subject to federal regulation in a number of areas, including
        the
        licensing and use of spectrum, and the technical parameters, certification,
        marketing, operation and disposition of wireless devices. Applicable consumer
        protection regulations also are enforced at the federal and state
        levels.
  The
        following summary of applicable regulation does not describe all present
        and
        proposed federal, state and local legislation and regulations affecting the
        communications industry. Some legislation and regulations are the subject
        of
        ongoing judicial proceedings, proposed legislation and administrative
        proceedings that could change the manner in which our industry is regulated
        and
        the manner in which we operate. We cannot predict the outcome of any of these
        matters or their potential impact on our business. See “Risks Relating to
        Government Regulation.”
  **Licensing
        and Use of Wireless Spectrum**
  The
        FCC
        regulates the licensing, construction, use, renewal, revocation, acquisition
        and
        sale of our licensed wireless spectrum holdings. Our wireless spectrum holdings
        currently include licensed spectrum in the WCS, AWS and BRS bands, and leased
        spectrum in the EBS band. We intend to make this spectrum available to
        service providers who want to deploy and operate next-generation mobile
        broadband networks that utilize our advanced technologies and
        spectrum.
  Certain
        general regulatory requirements apply to all licensed wireless spectrum.
        For
        example, certain build-out or “substantial service” requirements apply to our
        licensed wireless spectrum, which generally must be satisfied as a condition
        of
        license renewal. The Communications Act and FCC rules also require FCC prior
        approval for the acquisition, assignment or transfer of control of FCC licenses.
        In addition, FCC rules permit spectrum leasing arrangements for a range of
        wireless licenses. Approval from the Federal Trade Commission and the Department
        of Justice, as well as state or local regulatory authorities, also may be
        required if we sell or acquire spectrum. The FCC Sets rules, regulations
        and
        policies to, among other things:
  ·
              grant
                  licenses in the WCS, AWS, BRS and EBS
                  bands;
  ·
              regulate
                  the technical parameters and standards governing wireless services,
                  the
                  certification, operation and marketing of radio frequency devices
                  and the
                  placement of certain transmitting
                  facilities;
  ·
              impose
                  build-out or performance requirements as a condition to license
                  renewals;
  ·
              approve
                  applications for license renewals;
  ·
              approve
                  assignments and transfers of control of FCC
                  licenses;
  ·
              approve
                  leases covering use of FCC licenses held by other persons and
                  organizations;
  ·
              resolve
                  harmful radiofrequency interference between users of various spectrum
                  bands;
  ·
              impose
                  fines, forfeitures and license revocations for violations of FCC
                  rules;
                  and
  ·
              impose
                  other obligations that it determines to be in the public
                  interest.
  Additional,
        more specific regulatory requirements that apply to WCS, AWS, BRS and EBS
        spectrum are described below. Compliance with all of the foregoing regulatory
        requirements, and those listed below, increases our cost of doing business.
        For
        a description of an interference issue which may impact use of WCS, BRS and
        EBS
        spectrum, see “Risks Relating to Government Regulation-Wireless Devices
        utilizing WCS, BRS and EBS Spectrum May Be Susceptible to Interference from
        Satellite Digital Audio Radio Services (“SDARS”).”
  25
  **WCS
        License Conditions**
  WCS
        licensees must comply with all applicable legal and technical rules imposed
        by
        the FCC, including those found in Part 27, Title 47 of the Code of Federal
        Regulations. WCS licenses are granted for ten-year license terms, and licensees
        are required under applicable Part 27 rules to demonstrate that they are
        providing “substantial service” in their license area within the initial license
        term. Substantial service is defined as “service which is sound, favorable, and
        substantially above a level of mediocre service which just might minimally
        warrant renewal.” For WCS licensees, the FCC recently extended the substantial
        service build-out deadline until July 21, 2010. Failure to make the substantial
        service demonstration by that date, without seeking and obtaining an extension
        from the FCC, would result in license forfeiture. Extensions of time to meet
        substantial service demonstrations are not routinely granted by the
        FCC.
  **BRS-EBS
        License Conditions**
  Like
        WCS
        licenses, EBS and BRS licenses are granted for ten-year license terms, and
        licensees must comply with all applicable legal and technical rules imposed
        by
        the FCC, including those found in Part 27, Title 47 of the Code of Federal
        Regulations. Unlike WCS licenses, BRS and EBS licenses were granted at different
        times and, therefore, do not have a uniform expiration date. BRS and EBS
        licensees must also demonstrate that they are providing “substantial service” in
        their license areas. On April 27, 2006, the FCC released an order in which
        a May
        1, 2011 substantial service deadline for EBS and BRS spectrum was
        adopted.
  From
        2004
        to 2006, the FCC adopted a number of rule changes which create more flexible
        BRS/EBS spectrum rules to facilitate the growth of new and innovative wireless
        technologies and services, including fixed and mobile wireless broadband
        services. Although the proceedings to reform BRS/EBS rules have largely been
        completed, they remain subject to legal challenges and petitions for
        reconsideration and, thus, are subject to additional revisions. The FCC ordered
        the 2.5 GHz band to be reconfigured into three segments: upper- and lower-band
        segments for low-power operations, and a middle-band segment for high-power
        operations. The new BRS/EBS band configuration eliminates the use of interleaved
        channels by licensees in favor of contiguous channel blocks. By creating
        contiguous channel blocks, and grouping high- and low-power users into separate
        portions of the BRS/EBS band, the new band plan reduces the likelihood of
        interference caused by incompatible uses and creates incentives for the
        development of low-power, cellularized broadband operations, which were
        inhibited by the prior band plan. The new BRS/EBS band plan will allow licensees
        to use the 2496-2690 MHz spectrum in a more economical and efficient manner
        and
        will support the introduction of next-generation wireless technologies. The
        new
        rules preserve the operations of existing licensees, including educational
        institutions currently offering instructional television programming, but
        require that licensees transition to the new band plan by October 19, 2010
        (barring disputes in the transition process), which includes relocating
        licensees from their current channel assignments to new spectrum designations
        in
        the band.
  For
        each
        EBS and BRS licensee, the deadline for filing initial plans with the FCC
        - the
        first step in launching the transition process in a given market - is January
        19, 2009. After the initial plan is filed with the FCC, licensees have a
        90-day
        transition planning period, followed by an additional eighteen months to
        complete the transition. We and other parties intend to transition the 2.5
        GHz
        band to the new configuration on a market-by-market basis. The process may
        require several years to complete nationally. When the transition is complete,
        which should occur by October 19, 2010, we believe that the 2.5 GHz band
        will be
        more suitable for providing NextWave’s suite of wireless broadband products and
        services. See, “Risks Relating to Government Regulation-We Will Not Have
        Complete Control Over our Transition of EBS and BRS Spectrum, Which Could
        Impact
        Compliance With FCC Rules.”
  **AWS
        License Conditions**
  AWS
        licensees must comply with all applicable legal and technical rules imposed
        by
        the FCC, including those found in Part 27, Title 47 of the Code of Federal
        Regulations. The initial AWS licenses, which include all of our licenses,
        are
        granted for a fifteen-year license term, with a renewal term of 10-years.
        Licensees are required to demonstrate that they are providing “substantial
        service” in their license area within the initial fifteen-year license term.
        Substantial service is defined as “service which is sound, favorable, and
        substantially above a level of mediocre service which just might minimally
        warrant renewal.” For our AWS licensees, the renewal deadline and the
        substantial service build-out deadline is December 18, 2021. Failure to make
        the
        substantial service demonstration, without seeking and obtaining an extension
        from the FCC, would result in license forfeiture. Extensions of time to meet
        substantial service demonstrations are not routinely granted by the
        FCC.
  26
  The
        AWS
        spectrum includes a large number of incumbent federal government and
        non-government operations that must be relocated to other spectrum. AWS
        licensees are required to coordinate their operations to avoid interfering
        with
        these incumbent stations until relocation is complete. A small number of
        these
        incumbent stations must be protected indefinitely. In certain cases, the
        AWS
        licensee must pay for the relocation of incumbent stations within the AWS
        licensee’s license area. AWS licensees are effectively prohibited from deploying
        time division duplex (“TDD”) systems in the AWS spectrum.
  **Point-to-Point
        Microwave License Conditions**
  We
        hold a
        number of 18 GHz and 23 GHz point-to-point microwave licenses in Las Vegas
        that
        we intend to use as part of our network to transmit or “backhaul” wireless
        broadband communications traffic to our cell sites and network trial operations
        center. These licenses are granted based upon applications that demonstrate
        that
        the applicant is legally and technically qualified and that the proposed
        station
        will not cause impermissible interference to other stations or proposed stations
        that are entitled to interference protection. These licenses also have license
        terms of 10 years, and are subject to satisfying construction deadlines that
        occur 18 months after the licenses are granted. Point-to-point microwave
        licensees must also comply with certain technical rules contained in Part
        101,
        Title 47 of the Code of Federal Regulations.
  **New
        Spectrum Opportunities and Spectrum Auctions**
  Several
        FCC proceedings and initiatives are underway that may affect the availability
        of
        spectrum for commercial wireless services. These proceedings may make more
        wireless spectrum available to us and other new wireless competitors. We
        believe
        that additional spectrum bands may also be attractive for the deployment
        of
        mobile WiMAX networks, and in the future we may obtain spectrum in those
        bands
        through secondary markets acquisitions and leases and whatever mechanisms
        the
        FCC may establish including participation in FCC auctions.
 
 **Other
        FCC Requirements**
  **Internet
        Access Services**
  Internet
        access services are generally considered “information services,” not
“telecommunications services,” and are therefore exempt from common carrier
        regulation by the FCC. Such services are not, however, without regulatory
        requirements. Providers of facilities-based broadband Internet access services,
        and providers of interconnected VoIP services, are required to comply with
        the
        Communications Assistance for Law Enforcement Act (“CALEA”). Providers of
        interconnected VoIP services also are required to comply both with Enhanced
        911
        (“E911”) regulations, which require routing of 911 calls to geographically
        appropriate public safety answering points based on the caller’s location, as
        well as certain Universal Service Fund (“USF”) contribution, reporting and
        registration obligations. Certain consumer protection regulations also may
        apply
        at the state and federal levels. The regulatory treatment of other IP-enabled
        services, including the remainder of NextWave’s wireless broadband products and
        services, is presently under consideration by the FCC.
  **Voice
        over Internet Protocol**
  The
        FCC
        has and continues to consider the regulatory status of various forms of VoIP
        services. In 2004, the FCC issued decisions in which it found that: (i) a
        computer-to-computer VoIP service for which no charge is assessed and
        conventional telephone numbers are not used, is an unregulated “information
        service,” rather than a telecommunications service ; and (ii) long distance
        offerings in which calls originate from and terminate to the ordinary public
        switched telephone network, using regular telephones, but are transmitted
        in
        part through the use of IP, are “telecommunications services,” thereby rendering
        such services subject to the payment of access charges. The FCC also preempted
        states from exercising entry and related economic regulation of VoIP services
        that require the use of specialized end user equipment to send/receive calls
        over a broadband connection to the Internet, and use North American Numbering
        Plan (NANP) numbers as the identification mechanism for the user’s IP address.
        This ruling did not address specifically whether this form of VoIP is an
        “information service” or a “telecommunications service,” or what regulatory
        obligations, such as intercarrier compensation, should apply. In 2005, as
        detailed below, the FCC subjected “interconnected VoIP” service providers to
        Enhanced 911 and Communications Assistance for Law Enforcement Act obligations.
        In 2006 the FCC subjected “interconnected VoIP” service providers to certain USF
        contribution, reporting, registration and contribution obligations (discussed
        below). Issues surrounding whether or how VoIP offerings should be regulated,
        including whether they should pay access charges, along with the regulatory
        treatment of other IP-enabled services, is presently under consideration
        by the
        FCC.
  27
  **E911
        Services**
  The
        FCC
        adopted E911 obligations for broadband service providers that offer
        interconnected VoIP service to end users. E911 systems route 911 calls to
        a
        geographically appropriate public safety answering point based on the caller’s
        location. Unlike basic 911, which merely connects the caller with public
        safety
        entities, E911 provides public safety entities with the caller’s call back
        number and in many cases location information. The FCC order establishing
        this
        obligation was not clear as to whether the obligation, which has been effective
        since November 28, 2005, applies to both wholesale and retail providers of
        interconnected VoIP service. The obligation can be met through contracting
        with
        third parties or purchasing tariffed E911 services from local exchange carriers.
        The FCC also is examining whether to apply a range of additional E911
        requirements to interconnected VoIP providers.
  **CALEA
        Requirements**
  Providers
        of interconnected VoIP and facilities-based broadband Internet access providers
        are subject to the requirements set forth in CALEA. CALEA requires that our
        equipment, facilities and services allow for lawfully authorized electronic
        surveillance by law enforcement agencies based on either industry or FCC
        standards. In September 2005, the FCC extended CALEA obligations to
        facilities-based broadband Internet access providers and to interconnected
        VoIP
        providers, whether wireline or wireless. These entities must be compliant
        with
        CALEA’s obligations by May 14, 2007, unless a waiver or extension has been
        obtained from the FCC.
  **Universal
        Service Fund**
  In
        2006,
        the FCC established USF contribution, reporting and registration obligations
        for
        providers of interconnected VoIP. The USF contribution obligation is based
        upon
        the portion of revenues derived from “telecommunications” service and the
        end-user telecommunications revenues derived from interstate and international
        traffic. The FCC rules provide various mechanisms for determining the
        contribution figure. Some aspects of these contribution rules, as applied
        to
        providers of interconnected VoIP service, are the subject of a pending challenge
        in federal court. Interconnected VoIP service providers also will be subject
        to
        the same USF reporting procedures that apply to all other providers of
        interstate and international telecommunications. These reporting procedures
        involve quarterly reporting of the gross projected billed and collected end-user
        interstate and international revenues as well as annual reporting of actual,
        gross, billed and collected end-user interstate and international revenues.
        Under the FCC rules, providers of interstate and international
        telecommunications whose annual USF contribution are expected to be less
        than
        $10,000 are not required to contribute to the USF, or file quarterly or annual
        USF reports. All interconnected VoIP providers that have not already registered
        with the FCC and designated an agent for service of process must complete
        certain registration requirements.
  **Consumer-Related
        Regulations**
  The
        FCC
        is considering whether Internet access services, regardless of the technology
        used, should be subject to FCC consumer protection regulations. Various states
        may also exercise authority over terms and conditions of Internet access
        services, such as billing practices and other consumer-related matters.
        Compliance with additional consumer-related obligations will result in
        significant additional costs for us.
  **Privacy-Related
        Regulations**
  In
        providing NextWave’s suite of wireless broadband products and services to
        consumers, we may be required to comply with FCC-mandated rules that limit
        how
        customer proprietary network information, or CPNI, can be used for marketing
        purposes, and what we must do to safeguard CPNI. It was recently reported
        that
        the call detail records of both wireline and wireless telephone customers
        are
        available from certain Internet-based vendors. Both Congress and state
        legislatures are considering legislation to criminalize the sale of call
        detail
        records and to further restrict the manner in which carriers make such
        information available. The FCC is investigating these practices and is examining
        whether existing regulations with respect to CPNI require revision or expansion,
        which could result in additional costs to us, including administrative or
        operational burdens on our customer care, sales, marketing and IT
        systems.
  **Equipment
        Certification**
  Our
        equipment must conform to a variety of federal regulations that require
        compliance with administrative and technical requirements as a condition
        to
        marketing devices that emit radio frequency energy.
  28
  **Tower
        Siting**
  Wireless
        systems must comply with various federal, state and local regulations that
        govern the siting, marking, lighting and construction of transmitter towers
        and
        antennas, including regulations promulgated by the FCC and Federal Aviation
        Administration, or FAA. FCC rules subject certain tower locations to
        environmental and historic preservation statutory requirements. To the extent
        governmental agencies impose additional requirements on the tower siting
        process, the time and cost to construct and deploy towers could be negatively
        impacted. The FAA has proposed modifications to its rules that would impose
        certain notification requirements upon entities seeking to (i) construct
        or
        modify any tower or transmitting structure located within certain proximity
        parameters of any airport or heliport, and/or (ii) construct or modify
        transmission facilities using the 2500-2700 MHz radiofrequency band, which
        encompasses virtually all of the BRS/EBS frequency band. If adopted, these
        requirements could impose new administrative burdens upon users of BRS/EBS
        spectrum.
  **E-waste
        legislation**
  Electronics
        waste laws, also known as “E-waste” laws, went into effect July 1, 2006 in
        California, China, Japan and the European Union (“EU”) and require electronics
        developers, manufacturers and distributors to eliminate hazardous substances,  such as
        lead and mercury, in their products and to participate in, and finance, the
        recycling of E-waste. Congress is considering national legislation that would
        override state E-waste laws and provide for more consistent application of
        E-waste standards.
  **Employees**
  As
        of
        March 21, 2007, we had 662 full-time employees, including 240 in our Advanced
        Technology Group, 47 in our Network Solutions Group, 234 in PacketVideo,
        67 in
        GO Networks and 74 in corporate operations and administration. In addition,
        we
        had 220 full-time equivalent contractors, including 18 in our Advanced
        Technology Group, 18 in our Network Solutions Group, 153 in PacketVideo and
        31
        in corporate operations and administration. We are not subject to any collective
        bargaining agreements and believe that our relationship with our employees
        is
        good.
  **Our
        History**
  *NextWave
        Telecom and the PCS Business*
  Our
        predecessor entity, NextWave Wireless Inc. (later converted to NextWave Wireless
        LLC, and referred to in this Annual Report on Form 10-K as “Old NextWave
        Wireless”) was formed in 1996 as a wholly owned operating subsidiary of NextWave
        Telecom, Inc. (“NTI”). NTI sought to develop a nationwide CDMA-based PCS
        network. In 1998, Old NextWave Wireless, together with NTI and its other
        subsidiaries (the “NextWave Telecom group”), filed for protection under Chapter
        11 of the United States Bankruptcy Code. During the seven-year pendency of
        the
        Chapter 11 case, Old NextWave Wireless continued its involvement in the
        build-out of NTI’s PCS network. Substantially all of the related assets, except
        the PCS licenses, were abandoned when NTI was sold to Verizon Wireless as
        part
        of the plan of reorganization of the NextWave Telecom group described
        below.
  *Wireless
        Broadband Development*
  Although
        a commercial wireless broadband business was not developed during the pendency
        of the Chapter 11 case, the vision for our company was created at that time.
        Beginning in 2003, NTI began to explore opportunities to create the technology
        for a broadband wireless network utilizing BRS spectrum in the 2.5 GHz frequency
        range. In late 2003, NTI received authority from the Bankruptcy Court to
        construct and test a wireless broadband network in the Las Vegas, Nevada
        metropolitan area. Old NextWave Wireless acquired the rights to 24 MHz of
        BRS
        spectrum in Las Vegas and began work on the test network. In 2004, Old NextWave
        Wireless acquired preferred stock representing a 50% equity interest in CYGNUS
        Communications, Inc., a company engaged in the development of wireless
        communications hardware. Among other reasons, to separate the new prospective
        BRS spectrum wireless technology business from the PCS business of the rest
        of
        the NextWave Telecom group, NTI formed a new subsidiary, NextWave Broadband,
        to
        be the operating company for the BRS business. The capitalization of a new
        wireless technology company was discussed with the stakeholders of the NextWave
        Telecom group and was made part of the plan of reorganization described
        below.
  *Plan
        of Reorganization and Verizon Wireless Transaction*
  On
        March
        1, 2005, the Bankruptcy Court confirmed the plan of reorganization of the
        NextWave Telecom group, including Old NextWave Wireless. In December 2004,
        Old
        NextWave Wireless was converted from a corporation to a limited liability
        company. The plan of reorganization was funded with the proceeds from the
        sale
        of NextWave Telecom and its subsidiaries (other than Old NextWave Wireless)
        to
        Verizon Wireless for $3.0 billion, in addition to previous PCS spectrum sales
        to
        Cingular Wireless, Verizon Wireless and MetroPCS. The plan of reorganization
        provided for the payment in full of all the creditors of the NextWave Telecom
        group and the funding of Old NextWave Wireless as a new wireless broadband
        technology company to be distributed to equityholders, together with an
        aggregate distribution of $2.6 billion in cash and $149 million principal
        amount
        of our Non-Recourse Secured Notes. Prior to the consummation of the plan
        of
        reorganization, NTI and its subsidiaries entered into a global settlement
        agreement with the FCC resolving all outstanding claims of the FCC.
  29
  In
        connection with the sale of NextWave Telecom and its subsidiaries to Verizon
        Wireless, we agreed to indemnify NextWave Telecom and its subsidiaries against
        all pre-closing liabilities of NextWave Telecom and its subsidiaries and
        against
        any violation of the Bankruptcy Court injunction against persons having claims
        against NextWave Telecom and its subsidiaries, with no limit on the amount
        of
        such indemnity. A total of $165.0 million was held in escrow (the “Escrow
        Amount”) in order to secure such indemnity, and to satisfy any amounts due to
        Verizon Wireless in the event that the consolidated net loss of the NextWave
        Telecom group for the taxable year commencing on January 1, 2005, and ending
        on
        April 13, 2005 was, subject to certain adjustments, less than $1.362 billion.
        On
        December 6, 2006, Verizon and AirTouch Cellular, the assignee of Verizon,
        entered into an agreement (i) to settle the amounts payable under the Escrow
        Account and (ii) to release the Escrow Amount plus accrued interest. As a
        result, we received approximately $153.9 million of the proceeds from the
        Escrow
        Account, including accrued interest. In addition, the FCC received approximately
        $16.1 million of funds held in escrow, including approximately $0.8
        million held under a separate escrow, pursuant to a December 2004
        stipulation entered into between NextWave and the FCC. We are not currently
        aware of any other indemnifiable losses that remain following the effective
        date
        of the sale to Verizon, and Verizon has not made any related claims
        therefor.
  As
        part
        of the plan of reorganization, we issued $148.5 million of Non-Recourse Secured
        Notes to the former equityholders of NextWave Telecom. The notes were
        non-recourse to our assets and we were required to redeem the notes using
        the
        proceeds of any escrow release, net of payments due to the FCC. Accordingly,
        the
        full amount of the escrow released to us, $153.9 million, or approximately
        103.5% of the face amount of the notes, was paid directly into an escrow
        account
        to fund the redemption of the notes. The notes were redeemed as of December
        21,
        2006.
  *Inception
        of a Wireless Technology Company*
  The
        following steps were taken to organize Old NextWave Wireless as a new wireless
        technology company as part of the plan of reorganization:
  ·
              The
                  NextWave Telecom group abandoned substantially all of its PCS networks,
                  technology and fixed assets, except the PCS spectrum licenses to
                  be
                  acquired by Verizon Wireless.
  ·
              NTI
                  and its subsidiaries transferred all of their remaining non-PCS
                  assets to
                  NextWave Broadband, except cash and the PCS spectrum licenses to
                  be
                  acquired by Verizon Wireless. The assets contributed primarily
                  consisted
                  of property and equipment not desired by Verizon Wireless, having
                  a fair
                  market value of less than $10
                  million.
  ·
              NextWave
                  Broadband was transferred to Old NextWave
                  Wireless.
  ·
              Old
                  NextWave Wireless retained its investment in CYGNUS preferred stock
                  and
                  convertible notes, as well as wireless licenses useful for its
                  new
                  technology broadband business with a value of approximately $33.6
                  million.
  ·
              NTI
                  and its subsidiaries, including Old NextWave Wireless, obtained
                  an order
                  providing a release of claims pursuant to Section 1141 of the Bankruptcy
                  Code. To the extent that such release did not eliminate all liabilities
                  of
                  the NextWave Telecom group, NextWave Wireless assumed and agreed
                  to
                  indemnify Verizon Wireless against such
                  liabilities.
  ·
              NTI
                  and its subsidiaries (other than Old NextWave Wireless) were sold
                  to
                  Verizon Wireless for $3.0 billion.
  ·
              Membership
                  units of NextWave were distributed to the former stockholders of
                  NTI,
                  which distribution was exempt from registration under the Securities
                  Act
                  pursuant to Section 1145 of the Bankruptcy Code. Upon this distribution,
                  on April 13, 2005, Old NextWave Wireless emerged as NextWave
                  Wireless.
  ·
              Simultaneously
                  with the distribution, NextWave was capitalized with $550 million
                  of cash
                  proceeds from the sale to Verizon Wireless and prior PCS spectrum
                  license
                  sales.
  30
  ·
              Pursuant
                  to the plan, the NTI stockholders received the undivided interests
                  in the
                  underlying assets of Old NextWave Wireless as part of their consideration
                  for the redemption of their NTI shares, which was followed by the
                  deemed
                  contribution of these undivided interests to NextWave in return
                  for
                  membership interests in NextWave.
  *Our
        Recent Acquisitions*
  Since
        our
        emergence as a new wireless technology company, we have made several strategic
        investments and acquisitions, including most significantly:
  ·
              In
                  March 2007, we acquired all of the outstanding shares of common
                  stock of
                  4253311 Canada Inc., a Canadian company. The total cost of the
                  acquisition
                  was approximately $26.0 million in cash. The assets of the company
                  are
                  comprised almost entirely of wireless spectrum covering Canadian
                  markets.
  ·
              In
                  February 2007, NextWave acquired all of the outstanding common
                  stock and
                  warrants of GO Networks, Inc., for $13.2, million at closing plus
                  the
                  assumption of $6.7 million in debt, of which $1.3 million was paid
                  at
                  closing. Additional purchase consideration of up to $25.7 million
                  may be
                  paid in shares of NextWave common stock, subject to the achievement
                  of
                  certain operational milestones in the 18-month period subsequent
                  to the
                  closing of the acquisition. NextWave also adopted the GO Networks
                  Employee
                  Stock Bonus Plan, whereby certain employees may receive up to an
                  aggregate
                  of $5.0 million in shares of NextWave common stock upon the achievement
                  of
                  the operational milestones referred to above.·
              In
                  January 2007, PacketVideo acquired all of the shares of SDC Secure
                  Digital Container AG for cash of $19.0 million. The acquisition
                  will be
                  accounted for in the first quarter of 2007 using the purchase method
                  of
                  accounting whereby the total purchase price, including any transaction
                  related expenses, will be allocated to tangible and intangible
                  assets
                  acquired based upon their respective fair
                  values.
  ·
                In
                    December 2006, we were awarded 154 spectrum licenses for an aggregate
                    bid
                    of $115.6 million in the AWS auction. These licenses significantly
                    increased our spectrum portfolio to cover approximately 249 million
                    persons.·
                Since
                    our emergence as a wireless technology company, we have consummated
                    transactions to acquire licensed spectrum rights, including subsequent
                    lease obligations, for amounts totaling approximately $497 million,
                    including our recent acquisition of WCS Wireless Inc., which
                    holds
                    spectrum covering 188.8 million persons, or POPs, in the Central,
                    Western,
                    and Northeastern United States, for $160.5 million.·
                In
                    July 2005 we acquired all of the outstanding shares of PacketVideo
                    Corporation for $46.7 million in
                    cash.
  *Corporate
        Conversion Merger*
  To
        enable
        our listing on The Nasdaq Global Market, NextWave Wireless LLC’s Board of
        Managers and a majority in interest of NextWave Wireless LLC’s members approved
        the conversion of the Company from a Delaware limited liability company to
        a
        Delaware corporation. The corporate conversion was effected on November 13,
        2006
        through the merger of a wholly owned subsidiary of ours with and into NextWave
        Wireless LLC. Our common
        stock is now listed on ** The
        Nasdaq Global Market under the ticker symbol “ *WAVE* ”.
        In the
        merger, NextWave Wireless LLC’s equity holders received one share of our common
        stock for every six membership interests that they held. No fractional shares
        of
        our common stock were issued in connection with the corporate conversion
        merger.
        Instead, holders of LLC interests who would otherwise have been entitled
        to a
        fraction of a share of common stock were paid cash equal to $1.00 per LLC
        interest not exchanged for a whole share of our common stock. Each holder
        of
        NextWave Wireless LLC’s limited liability interests own the same percentage of
        the outstanding equity of the Company before and immediately after the corporate
        conversion merger. In addition, we assumed NextWave Wireless LLC’s obligations
        under all stock option plans of the Company and its subsidiaries.
 
 **Executive
        Officers of the Registrant**
 
 31
 
 All
        of
        our executive officers are elected at the organizational meeting of our Board
        of
        Directors held annually and serve at the pleasure of the Board of Directors.
        The
        following table sets forth names, ages and positions of the persons who are
        our
        executive officers as of March 21, 2007.
  **Name**
              
              **Age**
              
              **Position**Allen
                  Salmasi
              
              52
              
              Chief
                  Executive Officer and PresidentGeorge
                  C. Alex
              
              47
              
              Executive
                  Vice President - Chief Financial OfficerRoy
                  D. Berger
              
              49
              
              Executive
                  Vice President - Corporate Marketing &
                  CommunicationsFrank
                  A. Cassou
              
              50
              
              Executive
                  Vice President - Corporate Development and Chief Legal Counsel,
                  SecretaryKevin
                  M. Finn
              
              65
              
              Executive
                  Vice President - Chief Compliance OfficerMark
                  Kelley
              
              46
              
              Executive
                  Vice President - Chief Division Officer (ATG)Richard
                  Kornfeld
              
              46
              
              Executive
                  Vice President - Chief Strategy OfficerJim
                  Madsen
              
              47
              
              Executive
                  Vice President - Chief Business Development OfficerDavid
                  B. Needham
              
              49
              
              Executive
                  Vice President - Chief Division Officer (NSG)R.
                  Andrew Salony
              
              54
              
              Executive
                  Vice President - Chief Administration OfficerKenneth
                  Stanwood
              
              45
              
              Executive
                    Vice President - Technical and Standards
                    Development
 
 *Allen
        Salmasi* has
        served as our Chairman of the Board, Chief Executive Officer and President
        since
        our inception. Previously, Mr. Salmasi served as Chairman and CEO of NTI,
        which
        he founded in 1995 and subsequently sold to Verizon Wireless in 2005. Prior
        to
        NTI, Mr. Salmasi was a member of the Board of Directors, President of the
        Wireless Telecommunications Division, and Chief Strategic Officer of QUALCOMM
        Inc. He joined QUALCOMM in 1988 as a result of the merger of QUALCOMM and
        Omninet Corporation, which Mr. Salmasi founded in 1984. He initiated and
        led the
        development of CDMA technologies, standards and the associated businesses
        at
        QUALCOMM until 1995. At Omninet, he conceived and led the development of
        the
        first OmniTRACS system, which provides two-way messaging and position reporting
        services to mobile users. From 1979 to 1984, Mr. Salmasi held several technical
        and management positions at the National Aeronautics and Space Administration
        Jet Propulsion Laboratory. Mr. Salmasi received two B.S. degrees in Electrical
        Engineering and Management Economics from Purdue University in 1977. He received
        his M.S. degrees in Electrical Engineering from Purdue University in 1979
        and
        Applied Mathematics from the University of Southern California in 1983,
        respectively. He completed his course work at the University of Southern
        California towards a Ph.D. degree in Electrical Engineering.
  *Frank
        A. Cassou* is our
        Executive Vice President, Corporate Development and Chief Legal Counsel and
        our
        Secretary. Mr. Cassou held similar positions at NTI, which he joined in 1996.
        Mr. Cassou has served as a Director since our inception. Prior to joining
        NextWave, Mr. Cassou was a partner at the law firm of Cooley Godward LLP,
        where
        he practiced corporate law representing telecommunications and technology
        companies. He was outside corporate counsel to QUALCOMM from June 1991 through
        February 1996, representing the company in its public financing and acquisition
        transactions, licensing agreements and the formation of strategic
        partnerships.
  *George
        C. Alex* serves
        as our Chief Financial Officer. Mr. Alex joined NextWave Telecom in 2001
        as
        Senior Vice President, Finance. Formerly, he was Chief Financial Officer
        of
        Network Plus Corp., an integrated communications provider and a Managing
        Director of Prudential Securities, where he headed the telecommunications
        practice. During his career as an investment banker, Mr. Alex completed
        transactions that raised more than $20 billion for his clients and executed
        M&A assignments in excess of $6 billion. Mr. Alex earned his B.A. from
        Harvard University and his M.B.A. from the Amos Tuck Business School at
        Dartmouth College.
  *Roy
        D. Berger* serves
        as our Executive Vice President of Corporate Marketing & Communications. Mr.
        Berger joined NTI in 1996 as Vice President, Business Planning and subsequently
        served in a number of executive marketing and business development positions.
        Prior to joining NextWave, Mr. Berger spent ten years at NYNEX, where he
        held
        senior management positions in both the telecommunications and computer
        retailing/distribution divisions, including Vice President-Personal
        Communication Services and Vice President-Marketing for NYNEX Mobile
        Communications. Before joining NYNEX, Mr. Berger held senior management
        positions with several leading companies in the personal computer retailing
        industry.
  *Kevin
        M. Finn* serves
        as our Chief Compliance Officer and as a Director. Mr. Finn joined NTI in
        1995
        where he was formerly Senior Vice President, Special Projects. From 1992
        until
        1995, Mr. Finn served as President of Marin-Finn Industries, Inc. Prior to
        that,
        he served as Vice President and General Manager of Densitron Technology plc.,
        and from 1986 to 1988, Mr. Finn was Executive Vice President of Omninet Inc.
        Mr.
        Finn was a Vice President of Sony Corporation of America and General Manager
        of
        its Component Products Division from 1983 to 1987.
  32
  *Mark
        Kelley* serves
        as the Chief Division Officer of NextWave Broadband’s Advanced Technology Group.
        Mr. Kelley has more than 25 years experience in engineering, communication
        systems planning and analysis. Prior to joining NextWave in 2005, Mr. Kelley
        was
        Chief Technical Officer of Leap Wireless. Formerly, he served as Vice President
        of Wireless System Design for QUALCOMM, where he was responsible for all
        wireless infrastructure system design activities, including radio and fixed
        network system planning, project engineering and the development of QUALCOMM’s
        commercial CDMA network planning software product. As a Director of Planning
        for
        Wireless Design Firm LLC, Mr. Kelley led the design of the world’s first GSM
        system in Germany. Earlier in his career, Mr. Kelley developed custom ASICs
        at
        Hughes Microelectronics. Mr. Kelley holds a Bachelor of Science degree in
        Electrical Engineering from San Diego State University.
  *Richard
        Kornfeld* serves
        as our Chief Strategy Officer. Before joining us, Mr. Kornfeld was the CEO
        of
        Staccato Communications, Inc. Prior to this, Mr. Kornfeld was the Vice President
        and General Manager of Texas Instruments’ Wireless Center responsible for the
        Wireless Chipset Business. He joined Texas Instruments through the acquisition
        of Dot Wireless, Inc., which he co-founded and served as the Chairman, CEO
        and
        President. Prior to founding Dot Wireless, Mr. Kornfeld had been a founding
        member of NTI, where he was the Senior Vice President and General Manager
        of the
        Consumer Products division. Previously, Mr. Kornfeld was Vice President of
        Engineering at QUALCOMM, Inc. During his 10-year tenure, he helped QUALCOMM
        grow
        from a 20-person startup to a world leader in telecommunications, currently
        employing more than 7,000 people. Prior to QUALCOMM, Mr. Kornfeld held various
        technical positions at M/A-Com Linkabit. Mr. Kornfeld is a graduate from
        the
        School of Engineering, University of California.
  *Jim
        Madsen* serves
        as our Chief Business Development Officer. Formerly, Mr. Madsen held several
        executive management positions at NTI which he co-founded in 1995. From 1989
        to
        1995, at QUALCOMM, Mr. Madsen headed CDMA Business Development where he led
        the
        company’s PCS business development, marketing and sales initiatives, and also
        served as Director of Marketing for OmniTRACS’ satellite data communications
        business and was responsible for worldwide VLSI components business development
        and marketing. Mr. Madsen earned his S.B. in mechanical engineering from
        the
        Massachusetts Institute of Technology and his M.B.A. from Stanford
        University.
  *David
        B. Needham* serves
        as the Chief Division Officer of NextWave Broadband’s Network Solutions Group.
        He was formerly the Chief Operating Officer for NTI and has been with NextWave
        since 1996. Prior to joining NextWave, Mr. Needham served as President and
        Chief
        Operating Officer of GE Capital-ResCom. From 1992 to 1994, Mr. Needham served
        as
        President of MetroCel Cellular Telephone Company, a joint-venture cellular
        telecommunications company owned by AT&T Wireless and Airtouch
        Communications serving the Dallas-Fort Worth area. While at MetroCel, Mr.
        Needham led the development and commercial launch of Voice Touch, the wireless
        industry’s first voice-activated switch product, and MetroCel Connect, one of
        the first wireless direction and information services. From 1989 to 1991,
        Mr.
        Needham served as District General Manager for the California Valley and
        Nevada
        cellular operations of McCaw Cellular Communications. Mr. Needham earned
        a
        Bachelor of Arts degree from Harvard University and a Masters in Business
        Administration from Harvard Business School.
  *R.
        Andrew Salony* is our
        Chief Administrative Officer and is responsible for Corporate Planning,
        Administration and Human Resources. Since joining NTI in 1996, Mr. Salony
        has
        served in numerous executive management roles, including Senior Vice President
        of Marketing, Strategy, Business Development and Human Resources. Prior to
        his
        tenure at NextWave, Mr. Salony was a Senior Partner and Managing Director
        of the
        wireless division at Warren, Morris and Madison Ltd., a leading boutique
        executive search firm specializing in telecommunications and entertainment.
        He
        began his wireless telecommunications career in 1982 with Communication
        Industries, where he held executive positions in sales, marketing and general
        management in the company’s cellular and paging operations. Mr. Salony remained
        with the company—which was sold to US West in 1986—until 1993, serving as
        General Manager of the Southern California Region.
  *Kenneth
          Stanwood* serves
          as Executive Vice President Technical and Standards Development. Formerly,
          Mr.
          Stanwood founded and served as Chief Executive Officer of CYGNUS Communications.
          Prior to CYGNUS, he was CTO of Ensemble Communications which produced LMDS
          equipment and provided key technology to 802.16 and WiMAX. As a representative
          of Ensemble, he was one of the founders of the WiMAX Forum and served on
          its
          board of directors. Ken served as vice-chair of IEEE 802.16 for three years
          and
          has been involved with 802.16 and ETSI BRAN for over 8 years. He was a
          primary
          designer of the 802.16 MAC layer. He holds numerous patents related to
          broadband
          wireless access. He received his MS degree from Stanford
          University.
 **Technology
        Development Steering Committee**
  33
  To
          provide additional guidance regarding the company’s technology development
          initiatives, we have formed a Technology Development Steering Committee
          that
          consists of highly accomplished individuals with extensive backgrounds
          in radio
          technologies, semiconductors, information theory, and signal processing.
          The
          Committee is comprised of senior level NextWave engineers and outside experts.
          Current non-NextWave, outside experts of the Technology Development Steering
          Committee are:
 *Dr.
        Andrew J. Viterbi (Committee Chairman)*
 Dr.
        Viterbi serves as president of the Viterbi Group, LLC, which advises and
        invests
        in early stage companies in the fields of wireless communications and network
        infrastructure. In 1985, he co-founded QUALCOMM Corp. where he and his
        colleagues developed CDMA (Code Division Multiple Access). Dr. Viterbi is
        a
        Fellow of the IEEE, a Marconi Fellow, a member of the American Academy of
        Arts
        and Sciences, and a member of both the National Academy of Engineering and
        the
        National Academy of Sciences. He sits on the USC School of Engineering Board
        of
        Councilers, the Burnham Institute Board of Directors and the Scripps Cancer
        Center Board of Directors and is a Trustee of the Mathematical Sciences Research
        Institute in Berkeley. Dr. Viterbi has received numerous awards for his
        contributions to communications theory, including the Institute of Electrical
        and Electronics Engineers’ (IEEE) Alexander Graham Bell Medal, the Marconi
        International Fellowship Award, the Christopher Columbus Award, and the IEEE’s
        Shannon Award and Lecture, considered the highest honor in communication
        technology. In 1962 Dr. Viterbi earned one of the first Doctorates in Electrical
        Engineering from the University of Southern California and has received honorary
        doctorates from universities in the United States, Canada, Italy and Israel.
 
 *Dr.
        Anantha P. Chandrakasan*
 Dr.
        Anantha Chandrakasan is currently the Joseph F. and Nancy P. Keithly Professor
        at the Massachusetts Institute of Technology where he has been a professor
        since
        1994. His research interests include micro-power digital and mixed-signal
        integrated circuit design, wireless microsensor system design, ultra-wideband
        radios, and emerging technologies. Dr. Chandrakasan held the Analog Devices
        Career Development Chair from 1994 to 1997 and served as technical program
        co-chair for the 1997 International Symposium on Low Power Electronics and
        Design (ISLPED), VLSI Design 1998, and the 1998 IEEE Workshop on Signal
        Processing Systems. He was the Signal Processing Sub-committee Chair for
        ISSCC
        1999-2001, the Program Vice-Chair for ISSCC 2002, the Program Chair for ISSCC
        2003, and the Technology Directions Sub-committee Chair for ISSCC 2004-2006.
        He
        is the Technology Directions Chair for ISSCC
        2007 .
        He
        serves on the SSCS
        AdCom and is
        the Committee Chair. He is the Director of the Massachusetts Institute of
        Technology Microsystems
        Technology Labs .
        His
        awards include the 1993 IEEE Communications Society's Best Tutorial Paper
        Award,
        the IEEE Electron Devices Society's 1997 Paul Rappaport Award for Best Paper
        in
        an EDS publication, the 1999 Design Automation Conference (DAC) Student Design
        Contest Award and First Place in the Operational Category of the 2004 DAC/ISSCC
        Student Design Contest.  He received the NSF Career Development award in
        1995, the IBM Faculty Development award in 1995 and the National Semiconductor
        Faculty Development award in both 1996 and 1997. Dr. Chandrakasan earned
        the
        B.S, M.S. and Ph.D. degrees in Electrical Engineering and Computer Sciences
        from
        the University of California, Berkeley, in 1989, 1990, and 1994 respectively.
 
 *Dr.
        Ian Galton*
 Dr.
        Galton is a professor of Electrical Engineering at the University of California,
        San Diego where he manages the Integrated Signal Processing Group for conducting
        research to improve signal processing in mixed-signal (analog and digital)
        integrated circuits for highly integrated, low-cost, communication systems.
        Prior to his position at UC San Diego he was at UC Irvine with the NASA Jet
        Propulsion Laboratory, Acuson, and Mead Data Central where his research has
        focused on the creation and implementation of critical communication system
        blocks such as data converters, frequency synthesizers, and clock recovery
        systems. Dr. Galton consults at several semiconductor companies and teaches
        industry-oriented courses on mixed-signal integrated circuit design. He has
        served on the Board of Directors and Technical Advisory Boards at a number
        of
        corporations and has held several positions with the IEEE including
        Editor-in-Chief of Transactions on Circuits and Systems II: Analog and Digital
        Signal Processing, as a member of the Solid-State Circuits Society
        Administrative Committee, the Circuits and Systems Society Board of Governors,
        and the International Solid-State Circuits Conference Technical Program
        Committee. Dr. Galton earned the Sc.B. degree from Brown University in 1984,
        and
        the M.S. and Ph.D. degrees in Electrical Engineering from the California
        Institute of Technology in 1989 and 1992, respectively.
  *Dr.
        Lawrence E. Larson*
 Dr.
        Larson is Director of the Center for Wireless Communications at University
        of
        California, San Diego and serves as the inaugural Communications Industry
        Chair.
        He has been a key figure in the development of ultrahigh frequency compound
        semiconductor transistor and integrated circuit technology. During the late
        1980's Dr. Larson led a team at Hughes Research Laboratories to develop
        high-reliability InP-based HEMT technology for spaceborne low-noise amplifier
        applications. His group’s research led to a number of firsts including the
        world's fastest room temperature millimeter-wave integrated circuit. Dr.
        Larson’s research in the early 1990's led to the development of the first
        microwave and mmW applications of microelectronic-mechanical (MEMS)
        technologies, including the first MEMS switches for microwave applications.
        Dr.
        Larson has received 25 US patents, co-authored three books and published
        over
        150 papers. Dr. Larson earned the B.S. in Electrical Engineering and the
        M.
        Engineering degrees from Cornell University in 1979 and 1980, respectively,
        and
        the PhD degree in Electrical Engineering from the University of California,
        Los
        Angeles in 1986.
  34
  Mitch
        Trott
 Dr.
        Mitch
        Trott is a Principal Research Scientist at Hewlett-Packard Laboratories where
        he
        leads research in the fields of wireless communication, information theory
        and
        video streaming systems. Prior to his work at Hewlett-Packard he was Director
        of
        Research at ArrayComm, Inc., San Jose, CA from 1997 to 2002. From 1992 to
        1998
        Dr. Trott served as Assistant then Associate Professor of Electrical Engineering
        at Massachusetts Institute of Technology. In the course of his career he
        has
        been named an inventor or co-inventor on 43 U.S. patents. Dr. Trott earned
        a
        B.S. and M.S. in Systems Engineering from Case Western University in 1987
        and
        1988, respectively, and a Ph.D. in Electrical Engineering from Stanford
        University in 1992.
 
 *Dr.
        David Tse*
 Dr.
        Tse
        is a professor of Electrical Engineering and Computer Sciences at the University
        of California at Berkeley, where he conducts research in the fields of
        information theory, wireless communications and networking. Prior to his
        position at UC Berkeley, Dr. Tse was a postdoctoral member of the technical
        staff at AT&T Bell Laboratories from 1994 to 1995. He was the Technical
        Program co-chair of the International Symposium on Information Theory in
        2004,
        and an Associate Editor of the IEEE Transactions on Information Theory from
        2001
        to 2003. David Tse earned the B.A.Sc. degree in Systems Design Engineering
        from
        University of Waterloo, Canada in 1989, and the M.S. and Ph.D. degrees in
        Electrical Engineering from Massachusetts Institute of Technology in 1991
        and
        1994, respectively.
 
 *Dr.
        Erez Uri*
 Dr.
        Erez
        Uri is a lecturer in the Electrical Engineering - Systems Department at Tel
        Aviv
        University. His research interests are in the fields of information theory
        and
        digital communication. He has consulted for a number of communications
        companies, including Lucent Technologies' Bell Laboratories, Tadiran-Systems
        and
        Ultracom and was a recipient of the Omicron Delta prize for his presentation
        at
        the 2000 Israel IEEE Convention. Dr. Uri earned undergraduate degrees in
        mathematics and physics in 1996 at Tel Aviv University, and masters and doctoral
        degrees in 1999 and 2003, respectively. He completed his postdoctoral studies
        at
        MIT in 2005, where he specialized in research on problems of coding and
        communication.
 
 Dr.
        Charles Wheatley
 Dr.
        Charles (Chuck) E. Wheatley has been involved with Spread Spectrum concepts,
        including frequency hopping and direct sequence techniques, for over 40 years.
        Until his retirement in January, 2007, he was Senior Vice President of
        Technology and a Fellow at QUALCOMM, Inc. where he worked with CDMA as applied
        to cellular/personal communications. Dr. Wheatley was a contributor to the
        successful commercial deployment of CDMA2000 systems in the U.S., China and
        India. Prior to QUALCOMM, Dr. Wheatley worked at Linkabit Corporation where
        he
        contributed to RF and system design aspects of the Milstar program and at
        Rockwell International. Dr. Wheatley has served for six years on the Board
        of
        Trustees of the Reuben H. Fleet Science Center in San Diego California, acting
        as President since November 2006. He is an IEEE fellow and holds over 75
        patents
        related to the fields of communications and navigation. Dr. Wheatley earned
        a
        B.S. degree in Physics from the California Institute of Technology in 1956,
        a
        M.S. degree in Electrical Engineering from the University of Southern California
        Angeles in 1958, and a Ph.D. degree in Electrical Engineering from the
        University of California (Los Angeles) in 1972.
 
 *Dr.
        Gregory W. Wornell*
 Dr.
        Gregory W. Wornell is a professor of Electrical Engineering and Computer
        Science
        at the Massachusetts Institute of Technology where he has been a member of
        the
        faculty since 1991. He directs the Signals, Information, and Algorithms
        Laboratory within the Research Laboratory of Electronics, and co-directs
        the
        Center for Wireless Networking. He is chair of Graduate Area I (Systems,
        Communication, Control, and Signal Processing) within the EECS department's
        doctoral program, and is a member of the Massachusetts Institute of Technology’s
        Computational and Systems Biology Initiative. He has held visiting appointments
        at the Department of Electrical Engineering and Computer Science at the
        University of California, Berkeley, CA, in 1999-2000, at Hewlett-Packard
        Laboratories, Palo Alto, CA, in 1999, and at AT&T Bell Laboratories in
        1992-1993. His research interests and publications are in the areas of signal
        processing, digital communication, and information theory, and include
        algorithms and architectures for wireless and sensor networks, broadband
        systems, and multimedia environments. He has served in a variety of positions
        with the Signal Processing and Information Theory societies of the IEEE and
        is a
        Fellow of the IEEE. Dr.Wornell earned the B.A.Sc. degree (with honors) from
        the
        University of British Columbia, Canada, in 1985 and the S.M. and Ph.D. degrees
        in Electrical Engineering and Computer Science from the Massachusetts Institute
        of Technology in 1987 and 1991, respectively.
  35
  **Investor
        Information**
  We
        are a
        public company and are subject to the informational requirements of the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly,
        we file periodic reports, proxy statements and other information with the
        Securities and Exchange Commission (the “SEC”). Such reports, proxy statements
        and other information may be obtained by visiting the Public Reference Room
        of
        the SEC at 100 F Street NE, Room 1580, Washington, D.C. 20549 or by calling
        the
        SEC at 1-800-SEC-0330. In addition, the SEC maintains a website ( *http://www.sec.gov* )
        that
        contains reports, proxy and information statements and other information
        regarding us and other issuers that file electronically.
  Our
        website address is *http://www.nextwave.com* .
        Our
        Code of Business Conduct and Ethics is available free of charge on our website.
  The
        certifications of our Chief Executive Officer and Chief Financial Officer,
        pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, about the
        disclosure contained in this Report are attached hereto.
 
 
 **Item
        1A. RISK FACTORS**
  ***We
        are an early-stage company and have limited relevant operating history and
        a
        history of losses.***
  We
        emerged from our reorganization in April 2005 with a new business plan and
        have
        made several recent acquisitions and investments. As a result, we are at
        an
        early stage of our development and have had a limited relevant operating
        history
        and, consequently, limited historical financial information. Other than through
        our PacketVideo business, which we acquired in July 2005, we have never
        generated any material revenues and have limited commercial operations. We
        are
        currently unable to project when our wireless broadband products and
        technologies will be commercially deployed and generate revenue. In addition,
        we, along with the companies we have acquired, have a history of losses.
        Other
        than our PacketVideo business, we will not have the benefit of any meaningful
        operations, and we will incur significant expenses in advance of generating
        significant revenues, particularly from our WiMAX/Wi-Fi semiconductor and
        network component products, and are expected to realize significant
        operating losses for the next few years. We are therefore subject to all
        risks
        typically associated with a start-up entity.
  We
        are in
        the early stages of the implementation of our business plan. If we are not
        able
        to successfully implement all key aspects of our business plan, including
        selling and/or licensing, high volumes of our WiMAX/Wi-Fi semiconductor and
        network component products to network operators and to device and network
        equipment manufacturers, we may not be able to develop a customer base
        sufficient to generate adequate revenues. If we are unable to successfully
        implement our business plan and grow our business, either as a result of
        the
        risks identified in this section or for any other reason, we may never achieve
        profitability, in which event our business would fail.
  ***We
        have identified a material weakness in our internal control over financial
        reporting, and the identification of any significant deficiencies or material
        weaknesses in the future could affect our ability to ensure timely and reliable
        financial reports.***
  In
        connection with our close process and the audit of the consolidated financial
        statements for the year ended December 30, 2006, our management concluded
        that a material weakness existed relating
        to revenue recognition pursuant to software contracts of PacketVideo. The
        Company's failure to properly apply software revenue recognition principles
        resulted from a lack of a sufficient number of employees with appropriate
        levels
        of knowledge, expertise and training in the application of generally accepted
        accounting principles relevant to software revenue recognition . As
        a
        public company, our systems of internal controls over financial reporting
        are
        required to comply with the standards adopted by the SEC and the Public Company
        Accounting Oversight Board (the “PCAOB”) .
        Both
        regulators currently define a material weakness as a single deficiency, or
        combination of deficiencies, that results in more than a remote likelihood
        that
        a material misstatement of the annual or interim financial statements will
        not
        be prevented or detected. We believe we have taken measures to remedy the
        material weakness, some of which is still in progress. For a discussion of
        our
        internal control over financial reporting and a description of the identified
        material weakness and the related remedial measures, see Item 9A in this
        Annual
        Report on Form 10-K.
 
 We
        will
        be required to make our first annual certification on our internal controls
        over
        financial reporting in our Annual Report for the fiscal year ended December
        30,
        2007. In preparing for such certification, we are presently evaluating our
        internal controls for compliance with applicable SEC and PCAOB
        requirements. We have identified that a material weakness exists related to
        revenue recognition in our PacketVideo subsidiary. We also may identify
        additional areas requiring improvement and may be required to design enhanced
        processes and controls to address issues identified through this review.
        This
        could result in significant delays and cost to us and require us to divert
        substantial resources, including management time, from other activities.
        We have
        commenced a review of our existing internal control structure and plan to
        hire
        additional personnel. Although our review is not complete, we have taken
        steps
        to improve our internal control structure by hiring dedicated, internal
        compliance personnel to analyze and improve our internal controls, to be
        supplemented periodically with outside consultants as needed. However, if
        we
        fail to achieve and maintain the adequacy of our internal controls, we may
        not
        be able to conclude that we have effective internal controls over financial
        reporting as of the end of our fiscal year 2007. Moreover, a lthough
        our management will continue to review and evaluate the effectiveness of
        our
        internal controls, we can give you no assurance that there will be no material
        weaknesses in our internal control over financial reporting. We may in the
        future have material weaknesses or other control deficiencies in our internal
        control over financial reporting as a result of our controls becoming inadequate
        due to changes in conditions, the degree of compliance with our internal
        control
        policies and procedures deteriorating, or for other reasons. If we have
        significant deficiencies or material weaknesses or other control deficiencies
        in
        our internal control over financial reporting, our ability to record, process,
        summarize and report financial information within the time periods specified
        in
        the rules and forms of the SEC will be adversely affected. This failure could
        materially and adversely impact our business, our financial condition and
        the
        market value of our securities.
  36
  ***If
        we fail to effectively manage growth in our business, our ability to develop
        and
        commercialize our products will be adversely
        affected.***
  Our
        business and operations have expanded rapidly since the completion of our
        reorganization in April 2005. For example, from April 13, 2005 through March
        21,
        2007, the number of our employees has increased from 50 to 662 as a result
        of
        organic growth and acquisitions. We acquired GO Networks in February 2007,
        CYGNUS Communications in February 2006 and PacketVideo in July 2005 and we
        are
        still in the process of integrating these businesses. To support our expanded
        research and development activities for our mobile broadband business and
        the growth in our PacketVideo business, we must continue to successfully
        hire,
        train, motivate and retain our employees. We expect that significant further
        expansion of our operations and employee base will be necessary. In addition,
        in
        order to manage our expanded operations, we will need to continue to expand
        our
        management, operational and financial controls and our reporting systems
        and
        procedures. We will also need to retain management, key employees and business
        partners of PacketVideo, GO and CYGNUS. All of these measures will require
        significant expenditures and will demand the attention of management. Failure
        to
        fulfill any of the foregoing requirements could result in our failure to
        successfully manage our intended growth and development, and successfully
        integrate PacketVideo, GO and CYGNUS, which would adversely affect our ability
        to develop and commercialize our products and achieve
        profitability.
  ***We
        operate in an extremely competitive environment which could materially adversely
        affect our ability to win market acceptance of our products and achieve
        profitability.***
  We
        operate in an extremely competitive market and we expect such competition
        to
        increase in the future. Set forth below is a brief description of the
        competitive environment for each of our divisions and PacketVideo:
  *NextWave
          Broadband* - As
          providers of mobile broadband products and technologies based on WiMAX and
          Wi-Fi standards, we will be competing with well established, international
          companies that are engaged in the development, manufacture and sale of
          products
          and technologies that support alternative wireless standards such as GSM,
          CDMA2000 and UMTS. Companies that support these alternative wireless
          technologies include well-established industry leaders such as Alcatel,
          Ericsson, Huawei, LGE, Lucent, Motorola, Nokia, Nortel, QUALCOMM, Samsung
          and
          Siemens.
  In
        addition, we will be competing with numerous companies that are currently
        developing or marketing WiMAX products and technologies including Beceem,
        Fujitsu, Intel, Motorola, Nortel, RunCom, Samsung, Sequans and WaveSat. Some
        of
        these companies have significantly greater financial, technical development,
        and
        marketing resources than we do, are already marketing commercial WiMAX
        semiconductor products, and have established a significant time to market
        advantage. These companies are also our potential customers and partners
        and may
        not be available to us if they develop competing products. In addition, we
        expect additional competition to emerge in the WiMAX semiconductor and
        components market including well-established companies such as Samsung and
        Broadcom.
  37
  *PacketVideo* - At
        present, the primary competitors for PacketVideo’s multimedia software products
        are the internal multimedia design teams at the OEM handset manufacturers
        to
        whom PacketVideo markets its products and services. Importantly, these OEMs
        represent some of PacketVideo’s largest customers. In addition several
        companies, including Flextronics/Emuzed, Hantro, Nextreaming, Philips Software,
        Sasken and Thin Multimedia also currently provide software products and services
        that directly or indirectly compete with PacketVideo. As the market for embedded
        multimedia software evolves, we anticipate that additional competitors may
        emerge including Apple Computer, Real Networks and OpenWave.
  *GO
        Networks* - GO
        Networks competition ranges from small and medium size companies such as
        Tropos
        Networks, Strix Systems, and Belair Networks to large-scale systems suppliers
        such as Cisco, Motorola, and Nortel. Many of GO Networks’ competitors have an
        established time-to-market advantage and have sales, marketing, manufacturing,
        and distribution capabilities that significantly exceed those of GO
        Networks.
 
 Some
        of
        our competitors have significantly greater financial, technological development,
        marketing and other resources than we do, are already marketing commercial
        products and technologies and have established a significant time to market
        advantage. Our ability to generate earnings will depend, in part, upon our
        ability to effectively compete with these competitors.
  ***We
        intend to expand our business through additional acquisitions that could
        result
        in diversion of resources and extra expenses, which could disrupt our business
        and increase our expenses.***
  Part
        of
        our strategy is to pursue acquisitions of and investments in businesses and
        technologies to expand our business and enhance our technology development
        capabilities. In addition to our CYGNUS, GO Networks and PacketVideo
        acquisitions, we have made investments in a number of companies including
        Hughes
        Systique and Inquam Broadband, and anticipate future investments in other
        companies. The negotiation of potential acquisitions and investments, as
        well as
        the integration of acquired businesses or technologies, could divert our
        management’s time and resources. Acquired businesses and technologies may not be
        successfully integrated with our products and operations. In addition, our
        investments, particularly minority investments, may not give us access to
        new
        technologies or provide us with business relationships with the other company.
        We may not realize the intended benefit of any acquisition or investment.
        Our
        acquisitions could result in substantial cash expenditures, potentially dilutive
        issuances of equity securities, the incurrence of debt and contingent
        liabilities, a decrease in our profit margins and amortization of intangibles
        and potential impairment of goodwill. In addition, our investments could
        result
        in substantial cash expenditures, fluctuations in our results of operations
        resulting from changes in the value of the investments and diversion of
        management’s time and attention. If acquisitions disrupt our operations or if
        our investments are not successful, our business, financial condition and
        results of operations may suffer.
  ***If
        WiMAX technology fails to gain acceptance, we will not be successful in selling
        WiMAX products and technologies.***
  Our
        business plan is reliant on the deployment and market acceptance of mobile
        WiMAX
        networks and WiMAX enabled handsets and devices. WiMAX and the market for
        WiMAX
        networks and services have only recently begun to develop and is continuing
        to
        evolve. We plan to generate most of our revenue from the sale of WiMAX products
        and the licensing of mobile WiMAX broadband technologies. There are currently
        no
        mobile WiMAX networks in commercial operation and there can be no assurance
        that
        commercial mobile WiMAX networks will prove to be commercially viable. Mobile
        WiMAX will compete with several third generation (3G) and fourth generation
        (4G)
        wireless air interface technologies that are currently being deployed or
        developed to enable the delivery of mobile broadband services to the market,
        including CDMA2000 and UMTS. In order for WiMAX to gain significant market
        acceptance among consumers, network operators and telecommunications service
        providers will need to deploy WiMAX networks. However, many of the largest
        wireless telecommunications providers have made significant expenditures
        in
        technologies that have the potential to be competitive with WiMAX and may
        choose
        to continue to develop these technologies rather than utilize WiMAX.
        Certification standards for WiMAX are controlled by the WiMAX Forum, an industry
        group. Accordingly, standard setting for WiMAX is beyond our control. If
        standards for WiMAX change, the commercial viability of mobile WiMAX may
        be
        delayed or impaired and our development efforts may also be delayed or impaired
        or become more costly. The development of mobile WiMAX networks is also
        dependent on the availability of spectrum. Access to spectrum suitable for
        mobile WiMAX is highly competitive. We currently contemplate using multiple
        frequencies for our mobile WiMAX networks. This multi-spectrum approach is
        technologically challenging and will require the development of new software,
        integrated circuits and equipment, which will be time consuming and expensive
        and may not be successful. In order for our business to continue to grow and to
        become profitable, mobile WiMAX technology and related services must gain
        acceptance among consumers, who tend to be less technically knowledgeable
        and
        more resistant to new technology or unfamiliar services. If consumers choose
        not
        to adopt mobile WiMAX technology, we will not be successful in selling WiMAX
        products and technologies and our ability to grow our business will be
        limited.
  38
  ***Our
        wireless broadband products and technologies are in the early stages of
        development and will require a substantial investment before they may become
        commercially viable.***
  Many
        of
        our wireless broadband products and technologies are in the early stages
        of
        development and will require a substantial investment before they may become
        commercially viable. We are currently unable to project when our semiconductors
        and other wireless broadband products based on WiMAX and Wi-Fi technologies
        will
        be commercially deployed and generate revenue. While we intend to continue
        to
        make substantial investments in development for the foreseeable future, it
        is
        possible that our development efforts will not be successful and that many
        of
        our wireless broadband products and technologies will not result in meaningful
        revenues. In addition, unexpected expenses and delays in development could
        adversely affect our liquidity. Many of our wireless broadband products and
        technologies have not been tested, even on a pre-commercial basis. Even if
        our
        new products and technologies function when tested, they may not produce
        sufficient performance and economic benefits to justify full commercial
        development efforts, or to ultimately attract customers. Failure to achieve
        high
        volume sales of our semiconductors and other wireless broadband products
        and
        technologies will adversely affect our ability to achieve
        profitability.
  ***Our
        future WiMAX products may not receive the certification we expect, which
        may
        affect our ability to sell our WiMAX products and
        services.***
  If
        our
        mobile WiMAX technologies and products do not receive WiMAX industry
        certification, we may not be able to successfully market, license or sell
        our
        mobile WiMAX products or technologies. Our WiMAX-based products may not receive
        the necessary certification in the time frame we expect, or at all, and may
        therefore not achieve the wide acceptance that we are seeking. In addition,
        we
        expect industry standards for WiMAX to evolve and if we are not able to adapt
        our products and technologies to any such changes, our ability to license
        or
        sell our products and technologies would be impaired.
 
 ***The
        business plan of our Network Solutions Group is dependent on entering into
        or
        maintaining network partner relationships.***
  Our
          Network Solutions Group intends to build and operate WiMAX/Wi-Fi networks
          for
          wireless service providers, cable operators, multimedia content distributors,
          applications service providers and Internet service providers. At present,
          NSG
          has not entered into any such arrangements and may not be able to negotiate
          such
          arrangements on acceptable terms, or at all. If we are unable to establish
          and
          maintain these service arrangements, we may have to modify our plans for
          the
          Network Solutions Group.
  The
          dependence of our Network Solutions Group business plan is subject to a
          number
          of risks, including:
 ·
                the
                    inability to control the amount and timing of resources that
                    our potential
                    service provider customers devote to their network deployment
                    activities;
  ·
                the
                    possibility that potential service provider customers could move
                    forward
                    and deploy networks without the assistance of
                    NSG;
  ·
                the
                    possibility that service provider customers may experience financial
                    or
                    technical difficulties;
  39
  ***We
        may require significant capital to implement our business plan, but we may
        not
        be able to obtain additional financing on favorable terms or at
        all.***
  While
        we
        estimate that our working capital will be sufficient to fund our research
        and
        development activities and our operating losses at least through 2008, we
        may
        need to secure significant additional capital in the future to implement
        changes
        to, or expansions of, our business plan and to become cash flow positive.
        We may
        also require additional cash resources to pursue investments or acquisitions,
        including investments in or acquisitions of other technologies, businesses
        or
        spectrum licenses. Sources of additional capital may include public or private
        debt and equity financings. We have completed a private placement of senior
        secured notes that provided us with net cash proceeds of $295.0 million
        available for the sole purpose of financing spectrum acquisitions and leases
        as
        well as a private placement of our Series A Senior Convertible Preferred
        Stock,
        that provided us with net cash proceeds of $351 million. The entire proceeds
        of
        our senior secured notes were used for the acquisition of WCS Wireless, Inc.
        for
        $160.5 million, the acquisition of two new EBS leases for $22.1 million and
        for
        the majority of the funding for the acquisition of 154 AWS licenses for $115.6
        million. The proceeds of our Series A Senior Convertiable Preferred Stock
        are
        available to fund working capital needs and potential strategic transactions.
        To
        the extent that other attractive opportunities to acquire complimentary
        businesses or additional spectrum arise, we may need to raise additional
        funds
        to capitalize on such opportunities.
 
 ***Risks
        Related to Our PacketVideo Business***
  Since
        our
        inception in April 2005, substantially all of our revenues have been generated
        by our PacketVideo subsidiary, which we acquired in July 2005, and we believe
        that PacketVideo will account for a substantial portion of our revenues until
        we
        complete the development and commercialization of our wireless broadband
        products and technologies. Our PacketVideo business is subject to a number
        of
        risks, including:
 *PacketVideo
          may be materially and adversely affected by a ban on EVDO phones by the
          United
          States International Trade Commission.*
 
 During
          2006, PacketVideo’s revenues from Verizon Wireless accounted for 64% of our
          revenues. Our embedded software is shipped by Verizon Wireless exclusively
          on
          EVDO handsets in connection with its V-Cast offering. Broadcom has alleged
          that
          QUALCOMM has infringed certain of its patents, including patents implicated
          in
          EVDO handsets, and filed a compliant in the United States International
          Trade
          Commission (ITC). Pursuant to the ITC hearing, an administrative law judge
          issued an initial determination in which he found infringement on some
          claims of
          one patent, which includes technology that governs power usage within EVDO
          handsets. The ITC has adopted the administrative law judge’s determination on
          violation and will issue its decision on remedy on March 8, 2007. The final
          determination is then subject to Presidential review. Following the
          determination on violation, Broadcom petitioned the ITC for a ban on the
          import
          of all EVDO phones, and the ITC will hold public hearings to investigate
          the
          impact on domestic businesses of such a ban. If such a ban were to be adopted,
          Verizon Wireless may be unable to sell EVDO handsets. Because PacketVideo
          license fees are generally based on a one time royalty when a new handset
          is
          sold, our revenue would be materially and adversely affected if a ban on
          EVDO
          handsets were to be enacted.
  *Reliance
        on a limited number of mobile phone and device manufacturers and wireless
        carriers* . During
        2006, PacketVideo’s revenues from Verizon Wireless accounted for 64% of our
        revenues. For the period from our inception (April 13, 2005) through December
        31, 2005 PacketVideo’s sales to Verizon Wireless, Fujitsu and Nokia accounted
        for 22%, 14% and 11%, respectively, of our revenues. Aggregated accounts
        receivable from Verizon Wireless and SEMC accounted for 42% and 11%,
        respectively, of total gross accounts receivable at December 30, 2006. We
        expect
        that our PacketVideo subsidiary will continue to generate a significant portion
        of its revenues through a limited number of mobile phone and device
        manufacturers and wireless carriers for the foreseeable future, although
        these
        amounts may vary from period-to-period. If any of these customers decides
        not to
        embed PacketVideo software into their mobile phones and devices or otherwise
        reduces the amount of PacketVideo software they embed in their mobile phones
        or
        devices generally, our PacketVideo revenues and results of operations could
        be
        materially adversely affected.
  Our
        agreements with mobile phone and device manufacturers are not exclusive,
        and
        many contain no minimum purchase requirements. Accordingly, mobile phone
        and
        device manufacturers may effectively terminate these agreements by no longer
        embedding PacketVideo’s software into their products. In addition, PacketVideo
        has indemnified these manufacturers from certain claims that PacketVideo’s
        software infringes third-party intellectual property rights. Our carrier
        agreements are not exclusive and generally have a limited term of one or
        two
        years with evergreen, or automatic renewal, provisions upon expiration of
        the
        initial term. These agreements set out the terms of our distribution
        relationships with the carriers but generally do not obligate the carriers
        to
        market or distribute any of our applications. In addition, the carriers can
        terminate these agreements early, and in some instances, at any time, without
        cause.
  Many
        factors outside our control could impair PacketVideo’s ability to generate
        revenues from mobile phone and device manufacturers and wireless carriers,
        including the following:
  ·
              a
                  preference for embedded software licensed by one of PacketVideo’s
                  competitors;
  ·
              competing
                  applications;
  ·
              a
                  decision to discontinue embedding our PacketVideo software, or
                  mobile
                  broadband embedded software
                  altogether;
  ·
              a
                  carrier’s decision not to provide mobile broadband applications or content
                  thereby reducing the need for PacketVideo’s
                  applications;
  ·
              a
                  carrier’s network encountering technical problems that disrupt the
                  delivery of content for our
                  applications;
  40
  ·
              a
                  manufacturer’s decision to increase the cost of mobile phones and devices
                  embedded with PacketVideo’s
                  software;
  ·
              a
                  manufacturer’s decision to reduce the price it is willing to pay for
                  embedded software such as PacketVideo’s;
                  and
  ·
              consolidation
                  among manufacturers or wireless carriers or the emergence of new
                  manufacturers or wireless carriers that do not license PacketVideo
                  software.
  *If
        wireless subscribers do not increase their use of their mobile phones to
        access
        multimedia content, our PacketVideo business may suffer.* Our
        PacketVideo business is reliant on the continued and increased use of mobile
        phones to access multimedia content by consumers. The market for multimedia
        content delivery through mobile phones is relatively new. If the market does
        not
        continue to develop or develops more slowly than anticipated, mobile phone
        manufacturers may cease to embed PacketVideo’s software in their handsets and
        wireless carriers may limit or stop the delivery of multimedia content and
        the
        demand for mobile phones with embedded multimedia software may decline. If
        this
        occurs, our PacketVideo business would be harmed and our revenues would
        decline.
  *If
        we
        fail to deliver our PacketVideo applications to correspond with the commercial
        introduction of new mobile phone*  *models* *,
        our
        sales may suffer.* PacketVideo’s business is tied, in part, to the commercial introduction of new
        mobile phones with enhanced features. Many new mobile phone models are released
        in the final quarter of the year to coincide with the holiday shopping season.
        We cannot control the timing of these mobile phone launches. Our PacketVideo
        software must be modified for each new mobile phone model. If we are unable
        to
        release new versions of our PacketVideo software to coincide with these new
        mobile phone launches, our sales of our PacketVideo software may suffer.
        In
        addition, if new mobile phone launches are delayed or if we miss the key
        holiday
        selling season, our sales may suffer.
  *PacketVideo
        may experience difficulties in the introduction of new or enhanced products,
        which could result in reduced sales, unexpected expenses or delays in the
        launch
        of new or enhanced products.* The
        development of new or enhanced embedded multimedia software products is a
        complex and uncertain process. We may experience design, manufacturing,
        marketing and other difficulties that could delay or prevent our development,
        introduction, commercialization or marketing of new products or product
        enhancements. The difficulties could result in reduced sales, unexpected
        expenses or delays in the launch of new or enhanced products, which may
        adversely affect our results or operations.
  ***We
        do not have any manufacturing capabilities and will depend on third-party
        manufacturers and suppliers to manufacture, assemble and package our
        semiconductor products.***
  We
        are
        currently designing and developing semiconductor products including digital
        baseband ASICs and multi-band RFICs. If we are successful in our design and
        development activities and a market for these products develops, these products
        will need to be manufactured. Due to the expense and complexity associated
        with
        the manufacturer of digital baseband ASICs and multi-band RFICs, we intend
        to
        depend on third-party manufacturers to manufacture these products. The
        dependence on third-parties to manufacture, assemble and package these products
        involves a number of risks, including:
  41
  ·
              a
                  potential lack of capacity to meet
                  demand;
  ·
              reduced
                  control over quality and delivery
                  schedules;
  ·
              risks
                  of inadequate manufacturing yield or excessive
                  costs;
  ·
              difficulties
                  in selecting and integrating
                  subcontractors;
  ·
              limited
                  warranties in products supplied to
                  us;
  ·
              price
                  increases; and
  ·
              potential
                  misappropriation of our intellectual
                  property.
 
 We
        may
        not be able to establish manufacturing relationships on reasonable terms
        or at
        all. The failure to establish these relationships on a timely basis and on
        attractive terms could delay our ability to launch these products or reduce
        our
        revenues and profitability.
  ***Defects
        or errors in our products and services or in products made by our suppliers
        could harm our relations with our customers and expose us to liability. Similar
        problems related to the products of our customers or licensees could harm
        our
        business.***
  Our
        WiMAX
        products and technologies that we are developing will be inherently complex
        and
        may contain defects and errors that are detected only when the products are
        in
        use. Further, because our products and technologies that we are developing
        will
        be responsible for critical functions in our customers’ products and/or
        networks, such defects or errors could have a serious impact on our customers,
        which could damage our reputation, harm our customer relationships and expose
        us
        to liability. Defects in our products and technologies or those used by our
        customers or licensees, equipment failures or other difficulties could adversely
        affect our ability and that of our customers and licensees to ship products
        on a
        timely basis as well as customer or licensee demand for our products. Any
        such
        shipment delays or declines in demand could reduce our revenues and harm
        our
        ability to achieve or sustain desired levels of profitability. We and our
        customers or licensees may also experience component or software failures
        or
        defects which could require significant product recalls, reworks and/or repairs
        which are not covered by warranty reserves and which could consume a substantial
        portion of the capacity of our third-party manufacturers or those of our
        customers or licensees. Resolving any defect or failure related issues could
        consume financial and/or engineering resources that could affect future product
        release schedules. Additionally, a defect or failure in our products and
        technologies that we are developing or the products of our customers or
        licensees could harm our reputation and/or adversely affect the growth of
        mobile
        WiMAX markets.
  ***Because
        mobile WiMAX is an emerging technology that is not fully developed, there
        is a
        risk that still unknown persons or companies may assert proprietary rights
        to
        the various technology components that will be necessary to operate a WiMAX
        network.***
  As
        a
        technology company, we expect to incur expenditures to create and protect
        our
        intellectual property and, possibly, to assert infringement by others of
        our
        intellectual property. We also expect to incur expenditures to defend against
        claims by other persons asserting that the technology that will be used and
        sold
        by our Company infringes upon the right of such other persons. Because mobile
        WiMAX is an emerging technology that is not fully developed, there may be
        a
        greater risk that persons or entities unknown to us will assert proprietary
        rights to technology components that are necessary to operate WiMAX networks
        or
        products. More than 20 companies have submitted letters of assurance related
        to
        IEEE 802.16 and amendments stating that they may hold or control patents
        or
        patent applications, the use of which would be unavoidable to create a compliant
        implementation of either mandatory or optional portions of the standard.
        In such
        letters, the patent holder typically asserts that it is prepared to grant
        a
        license to its essential IP to an unrestricted number of applicants on a
        worldwide, non-discriminatory basis and on reasonable terms and conditions.
        If
        any companies asserting that they hold or control patents or patent applications
        necessary to implement mobile WiMAX do not submit letters of assurance, or
        state
        in such letters that they do not expect to grant licenses, this could have
        an
        adverse effect on the implementation of mobile WiMAX networks and the sale
        of
        our mobile WiMAX products and technologies. In addition, we can not be certain
        of the validity of the patents or patent applications asserted in the letters
        of
        assurance submitted to date, or the terms of any licenses which may be demanded
        by the holders of such patents or patent applications. If we were required
        to
        pay substantial license fees to implement our mobile WiMAX products and
        technologies, this could adversely affect the profitability of these products
        and technologies.
  42
  As
        the
        number of competitors in our market increases and the functionality of our
        products is enhanced, we may become subject to claims of infringement or
        misappropriation of the intellectual property rights of others. Any claims,
        with
        or without merit, could be time consuming to address, result in costly
        litigation, divert the efforts of our technical and management personnel
        or
        cause product release or shipment delays, any of which could have a material
        adverse effect upon our ability to commercially launch our products and
        technologies and on our ability to achieve profitability. If any of our products
        were found to infringe on another company’s intellectual property rights or if
        we were found to have misappropriated technology, we could be required to
        redesign our products or license such rights and/or pay damages or other
        compensation to such other company. If we were unable to redesign our products
        or license such intellectual property rights used in our products, we could
        be
        prohibited from making and selling such products. In any potential dispute
        involving other companies’ patents or other intellectual property, our customers
        could also become the targets of litigation. Any such litigation could severely
        disrupt the business of our customers, which in turn could hurt our relations
        with our customers and cause our revenues to decrease.
  We
        anticipate that we will develop a patent portfolio related to our WiMAX products
        and technologies. However, there is no assurance that we will be able to
        obtain
        patents covering WiMAX products. Litigation may be required to enforce or
        protect our intellectual property rights. As a result of any such litigation,
        we
        could lose our proprietary rights or incur substantial unexpected operating
        costs. Any action we take to license, protect or enforce our intellectual
        property rights could be costly and could absorb significant management time
        and
        attention, which, in turn, could negatively impact our operating results.
        In
        addition, failure to protect our trademark rights could impair our brand
        identity.
  Other
        companies or entities also may commence actions or respond to an infringement
        action that we initiate by seeking to establish the invalidity or
        unenforceability of one or more of our patents or to dispute the patentability
        of one or more of our pending patent applications. In the event that one
        or more
        of our patents or applications are challenged, a court may invalidate the
        patent
        or determine that the patent is not enforceable or deny issuance of the
        application, which could harm our competitive position. If any of our key
        patent
        claims are invalidated or deemed unenforceable, or if the scope of the claims
        in
        any of these patents is limited by court decision, we could be prevented
        from
        licensing such patent claims. Even if such a patent challenge is not successful,
        it could be expensive and time consuming to address, divert management attention
        from our business and harm our reputation.
  ***We
        are dependent on a small number of individuals, and if we lose key personnel
        upon whom we are dependent, our business will be adversely
        affected.***
  Our
        future success depends largely upon the continued service of our board members,
        executive officers and other key management and technical personnel,
        particularly Allen Salmasi, our Chairman and Chief Executive Officer. Mr.
        Salmasi has been a prominent executive and investor in the technology industry
        for over 20 years, and the Company has benefited from his industry relationships
        in attracting key personnel and in implementing acquisitions and strategic
        plans. In addition, in order to develop and achieve commercial deployment
        of
        our mobile broadband products and technologies in competition with
        well-established companies such as Intel, QUALCOMM and others, we must rely
        on
        highly specialized engineering and other talent. Our key employees represent
        a
        significant asset, and the competition for these employees is intense in
        the
        wireless communications industry. We continue to anticipate significant
        increases in human resources, particularly in engineering resources, through
        2008. If we are unable to attract and retain the qualified employees that
        we
        need, our business may be harmed.
  As
        a
        start-up company, we may have particular difficulty attracting and retaining
        key
        personnel in periods of poor operating performance given the significant
        use of
        incentive compensation by well-established competitors. We do not have
        employment agreements with our key management personnel and do not maintain
        key
        person life insurance on any of our personnel. We also have no covenants
        against
        competition or nonsolicitation agreements with certain of our key employees.
        The
        loss of one or more of our key employees or our inability to attract, retain
        and
        motivate qualified personnel could negatively impact our ability to design,
        develop and commercialize our products and technology.
  ***We
        may be liable for certain indemnification payments pursuant to the Plan of
        Reorganization.***
  In
        connection with the sale of NTI and its subsidiaries other than Old NextWave
        Wireless to Verizon Wireless, we agreed to indemnify NTI and its subsidiaries
        against all pre-closing liabilities of NTI and its subsidiaries and against
        any
        violation of the Bankruptcy Court injunction against persons having claims
        against NTI and its subsidiaries, with no limit on the amount of such indemnity.
        We are not currently aware of any such liabilities that remain following
        the
        plan of reorganization and Verizon Wireless has not made any indemnity claims.
        To the extent that we are required to fund amounts under the indemnification,
        our results of operations and our liquidity and capital resources could be
        materially adversely affected. In addition, we may not have sufficient cash
        reserves to pay the amounts required under the indemnification if any amounts
        were to become due.
  43
  **Risks
        Relating to Government Regulation**
  ***Government
        regulation could adversely impact our development of wireless broadband products
        and services, our offering of products and services to consumers, and our
        business prospects.***
  The
        regulatory environment in which we operate is subject to significant change,
        the
        results and timing of which are uncertain. The FCC has jurisdiction over
        the
        grant, renewal, lease, assignment and sale of our wireless licenses, the
        use of
        wireless spectrum to provide communications services, and the resolution
        of
        interference between users of various spectrum bands. Other aspects of our
        business, including construction and operation of our wireless systems, and
        the
        offering of communications services, are regulated by the FCC and other federal,
        state and local governmental authorities. States may exercise authority over
        such things as billing practices and consumer-related issues.
  Various
        governmental authorities could adopt regulations or take other actions that
        would adversely affect the value of our assets, increase our costs of doing
        business, and impact our business prospects. Changes in the regulation of
        our
        activities, including changes in how wireless, mobile, IP-enabled services
        are
        regulated, changes in the allocation of available spectrum by the United
        States
        and/or exclusion or limitation of our technology or products by a government
        or
        standards body, could have a material adverse effect on our business, operating
        results, liquidity and financial position.
  ***Changes
        in legislation or regulations may affect our ability to conduct our business
        or
        reduce our profitability.***
  Future
        legislative, judicial or other regulatory actions could have a negative effect
        on our business. Some legislation and regulations applicable to the wireless
        broadband business, including how IP-enabled services are regulated, are
        the
        subject of ongoing judicial proceedings, legislative hearings and administrative
        proceedings that could change the manner in which our industry is regulated
        and
        the manner in which we operate. We cannot predict the outcome of any of these
        proceedings or their potential impact on our business.
  If,
        as a
        result of regulatory changes, we become subject to the rules and regulations
        applicable to telecommunications providers, commercial mobile service providers
        or common carriers at the federal level or in individual states, we may incur
        significant administrative, litigation and compliance costs, or we may have
        to
        restructure our service offerings, exit certain markets or raise the price
        of
        our services, any of which could cause our services to be less attractive
        to
        customers. In addition, future regulatory developments could increase our
        cost
        of doing business and limit our growth.
  ***We
        may not have complete control over our transition of EBS and BRS spectrum,
        which
        could impact compliance with FCC rules.***
  The
        FCC’s
        rules require transition of EBS and BRS spectrum to the new band plan on
        a Basic
        Trading Area (“BTA”) basis. See “Government Regulation-BRS-EBS License
        Conditions.” We do not hold all of the EBS and BRS spectrum in the BTAs in which
        we hold spectrum. Consequently, we will need to coordinate with other EBS
        and
        BRS licensees in order to transition spectrum we hold or lease. Disagreements
        with other EBS or BRS licensees about how the spectrum should be transitioned
        may delay our efforts to transition spectrum, could result in increased costs
        to
        transition the spectrum, and could impact our efforts to comply with applicable
        FCC rules. On April 27, 2006, the FCC implemented new, amended rules related
        to
        transition of the spectrum, and it adopted rules that will permit us to
        self-transition to the reconfigured band plan if other spectrum holders in
        our
        BTAs do not timely transition their spectrum.
  ***Our
        use of EBS spectrum is subject to privately negotiated lease agreements.
        Changes
        in FCC rules governing such lease agreements, contractual disputes with EBS
        licensees, or failures by EBS licensees to comply with FCC rules could impact
        our use of the spectrum.***
  All
        commercial enterprises are restricted from holding licenses for EBS spectrum.
        Eligibility for EBS spectrum is limited to accredited educational institutions,
        governmental organizations engaged in the formal education of enrolled students
        (e.g. school districts), and nonprofit organizations whose purposes are
        educational. Access to EBS spectrum can only be gained by commercial enterprises
        through privately-negotiated EBS lease agreements. FCC regulation of EBS
        leases,
        private interpretation of EBS lease terms, private contractual disputes,
        and
        failure of an EBS licensee to comply with FCC regulations all could impact
        our
        use of EBS spectrum and the value of our leased EBS spectrum. On April 27,
        2006,
        the FCC released new rules governing EBS lease terms. EBS licensees are now
        permitted to enter into lease agreements with a maximum term of 30 years;
        lease
        agreements with terms longer than 15 years must contain a “right of review” by
        the EBS licensee every five years beginning in year 15. The right of review
        must
        afford the EBS licensee with an opportunity to review its educational use
        requirements in light of changes in educational needs, technology, and other
        relevant factors and to obtain access to such additional services, capacity,
        support, and/or equipment as the parties shall agree upon in the spectrum
        leasing arrangement to advance the EBS licensee’s educational mission. A
        spectrum leasing arrangement may include any mutually agreeable terms designed
        to accommodate changes in the EBS licensee’s educational use requirements and
        the commercial lessee’s wireless broadband operations. In addition, the terms of
        EBS lease agreements are subject to contract interpretation and disputes
        could
        arise with EBS licensees. There can be no assurance that EBS leases will
        continue for the full lease term, or be renewed, or be extended beyond the
        current term, on terms that are satisfactory to us. Similarly, since we are
        not
        eligible to hold EBS licenses, we must rely on EBS licensees with whom we
        contract to comply with FCC rules. The failure of an EBS licensee from whom
        we
        lease spectrum to comply with the terms of their FCC authorization or FCC
        rules
        could result in termination, forfeiture or non-renewal of their authorization,
        which would negatively impact the amount of spectrum available for our
        use.
  44
  ***If
        we do not comply with FCC build-out requirements relating to our spectrum
        licenses, such licenses could be subject to
        forfeiture.***
  Certain
        build-out or “substantial service” requirements apply to our licensed wireless
        spectrum, which generally must be satisfied as a condition of license renewal.
        In particular, the renewal deadline and the substantial service build-out
        deadline for our WCS spectrum is July 21, 2010; for our BRS and EBS spectrum,
        the substantial service build-out deadline is May 1, 2011; and for our AWS
        spectrum, the substantial service build-out deadline is December 18, 2021.
        Failure to make the substantial service demonstration, without seeking and
        obtaining an extension from the FCC, would result in license
        forfeiture.
  ***We
        have no guarantee that the licenses we hold or lease will be
        renewed.***
  The
        FCC
        generally grants wireless licenses for terms of ten or fifteen years, which
        are
        subject to renewal and revocation. FCC rules require all wireless licensees
        to
        comply with applicable FCC rules and policies and the Communications Act
        of 1934
        in order to retain their licenses. For example, licensees must meet certain
        construction requirements, including making substantial service demonstrations,
        in order to retain and renew FCC licenses. Failure to comply with FCC
        requirements with respect to any license could result in revocation or
        non-renewal of a license. There is no guarantee that licenses we hold or
        lease
        will remain in full force and effect or be renewed.
  ***New
        FCC concepts impacting spectrum use could affect our use of wireless
        spectrum.***
  The
        FCC
        has initiated a number of proceedings to evaluate its rules and policies
        regarding spectrum licensing and usage. For example, it is considering new
        concepts that might permit unlicensed users to “share” our licensed spectrum to
        the extent the FCC believes harmful interference will not occur. These new
        uses
        could adversely impact our utilization of our licensed spectrum and our
        operational costs.
  ***Interference
        could negatively impact our use of wireless spectrum we hold, lease or
        use.***
  Under
        applicable FCC rules, users of wireless spectrum must comply with technical
        rules that are intended to eliminate or diminish harmful radiofrequency
        interference between wireless users. Licensed spectrum is generally entitled
        to
        interference protection, subject to technical rules applicable to the radio
        service, while unlicensed spectrum has no interference protection rights
        and
        must accept interference caused by other users.
  ***Wireless
        devices utilizing WCS, BRS and EBS spectrum may be susceptible to interference
        from Satellite Digital Audio Radio Services
        (“SDARS”).***
  Since
        1997, the FCC has considered a proposal to permanently authorize terrestrial
        repeaters for SDARS operations adjacent to the C and D blocks of the WCS
        band.
        The FCC has permitted a large number of these SDARS terrestrial repeaters
        to
        operate on a special temporary authorization since 2001. Permanently authorizing
        SDARS repeaters adjacent to the WCS band could cause interference to WCS,
        BRS
        and EBS receivers. The extent of the interference from SDARS repeaters is
        unclear and is subject to the FCC’s final resolution of pending proceedings.
        Because WCS C and D block licenses are adjacent to the SDARS spectrum, the
        potential for interference to this spectrum is of greatest concern. There
        is a
        lesser magnitude concern regarding interference from SDARS to WCS A and B
        block
        licenses, and EBS and BRS licenses. Central to the FCC’s evaluation of this
        proposal has been the technical specification for the operation of such
        repeaters. SDARS licensees are seeking rule changes that would both unfavorably
        alter WCS technical operating requirements and permit all existing SDARS
        repeaters to continue to operate at their current operating parameters. Final
        technical rules will determine the potential interference conditions and
        requirements for mitigation. If SDARS repeaters result in interference to
        our
        WCS, BRS or WBS spectrum our ability to realize value from this spectrum
        may be
        impaired.
  45
  ***Increasing
        regulation of the tower industry may make it difficult to deploy new towers
        and
        antenna facilities.***
  The
        FCC,
        together with the FAA, regulates tower marking and lighting. In addition,
        tower
        construction and deployment of antenna facilities is impacted by federal,
        state
        and local statutes addressing zoning, environmental protection and historic
        preservation. The FCC adopted significant changes to its rules governing
        historic preservation review of new tower projects, which makes it more
        difficult and expensive to deploy towers and antenna facilities. The FCC
        also is
        considering changes to its rules regarding when routine environmental
        evaluations will be required to determine compliance of antenna facilities
        with
        its RF radiation exposure limits. If adopted, these regulations could make
        it
        more difficult to deploy facilities. In addition, the FAA has proposed
        modifications to its rules that would impose certain notification requirements
        upon entities seeking to (i) construct or modify any tower or transmitting
        structure located within certain proximity parameters of any airport or
        heliport, and/or (ii) construct or modify transmission facilities using the
        2500-2700 MHz radio frequency band, which encompasses virtually all of the
        BRS/EBS frequency band. If adopted, these requirements could impose new
        administrative burdens upon use of BRS/EBS spectrum.
  **Risks
        Relating to An Investment in Our Common Stock**
  ***Our
        derivative securities have the potential to dilute shareholder value and
        cause
        our stock price to decline***
  On
        March
        21, 2007, 84.5 million shares of our common stock were outstanding. Up to
        46.2
        million additional shares of our common stock may be issued upon the
        exercise or conversion of warrants, options, and shares of our Series A
        Senior Convertible Preferred Stock that have been issued or granted. On
        December 30, 2006, we had options outstanding to purchase 10.9 million shares
        of
        our common stock at a weighted average exercise price of $6.20 per share
        and
        warrants outstanding to purchase 500,000 shares of our common stock at an
        exercise price of $6.00 per share. We also had warrants outstanding at December
        30, 2006, to purchase 2.6 million shares of our common stock for $0.01 per
        share
        pursuant to the Warrant Agreement, dated July 17, 2006, among the Company
        and
        the initial purchasers of our senior notes. In addition, in March 2007, we
        issued 355,000
        shares of Series
        A
        Senior Convertible Preferred Stock at a price of $1,000 per share of
        convertible preferred stock in a private offering to investment funds and
        other
        institutional investors, as well as shareholders of the Company, including NextWave
        Wireless Chairman and CEO, Allen Salmasi, and from Douglas Manchester, a
        member
        of the NextWave Wireless Board of Directors and Avenue Capital Group, of
        which
        Robert T. Symington, a member of the NextWave Board, is a portfolio manager.
        The
        Series A Senior Convertible Preferred Stock is convertible into shares of
        our
        common stock upon election of the holders at any time and at our election
        under
        certain circumstances. If all shares of Series A Senior Convertible Preferred
        Stock were converted, we would be obligated to issue 32.1 million shares
        of our
        common stock.
  The
        exercise of these derivative instruments or the conversion of the convertible
        preferred stock into common stock may result in significant dilution to our
        current stockholders. In addition, sales of large amounts of common stock
        in the
        public market upon exercise or conversion could materially adversely affect
        the
        share price.
 
 In
        addition, we may need to raise additional funds to fund our operations, to
        pay
        for an acquisition or to enter into a strategic alliance, and we might use
        equity securities, debt, cash, or a combination of the foregoing. If we use
        equity securities, our stockholders may experience dilution. A significant
        amount of our common stock coming on the market at any given time could result
        in a decline in the price of our common stock or increased
        volatility.
  ***Our
        operating results are subject to substantial quarterly and annual fluctuations
        and to market downturns.***
  We
        believe that our future operating results over both the short- and long-term
        will be subject to annual and quarterly fluctuations due to several factors,
        some of which are outside management’s control. These factors
        include:
  ·
              significant
                  research and development costs;
  46
  ·
              research
                  and development issues and delays;
 
 ·
              the
                  financial results of our PacketVideo
                  subsidiary;
  ·
              spectrum
                  acquisition costs;
  ·
              manufacturing
                  issues and delays;
  ·
              fluctuating
                  market demand for WiMAX services;
  ·
              impact
                  of competitive products, services and
                  technologies;
  ·
              changes
                  in the regulatory environment;
  ·
              the
                  cost and availability of network infrastructure;
                  and
  ·
              general
                  economic conditions.
  These
        factors affecting our future operating results are difficult to forecast
        and
        could harm our quarterly or annual operating results and the prevailing market
        price of our securities. If our operating results fail to meet the financial
        guidance we provide to investors or the expectations of investment analysts
        or
        investors in any period, securities class action litigation could be brought
        against us and/or the market price of our securities could decline.
  ***If
        the ownership of our common stock continues to be highly concentrated, it
        may
        prevent you and other stockholders from influencing significant corporate
        decisions and may result in conflicts of interest that could cause the price
        of
        our common stock to decline.***
  Allen
        Salmasi, our executive officers and other members of our Board of Directors
        beneficially own or control 48.0% of our common stock, as of March 21,
        2007. Accordingly, Mr. Salmasi and the other members of the Board of Directors
        will be able to significantly influence matters that require stockholder
        approval, including the election of directors, any merger, consolidation
        or sale
        of all or substantially all of our assets or other significant corporate
        transactions. Our controlling stockholders may have interests that differ
        from
        your interests and may vote in a way with which you may disagree and which
        may
        be adverse to your interests. Corporate action may be taken even if other
        stockholders oppose them. These stockholders may also delay or prevent a
        change
        of control of us, even if that change of control would benefit our other
        stockholders, which could deprive our stockholders of the opportunity to
        receive
        a premium for their shares. The significant concentration of ownership of
        our
        common stock may adversely affect the trading price of our common stock due
        to
        investors’ perception that conflicts of interest may exist or
        arise.
  ***If
        securities or industry analysts do not publish research or reports about
        our
        business, if they change their recommendations regarding our shares adversely
        or
        if our operating results to not meet their expectations, the price of our
        common
        stock could decline.***
  The
        trading market for our common stock will be influenced by the research and
        reports that industry and securities analysts publish about us or our business.
        If these analysts fail to publish reports about us or if one or more of these
        analysts cease coverage of our company or fail to publish reports on us
        regularly, we could lose visibility in the financial markets, which in turn
        could cause the price of our common stock to decline. Moreover, if one or
        more
        analysts who cover us downgrade our common stock or if our operating results
        do
        not meet their expectations, the price of our common stock could
        decline.
  ***The
        market price for our common stock may be volatile, which could cause the
        value
        of your investment to decline.***
  47
  The
        stock
        market in general, and the stock prices of technology and wireless
        communications companies in particular, have experienced volatility that
        often
        has been unrelated to the operating performance of any specific public company.
        Factors that may have a significant impact on the market price of our common
        stock include:
  ·
              announcements
                  concerning us or our competitors, including the selection of mobile
                  WiMAX
                  wireless communications technology by telecommunications providers
                  and the
                  timing of the roll-out of those
                  systems;
  ·
              receipt
                  of substantial orders or order cancellations for integrated circuits
                  and
                  system software products for mobile WiMAX networks by us or our
                  competitors;
  ·
              quality
                  deficiencies in technologies, products or
                  services;
  ·
              announcements
                  regarding financial developments or technological
                  innovations;·
              our
                  ability to remediate the material weakness in internal controls
                  over
                  financial reporting identified in connection with our restatement
                  of
                  revenues of our PacketVideo
                  subsidiary;
  ·
              international
                  developments, such as technology mandates, political developments
                  or
                  changes in economic policies;
  ·
              lack
                  of capital to invest in WiMAX
                  networks;
  ·
              new
                  commercial products;
  ·
              changes
                  in recommendations of securities
                  analysts;
  ·
              government
                  regulations, including FCC regulations governing spectrum
                  licenses;
  ·
              earnings
                  announcements;
  ·
              proprietary
                  rights or product or patent
                  litigation;
  ·
              strategic
                  transactions, such as acquisitions and divestitures;
                  or
  ·
              rumors
                  or allegations regarding our financial disclosures or
                  practices.
  Our
        share
        price may be subject to volatility, particularly on a quarterly basis.
        Shortfalls in our revenues or earnings in any given period relative to the
        levels expected by securities analysts could immediately, significantly and
        adversely affect the trading price of our common stock.
  From
        time
        to time, we may repurchase our common stock at prices that may later be higher
        than the market value of the share on the repurchase date. This could result
        in
        a loss of value for stockholders if new shares are issued at lower
        prices.
  In
        the
        past, securities class action litigation has often been brought against a
        company following periods of volatility in the market price of its securities.
        Due to changes in the volatility of the price of our common stock, we may
        be the
        target of securities litigation in the future. Securities litigation could
        result in substantial costs and divert management’s attention and
        resources.
  ***Provisions
        of our charter documents could delay or prevent an acquisition of our company,
        even if the acquisition would be beneficial to holders of our common stock,
        and
        could make it more difficult for you to change
        management.***
  Our
        Certificate of Incorporation and Bylaws contain provisions that could depress
        the trading price of our common stock by acting to discourage, delay or prevent
        a change of control of our company or changes in management that holders
        of our
        common stock might deem advantageous. Specific provisions in our Certificate
        of
        Incorporation and Bylaws include:
  ·
              our
                  directors serve staggered, three-year terms and accordingly, pursuant
                  to
                  Delaware law, can only be removed with
                  cause;
  48
  ·
              no
                  action can be taken by stockholders except at an annual or special
                  meeting
                  of the stockholders called in accordance with our bylaws, and stockholders
                  may not act by written consent;
  ·
              our
                  board of directors will be expressly authorized to make, alter
                  or repeal
                  our bylaws, and our stockholders will be able to make, alter or
                  repeal our
                  bylaws by a vote of 66-2/3% of the issued and outstanding voting
                  shares;
  ·
              any
                  vacancies on the board of directors would be filled by a majority
                  vote of
                  the board;
  ·
              our
                  board of directors will be authorized to issue preferred stock
                  without
                  stockholder approval; and
  ·
              we
                  will indemnify officers and directors against losses that they
                  may incur
                  in investigations and legal proceedings resulting from their services
                  to
                  us, which may include services in connection with takeover defense
                  measures.
  As
        a
        result of the provisions of our Certificate of Incorporation and Bylaws,
        the
        price investors may be willing to pay in the future for our common stock
        may be
        limited.
 
 **ITEM 1B.**  **Unresolved
        Staff Comments**
 
 Not
        applicable.
 
 **ITEM
        2.**  **Properties**
 
 We
        are
        headquartered in San Diego, California and are currently occupying a leased
        facility containing an aggregate of approximately 76,000 square feet. We
        have
        three additional leased facilities in the San Diego area containing an aggregate
        of approximately 163,500 square feet, including a new lease agreement signed
        in
        March 2007 for a 118,000 square foot building, in which we intend to relocate
        our corporate headquarters.
 
 We
        also
        lease two locations in Henderson, Nevada. We plan to replace those leased
        facilities with an owned 30,000 square foot facility that is currently being
        constructed. We expect to occupy this facility in the second quarter of
        2007.
 
 We
        also
        lease a total of approximately 98,500 square feet of aggregate office space
        in
        Connecticut, Illinois, North Carolina, Mountain View and Las Vegas as well
        as
        facilities in Japan, India, Korea, France, Finland, Israel and
        Canada.
  We
        believe that our properties are adequate for our business as presently
        conducted.
 
 **ITEM
        3.**  **Legal
        Proceedings**
 
 **Proceedings
        Under Chapter 11 of the Bankruptcy Code**
 
 On
        June
        8, 1998, NextWave Personal Communications Inc., NextWave Power Partners Inc.,
        NextWave Partners Inc. and Old NextWave Wireless, all direct and indirect
        wholly-owned subsidiaries of NextWave Telecom Inc., filed a voluntary petition
        for relief under Chapter 11 of the Bankruptcy Code in the United States
        Bankruptcy Court for the Southern District of New York. On December 23, 1998,
        NextWave Telecom Inc. filed its voluntary petition, in order to implement
        an
        overall corporate restructuring. On March 1, 2005, the Bankruptcy Court
        confirmed the Third Joint Plan of Reorganization dated January 21, 2005.
        The
        cornerstone of the Plan of Reorganization was the sale of NextWave Telecom
        and
        its subsidiaries, excluding Old NextWave Wireless, to Verizon Wireless for
        approximately $3.0 billion. Pursuant to the Plan of Reorganization, on April
        13,
        2005, all non-PCS assets and liabilities of the NextWave Telecom group were
        contributed to Old NextWave Wireless, and Old NextWave Wireless was capitalized
        with $550 million in cash. Through this process, Old NextWave Wireless was
        reconstituted as a company with a new capitalization and a new wireless
        technology business plan. All claims made in connection with the Chapter
        11 case
        have been resolved. See “Item 1. Business-Our History”
 
 **Other
        Litigation**
  We
        are
        currently a party to various other legal proceedings that arise in the ordinary
        course of our business. While management presently believes that the ultimate
        outcome of these proceedings, individually and in the aggregate, will not
        have a
        material adverse effect on our financial position, cash flows or overall
        trends
        in results of operations, litigation is subject to inherent uncertainties,
        and
        unfavorable rulings could occur. For example, we are currently engaged in
        a
        dispute relating to a lease of EBS spectrum covering approximately 1 million
        POPs in the Toms River, New Jersey geographic area. The lessor has claimed
        that
        we are in breach of the terms of the lease and that the lease has been
        terminated. We believe that these claims are without merit, and, in any event,
        any adverse resolution would not have a material adverse effect on our business,
        results of operations or financial condition.
 
 49
 
 **ITEM 4.**  **Submission
        of Matters to a Vote of Security Holders**
 
 Not
        applicable
 
 **PART II**
  **ITEM
        5.**  **Market
        for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases
        of Equity Securities** ******
 
 The
        principal market for our common stock is the NASDAQ Global Market, on which
        it began trading in the first quarter of 2007. During the pendency of our
        application to list our common stock on the NASDAQ Global Market, our common
        stock was quoted on the Over-the-Counter Bulletin Board for less than a full
        quarterly period.
  In
        addition, we recently issued Series A Senior
        Convertible Preferred Stock, which has priority over our common stock with
        regard to the earnings and assets of the Company. For additional information
        regarding the Series A Senior Convertible Preferred Stock, please see Item
        8B. Other.


**Market
        Information**
  The
        following table reflects the high and low sales prices, or high and low bid
        prices, as applicable, rounded to the nearest penny, of NextWave common stock
        as
        reported by the Over-the-Counter (“OTC”) Bulletin Board and the NASDAQ Global
        Market, as applicable, for each quarterly period in 2006 in which NextWave
        common stock was listed thereon, beginning with the listing date. NextWave
        common stock traded on the OTC Bulletin Board only for a period between November
        16, 2006 and January 2, 2007. Subsequently, NextWave common stock was listed
        on
        the Nasdaq Global Market, beginning on January 3, 2007 under the “ *WAVE* ”
symbol,
        where it continues to trade. OTC market quotations reflect inter-dealer
        quotations and do not include retail markups, markdowns or commissions and
        may
        not necessarily represent actual transactions.
  **High**
                
                **Low****2006:**Fourth
                    Quarter
                
                
                
                
                $
                11.00
                
                $
                6.00**2007:**First
                    Quarter (through March
                    21, 2007)
                
                
                
                
                $
                12.75
                
                $
                9.86
 
 **Dividend
        Policy.**
 
 We
        have
        never paid a dividend on our common stock and do not anticipate paying one
        in
        the foreseeable future. Pursuant to the terms of the Purchase Agreement
        governing our 7% Senior Secured Notes, we are restricted from paying
        dividends and making distributions. In addition, without the prior written
        consent of the holders of at least 75% of the outstanding shares of our Series
        A
        Senior Convertible Preferred Stock, so long as at least 25% of the issued
        shares
        remain outstanding, no cash dividends may be paid on our common stock. If
        we
        were to pay a dividend in cash or any other property on our common stock,
        the
        holders of our Series A Senior Convertible Preferred Stock will be entitled
        to
        participate in such dividend on an as-converted basis.
 
 In
        the
        event we are permitted to pay a dividend on our common stock, the payment
        of any
        future dividends will be at the discretion of our Board and will depend upon,
        among other things, our financial condition and capital needs, legal or
        contractual restrictions on the payment of dividends and other factors deemed
        pertinent by our Board. For additional information on payment of and
        restrictions on dividends, please also see Item
        8. Financial Statements and the
        notes thereto.
 
 **Repurchases
        of Common Stock**
  50
  We
        repurchased 638 shares of our common stock during the year ended December
        30,
        2006, for $10.69 per share in connection with shares tendered for a stock
        option
        exercise.
  **Stock
        Performance Chart**
 
 The
        following performance chart assumes an investment of $100 on November 17,
        2006
        and compares the change to December 31, 2006 in the market price for our
        common
        stock with the NASDAQ Composite Index and the NASDAQ Telecom Index.
 
 The
        comparisons in the graph below are based on historical data and are not intended
        to forecast the possible future performance of our common stock.
  
 
  **Holders**
  As
        of
        March 29, 2007, there were approximately 980 holders of record of our
        common stock.


51


Certain
      provisions in our Certificate of Incorporation and Bylaws will have the effect
      of delaying, deferring or preventing a change of control of our Company. These
      provisions include that our directors serve staggered terms, and, pursuant
      to
      Delaware law, can only be removed for cause; stockholders cannot act by written
      consent and can only amend or repeal the bylaws by a supermajority vote of
      the
      issued and outstanding voting shares and our board of directors is authorized
      to
      issue preferred stock without stockholder approval. In addition, vacancies
      on
      our Board of Directors are filled only through a majority vote of the Board,
      and
      directors and officers are indemnified against losses that they may incur in
      investigations and legal proceedings resulting from their services to us,
      including in connection with takeover defense measures.




52




**ITEM
      6. Selected Financial Data**




The
      following selected consolidated statement of operations data for the year ended
      December 30, 2006 and for the period from the date of our inception as a new
      wireless technology company pursuant to the plan of reorganization of Old
      NextWave Wireless described below (April 13, 2005) to December 31, 2005 and
      selected consolidated balance sheet data as of December 30, 2006 and December
      31, 2005 was derived from our audited consolidated financial statements and
      should be read in conjunction with our audited consolidated financial statements
      and Management’s Discussion and Analysis of Financial Condition and Results of
      Operations included elsewhere in this Form 10-K.




*(in
                thousands, except per share data)*
            
            **Year
                Ended**
              **December
                30, 2006****(1)
                (2)**
            
            **Inception**
              **(April
                13, 2005) to December 31, 2005****(3)****Consolidated
                Statement of Operations Data:**Revenues
            
            $
            24,284
            
            $
            4,144Loss
                from operations
            
            
            (98,526
            )
            
            (55,687
            )Net
                loss
            
            
            (105,020
            )
            
            (45,952
            )Basic
                and diluted net loss per share
            
            $
            (1.28
            )
            $
            —(4
            )**Consolidated
                Balance Sheet Data:**Cash,
                cash equivalents and short-term investments
            
            $
            200,685
            
            $
            459,231Restricted
                cash(5)
            
            
            75,000
            
            
            —Wireless
                spectrum licenses, net
            
            
            527,998(6
            )
            
            45,467Goodwill
            
            
            32,184
            
            
            24,782Other
                intangible assets, net
            
            
            18,570
            
            
            18,100Total
                assets
            
            
            897,079
            
            
            579,774Long-term
                obligations, net of current portion(5)
            
            
            298,030
            
            
            14,934Total
                shareholders’ equity(1)(7)
            
            
            469,178
            
            
            —Total
                members’ equity(1)
            
            
            —
            
            
            539,364







(1)
            On
                November 13, 2006, NextWave completed a corporate conversion merger,
                whereby a wholly-owned subsidiary of NextWave Wireless Inc. was merged
                with and into NextWave Wireless LLC (“Corporate Conversion Merger”). As a
                result of the merger, NextWave Wireless LLC became a wholly-owned
                subsidiary of NextWave Wireless Inc. Under the terms of the merger
                agreement, NextWave Wireless Inc. issued shares of its common stock
                to
                holders of NextWave Wireless LLC’s membership units in exchange for all of
                the outstanding membership units of NextWave Wireless LLC, with NextWave
                Wireless LLC unitholders receiving one share of NextWave Wireless
                Inc.
                common stock for each six membership units of NextWave Wireless LLC
                that
                they held.




(2)
            Effective
                January 1, 2006, we changed our fiscal year end and quarterly reporting
                periods from quarterly calendar periods ending on December 31 to
                a 52-53
                week fiscal year ending on the Saturday nearest to December 31 of
                the
                current calendar year or the following calendar year.




(3)
            On
                April 13, 2005, pursuant to the plan of reorganization of the NextWave
                Telecom group, our equity securities were distributed to the NTI
                equity
                holders and we were reconstituted as a company with a new capitalization
                and a new wireless technology business plan. A summary of the assets
                and
                liabilities contributed to us on April 13, 2005 is provided in the
                Notes
                to Consolidated Financial Statements included elsewhere in this Form
                10-K.
                For more information on our emergence as a new wireless technology
                company, see “Business-Our
                History.”




(4)
            Loss
                per share information is not presented for the period from inception
                (April 13, 2005) to December 31, 2005 as it would not be meaningful
                due to
                the Corporate Conversion Merger.




(5)
            On
                July 17, 2006, NextWave issued 7% Senior Secured Notes due 2010 (the
                “Notes”) in the aggregate principal amount of $350.0 million. The Notes
                were issued at a fifteen percent (15%) original issue discount, resulting
                in gross proceeds of $297.5 million. NextWave is required to maintain
                a
                minimum balance of $75.0 million in cash or cash equivalents from
                funds
                other than the proceeds of the Notes in a restricted collateral account
                at
                all times while the Notes remain
                outstanding.




(6)
            The
                increase in wireless spectrum licenses, net, during 2006, includes
                our
                July 2006 acquisition of WCS Wireless, Inc. which resulted in the
                addition
                of $236.4 million of wireless spectrum licenses. The value assigned
                to the
                wireless spectrum includes the cash purchase price of $160.5 million,
                legal costs of $0.1 million, and $75.8 million in associated deferred
                tax.
                We also acquired other licensed spectrum rights for $245.0 million
                in cash
                and $4.0 million through the assumption of lease liabilities. These
                additions were reduced by amortization during 2006 of $2.9
                million.




53




(7)
            On
                March 28, 2007, we issued and sold 355,000 shares of our Series A
                Senior
                Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of
                $1,000 per share. We received $351 millionin
                net proceeds from the sale of the Series A Preferred Stock.****




54




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





*In
      addition to historical information, the following discussion contains
      forward-looking statements that are subject to risks and uncertainties. Our
      actual results could differ substantially from those anticipated by such
      forward-looking information due to a number of factors, including but not
      limited to risks described in the section entitled Risk Factors and elsewhere
      in
      this Form 10-K. Additionally, the following discussion and analysis should
      be
      read in conjunction with the consolidated financial statements and the notes
      thereto included elsewhere in this Form 10-K.*




**OVERVIEW**




***Corporate
      Conversion Merger***




In
      order
      to convert NextWave Wireless LLC into a corporate form, the Board of Directors
      and a majority in interest of the holders of NextWave Wireless LLC membership
      units approved the merger of NextWave Wireless LLC with a wholly owned
      subsidiary of a newly formed Delaware corporation, NextWave Wireless Inc. On
      November 13, 2006, the corporate conversion merger was completed and NextWave
      Wireless LLC became a wholly-owned subsidiary of NextWave Wireless Inc. Under
      the terms of the merger agreement, NextWave Wireless Inc. issued shares of
      its
      common stock to holders of NextWave Wireless LLC’s membership units in exchange
      for all of the outstanding membership units of NextWave Wireless LLC, with
      NextWave Wireless LLC unitholders receiving one share of NextWave Wireless
      Inc.
      common stock for every six membership units of NextWave Wireless LLC that they
      held. Following the corporate conversion merger, NextWave Wireless LLC’s
      obligation to file periodic reports under the Securities Exchange Act of 1934
      was suspended, and NextWave Wireless Inc. became the successor to NextWave
      Wireless LLC for Securities and Exchange Commission reporting
      purposes.




***Inception
      of NextWave Wireless LLC***




NextWave
      Wireless Inc. (“Old NextWave Wireless”) was formed in 1996 as a wholly-owned
      subsidiary of NextWave Telecom Inc. (“NTI”) which sought to develop a nationwide
      CDMA-based personal communication services (“PCS”) network. Pursuant to the plan
      of reorganization of NTI and its subsidiaries, NTI and its subsidiaries,
      excluding Old NextWave Wireless, were sold to Verizon Wireless for approximately
      $3.0 billion. Prior to this sale, on April 13, 2005, the NextWave Telecom Group
      abandoned substantially all of its PCS assets other than the spectrum licenses
      and all remaining non-PCS assets and liabilities were contributed to Old
      NextWave Wireless. Immediately thereafter, membership interests in NextWave
      Wireless LLC (together with its subsidiaries, “NextWave”) were distributed to
      the NTI equity holders and Old NextWave Wireless was capitalized with $550.0
      million in cash. Through this process, Old NextWave Wireless was reconstituted
      as a company with a new capitalization and a new wireless technology business
      plan.




**Our
      Business**




We
      are an
      early stage wireless technology company engaged in the development of
      next-generation mobile broadband and wireless multimedia products, technologies
      and services. During 2006 all of our revenues were derived from the sale of
      device-embedded multimedia software solutions by our PacketVideo subsidiary,
      which was acquired in July 2005. While we expect to continue to grow and expand
      our multimedia software business, we expect that, following the development
      of
      our WiMAX products and technologies, the majority of our revenues will
      ultimately be derived from the sale and licensing, to network infrastructure
      and
      mobile terminal manufacturers of the chipsets, network components and device
      technologies based on WiMAX and Wi-Fi technologies that we are
      developing.




Our
      revenues for 2006 totaled $24.3 million compared to revenues of $4.1 million
      that were recognized during the period from inception (April 13, 2005) to
      December 31, 2005. Our net loss for 2006 totaled $105.0 million compared to
      our
      net loss for the period from inception (April 13, 2005) to December 31, 2005
      which totaled $46.0 million. Our net losses for 2006 included $5.2 million
      of
      total share-based compensation expense, including employee share-based
      compensation expense related to the adoption of SFAS 123(R) on January 1, 2006,
      compared to $1.1 million in non-employee share-based compensation for the period
      from inception (April 13, 2005) to December 31, 2005.




At
      present, the majority of our employees are assigned to the Advanced Technology
      Group and are directly engaged in the design, development, and commercialization
      of a family of semiconductor and network component products, based on WiMAX
      and
      Wi-Fi technologies including digital baseband ASICs and multi-band RFICs. Our
      development team is also focused on developing technologies such as advanced
      antenna systems and advanced cognitive radios that we believe will help
      stimulate sales of our suite of WiMAX/Wi-Fi products. All of our WiMAX
      semiconductor products and technologies are in an early stage of
      development.




55




To
      conserve capital we intend to outsource the production of our semiconductors
      to
      third-party chip manufacturers that can rapidly scale production volumes to
      meet
      our future needs. We plan to license our reference designs to third party
      vendors. By adopting this approach, we will be able to continue investing in
      the
      research and development needed over the next several years to fully
      commercialize our technologies and semiconductor designs. Although we expect
      most of our WiMAX semiconductors and products to incorporate the proprietary,
      performance improving technologies we are currently developing, we intend our
      products to be WiMAX Forum certified to ensure full interoperability with WiMAX
      certified products and systems being developed by other companies.




The
      success of our WiMAX semiconductor and product business will be reliant on
      market acceptance of WiMAX as a competitive wireless broadband technology and
      on
      our ability to differentiate our WiMAX products from those offered by
      competitors. To help accelerate global market adoption of WiMAX and to showcase
      the competitive strength of our WiMAX mobile broadband and wireless multimedia
      products, we intend to make our significant spectrum holdings available to
      Internet service providers, cable operators, satellite television companies,
      content developers, existing wireless service providers and other companies
      interested in deploying, on individual or joint basis, WiMAX networks
      that utilize our mobile broadband and wireless multimedia
      technologies.




Our
      PacketVideo subsidiary supplies device embedded multimedia software to many
      of
      the largest manufacturers of high-end mobile phones in the world including
      LGE,
      Motorola, Nokia, Sony Ericsson, and Samsung. PacketVideo’s software enables
      a mobile handset to stream, download, and play video and music, receive live
      TV,
      or engage in two way video telephony. PacketVideo’s continued growth will be
      reliant on its ability to continue offering superior software solutions to
      its
      customers and on the continued growth of the global market for high-end mobile
      phones and other converged devices. PacketVideo’s revenues are currently
      generated from royalties associated with the licensing of its software products,
      based on units sold, and by providing its customers with customized software
      development services on a contract basis. During 2006, 75% of PacketVideo’s
      revenues collected were based units shipped by the licensee. We expect this
      percentage to increase over time based on the anticipated growth in the global
      market for devices having multimedia capabilities.




**Change
      in Fiscal Year End**




Effective
      January 1, 2006, we changed our fiscal year end and quarterly reporting periods
      from quarterly calendar periods ending on December 31 to a 52-53 week fiscal
      year ending on the Saturday nearest to December 31 of the current calendar
      year
      or the following calendar year. Normally, each fiscal year consists of 52 weeks,
      but every five or six years the fiscal year consists of 53 weeks. Fiscal year
      2006 is a 52-week year ending on December 30, 2006 and the first 53-week year
      will occur in 2009.




**Fiscal
      Year Ended December 30, 2006 Compared to the Period From Inception (April 13,
      2005) to December 31, 2005**




**Revenues.** Revenues
      for 2006 were $24.3 million compared to $4.1 million for the period from
      inception (April 13, 2005) to December 31, 2005, an increase of $20.2 million.
      The increase in revenue resulted primarily from unit sales growth and market
      penetration of mobile subscriber services by PacketVideo’s customer base, which
      includes wireless operators and device manufacturers, and from higher contract
      revenues from our PacketVideo subsidiary, which resulted from growth in
      technology development contracts, addressing an increasing number of wireless
      devices in which PacketVideo technology is embedded, in addition to the
      inclusion of PacketVideo’s revenues for a full twelve months in 2006.
      Additionally, certain revenues reported by PacketVideo licensees during the
      period from our acquisition in July 2005 to December 31, 2005, were not
      recognizable by us under EITF 01-3, “Accounting in a Business Combination for
      Deferred Revenue of an Acquiree,” as these represented customer revenues that
      were generated prior to our acquisition of PacketVideo.




In
      general, the financial consideration received from wireless carriers and mobile
      phone and wireless device manufacturers is derived from a combination of
      technology development contracts and royalties.




Since
      our
      inception in April 2005, substantially all of our revenues have been generated
      by our PacketVideo subsidiary, which we acquired in July 2005. We believe that
      PacketVideo will continue to account for a substantial portion of our revenues
      until we complete the development and commercialization of our wireless
      broadband products and technologies by the Advanced Technology Group of NextWave
      and the mobile Wi-Fi network solutions of GO Networks, Inc. which
      we acquired in February 2007. Following the development and commercialization
      of
      our wireless broadband products and technologies, we believe that the sale
      or
      licensing of our proprietary chipsets, network components and device
      technologies will become an additional source of recurring revenue.




56




We
      expect
      that future revenues will be affected by, among other things, new product and
      service introductions, competitive conditions, customer marketing budgets for
      introduction of new subscriber products, the rate of expansion of our customer
      base, the build out rate of networks that utilize our WiFi and WiMAX
      technologies, price increases, subscriber device life cycles, demand for
      wireless data services and acquisitions or dispositions of businesses or product
      lines.




**Operating
      Expenses.**




*(in
                millions)*
            
            **Year
                Ended December 30, 2006**
            
            **Inception**
              **(April
                13, 2005) to December 31, 2005**
            
            **Increase
                (Decrease)**Cost
                of revenues
            
            $
            12.1
            
            $
            4.6
            
            $
            7.5Engineering,
                research and development
            
            
            52.8
            
            
            17.3
            
            
            35.5General
                and administrative
            
            
            51.5
            
            
            15.3
            
            
            36.2Sales
                and marketing
            
            
            10.0
            
            
            3.0
            
            
            7.0Business
                realignment costs
            
            
            (7.1
            )
            
            13.0
            
            
            (20.1
            )Purchased
                in-process research and development
            
            
            3.5
            
            
            6.6
            
            
            (3.1
            )Total
                operating expenses
            
            $
            122.8
            
            $
            59.8
            
            $
            63.0




**Cost
      of Revenues.** The
      increase in cost of revenues for our PacketVideo subsidiary during 2006 includes
      higher amortization expenses of $0.9 million for the purchase of intangible
      assets related to the acquisition of PacketVideo, resulting from a full year
      of
      amortization in 2006. Cost of revenues includes direct engineering labor
      expenses, allocated overhead costs, costs associated with offshore contract
      labor costs, other direct costs related to the execution of technology
      development contracts as well as amortization of acquired software and other
      costs.




We
      believe that cost of revenues as a percentage of revenue for future periods
      will
      be affected by, among other things, the integration of acquired businesses
      in
      addition to sales volumes, competitive conditions, royalty payments by us on
      licensed technologies, changes in average selling prices, and our ability to
      make productivity improvements.




**Engineering,
      Research and Development.** Costs
      for the internal and external development of our wireless broadband products
      and
      technologies, including our chipsets, for 2006 were $41.4 million compared
      to
      $15.0 million for the period from inception (April 13, 2005) to December 31,
      2005, an increase of $26.4 million which is due primarily to the expansion
      of
      the engineering development organization and inclusion of expenses for a full
      twelve months in 2006.




Costs
      for
      the internal and external development of our PacketVideo software for 2006
      were
      $11.4 million compared to $2.3 million for the period from inception (April
      13,
      2005) to December 31, 2005, an increase of $9.1 million, which is due primarily
      to the inclusion of expenses for a full twelve months in 2006, additional 2006
      acquisitions by PacketVideo and an increase in headcount in the engineering
      development organization.




Share-based
      compensation for 2006 totaled $2.1 million.




Largely
      due to our planned increase in engineering personnel to further our WiMAX
      related and other technology development initiatives, we expect our engineering,
      research and development expenses to increase over the next twelve
      months.




**General
      and Administrative.** NextWave
      and PacketVideo accounted for $33.2 million and $3.0 million of the increase
      in
      2006, respectively. These increases, which are affected by the inclusion of
      expenses for a full twelve months in 2006, are comprised primarily of increased
      spending for compensation and associated costs of general and administrative
      personnel of $24.6 million, professional fees of $6.2 million, losses incurred
      by our strategic investment of $1.3 million, amortization of intangible assets
      of $1.4 million, and share-based compensation of $2.7 million.




57




We
      expect
      that general and administrative costs will increase in absolute terms as we
      hire
      additional personnel and incur costs related to the anticipated growth of our
      business and our global operations. We also expect an increase in our general
      and administrative expenses to occur as a result of our efforts to develop
      and
      protect intellectual property rights, including expenses associated with the
      identification and documentation of intellectual property, the preparation
      and
      prosecution of patent applications and as we incur additional expenses
      associated with being a publicly traded company, including expenses associated
      with comprehensively analyzing, documenting and testing our system of internal
      controls and maintaining our disclosure controls and procedures as a result
      of
      the regulatory requirements of the Sarbanes-Oxley Act.




**Sales
      and Marketing.** PacketVideo and NextWave accounted for $4.9 million and $2.1 million of the
      increase in 2006, respectively. The increases are comprised primarily of
      increased spending for compensation and associated costs for marketing and
      sales
      personnel of $6.1 million, share-based compensation of $0.3 million, expenses
      associated with marketing and promotional activities of $0.3 million, and
      amortization expenses related to intangible assets of $0.3 million.




We
      expect
      sales and marketing expenses to increase in absolute terms with the growth
      of
      our business in the upcoming year, primarily from our PacketVideo business
      and
      from our GO Networks business which was acquired in February 2007.
      Additionally, as we achieve full commercial deployment of our wireless broadband
      technologies and products, we will increase sales and marketing expenses both
      in
      absolute terms, and as a percentage of revenue at NextWave Broadband,
      Inc.




**Business
      Realignment Costs.** Business
      realignment costs for the period from inception (April 13, 2005) to December
      31,
      2005 were $13.0 million and include non-cash impairment costs of $5.9 million
      for certain hardware and service costs deemed to have no value in consideration
      of current technology and then-anticipated  test site plans in
      Henderson, Nevada. The impairment loss recognized was equal to the carrying
      value of impaired assets. Additionally, we accrued $7.1 million related to
      minimum purchase obligations that we believed we would not utilize due to the
      then-anticipated technology and market trial plans in Henderson, Nevada. In
      the
      fourth quarter of 2006, we renegotiated this minimum purchase obligation with
      the vendor and reversed the 2005 accrual to reflect the reduction in the
      contractual obligation.




**Purchased
      In-Process Research and Development Costs.** In
      conjunction with our acquisition of CYGNUS in 2006, one of our small
      acquisitions during 2006 and our acquisition of PacketVideo in 2005, we
      purchased in-process research and development projects valued at $1.9 million,
      $1.6 million and $6.6 million, respectively. These amounts were expensed upon
      the respective dates of acquisition because the acquired technology had not
      yet
      reached technological feasibility and had no future alternative
      uses.




**Interest
      Income.** Interest
      income for 2006 was $12.5 million compared to $11.1 million for the period
      from
      inception (April 13, 2005) to December 31, 2005, an increase of $1.4 million,
      and consisted of interest earned during the respective periods on our
      unrestricted and restricted cash and investment balances, which totaled $275.7
      million and $459.2 million at the end of 2006 and 2005,
      respectively.




Interest
      income in the future will be affected by changes in short-term interest rates
      and changes in our cash and investment balances, which may be materially
      impacted by development plans, acquisitions and other financial
      activities.




**Interest
      Expense.** Interest
      expense for 2006 was $20.6 million compared to $1.0 million for the period
      from
      inception (April 13, 2005) to December 31, 2005, an increase of $19.6 million.
      Our issuance of $350.0 million in principal amount of 7% Senior Secured Notes
      in
      July 2006 accounted for $19.2 million of the increase. The remainder of the
      increase of $0.4 million consists primarily of the accretion of discounted
      wireless spectrum license lease liabilities acquired in 2006.




Our
      interest expense will increase during 2007 due to the accrual of interest for
      a
      full year on our 7% Senior Secured Notes, amortization of the discount and
      debt
      issue costs related to our 7% Senior Secured Notes and interest accreted on
      our
      newly acquired spectrum lease liabilities. Interest expense will also increase
      during 2007 from the assumption of a loan in connection with the acquisition
      of
      GO Networks, Inc.




**Provision
      for Income Taxes.** The
      effective income tax rate for 2006 was 0.0%, resulting in no income tax
      provision in 2006 on our pre-tax loss of $106.7 million. The effective tax
      rate
      in 2006 was unfavorably impacted by the recording of $41.3 million of valuation
      allowance on the increase in our U.S. net deferred tax asset balance. The
      effective income tax rate for the period from inception (April 13, 2005) to
      December 31, 2005 was a negative 0.9%, resulting in an income tax provision
      of
      $0.4 million on our pre-tax loss of $45.7 million. The effective tax rate in
      2005 was unfavorably impacted by the recording of $17.1 million of valuation
      allowance on the net increase in our U.S. deferred tax asset balance.




58




**Minority
      Interest.** Minority
      interest for 2006 was $1.6 million compared to $0.1 million for the period
      from
      inception (April 13, 2005) to December 31, 2005. Minority interest in 2006
      primarily represents our minority partner’s share of losses in our Inquam
      Broadband joint venture formed in January 2006. Minority interest in 2005
      represents minority shareholders’ share of losses in our CYGNUS
      subsidiary.




**Liquidity
      And Capital Resources**




Since
      our
      inception (April 13, 2005), we have incurred operating losses and negative
      cash
      flows and had an accumulated deficit of $151.0 million at December 30, 2006,
      consisting of $122.9 million and $28.1 million from NextWave and PacketVideo,
      respectively. We have funded our operations, strategic investments and wireless
      license acquisitions primarily with the $550.0 million in cash received in
      our
      initial capitalization in April 2005 and the net proceeds from the issuance
      of
      our 7% Senior Secured Notes in July 2006 of $295.0 million. Our total cash,
      cash
      equivalents and short-term investments at December 30, 2006 were $200.7 million.




The
      following table presents working capital, cash, cash equivalents and
      investments:




*(in
                millions)*
            
            **December
                30, 2006**
            
            **Decrease
                for the Year Ended December 30, 2006**
            
            **December
                31, 2005**
            
            **Increase
                (Decrease) for the Period from Inception (April 13, 2005) to December
                31,
                2005**
            
            **Inception**
              **(April
                13, 2005)**Working
                capital
            
            $
            166.3
            
            $
            (290.1
            )
            $
            456.4
            
            $
            (96.3
            )
            $
            552.7Cash
                and cash equivalents
            
            
            33.0
            
            
            (60.6
            )
            
            93.6
            
            
            (461.5
            )
            
            555.1Short-term
                investments
            
            
            167.7
            
            
            (197.9
            )
            
            365.6
            
            
            365.6
            
            
            —Total
                cash, cash equivalents and investments
            
            $
            200.7
            
            $
            (258.5
            )
            $
            459.2
            
            $
            (95.9
            )
            $
            555.1






The
      following table presents our utilization of cash, cash equivalents and
      short-term investments for the year ended December 30, 2006 compared to the
      period from inception (April 13, 2005) to December 31, 2005:




*(in
                millions)*
            
            **Year
                Ended December 30, 2006**
            
            **Inception**
              **(April
                13, 2005)**
              **to**
              **December
                31, 2005**Beginning
                cash, cash equivalents and investments
            
            $
            459.2
            
            $
            555.1Cash
                paid for acquisition of wireless spectrum licenses and subsequent
                lease
                obligations
            
            
            (402.7
            )
            
            (18.8
            )Cash
                paid for business combinations, net of cash acquired
            
            
            (8.4
            )
            
            (51.1
            )Proceeds
                from long-term obligations, net of costs to issue
            
            
            295.0
            
            
            —Net
                payments to and changes in restricted investment account securing
                long-term obligations
            
            
            (75.0
            )
            
            —Cash
                used by operating activities
            
            
            (56.3
            )
            
            (18.7
            )Cash
                paid for property and equipment
            
            
            (13.0
            )
            
            (7.3
            )Other,
                net
            
            
            1.9
            
            
            —Ending
                cash, cash equivalents and investments
            
            $
            200.7
            
            $
            459.2




59




The
      decrease in cash, cash equivalents and investments of $258.5 million during
      2006, primarily reflects $402.7 million paid for wireless spectrum licenses
      and
      subsequent lease obligations, our payment of $75.0 million into a restricted
      cash account to secure our 7% Senior Secured Notes, cash used in operating
      activities of $56.3 million, consisting of $57.8 million used by NextWave and
      our joint venture which was partially offset by $1.5 million in cash provided
      by
      PacketVideo operations, $13.0 million in cash paid for capital expenditures
      and
      $8.4 million paid for business combinations. These uses of cash were partially
      offset by the net proceeds from the issuance of our 7% Senior Secured Notes
      of
      $295.0 million.




The
      decrease in cash, cash equivalents and investments of $95.9 million during
      the
      period from inception (April 13, 2005) to December 31, 2005, primarily reflects
      $51.1 million in cash paid for our acquisition of PacketVideo and our joint
      venture investment, $18.8 million paid for wireless spectrum licenses and
      subsequent lease obligations, cash used in operating activities of $18.7
      million, consisting of $15.2 million used by NextWave and our joint venture
      and
      $3.5 million used by PacketVideo, and $7.3 million in cash paid for capital
      expenditures.




In
      August
      2006, we acquired WCS Wireless Inc., which holds spectrum covering the central,
      western, and northeastern United States, for $160.5 million. The $160.5 million
      purchase price for WCS was funded with a portion of the proceeds from our
      recently completed 7% Senior Secured Notes financing.




In
      July
      2006, our subsidiary NextWave Wireless LLC issued 7% Senior Secured
      Notes due 2010 (the “Notes”) in the aggregate principal amount of $350.0
      million. The Notes were issued at a fifteen percent (15%) original issue
      discount, resulting in gross proceeds of $297.5 million. We will be obligated
      to
      pay the Notes at their full face value of $350.0 million on July 17, 2010 and
      interest of 7% per annum, or $24.5 million, is payable semiannually in January
      and July each year commencing January 15, 2007. The original issue discount
      will
      provide the note purchasers with a yield that is in addition to the coupon
      rate
      upon repayment of the Notes. After the payment of transaction related expenses,
      we received net proceeds of $295.0 million available for the sole purpose of
      financing spectrum acquisitions and leases. The net proceeds from the Notes
      were
      used to acquire WCS Wireless, Inc. for $160.5 million, 154 spectrum licenses
      from the FCC aggregating $115.6 million and two new Educational Broadband
      Service (“EBS”) leases for $22.1 million.




The
      purchasers of the Notes were investment funds and other institutional investors,
      including affiliates of Avenue Capital Group, among others. Robert T. Symington,
      a member of our Board of Directors, is a Portfolio Manager at Avenue Capital
      Group. Neither Mr. Symington nor Avenue Capital Group or its affiliates received
      any compensation in connection with the financing. The Notes are guaranteed
      by
      certain of our subsidiaries, including NextWave Broadband and PacketVideo.
      In
      addition, NextWave Wireless Inc. guaranteed the Notes following the corporate
      conversion merger in November 2006. No scheduled principal payments will be
      due
      on the Notes before the maturity date of July 15, 2010. The Notes are
      pre-payable at our option at specified premiums to the principal amount that
      will decline over the term of the Notes from 105% to 100%, plus a make-whole
      amount applicable until July 17, 2008. The obligations under the Notes are
      secured by first priority liens on certain pledged equity interests, FCC
      licenses, spectrum leases, securities accounts, proceeds from any of the
      foregoing as well as proceeds derived in any way from foreign licenses. We
      are
      required to maintain $75.0 million in cash or cash equivalents from funds other
      than the proceeds of the Notes in a restricted collateral account at all times
      while the Notes remain outstanding. The purchase agreement contains
      representations and warranties, affirmative and negative covenants (including,
      without limitation, (i) our obligation to maintain in full force and effect
      our
      FCC licenses and spectrum leases, (ii) our obligation to use the note proceeds
      for the acquisition of spectrum, not to exceed $0.25 per MHz-POP, (iii) our
      obligation not to become liable to any additional indebtedness, subject to
      certain exceptions including the ability to enter into spectrum leases or to
      incur $25.0 million of acquired company debt or purchase money indebtedness
      and
      (iv) our obligation not to make restricted payments to holders of subordinated
      debt or equity securities, including cash dividends, that are customary in
      similar types of transactions. The purchase agreement also contains customary
      events of default and additional events of default including, the termination,
      cancellation or rescission of any FCC license owned or leased by us and
      necessary for our operation of a wireless communications system. At December
      30,
      2006, we were not in compliance with the types of investments required to be
      held in our restricted collateral account. This default was subsequently cured
      by us on our own accord and no waiver was required.




In
      connection with the Notes financing described above, we entered into a warrant
      agreement with the purchasers of the Notes whereby on November 13, 2006, we
      issued 4.1 million warrants to purchase shares of common stock. The warrants
      have an exercise price of $0.01 per share and are exercisable at any time from
      the date of issuance until July 15, 2009.




60




On
      March
      28, 2007, we issued and sold 355,000 shares of our Series A Senior Convertible
      Preferred Stock (the “Series A Preferred Stock”) at a price of $1,000 per share.
      The Series A Preferred Stock was issued in a private placement transaction
      exempt from the registration requirements of the Securities Act of 1933. We
      received $351 million in net
      proceeds from the sale of the Series A Preferred Stock. The net proceeds will
      be
      used to fund operations, accelerate the development of new wireless
      technologies, expand the company’s business, and enable future strategic
      acquisitions. The purchasers of the Series A Preferred Stock include, in
      addition to other investment funds and institutional investors, Navation, Inc.,
      an entity owned by Allen Salmasi, our Chairman and Chief Executive Officer,
      Manchester Financial Group, L.P., an entity indirectly owned and controlled
      by
      Douglas F. Manchester, a member of our Board of Directors, and affiliates of
      Avenue Capital, of which a member of our Board of Directors, Robert Symington,
      is a portfolio manager.




The
      Series A Preferred Stock has an initial liquidation preference of $1,000 per
      share, subject to increase for accrued dividends as described below. The
      liquidation preference would become payable upon redemption, as described below,
      upon a liquidation or dissolution of our company, or upon deemed liquidation
      events including a change in control, merger or sale of all or substantially
      all
      our assets, in which case the Series A Preferred Stock will be entitled to
      receive an amount per share equal to the greater of 120% of the liquidation
      preference or the amount that would have been received if such share had
      converted into common stock in connection with such deemed liquidation
      event.




Each
      share of Series A Preferred Stock is convertible into a number of shares of
      our
      common stock equal to the liquidation preference then in effect divided by
      $11.05 and is convertible at any time at the option of the holder, or at our
      election after the 18-month anniversary of issuance, subject to the trading
      price of our common stock reaching $22.10 for a specified period of time,
      subject to adjustment. We will not be entitled to convert the Series A Preferred
      Stock at our election unless a shelf registration statement covering the shares
      of common stock issued upon conversion is then effective or the shares are
      no
      longer considered restricted securities under the Securities Act.




The
      Series A Preferred Stock is entitled to receive quarterly dividends on the
      liquidation preference at a rate of 7.5% per annum. Until the fourth anniversary
      of issuance, we can elect whether to declare dividends in cash or to not declare
      and pay dividends, in which case the per share dividend amount will be added
      to
      the liquidation preference. From and after the fourth anniversary of issuance,
      we must declare dividends in cash each quarter, subject to applicable law.
      The
      dividend rate is subject to adjustment to 10% per annum if we default in our
      dividend payment obligations, or certain registration obligations. The dividend
      rate is subject to adjustment to 15% per annum if we fail to comply with the
      protective covenants of the Series A Preferred Stock described below and to
      18%
      per annum if we fail to convert or redeem the Series A Preferred Stock when
      required to do so.




Pursuant
      to the terms of the Series A Preferred Stock, so long as at least 25% of the
      issued shares of Series A Preferred Stock remain outstanding, and until the
      date
      on which we elect to redeem all shares of Series A Preferred Stock in connection
      with an asset sale, as described below, we must receive the approval of the
      holders of shares representing at least 75% of the Series A Preferred Stock
      then
      outstanding to (i) incur indebtedness in excess of $500 million, subject to
      certain adjustments and exceptions, (ii) create any capital stock that is senior
      to or on a parity with the Series A Preferred Stock, or (iii) consummate asset
      sales involving the receipt of gross proceeds of, or the disposition of assets
      worth, $500 million or more. In addition, so long as at least 25% of the issued
      shares of Series A Preferred Stock remain outstanding, we may not distribute
      rights or warrants to all holders of our common stock entitling them to purchase
      shares of our common stock, or consummate any sale of our common stock, for
      an
      amount less than the fair market value on the date of issuance, with certain
      exceptions. With respect to other matters requiring stockholder approval, the
      shares of Series A Preferred Stock will be entitled to vote as one class with
      the common stock on an as-converted basis.




We
      will
      be required to redeem all outstanding shares of Series A Preferred Stock, if
      any, on March 28, 2017, at a price equal to the liquidation preference plus
      unpaid dividends. If we elect to convert the Series A Preferred Stock after
      our
      common stock price has reached the qualifying threshold, we must redeem the
      shares of holders of Series A Preferred Stock who elect not to convert into
      common stock at a price equal to 130% of the liquidation preference. However,
      we
      are not required to redeem more than 50% of the shares of Series A Preferred
      Stock subject to any particular conversion notice. In the event that we fail
      to
      obtain approval of the holders of Series A Preferred Stock to an asset sale
      transaction, we must either not consummate such asset sale or elect to redeem
      all shares of Series A Preferred Stock at a redemption price equal to 120%
      of
      the liquidation preference. Holders will be entitled to opt-out of such a
      redemption.




In
      2005,
      in order to consolidate current operations from two leased facilities into
      one
      building, we entered into a purchase agreement to acquire a build-to-suit office
      building in Henderson, Nevada for $8.2 million, which included an allowance
      for
      the construction of related interior improvements. In addition, we planned
      to
      install furniture, fixtures and equipment costing approximately $3.6 million.
      This purchase agreement was amended in March 2007, reducing the cost of the
      building to $6.9 million (not including interior improvements) as the result
      of
      construction delay penalties. We expect to pay the $6.9 million in the second
      quarter of 2007. A separate agreement was entered into in March 2007 for the
      construction of the interior improvements in the amount of $2.6 million and
      further agreements will be entered into in the second quarter of 2007 for the
      acquisition of furniture, fixtures and equipment for approximately $1.9 million.
      Construction is expected to be completed during the second quarter of 2007,
      at
      which time we expect to occupy the facility and pay the remaining costs
      associated with occupancy.




61




In
      September 2006, we were declared the winning bidder for 154 AWS spectrum
      licenses for an aggregate bid of $115.6 million. As of December 30, 2006, under
      a note agreement, we had loaned Inquam Broadband, our joint venture, $22.7
      million to participate in a wireless spectrum auction in Germany. In December
      2006, Inquam Broadband was declared the winning bidder for 28 wireless licenses
      in Germany for an aggregate cost of $23.1 million. In February 2007, we loaned
      Inquam Broadband an additional $5.8 million to participate in a spectrum auction
      in Switzerland and are currently awaiting notification from the Federal Office
      of Communication in Switzerland, which will determine if the license will be
      granted to Inquam Broadband for the minimum concession.




We
      also
      have the option to acquire a 51% interest in a subsidiary of Inquam-BMR GP,
      the
      holder of the remaining 49% interest in our Inquam Broadband joint venture,
      for
      9.7 million Euros ($12.7 million at December 30, 2006). The option price is
      subject to adjustment for changes in liabilities or subsequent funding provided
      to the subsidiary by Inquam Broadband. The option expires on the later of April
      18, 2007 and the 12th business day following the announcement of the outcome
      of
      the Swiss auction described below. At any time prior to the expiration of the
      option in April 2007, Inquam-BMR GP has the right to purchase an interest
      between 25% and 49% in the note agreement, at which time both Inquam-BMR GP’s
      and our note interests would simultaneously convert into ordinary shares of
      Inquam Broadband on a pro rata basis. In lieu of this right and at any time
      prior to the expiration of the option, Inquam-BMR GP has the right to require
      us
      to purchase all Inquam Broadband shares then held by Inquam-BMR GP for 1,000
      Euros per share ($2.1 million at December 30, 2006). In the event that
      Inquam-BMR GP does not exercise either of these rights prior to the expiration
      of our option on the date referenced above, we must elect to either convert
      the
      note into shares of Inquam Broadband equal to the note amount divided by 1,000
      or purchase all Inquam Broadband shares then held by Inquam-BMR GP for 1,000
      Euros per share ($2.1 million at December 30, 2006).




In
      December 2006, our PacketVideo subsidiary signed a share purchase agreement
      to
      acquire all of the shares of SDC Secure Digital Container AG for cash of $19.0
      million. The acquisition was completed in January 2007.




In
      February 2007, NextWave acquired all of the outstanding common stock and
      warrants of GO Networks, Inc., for $13.2 million plus the assumption of $6.7
      million in debt, of which $1.3 million was paid at closing. Additional purchase
      consideration of up to $25.7 million may be paid in shares of NextWave common
      stock, subject to the achievement of certain operational milestones in the
      18-month period subsequent to the closing of the acquisition. NextWave also
      adopted the GO Networks Employee Stock Bonus Plan, whereby certain employees
      may
      receive up to an aggregate of $5.0 million in shares of NextWave common stock
      upon the achievement of certain operational milestones in the 18-month period
      subsequent to the closing of the acquisition.




In
      March
      2007, NextWave acquired all of the outstanding shares of common stock of 4253311
      Canada Inc., a Canadian company. The total cost of the acquisition is expected
      to be approximately $26.0 million in cash. The assets of the company are
      comprised almost entirely of wireless spectrum.




As
      of
      December 30, 2006, we had $200.7 million of unrestricted cash, cash equivalents
      and short-term investments, and $75.0 million in restricted investments required
      to be reserved under our Notes financing.




Since
      our
      emergence as a wireless technology company, we have consummated transactions
      to
      acquire licensed spectrum rights, including subsequent lease obligations, for
      amounts totaling $451.9 million. These transactions include our recent
      acquisition of Canadian licenses for $19.5 million paid and approximately $6.5
      million held in escrow the acquisition of German licenses by Inquam
      Broadband for $23.1 million, our acquisitions of 154 AWS spectrum licenses
      totaling $115.6 million, the WCS licenses from Bal-Rivgam, LLC for $56.9
      million, and WCS Wireless Inc., for $160.5 million. The Bal-Rivgam acquisition
      agreement provides that $21.9 million of the proceeds of the purchase would
      be
      deposited into escrow until January 2008 to cover any liabilities stemming
      from
      Bal-Rivgam's ownership of the licenses prior to closing, claims resulting from
      breaches of representations or warranties and certain claims under the spectrum
      licenses.




We
      are
      currently unable to project when our chipsets and network components based
      on
      WiMAX and Wi-Fi technologies will be commercially deployed and generate revenue.
      However, we believe that our current revenues, cash and short-term investments
      and financing activities will be sufficient to fund our operating activities
      at
      least through 2008.




62




·
            We
                plan to fund our wireless broadband technology development
                activities with our unrestricted cash and investments and net proceeds
                from the sale of preferred stock until such point that we begin sales
                of
                our chipsets and network component products and enter into licensing
                arrangements for our wireless broadband technologies. Our wireless
                broadband products and technologies are in the early stages of development
                and will require a substantial investment before they may become
                commercially viable. Our research and development expenses for our
                wireless broadband products and technologies, including our chipsets
                were
                $41.4 million during 2006. Largely due to our planned increase in
                engineering personnel, we expect our wireless broadband technology
                development expenses to increase by approximately 69% during 2007.
                Because
                we are adopting a strategy of licensing our technology and selling
                chipsets to third party equipment manufacturers, we do not anticipate
                that
                the license and sale of our products and technologies will require
                significant additional capital.




·
            Our
                network services business is not expected to require significant
                additional capital expenditures beyond what is necessary to complete
                our
                Henderson, Nevada office building and test site. With the exception
                of
                our test site in Henderson, Nevada, we do not intend to
                build-out wireless networks, but will provide our technologies, services
                and spectrum to service providers who are engaged in these
                activities. In 2007, we expect to expend $4.4 million on the deployment
                of
                our test site in Henderson, Nevada. If that test site is
                successful, we anticipate that we will seek service providers to
                expand the trial network to cover most of the Las Vegas metropolitan
                region.




·
            GO
                Networks, Inc., acquired in February 2007, develops high-performance
                mobile Wi-Fi systems for commercial and municipal service providers.
                GO
                Networks’ Mobile Broadband Wireless system combines xRFTMsmart-antenna technology with a cellular-mesh Wi-FI architecture
                to
                provide commercial and municipal service providers with a cost-effective
                solution to support bandwidth-intensive mobile broadband services
                such as
                video streaming, web browsing, real-time gaming, video telephony and
                other types of multimedia applications.




We
      may
      need to secure significant additional capital in the future to implement changes
      to, or expansions of, our business plan and to become cash flow positive. We
      may
      also require additional cash resources for other future developments, including
      any investments or acquisitions we may pursue, such as investments or
      acquisitions of other business or technologies. If our existing working capital
      resources are insufficient to satisfy our cash requirements, we may seek to
      sell
      debt securities or additional equity securities or to obtain a credit facility.
      Our Notes and our Series A Senior Convertible Preferred Stock prohibit our
      incurrence of additional indebtedness, subject to certain exceptions. The sale
      of equity securities or convertible debt securities could result in additional
      dilution to our stockholders.




The
      incurrence of indebtedness would result in debt service obligations and the
      requirement that we comply with operating and financial covenants that would
      restrict our operations. In addition, there can be no assurance that any
      additional financing will be available on acceptable terms, if at
      all.




**Restatement
      of Previously Reported Interim Financial Statements**




On
      March
      23, 2007, we announced the need to adjust our financial results for the
      first three quarters of 2006 to reflect a correction in our accounting for
      certain revenue contracts and for the incorrect capitalization of certain
      engineering costs in our PacketVideo subsidiary. Specifically, we determined
      that we were incorrectly deferring engineering design, maintenance and
      support and royalty revenues on contracts where post-contract customer support
      (“PCS”) was required and no separate objective evidence of its fair value,
      specific to Packet Video, existed for the PCS. We also determined that we had
      incorrectly deferred certain technology costs prior to achieving technological
      feasibility. The change has been made to defer revenue and related
      costs determined to be related to the PCS portion of the contract and to expense
      previously capitalized engineering costs.




The
      following interim unaudited condensed consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States for interim financial information and with the instructions to
      SEC
      Form 10-Q and Article 10 of SEC Regulation S-X. In our opinion, this information
      has been prepared on a basis consistent with that of our audited consolidated
      financial statement and all necessary material adjustments, consisting of normal
      recurring accruals and adjustments, have been included to present fairly the
      unaudited quarterly and year-to-date financial data. Our quarterly results
      of
      operations for these periods are not necessarily indicative of future results
      of
      operations. They do not include all of the information and footnotes required
      by
      generally accepted accounting principles for complete financial statements.
      Therefore, these condensed consolidated financial statements should be read
      in
      conjunction with our audited consolidated financial statements and notes thereto
      for the year ended December 30, 2006 included in this Annual Report on Form
      10-K.




63




The
      following table presents the impact of the change in revenues and related costs
      on our previously reported consolidated statements of operations for the first
      three quarters of 2006:




**Three
                  Months Ended****April
                  1, 2006**
              
              **July
                  1, 2006**
              
              **September
                  30, 2006***(in
                  thousands)*
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                    Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated****Consolidated
                  Statements of Operations**Revenues
              
              $
              5,673
              
              $
              (1,768
              )
              $
              3,905
              
              $
              8,331
              
              $
              (2,038
              )
              $
              6,293
              
              $
              8,051
              
              $
              (1,381
              )
              $
              6,670Operating
                  expenses:Cost
                  of revenues
              
              
              2,686
              
              
              (879
              )
              
              1,807
              
              
              3,198
              
              
              (560
              )
              
              2,638
              
              
              4,568
              
              
              (1,062
              )
              
              3,506Engineering,
                  research and development
              
              
              10,233
              
              
              856
              
              
              11,089
              
              
              12,601
              
              
              693
              
              
              13,294
              
              
              11,455
              
              
              179
              
              
              11,634General
                  and administrative
              
              
              8,492
              
              
              —
              
              
              8,492
              
              
              12,140
              
              
              —
              
              
              12,140
              
              
              14,896
              
              
              —
              
              
              14,896Sales
                  and marketing
              
              
              1,613
              
              
              —
              
              
              1,613
              
              
              2,539
              
              
              —
              
              
              2,539
              
              
              2,992
              
              
              —
              
              
              2,992Purchased
                  in-process research and development
              
              
              —
              
              
              —
              
              
              —
              
              
              1,648
              
              
              —
              
              
              1,648
              
              
              —
              
              
              —
              
              
              —Total
                  operating expenses
              
              
              23,024
              
              
              (23
              )
              
              23,001
              
              
              32,126
              
              
              133
              
              
              32,259
              
              
              33,911
              
              
              (883
              )
              
              33,028Loss
                  from operations
              
              
              (17,351
              )
              
              (1,745
              )
              
              (19,096
              )
              
              (23,795
              )
              
              (2,171
              )
              
              (25,966
              )
              
              (25,860
              )
              
              (498
              )
              
              (26,358
              )Other
                  income (expense)Interest
                  income
              
              
              3,187
              
              
              —
              
              
              3,187
              
              
              3,197
              
              
              —
              
              
              3,197
              
              
              3,419
              
              
              —
              
              
              3,419Interest
                  expense
              
              
              (308
              )
              
              —
              
              
              (308
              )
              
              (366
              )
              
              —
              
              
              (366
              )
              
              (9,010
              )
              
              —
              
              
              (9,010
              )Other
                  income and expense, net
              
              
              (92
              )
              
              —
              
              
              (92
              )
              
              216
              
              
              —
              
              
              216
              
              
              (26
              )
              
              —
              
              
              (26
              )Total
                  other income (expense), net
              
              
              2,787
              
              
              —
              
              
              2,787
              
              
              3,047
              
              
              —
              
              
              3,047
              
              
              (5,617
              )
              
              —
              
              
              (5,617
              )Loss
                  before provision for income taxes and minority interest
              
              
              (14,564
              )
              
              (1,745
              )
              
              (16,309
              )
              
              (20,748
              )
              
              (2,171
              )
              
              (22,919
              )
              
              (31,477
              )
              
              (498
              )
              
              (31,975
              )Income
                  tax benefit (provision)
              
              
              209
              
              
              —
              
              
              209
              
              
              —
              
              
              —
              
              
              —
              
              
              (93
              )
              
              —
              
              
              (93
              )Minority
                  interest
              
              
              657
              
              
              —
              
              
              657
              
              
              214
              
              
              —
              
              
              214
              
              
              265
              
              
              —
              
              
              265Net
                  loss
              
              $
              (13,698
              )
              $
              (1,745
              )
              $
              (15,443
              )
              $
              (20,534
              )
              $
              (2,171
              )
              $
              (22,705
              )
              $
              (31,305
              )
              $
              (498
              )
              $
              (31,803
              )


The
      following table presents the impact of the change in revenues and related costs
      on our previously-reported consolidated balance sheets for the first three
      interim reporting dates in 2006:


**April
                  1, 2006**
              
              **July
                  1, 2006**
              
              **September
                  30, 2006***(in
                  thousands)*
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated****Consolidated
                  Balance Sheets****ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              99,871
              
              $
              —
              
              $
              99,871
              
              $
              30,643
              
              $
              —
              
              $
              30,643
              
              $
              25,371
              
              $
              —
              
              $
              25,371Short-term
                  investments
              
              
              266,716
              
              
              —
              
              
              266,716
              
              
              309,794
              
              
              —
              
              
              309,794
              
              
              196,801
              
              
              —
              
              
              196,801Accounts
                  receivable, net
              
              
              2,235
              
              
              —
              
              
              2,235
              
              
              5,206
              
              
              —
              
              
              5,206
              
              
              5,728
              
              
              —
              
              
              5,728Deposits
                  for wireless spectrum bids
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              142,866
              
              
              —
              
              
              142,866Deferred
                  contract costs
              
              
              1,456
              
              
              21
              
              
              1,477
              
              
              2,105
              
              
              (110
              )
              
              1,995
              
              
              2,242
              
              
              772
              
              
              3,014Prepaid
                  expenses and other current assets
              
              
              5,745
              
              
              —
              
              
              5,745
              
              
              8,518
              
              
              —
              
              
              8,518
              
              
              7,252
              
              
              —
              
              
              7,252Total
                  current assets
              
              
              376,023
              
              
              21
              
              
              376,044
              
              
              356,266
              
              
              (110
              )
              
              356,156
              
              
              380,260
              
              
              772
              
              
              381,032Restricted
                  cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              76,792
              
              
              —
              
              
              76,792Wireless
                  spectrum licenses, net
              
              
              130,889
              
              
              —
              
              
              130,889
              
              
              130,374
              
              
              —
              
              
              130,374
              
              
              374,137
              
              
              —
              
              
              374,137Goodwill
              
              
              27,001
              
              
              —
              
              
              27,001
              
              
              32,936
              
              
              —
              
              
              32,936
              
              
              32,829
              
              
              —
              
              
              32,829Other
                  intangible assets, net
              
              
              17,449
              
              
              —
              
              
              17,449
              
              
              16,846
              
              
              —
              
              
              16,846
              
              
              16,306
              
              
              —
              
              
              16,306Property
                  and equipment, net
              
              
              15,040
              
              
              —
              
              
              15,040
              
              
              14,632
              
              
              —
              
              
              14,632
              
              
              16,796
              
              
              —
              
              
              16,796Prepaid
                  expenses and other noncurrent assets
              
              
              7,708
              
              
              —
              
              
              7,708
              
              
              6,761
              
              
              —
              
              
              6,761
              
              
              8,279
              
              
              —
              
              
              8,279Total
                  assets
              
              $
              574,110
              
              $
              21
              
              $
              574,131
              
              $
              557,815
              
              $
              (110
              )
              $
              557,705
              
              $
              905,399
              
              $
              772
              
              $
              906,171**LIABILITIES
                  AND MEMBERS’ EQUITY**Current
                  liabilities:Accounts
                  payable
              
              $
              4,488
              
              $
              —
              
              $
              4,488
              
              $
              2,274
              
              $
              —
              
              $
              2,274
              
              $
              2,369
              
              $
              —
              
              $
              2,369Accrued
                  expenses
              
              
              7,058
              
              
              —
              
              
              7,058
              
              
              12,104
              
              
              —
              
              
              12,104
              
              
              19,465
              
              
              —
              
              
              19,465Current
                  portion of long-term obligations
              
              
              2,575
              
              
              —
              
              
              2,575
              
              
              2,822
              
              
              —
              
              
              2,822
              
              
              2,681
              
              
              —
              
              
              2,681Deferred
                  revenue
              
              
              4,021
              
              
              1,766
              
              
              5,787
              
              
              3,100
              
              
              3,806
              
              
              6,906
              
              
              2,867
              
              
              5,186
              
              
              8,053Current
                  tax liability
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              40
              
              
              —
              
              
              40Other
                  current liabilities and deferred credits
              
              
              755
              
              
              —
              
              
              755
              
              
              1,009
              
              
              —
              
              
              1,009
              
              
              961
              
              
              —
              
              
              961Total
                  current liabilities
              
              
              18,897
              
              
              1,766
              
              
              20,663
              
              
              21,309
              
              
              3,806
              
              
              25,115
              
              
              28,383
              
              
              5,186
              
              
              33,569Deferred
                  income tax liabilities
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              67,673
              
              
              —
              
              
              67,673Long-term
                  deferred credits and reserves
              
              
              8,203
              
              
              —
              
              
              8,203
              
              
              8,575
              
              
              —
              
              
              8,575
              
              
              8,243
              
              
              —
              
              
              8,243Long-term
                  obligations
              
              
              15,311
              
              
              —
              
              
              15,311
              
              
              15,661
              
              
              —
              
              
              15,661
              
              
              292,310
              
              
              —
              
              
              292,310Minority
                  interest in subsidiary
              
              
              889
              
              
              —
              
              
              889
              
              
              1,143
              
              
              —
              
              
              1,143
              
              
              884
              
              
              —
              
              
              884Commitments
                  and contingenciesMembers’
                  equity:Membership
                  interests
              
              
              591,452
              
              
              —
              
              
              591,452
              
              
              592,389
              
              
              —
              
              
              592,389
              
              
              619,966
              
              
              —
              
              
              619,966Accumulated
                  other comprehensive loss
              
              
              (992
              )
              
              —
              
              
              (992
              )
              
              (1,078
              )
              
              —
              
              
              (1,078
              )
              
              (571
              )
              
              —
              
              
              (571
              )Accumulated
                  deficit
              
              
              (59,650
              )
              
              (1,745
              )
              
              (61,395
              )
              
              (80,184
              )
              
              (3,916
              )
              
              (84,100
              )
              
              (111,489
              )
              
              (4,414
              )
              
              (115,903
              )Total
                  members’ equity
              
              
              530,810
              
              
              (1,745
              )
              
              529,065
              
              
              511,127
              
              
              (3,916
              )
              
              507,211
              
              
              507,906
              
              
              (4,414
              )
              
              503,492Total
                  liabilities and members’ equity
              
              $
              574,110
              
              $
              21
              
              $
              574,131
              
              $
              557,815
              
              $
              (110
              )
              $
              557,705
              
              $
              905,399
              
              $
              772
              
              $
              906,171




64




**Critical
      Accounting Policies and Estimates**




Our
      discussion and analysis of our results of operations and liquidity and capital
      resources are based on our consolidated financial statements which have been
      prepared in accordance with accounting principles generally accepted in the
      United States. The preparation of these financial statements requires us to
      make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and disclosure of contingent assets and liabilities.
      On
      an ongoing basis, we evaluate our estimates and judgments, including those
      related to revenue recognition, valuation of intangible assets and investments,
      and litigation. We base our estimates on historical and anticipated results
      and
      trends and on various other assumptions that we believe are reasonable under
      the
      circumstances, including assumptions as to future events. These estimates form
      the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources. By their nature,
      estimates are subject to an inherent degree of uncertainty. Actual results
      that
      differ from our estimates could have a significant adverse effect on our
      operating results and financial position. We believe that the following
      significant accounting policies and assumptions may involve a higher degree
      of
      judgment and complexity than others.




***Revenue
      Recognition*** .
      We
      recognize revenue in accordance with the following authoritative literature:
      American Institute of Certified Public Accountants Statement of Position (“SOP”)
      No. 97-2, *Software
      Revenue Recognition;* SOP No. 98-9, *Software
      Revenue Recognition with Respect to Certain Arrangements* ;
      SOP No. 81-1, *Accounting
      for Performance of Construction-Type and Certain Production-Type
      Contracts* ;
      and
      Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force
      (“EITF”) Issue No. 00-21, *Revenue
      Arrangements with Multiple Deliverables.* We
      recognize revenue when there is persuasive evidence of an arrangement, the
      fee
      is fixed or determinable, the product or services have been delivered and
      collectibility is reasonably assured. We derive revenue principally from
      contracts to provide embedded multimedia software products for mobile devices
      and related royalties.





We
      have
      arrangements whereby customers pay one contracted amount for multiple products
      and services and in some cases, involve a combination of products and
      services. Our arrangements generally include a software or technology
      license, non-recurring engineering services, and in most situations post
      contract customer support (“PCS”). To
      date,
      we have not been able to establish vendor specific objective evidence (“VSOE”)
      for any of the elements included in our revenue arrangements. We have been
      unable to establish VSOE for the elements that we sell as part of a
      multiple-element arrangement because the products or services have not yet
      been
      sold separately or a standard price list has not been established. As a result,
      once the software or technology is delivered and the only undelivered element
      is
      services, the entire non-contingent contract value is recognized over the
      remaining service period. Costs directly attributable to providing these
      services are also deferred in deferred contracts costs and amortized over the
      remaining service period of the revenues.




65




When
      we
      provide services under non-recurring engineering
      contracts that are
      considered essential to the functionality of the software products and there
      is
      an undelivered element without VSOE, generally PCS, revenues are deferred until
      the engineering services are complete. Revenues are then recognized from the
      delivery of the software ratably through the end of the support
      period.




Typically,
      we earn royalty revenues on licensed embedded multimedia products sold
      by our licensees. Generally, royalties are paid by licensees on a per unit
      or contingent use basis. The licensees generally report and pay the royalty
      in
      the quarter subsequent to the period of delivery or usage. When royalty
      arrangements also provide for ongoing PCS that does not meet the criteria to
      be
      accrued on delivery of the software, the royalty is recognized ratably from
      the
      date the royalty report is received through the stated remaining term of the
      PCS
      arrangement.




In
      limited situations, we have determined that PCS revenue can be
      recognized upon delivery of the software. In these situations, we
      have determined that PCS is for one year or less, the estimated cost of
      providing PCS during the arrangement is insignificant and unspecified upgrades
      or enhancements offered during PCS arrangements historically have been and
      are
      expected to continue to be minimal and infrequently provided. In these limited
      situations, we have accrued all the estimated costs of providing the
      services, which to date have been insignificant.




Services
      sold separately are generally billed on a time-and- materials basis at
      agreed-upon billing rates, and revenue is generally recognized as the services
      are performed.




Arrangements
      generally do not allow for product returns and we have no history of
      product returns. Accordingly, no allowance for returns has been provided.
      Revenue payable on extended payment terms are recognized in the period the
      payment becomes due. If an arrangement includes specified upgrade rights,
      revenue is deferred until the specified upgrade has been delivered.








***Wireless
      Spectrum Licenses*** .
      Wireless licenses that we purchase from third parties or in spectrum auctions
      held by the FCC are initially recorded at fair value, which is the purchase
      price paid for the license at the time of acquisition plus legal costs incurred
      to acquire the intangible asset. We have determined that our Broadband Radio
      Service (“BRS”) and Wireless Communication Service (“WCS”) wireless spectrum
      licenses meet the definition of indefinite-lived intangible assets under SFAS
      No. 142, “Goodwill and Other Intangible Assets”. The wireless spectrum licenses
      from the FCC may be renewed every ten years for a nominal fee, provided that
      we
      continue to meet the service and geographic coverage provisions required by
      the
      FCC. As of December 30, 2006, indefinite-lived wireless spectrum licenses that
      are not subject to amortization totaled $450.1 million.




Wireless
      licenses for which we have acquired lease rights from third parties or from
      foreign countries where the renewal terms are not yet established are considered
      to have finite lives. The asset and related liability are recorded at the
      present value of future cash flows using our incremental borrowing rate at
      the
      time of acquisition. The wireless license asset is amortized over the
      contractual life of the lease. Such licenses in the United States are the
      Educational Broadband Service (“EBS”) licenses for which we have entered into
      long-term leases. As of December 30, 2006, amortized wireless spectrum licenses,
      net of accumulated amortization, totaled $77.9 million.




In
      cases
      where we acquire the stock of an entity whose assets are comprised almost
      entirely of wireless spectrum, we account for the acquisition of the company
      as
      an acquisition of wireless spectrum assets rather than as an acquisition of
      a
      business based on guidance under EITF 98-3, “Determining Whether a Nonmonetary
      Transaction Involves Receipt of Productive Assets or of a Business”. The value
      assigned to the wireless spectrum generally includes the cash purchase price,
      associated legal and closing costs and deferred tax liabilities. Deferred tax
      liabilities are determined in accordance with EITF 98-11, “Accounting for
      Acquired Temporary Differences in Certain Purchase Transactions That Are Not
      Accounted for as Business Combinations”. During 2006, we acquired such a
      wireless spectrum license for a total cost of $236.4 million, which included
      the
      cash purchase price of $160.5 million, legal costs of $0.1 million, and $75.8
      million in associated deferred tax liabilities.




***Valuation
      of Intangible Assets and Investments*** .
      In
      accordance with Statement of Financial Accounting Standards No. 142, or SFAS
      No.
      142, “Goodwill and Other Intangible Assets,” we do not amortize goodwill and
      certain spectrum licenses. In lieu of amortization, we are required to perform
      an annual review for impairment, or more frequently if impairment indicators
      arise. Goodwill and intangible assets not subject to amortization are considered
      to be impaired if we determine that the carrying value of the asset exceeds
      its
      fair value.




66




We
      test
      goodwill for impairment annually at a reporting unit level using a two-step
      process. As of December 30, 2006, we had two reporting units as defined by
      SFAS
      142 containing goodwill that required testing for impairment. The first step
      of
      the impairment test involves comparing the fair values of the applicable
      reporting units with their aggregate carrying values, including goodwill. If
      the
      carrying amount of a reporting unit exceeds the reporting unit’s fair value, we
      then perform the second step of the goodwill impairment test to determine the
      amount of the impairment loss. The second step of the goodwill impairment test
      involves comparing the implied fair value of the affected reporting unit’s
      goodwill with the carrying value of that goodwill. If the carrying amount of
      goodwill exceeds the implied fair value of that goodwill, an impairment loss
      is
      recognized in an amount equal to that excess.




For
      the
      goodwill impairment test performed as of October 1, 2006, the discounted cash
      flows used to estimate fair value were based on discrete financial forecasts
      of
      five years for our PacketVideo reporting unit and seven years for our Advanced
      Technology Group reporting unit. These forecasts were developed by management
      for planning purposes. Cash flows beyond these periods were estimated using
      terminal value calculations. The future cash flows were discounted to present
      value using a discount rate of 17.7% and a terminal growth rate of 6% for our
      PacketVideo reporting unit and 8% for our Advanced Technologies Group reporting
      unit. A variance in the discount rate or in management’s forecasts would have a
      significant impact on the estimated fair value of the reporting unit and
      consequently the amount of identified goodwill impairment. We did not recognize
      any goodwill impairment as a result of performing this annual test.




We
      test
      indefinite-lived intangible assets by making a determination of the fair value
      of the intangible asset. If the fair value of the intangible asset is less
      than
      its carrying value, an impairment loss is recognized in an amount equal to
      the
      difference. We also evaluate the remaining useful life of our intangible assets
      that are not subject to amortization on an annual basis to determine whether
      events and circumstances continue to support an indefinite useful life. If
      an
      intangible asset that is not being amortized is subsequently determined to
      have
      a finite useful life, that asset is tested for impairment. After recognition
      of
      the impairment, if any, the asset is amortized prospectively over its estimated
      remaining useful life and accounted for in the same manner as other intangible
      assets that are subject to amortization. At October 1, 2006, our intangible
      assets not subject to amortization were evaluated for impairment and we
      determined that no impairment existed at that date.




In
      accordance with SFAS No. 144, “Accounting for Impairment or Disposal of
      Long-Lived Assets,” intangible assets subject to amortization were evaluated for
      impairment as of December 30, 2006. SFAS 144 requires the recognition of an
      impairment loss when the carrying amount of an intangible asset is not
      recoverable and its carrying amount exceeds its fair value. We determined that
      no impairment existed at our testing date.




Any
      required impairment loss would be recorded as a reduction in the carrying value
      of the related asset and charged to results of operations.




The
      determination of the fair value of certain acquired assets and liabilities
      is
      subjective in nature and often involves the use of significant estimates and
      assumptions. Determining the fair values and useful lives of intangible assets
      requires the exercise of judgment. Upon initially recording intangible assets
      that are acquired through business combinations we may use an independent
      valuation firm to assist us in determining the appropriate values for those
      assets. While there are a number of different generally accepted valuation
      methods to estimate the value of intangible assets acquired, we primarily use
      the undiscounted cash flows expected to result from the use of the assets.
      This
      method requires significant management judgment to forecast the future operating
      results used in the analysis. In addition, other significant estimates are
      required such as residual growth rates and discount factors. The estimates
      we
      use are consistent with the plans and estimates that we use to manage our
      business and are based on available historical information and industry
      averages.




The
      recorded value of goodwill and other intangible assets may become impaired
      in
      the future. As of December 30, 2006, our goodwill and intangible assets, net
      of
      accumulated amortization, were $32.2 million and $546.6 million, respectively.
      If the estimates of fair values or their related assumptions change in the
      future, we may be required to record an impairment charge on all or a portion
      of
      our goodwill and intangible assets. We also cannot predict the occurrence of
      future impairment-triggering events nor the impact such events might have on
      our
      reported asset values. Future events could cause us to conclude that impairment
      indicators exist and that goodwill or other intangible assets associated with
      our acquired businesses is impaired. Any resulting impairment loss could have
      an
      adverse impact on our results of operations.




67




***Share-Based
      Payments and Pro forma Share-Based Compensation*** .
      We
      grant options and warrants to purchase common stock to our employees, directors,
      members of our Technical Developments Steering Committee and other strategic
      advisors under our stock option plans and advisory agreements. The benefits
      provided by these plans and agreements qualify as share-based compensation
      under
      the provisions of Statement of Financial Accounting Standards No. 123 (revised
      2004), “Share-Based Payment” (“SFAS 123(R)”), which requires us to recognize
      compensation expense based on the estimated fair values of the share-based
      awards to employees determined on the date of grant for all awards granted,
      modified or cancelled as of January 1, 2006 (the effective date).




Prior
      to
      the effective date, we did not recognize any compensation cost in our statements
      of operations for share-based awards granted to employees with an option price
      equal to the fair market value of respective common stock on the date of grant
      as we accounted for them under the recognition and measurement principles of
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”), and its related interpretations and adopted the
      disclosure only provisions of Statement of Financial Accounting Standards No.
      123, “Stock-Based Compensation” (“SFAS 123”). We provided pro forma net loss in
      accordance with the disclosure only provision of SFAS 123. The share-based
      compensation expense used in these pro forma amounts is based on the minimum
      value method option-pricing model. This method required us to use several
      assumptions to estimate the fair value including the expected life of the
      option.




We
      adopted the provisions of SFAS 123(R) using the prospective transition method,
      whereby we will continue to account for nonvested equity awards to employees
      outstanding at December 31, 2005 using APB 25, and apply SFAS 123(R) to all
      awards granted or modified after that date. In accordance with the transition
      rules of SFAS 123(R), we no longer provide the pro forma disclosures in reports
      issued for periods ending after December 31, 2005 as SFAS 123(R) precludes
      companies that use the minimum value method for pro forma disclosure from
      continuing to provide those pro forma disclosures for outstanding awards
      accounted for under the intrinsic value method of APB 25.




Our
      determination of the fair value of share-based payment awards utilizing the
      Black-Scholes model is affected by a number of assumptions such as expected
      volatility, expected term, risk-free interest rates and expected dividends.
      We
      base expected volatility on an average of our peer companies’ expected
      volatilities due to lack of trading history of our common stock and our
      subsidiaries’ shares. As none of the plans have sufficient history for
      estimating the term from grant date to full exercise of the option, we consider
      expected terms applied, in part, by our peer companies to determine the expected
      life of each grant. We base the risk-free interest rates on the implied yield
      available on U.S. Treasury constant maturities in effect at the time of the
      grant with remaining terms equivalent to the respective expected terms of the
      share-based award. Our expected dividend yield of zero is based on the fact
      that
      we have never paid cash dividends and have no present intention to pay cash
      dividends on our common stock. We have assumed an annualized forfeiture rate
      of
      10% for our options based on a combined review of industry and employee turnover
      data, as well as an analytical review performed of historical pre-vesting
      forfeitures occurring over the previous year. Under the true-up provisions
      of
      SFAS 123(R), we record additional expense if the actual forfeiture rate is
      lower
      than estimated, and will record a recovery of prior expense if the actual
      forfeiture rate is higher than estimated.




We
      believe it is important for investors to be aware of the high degree of
      subjectivity involved when using option pricing models to estimate share-based
      compensation under SFAS 123(R). Option-pricing models were developed for use
      in
      estimating the value of traded options that have no vesting or hedging
      restrictions, are fully transferable and do not cause dilution. Because our
      share-based payments have characteristics significantly different from those
      of
      freely traded options, and because changes in the subjective input assumptions
      can materially affect our estimates of fair values, in our opinion, existing
      valuation models, including the Black-Scholes, may not provide reliable measures
      of the fair values of our share-based compensation. Consequently, there is
      a
      risk that our estimates of the fair values of our share-based compensation
      awards on the grant dates may bear little resemblance to the actual values
      realized upon the exercise, expiration, early termination or forfeiture of
      those
      share-based payments in the future. Certain share-based payments, such as
      employee stock options, may expire worthless or otherwise result in zero
      intrinsic value as compared to the fair values originally estimated on the
      grant
      date and reported in our financial statements. Alternatively, value may be
      realized from these instruments that is significantly in excess of the fair
      values originally estimated on the grant date and reported in our financial
      statements. There is currently no market-based mechanism or other practical
      application to verify the reliability and accuracy of the estimates stemming
      from these valuation models, nor is there a means to compare and adjust the
      estimates to actual values. Although the fair value of employee share-based
      awards is determined in accordance with SFAS 123(R) and the Securities and
      Exchange Commission’s Staff Accounting Bulletin No. 107 (SAB 107) using an
      option-pricing model, that value may not be indicative of the fair value
      observed in a willing buyer and willing seller market transaction. If factors
      change and we employ different assumptions in the application of SFAS 123(R)
      in
      future periods than those currently applied under SFAS 123(R), the compensation
      expense that we record in the future under SFAS 123(R) may differ significantly
      from what we have reported during 2006.




68




The
      CYGNUS Communications, Inc. 2004 Stock Option Plan., as amended in February
      2006, provided for the conversion of each CYGNUS option, whether issued or
      unissued, into the right to purchase .05097 shares of NextWave common stock
      upon
      the Corporate Conversion Merger. The conversion was accounted for as a
      modification resulting from an exchange of options in a business combination
      under SFAS 123(R) in which the fair value of the vested portion of the new
      options at the date of conversion, valued at $0.9 million, was added to the
      purchase price of CYGNUS and the fair value of the unvested portion of the
      new
      options, valued at $1.2 million, is amortized over the remaining vesting
      periods.




For
      2006,
      we recognized $2.8 million in compensation expense for employee stock options.
      At December 30, 2006, there was $8.6 million remaining in unrecognized
      compensation cost related to employee stock options which is expected to be
      recognized over a weighted average period of 3.4 years.




On
      January 3, 2007, concurrent with the listing of NextWave’s common stock on the
      Nasdaq Global Market, an option to purchase one share of common stock of
      NextWave for $6.00 per share was issued for every six options outstanding under
      our PacketVideo 2005 Equity Incentive Plan. The exchange will be accounted
      for
      as a modification under SFAS 123(R) during fiscal year 2007 and is expected
      to
      result in additional compensation expense.




***Litigation*** .
      We are
      currently involved in certain legal proceedings. Although there can be no
      assurance that unfavorable outcomes in any of these matters would not have
      a
      material adverse effect on our operating results, liquidity or financial
      position, we believe the claims are without merit and intend to vigorously
      defend the actions. We estimate the range of liability related to pending
      litigation where the amount and range of loss can be estimated. We record our
      best estimate of a loss when the loss is considered probable. Where a liability
      is probable and there is a range of estimated loss with no best estimate in
      the
      range, we record the minimum estimated liability related to the claim. As
      additional information becomes available, we assess the potential liability
      related to our pending litigation and revise our estimates. We have not recorded
      any accrual for contingent liability associated with our legal proceedings
      based
      on our belief that a liability, while possible, is not probable. Further, any
      possible range of loss cannot be estimated at this time. Revisions in our
      estimates of the potential liability could materially impact our results of
      operations.




**Recent
      Accounting Pronouncements**




In
      June
      2006, the FASB Issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”), effective
      for our fiscal year beginning December 31, 2006. FIN 48 clarifies the accounting
      for uncertainty in income taxes recognized in financial statements in accordance
      with FASB Statement No. 109, “Accounting for Income Taxes,” and prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. We believe that adoption of this interpretation will not have a
      material impact on our financial statements.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS 157”). This Standard defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles and expands disclosures about fair value measurements.
      SFAS 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years.
      NextWave’s management is in the process of evaluating the impact of the adoption
      of SFAS No. 157.




**Contractual
      Obligations**




The
      following table summarizes our contractual obligations at December 30, 2006,
      and
      significant contractual obligations entered into subsequent to that date, and
      the effect such obligations are expected to have on our liquidity and cash
      flows
      in future periods.




**Payments
                Due by Period***(in
                thousands)*
            
            **Total**
            
            **2007**
            
            **Years**
              **2008-2009**
            
            **Years**
              **2010-2011**
            
            **Years**
              **2012
                and Thereafter**Long-term
                obligations
            
            $
            380,178
            
            $
            3,066
            
            $
            5,744
            
            $
            354,929
            
            $
            16,439Services
                and other purchase agreements
            
            
            12,929
            
            
            7,535
            
            
            5,394
            
            
            —
            
            
            —Pending
                business acquisition
            
            
            19,000
            
            
            19,000
            
            
            —
            
            
            —
            
            
            —Capital
                expenditures(1)
            
            
            8,200
            
            
            8,200
            
            
            —
            
            
            —
            
            
            —Operating
                leases
            
            
            21,362
            
            
            7,037
            
            
            10,879
            
            
            3,084
            
            
            362Total
            
            $
            441,669
            
            $
            44,838
            
            $
            22,017
            
            $
            358,013
            
            $
            16,801Significant
                contractual obligations entered into subsequent to December 30,
                2006:Mandatorily
                redeemable senior convertible preferred stock(2)
            
            $
            355,000
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            355,000Business
                acquisition(3)
            
            
            19,863
            
            
            16,283
            
            
            3,580
            
            
            —
            
            
            —Pending
                wireless spectrum acquisition(4)
            
            
            26,015
            
            
            26,015
            
            
            —
            
            
            —
            
            
            —Pending
                wireless spectrum leases(5)
            
            
            23,399
            
            
            7,523
            
            
            1,597
            
            
            1,633
            
            
            12,646Operating
                facility lease(6)
            
            
            17,286
            
            
            1,238
            
            
            6,706
            
            
            7,967
            
            
            1,375




69


(1)
            Our
                purchase agreement for an office building in Henderson, Nevada was
                amended
                in March 2007, reducing the cost of the building to $6.9 million.
                The $6.9
                million was paid in March 2007. A separate agreement was entered
                into in
                March 2007 related to the interior construction costs of the building
                for
                $2.6 million. An additional estimated $1.9 million for non-contracted
                fixtures and furniture will also be required to ready the building
                for
                occupancy. Construction is expected to be completed during the second
                quarter of 2007, at which time we expect to occupy the facility and
                pay
                the remaining costs associated with
                occupancy.


(2)
            On
                March 28, 2007, we issued and sold 355,000 shares of our Series A
                Senior
                Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of
                $1,000 per share. We received $351 million in net proceeds from
                the sale of the Series A Preferred Stock.  (3)
            In
                February 2007, we acquired all of the outstanding common stock and
                warrants of GO Networks, Inc., for $13.2 million plus the assumption
                of
                $6.7 million in debt, of which $1.3 million was paid at closing.
                Additional purchase consideration of up to $25.7 million may be paid
                in
                shares of NextWave common stock, subject to the achievement of certain
                operational milestones in the 18-month period subsequent to the closing
                of
                the acquisition. We also adopted the GO Networks Employee Stock Bonus
                Plan, whereby a select group of employees may receive up to an aggregate
                of $5.0 million in shares of NextWave common stock upon the achievement
                of
                certain operational milestones in the 18-month period subsequent
                to the
                closing of the acquisition.  (4)
            In
                March 2007, we acquired all of the outstanding shares of common stock
                of
                4253311 Canada Inc., a Canadian company. The total cost of the acquisition
                is expected to be approximately $26.0 million in cash. The assets
                of the
                company are comprised almost entirely of wireless spectrum.  (5)
            During
                the first three months of 2007, we entered into three separate wireless
                spectrum leases. Approval of one of the license transfer applications
                has
                been received from the FCC and one is pending. The third application
                is
                pending with the Swiss Confederated Communications
                Commission.  (6)
            In
                March 2007, we signed a lease agreement for office facilities that
                expires
                in 2012. The lease requires a $2.5 million letter of credit, which
                is
                gradually reduced until termination of the lease in
                2012.


70




**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




***Interest
      Rate Risk***




At
      December 30, 2006, our investment portfolios included unrestricted and
      restricted investment securities with fair values of $200.7 million and $75.0
      million, respectively. These securities are subject to interest rate risk and
      will decline in value if interest rates increase. Interest income earned on
      our
      investments is affected by changes in the general level of U.S. interest rates.
      These income streams are generally not hedged.




Due
      to
      the relatively short duration of our investment portfolio, an immediate ten
      percent change in interest rates (e.g. 3.00% to 3.30%) would have no material
      impact on our financial condition or results of operations.




***Foreign
      Currency Risk***




We
      conduct our business through subsidiaries in Europe, Asia-Pacific and North
      America. Substantially all of our sales to customers located in foreign
      countries are denominated in U.S. dollars, minimizing foreign currency risks
      related to those transactions. Our foreign subsidiaries use the U.S. dollar
      as
      their functional currency. Accordingly, monetary assets and liabilities are
      translated into U.S. dollars at the exchange rate in effect at the balance
      sheet
      date. Revenues, expenses, gains and losses associated with monetary assets
      and
      liabilities are translated at the rates of exchange that approximate the rates
      in effect at the transaction date. Non-monetary assets and liabilities and
      related elements of revenues, expenses, gains and losses are translated at
      historical rates. Resulting exchange gains or losses of these foreign investees
      are recognized in the consolidated statements of operations. Changes in currency
      exchange rates have affected, and will continue to affect our operating costs
      and net income.




71




**ITEM
      8. FINANCIAL STATEMENTS AND EXHIBITS**




Index
      to
      Consolidated Financial Statements and Financial Statement Schedule


**Page****Consolidated
                Financial Statements**Report
                of Ernst & Young LLP, Independent Registered Public Accounting
                Firm
            
            [
                ]Consolidated
                Balance Sheets as of December 30, 2006 and December 31,
                2005
            
            [
                ]Consolidated
                Statements of Operations for the Year Ended December 30, 2006 and
                for the
                Period from Inception (April 13, 2005) to December 31,
                2005
            
            [
                ]Consolidated
                Statement of Stockholders’/Members’ Equity for the Year Ended December 30,
                2006 and for the Period from Inception (April 13, 2005) to December
                31,
                2005
            
            [
                ]Consolidated
                Statements of Cash Flows for the Year Ended December 30, 2006 and
                for the
                Period from Inception (April 13, 2005) to December 31,
                2005
            
            [
                ]Notes
                to Consolidated Financial Statements
            
            [
                ]Schedule
                II - Valuation and Qualifying Accounts
            
            [
                ]







Financial
      Statement Schedules: Financial statements schedules other than those appearing
      on page [ ] are omitted
      as they are not applicable, are not required, or the information is included
      in
      the Consolidated Financial Statements or the Notes to Consolidated Financial
      Statements.




72





**Report
      of Ernst & Young LLP, Independent Registered Public Accounting
      Firm**




The
      Board
      of Directors and Stockholders




NextWave
      Wireless Inc.




We
      have
      audited the accompanying consolidated balance sheets of NextWave Wireless Inc.
      as of December 30, 2006 and December 31, 2005, and the related consolidated
      statements of operations, equity and cash flows for the year ended December
      30,
      2006 and for the period from April 13, 2005 (date of inception) through December
      31, 2005. Our audits also included the financial statement schedule listed
      in
      the Index at Item 15(a). These financial statements and schedule are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements and schedule based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. We were not engaged to perform
      an
      audit of the Company’s internal control over financial reporting. Our audit
      included consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      Company's internal control over financial reporting. Accordingly, we express
      no
      such opinion. An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principles used and significant estimates made by management,
      and
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of NextWave Wireless
      Inc.
      at December 30, 2006 and December 31, 2005, and the consolidated results of
      its
      operations and its cash flows for the year ended December 30, 2006 and for
      the
      period from April 13, 2005 (date of inception) through December 31, 2005, in
      conformity with U.S. generally accepted accounting principles. Also, in our
      opinion, the related financial statement schedule, when considered in relation
      to the basic financial statements taken as a whole, present fairly in all
      material respects the information set forth therein.





As
      discussed in Note 1 to the consolidated financial statements, effective January
      1, 2006, the Company changed its method of accounting for share-based payments
      in accordance with Statement of Financial Accounting Standards No. 123(R), *Share-Based
      Payment* .





/s/
      ERNST
& YOUNG LLP


San
      Diego, California


March
      26,
      2007,


except
      for Note 14, as to which the date is


March
      29,
      2007




73




NEXTWAVE
      WIRELESS INC.


**CONSOLIDATED
      BALANCE SHEETS**


**(in
      thousands, except par value data)**


**December
                30,**
              **2006**
            
            **December
                31,**
              **2005****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            32,980
            
            $
            93,649Short-term
                investments
            
            
            167,705
            
            
            365,582Accounts
                receivable, net of allowance for doubtful accounts of $321 and $391,
                respectively
            
            
            5,056
            
            
            3,712Deferred
                contract costs
            
            
            2,397
            
            
            898Prepaid
                expenses and other current assets
            
            
            7,837
            
            
            8,677Total
                current assets
            
            
            215,975
            
            
            472,518Restricted
                cash
            
            
            75,000
            
            
            —Wireless
                spectrum licenses, net
            
            
            527,998
            
            
            45,467Goodwill
            
            
            32,184
            
            
            24,782Other
                intangible assets, net
            
            
            18,570
            
            
            18,100Property
                and equipment, net
            
            
            17,529
            
            
            11,092Other
                noncurrent assets
            
            
            9,823
            
            
            7,815Total
                assets
            
            $
            897,079
            
            $
            579,774**LIABILITIES
                AND STOCKHOLDERS’/MEMBERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            1,630
            
            $
            3,406Accrued
                expenses
            
            
            33,537
            
            
            5,152Current
                portion of long-term obligations
            
            
            3,065
            
            
            2,200Deferred
                revenue
            
            
            10,253
            
            
            4,103Current
                tax liability
            
            
            80
            
            
            417Other
                current liabilities and deferred credits
            
            
            1,160
            
            
            822Total
                current liabilities
            
            
            49,725
            
            
            16,100Deferred
                income tax liabilities
            
            
            75,774
            
            
            —Long-term
                deferred credits and reserves
            
            
            3,324
            
            
            8,306Long-term
                obligations, net of current portion
            
            
            298,030
            
            
            14,934Total
                liabilities
            
            
            426,853
            
            
            39,340Minority
                interest in subsidiary
            
            
            1,048
            
            
            1,070Commitments
                and contingenciesStockholders’/Members’
                equity:Preferred
                stock, $0.001 par value; 25,000 shares authorized; no shares issued
                or
                outstanding
            
            
            —
            
            
            —Common
                stock, $0.001 par value; 400,000 shares authorized; 83,716 and 83,715
                issued and outstanding, respectively, at December 30, 2006
            
            
            84
            
            
            —Membership
                interests; 488,672 interests issued and outstanding as of December
                31,
                2005
            
            
            —
            
            
            589,354Additional
                paid-in-capital
            
            
            620,430
            
            
            —Common
                stock in treasury, at cost, 1 share at December 30, 2006
            
            
            (7
            )
            
            —Accumulated
                other comprehensive loss
            
            
            (357
            )
            
            (832
            )Accumulated
                deficit
            
            
            (150,972
            )
            
            (49,158
            )Total
                stockholders’/members’ equity
            
            
            469,178
            
            
            539,364Total
                liabilities and stockholders’/members’ equity
            
            $
            897,079
            
            $
            579,774





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




74




**NEXTWAVE
      WIRELESS INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(in
      thousands, except per share data)**







**Year
                Ended December 30, 2006**
            
            **Inception**
              **(April
                13, 2005) to December 31, 2005**Revenues
            
            $
            24,284
            
            $
            4,144Operating
                expenses:Cost
                of revenues
            
            
            12,054
            
            
            4,573Engineering,
                research and development
            
            
            52,810
            
            
            17,349General
                and administrative
            
            
            51,537
            
            
            15,318Sales
                and marketing
            
            
            9,992
            
            
            2,960Business
                realignment costs (credits)
            
            
            (7,121
            )
            
            13,031Purchased
                in-process research and development
            
            
            3,538
            
            
            6,600Total
                operating expenses
            
            
            122,810
            
            
            59,831Loss
                from operations
            
            
            (98,526
            )
            
            (55,687
            )Other
                income (expense)Interest
                income
            
            
            12,533
            
            
            11,051Interest
                expense
            
            
            (20,647
            )
            
            (1,006
            )Other
                income and expense, net
            
            
            (23
            )
            
            (20
            )Total
                other income (expense), net
            
            
            (8,137
            )
            
            10,025Loss
                before provision for income taxes and minority interest
            
            
            (106,663
            )
            
            (45,662
            )Income
                tax benefit (provision)
            
            
            35
            
            
            (417
            )Minority
                interest
            
            
            1,608
            
            
            127Net
                loss
            
            $
            (105,020
            )
            $
            (45,952
            )Net
                loss per common share - basic and diluted
            
            $
            (1.28
            )
            
            N/AWeighted
                average shares used in per share calculation
            
            
            81,841
            
            
            N/ASee
                Note 1 for pro forma net loss per common share
                information.




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




75


**NEXTWAVE
      WIRELESS INC.**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’/MEMBERS’ EQUITY**


**(in
      thousands)**


**Common
                      Stock**
                  
                  
                  **Membership
                      Interests**
                  
                  
                  **Additional**
                    **Paid-In**
                  
                  
                  **Treasury
                      Stock**
                  
                  
                  **Accumulated
                      Other**
                    **Compre-hensive**
                  
                  
                  **Accumulated**
                  
                  
                  **Total
                      Stockholders’/**
                    **Members’**
                  
                  
                  **Compre-**
                    **hensive****Shares**
                  
                  
                  **Amount**
                  
                  
                  **Units**
                  
                  
                  **Amount**
                  
                  
                  **Capital**
                  
                  
                  **Shares**
                  
                  
                  **Amount**
                  
                  
                  **Loss**
                  
                  
                  **Deficit**
                  
                  
                  **Equity**
                  
                  
                  **Loss**Capital
                      contributions upon inception (April 13, 2005)
                  
                  
                  —
                  
                  $
                  —
                  
                  
                  488,672
                  
                  $
                  588,279
                  
                  $
                  —
                  
                  
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  588,279Accumulated
                      deficit of variable interest entity contributed upon inception
                      (April 13,
                      2005)
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (3,206
                  )
                  
                  (3,206
                  )Share-based
                      compensation for non-employee advisory services
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,075
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,075Unrealized
                      net losses on investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (832
                  )
                  
                  —
                  
                  
                  (832
                  )
                  $
                  (832
                  )Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (45,952
                  )
                  
                  (45,952
                  )
                  
                  (45,952
                  )**Balance
                      at December 31, 2005**
                  
                  
                  —
                  
                  
                  —
                  
                  
                  488,672
                  
                  
                  589,354
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (832
                  )
                  
                  (49,158
                  )
                  
                  539,364
                  
                  $
                  (46,784
                  )Units
                      issued and stock options exchanged in a business
                      acquisition
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,558
                  
                  
                  1,558
                  
                  
                  904
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  2,462Shares/units
                      issued for stock/unit options and warrants exercised, net of
                      repurchases
                  
                  
                  1,504
                  
                  
                  2
                  
                  
                  1,382
                  
                  
                  1,382
                  
                  
                  13
                  
                  
                  (1
                  )
                  
                  (7
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  1,390Sale
                      of restricted units
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,000
                  
                  
                  1,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,000Share-based
                      compensation expense
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,969
                  
                  
                  1,187
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  5,156Distributions
                      to members
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (3,481
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (3,481
                  )Accumulated
                      deficit of variable interest entity eliminated upon acquisition
                      by
                      NextWave
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,206
                  
                  
                  3,206Fair
                      value of warrants issued in connection with the issuance of
                      7% Senior
                      Secured Notes
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  24,626
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  24,626Exchange
                      membership interests for common shares in conjunction with
                      the Corporate
                      Conversion
                  
                  
                  82,212
                  
                  
                  82
                  
                  
                  (492,612
                  )
                  
                  (618,408
                  )
                  
                  618,326
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Unrealized
                      net gains on investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  475
                  
                  
                  —
                  
                  
                  475
                  
                  $
                  475Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (105,020
                  )
                  
                  (105,020
                  )
                  
                  (105,020
                  )**Balance
                      at December 30, 2006**
                  
                  
                  83,716
                  
                  $
                  84
                  
                  
                  —
                  
                  $
                  —
                  
                  $
                  620,430
                  
                  
                  (1
                  )
                  $
                  (7
                  )
                  $
                  (357
                  )
                  $
                  (150,972
                  )
                  $
                  469,178
                  
                  $
                  (104,545
                  )




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




76




**NEXTWAVE
      WIRELESS INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(in
      thousands)**


**Year
                Ended December 30, 2006**
            
            **Inception**
              **(April
                13, 2005) to December 31, 2005****OPERATING
                ACTIVITIES**Net
                loss
            
            $
            (105,020
            )
            $
            (45,952
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            6,081
            
            
            661Amortization
                of intangible assets
            
            
            5,831
            
            
            2,926Non-cash
                share-based compensation
            
            
            5,156
            
            
            1,075Non-cash
                business realignment costs (credits)
            
            
            (7,121
            )
            
            13,031In-process
                research and development
            
            
            3,538
            
            
            6,600Accretion
                of interest expense
            
            
            9,503
            
            
            939Losses
                incurred on strategic investment
            
            
            1,494
            
            
            159Minority
                interest
            
            
            (1,537
            )
            
            —Other
                non-cash adjustments
            
            
            848
            
            
            (614
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (1,513
            )
            
            (406
            )Deferred
                contract costs
            
            
            (1,499
            )
            
            (424
            )Prepaid
                expenses and other current assets
            
            
            (2,463
            )
            
            (3,742
            )Other
                assets
            
            
            (724
            )
            
            205Accounts
                payable and accrued liabilities
            
            
            22,819
            
            
            4,758Deferred
                revenue
            
            
            8,599
            
            
            1,760Other
                current liabilities and deferred credits
            
            
            (329
            )
            
            350Net
                cash used in operating activities
            
            
            (56,337
            )
            
            (18,674
            )**INVESTING
                ACTIVITIES**Proceeds
                from maturities of available-for-sale securities
            
            
            457,985
            
            
            1,137,962Proceeds
                from the sale of available-for-sale securities
            
            
            1,091,844
            
            
            —Purchases
                of available-for-sale securities
            
            
            (1,351,477
            )
            
            (1,503,544
            )Payments
                for wireless spectrum licenses
            
            
            (400,337
            )
            
            (18,780
            )Cash
                paid for business combination, net of cash acquired
            
            
            (8,446
            )
            
            (46,621
            )Payment
                for investment in software development company
            
            
            —
            
            
            (4,500
            )Purchase
                of property and equipment
            
            
            (13,036
            )
            
            (7,278
            )Other,
                net
            
            
            (1,909
            )
            
            —Net
                cash used in investing activities
            
            
            (225,376
            )
            
            (442,761
            )**FINANCING
                ACTIVITIES**Proceeds
                from long-term obligations, net of costs to issue
            
            
            295,018
            
            
            —Payments
                on long-term obligations
            
            
            (2,502
            )
            
            (15
            )Payment
                to restricted cash account securing long-term obligations
            
            
            (75,000
            )
            
            —Proceeds
                from the sale of equity interests, net of repurchases
            
            
            2,390
            
            
            —Proceeds
                from investment by joint venture partner
            
            
            2,585
            
            
            —Cash
                distributions paid to members
            
            
            (1,447
            )
            
            —Net
                cash provided by (used in) financing activities
            
            
            221,044
            
            
            (15
            )Net
                decrease in cash and cash equivalents
            
            
            (60,669
            )
            
            (461,450
            )Cash
                and cash equivalents, beginning of period
            
            
            93,649
            
            
            555,099Cash
                and cash equivalents, end of period
            
            $
            32,980
            
            $
            93,649





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




77





**NEXTWAVE
      WIRELESS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.
      NextWave, Summary of Significant Accounting Policies and Significant
      Accounts**




NextWave
      Wireless Inc. (together with its subsidiaries, “NextWave”), the successor to
      NextWave Wireless LLC, is an early-stage wireless technology company engaged
      in
      the development of next-generation mobile broadband and wireless multimedia
      products, technologies and services. NextWave is developing proprietary chipsets
      and related network and device products based on the IEEE 802.16e WiMAX
      standard. A key design objective of its products and technologies is to improve
      the ability of mobile WiMAX to cost effectively handle the large volume of
      network traffic that it believes Voice Over Internet Protocol (“VoIP”)
      telephony, high speed web-surfing and next-generation wireless multimedia
      applications such as high resolution mobile TV, high fidelity streaming audio
      and interactive real-time gaming will generate. NextWave intends to sell and/or
      license its WiMAX certified products and technologies to network infrastructure
      and device manufacturers and network operators worldwide. To stimulate demand
      for products, NextWave plans to partner with service providers to build and
      operate shared mobile WiMAX networks that operate on its licensed spectrum
      and
      utilize network and device equipment which incorporate its products and
      technologies. In addition, through its PacketVideo subsidiary, NextWave is
      a
      global provider of embedded multimedia software for mobile phones. NextWave
      believes that its global deployments of mobile broadband networks and subscriber
      solutions, combined with its wireless multimedia software products and its
      spectrum assets, will offer wireless service providers, cable operators,
      multimedia content distributors, applications service providers and Internet
      service providers a platform to provide advanced wireless broadband services
      to
      their customers.




***Corporate
      Conversion Merger***




In
      order
      to convert NextWave Wireless LLC with and into a corporate form, the Board
      of
      Managers and a majority in interest of the holders of NextWave Wireless LLC
      membership units approved the merger of NextWave Wireless LLC with a wholly
      owned subsidiary of a newly formed Delaware corporation, NextWave Wireless
      Inc.
      (“Corporate Conversion Merger”). On November 13, 2006, the Corporate Conversion
      Merger was completed and NextWave Wireless LLC became a wholly-owned subsidiary
      of NextWave Wireless Inc. Under the terms of the merger agreement, NextWave
      Wireless Inc. issued shares of its common stock to holders of NextWave Wireless
      LLC’s membership units in exchange for all of the outstanding membership units
      of NextWave Wireless LLC, with NextWave Wireless LLC unitholders receiving
      one
      share of NextWave Wireless Inc. common stock for every six membership units
      of
      NextWave Wireless LLC that they held. Additionally, the terms of the CYGNUS
      2004
      Stock Option Plan, a plan administered by NextWave’s wholly-owned subsidiary,
      CYGNUS Communications, Inc. (“CYGNUS”), which was amended in February 2006,
      provided for the conversion of each CYGNUS option into .05097 options to
      purchase shares of NextWave common stock at the time of the conversion.
      Following the Corporate Conversion Merger, NextWave Wireless LLC’s obligation to
      file periodic reports under the Securities Exchange Act of 1934 was suspended,
      and NextWave Wireless Inc. became the successor to NextWave Wireless LLC for
      Securities and Exchange Commission (“SEC”) reporting purposes.




All
      references to per unit amounts in the notes to the consolidated financial
      statements regarding per unit and stock option information have been restated
      to
      their equivalent shares based on the conversion of the membership units of
      NextWave Wireless LLC into shares of common stock of NextWave Wireless Inc
      and
      the conversion of stock options of CYGNUS into stock options for shares of
      common stock of NextWave Wireless Inc.




***Inception
      of NextWave Wireless LLC***




NextWave
      Wireless Inc. (“Old NextWave Wireless”) was formed in 1996 as a wholly-owned
      operating subsidiary of NextWave Telecom, Inc. (“NTI”), which sought to develop
      a nationwide CDMA-based personal communication services (“PCS”) network. In
      1998, Old NextWave Wireless, together with NTI and its other subsidiaries (the
      “NextWave Telecom group”), filed for protection under Chapter 11 of the United
      States Bankruptcy Code. In December 2004, Old NextWave Wireless was converted
      from a corporation to a limited liability company named NextWave Wireless LLC.
      On March 1, 2005, the Bankruptcy Court confirmed the plan of reorganization
      of
      the NextWave Telecom group. The cornerstone of the plan was the sale of NTI
      and
      its subsidiaries, excluding Old NextWave Wireless, to Verizon Wireless for
      approximately $3.0 billion. With the proceeds of the Verizon sale, as well
      as
      the proceeds of prior PCS spectrum license sales to Cingular Wireless, Verizon
      Wireless and MetroPCS, all creditors of the NextWave Telecom group were paid
      in
      full and the NTI equity holders received an aggregate cash distribution of
      approximately $2.6 billion. In addition, the plan provided for the
      capitalization and distribution to the NTI equity holders of NextWave Wireless
      LLC, a new wireless technology company. Pursuant to the plan, on April 13,
      2005,
      the NextWave Telecom group abandoned substantially all of its PCS assets other
      than the spectrum licenses and all remaining non-PCS assets and liabilities
      were
      contributed to Old NextWave Wireless. Immediately thereafter limited liability
      company interests (“LLC Interests”) in NextWave Wireless LLC were distributed to
      the NTI equity holders and NextWave Wireless LLC was capitalized with $550.0
      million in cash. Through this process, Old NextWave Wireless was reconstituted
      as a company with a new capitalization and a new wireless technology business
      plan. The significant underlying assets contributed to NextWave Wireless LLC
      included NTI’s residual cash referred to above, the common stock of NextWave
      Broadband Inc., the convertible Series A Preferred Stock and notes receivable
      from CYGNUS, and wireless spectrum licenses from the Federal Communications
      Commission (“FCC”) useful to NextWave or its new wireless technology business.
      Pursuant to the plan, the NTI shareholders received undivided interests in
      the
      underlying assets of NextWave Wireless LLC as part of their consideration for
      the redemption of their NTI shares, which was followed by the deemed
      contribution of these undivided interests to NextWave Wireless LLC in return
      for
      unit membership interests.




78




The
      assets and liabilities contributed to NextWave on April 13, 2005, were recorded
      at their carryover basis, which NextWave believes approximated fair value,
      at
      that date and include the assets and liabilities of CYGNUS at their respective
      book values, including cash of $5.1 million, which were consolidated in
      accordance with Financial Accounting Standards Board Interpretation No. 46
      (Revised) (“FIN 46(R)”). A summary of the consolidated assets and liabilities
      contributed to NextWave on April 13, 2005 is as follows:




*(in
                thousands)*Cash
            
            $
            555,099Prepaid
                expenses and other current assets
            
            
            1,240Property
                and equipment, net
            
            
            9,706Wireless
                spectrum licenses
            
            
            33,597Goodwill
            
            
            4,619Deposits
                and other noncurrent assets
            
            
            369Lease
                obligations for wireless spectrum licenses
            
            
            (16,107
            )Accrued
                lease liability
            
            
            (1,260
            )Accrued
                expenses and other current liabilities
            
            
            (1,120
            )Minority
                interest in variable interest entity
            
            
            (1,070
            )Accumulated
                deficit of variable interest entity
            
            
            3,206Total
                membership interests
            
            $
            588,279







***Principles
      of Consolidation and Strategic Investments***




NextWave’s
      consolidated financial statements include the assets, liabilities and operating
      results of its wholly-owned and majority-owned subsidiaries as of December
      30,
      2006 and December 31, 2005. NextWave’s operating results through January 2006
      also include those of CYGNUS, of which NextWave was the primary beneficiary
      until February 2006, when NextWave acquired all of the remaining ownership
      interests of the entity and it became a wholly-owned subsidiary. Minority
      interest principally represents minority shareholders’ proportionate share of
      the net equity in NextWave’s consolidated subsidiary, Inquam Broadband Holding,
      Inc. (“Inquam Broadband”). All significant intercompany accounts and
      transactions have been eliminated in consolidation.




Prior
      to
      CYGNUS becoming a wholly-owned subsidiary of NextWave in January 2006, NextWave
      had determined that it was the primary beneficiary of CYGNUS and its
      subsidiaries under FIN 46(R) due to its convertible preferred stock ownership
      rights, notes receivable with conversion rights, contribution of capital and
      debt in relation to total capital and debt, and representation on the board
      of
      directors. Assets and liabilities of CYGNUS, including loans from NextWave,
      totaled $11.2 million and $18.7 million, respectively, at December 31, 2005.
      NextWave’s investment, including loans, in CYGNUS totaled $19.9 million at
      December 31, 2005.




The
      equity method of accounting is used for NextWave’s October 2005 investment in
      preferred stock of Hughes Systique, an early stage software development services
      company. NextWave’s share
      in
      the income or loss is determined by applying the equity method of accounting
      using the “hypothetical-liquidation-at-book-value” method. Under the
      hypothetical-liquidation-at-book-value method, the investor’s share of earnings
      or losses is determined based on changes in the investor’s claim in the book
      value of the investee. Additionally, the carrying value of investments accounted
      for using the equity method of accounting is adjusted downward to reflect any
      other-than-temporary declines in value. Losses
      of
      $1.5 million and $0.2 million are included in general and administrative
      expenses in the consolidated statements of operations for the year ended
      December 30, 2006 and during the period from inception (April 13, 2005) to
      December 31, 2005, respectively, and represents NextWave’s share of losses in
      the early stage company since its investment in October 2005. The carrying
      value
      of this investment at December 30, 2006, totaled $2.8 million, which is reported
      in other noncurrent assets in the consolidated balance sheet, represents
      NextWave’s maximum remaining exposure to loss.




79




***Change
      in Fiscal Year End***




Effective
      January 1, 2006, NextWave changed its fiscal year end and quarterly reporting
      periods from quarterly calendar periods ending on December 31, to a 52-53 week
      fiscal year ending on the Saturday nearest to December 31 of the current
      calendar year or the following calendar year. Normally, each fiscal year
      consists of 52 weeks, but every five or six years the fiscal year consists
      of 53
      weeks. Fiscal year 2006 is a 52-week year ending on December 30, 2006 and the
      first 53-week year will occur in 2009.




***Use
      of Estimates***




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




***Revenues,
      Cost of Revenues and Deferred Contract Costs***




NextWave
      recognizes revenue in accordance with the following authoritative literature:
      American Institute of Certified Public Accountants Statement of Position (“SOP”)
      No. 97-2, *Software
      Revenue Recognition;* SOP No. 98-9, *Software
      Revenue Recognition with Respect to Certain Arrangements* ;
      SOP No. 81-1, *Accounting
      for Performance of Construction-Type and Certain Production-Type
      Contracts* ; Securities
      and Exchange Commission (“SEC”) Staff Accounting Bulletin
      No. 104, *Revenue Recognition*  and
      Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force
      (“EITF”) Issue No. 00-21, *Revenue
      Arrangements with Multiple Deliverables.* NextWave
      recognizes revenue when there is persuasive evidence of an arrangement, the
      fee
      is fixed or determinable, the product or services have been delivered and
      collectibility is reasonably assured. NextWave derives revenue principally
      from
      contracts to provide embedded multimedia software products for mobile devices
      and related royalties.





NextWave
      has arrangements whereby customers pay one contracted amount for multiple
      products and services and in some cases, involve a combination of products
      and
      services. Nextwave’s arrangements generally include a software or technology
      license, non-recurring engineering services, and in most situations post
      contract customer support (“PCS”). To
      date,
      NextWave has not been able to establish vendor specific objective evidence
      (“VSOE”) for any of the elements included in its revenue arrangements. NextWave
      has been unable to establish VSOE for the elements that it sells as part of
      a
      multiple-element arrangement because the products or services have not yet
      been
      sold separately or a standard price list has not been established. As a result,
      once the software or technology is delivered and the only undelivered element
      is
      services, the entire non-contingent contract value is recognized over the
      remaining service period. Costs directly attributable to providing the services
      are also deferred in deferred contracts costs and are amortized over the
      remaining service period of the revenues.




When
      NextWave provides services under non-recurring engineering
      contracts that are
      considered essential to the functionality of the software products and there
      is
      an undelivered element without VSOE, generally PCS, revenues are deferred until
      the engineering services are complete. Revenues are then recognized from the
      delivery of the software ratably through the end of the support
      period.




Typically,
      NextWave earns royalty revenues on licensed embedded multimedia products sold
      by
      its licensees. Generally, royalties are paid by licensees on a per unit or
      contingent use basis. The licensees generally report and pay the royalty in
      the
      quarter subsequent to the period of delivery or usage. When royalty arrangements
      also provide for ongoing PCS that does not meet the criteria to be accrued
      on
      delivery of the software, the royalty is recognized ratably from the date the
      royalty report is received through the stated remaining term of the PCS
      arrangement.




In
      limited situations, NextWave has determined that PCS revenue can be recognized
      upon delivery of the software. In these situations, NextWave has determined
      that
      PCS is for one year or less, the estimated cost of providing PCS during the
      arrangement is insignificant and unspecified upgrades or enhancements offered
      during PCS arrangements historically have been and are expected to continue
      to
      be minimal and infrequently provided. In these limited situations, NextWave
      has
      accrued all the estimated costs of providing the services, which to date have
      been insignificant.




Services
      sold separately are generally billed on a time-and- materials basis at
      agreed-upon billing rates, and revenue is generally recognized as the services
      are performed. We believe that inflation has not had a material effect on our
      results of operations.




Arrangements
      generally do not allow for product returns and NextWave has no history of
      product returns. Accordingly, no allowance for returns has been provided.
      Revenue payable on extended payment terms are recognized in the period the
      payment becomes due. If an arrangement includes specified upgrade rights,
      revenue is deferred until the specified upgrade has been delivered.




80




***Engineering,
      Research and Development***




Engineering,
      research and development costs are expensed as incurred, except for burdened
      direct costs associated with deferred revenue from contract engineering services
      performed by NextWave.




NextWave
      accounts for research and development costs in accordance with several
      accounting pronouncements, including SFAS No. 2, Accounting for Research and
      Development Costs, and SFAS No. 86, Accounting for the Costs of Computer
      Software to be Sold, Leased, or Otherwise Marketed. SFAS No. 86 specifies that
      costs incurred internally in researching and developing a software product
      should be charged to expense until technological feasibility has been
      established for the product. Once technological feasibility is established,
      all
      software costs should be capitalized until the product is available for general
      release to customers. Judgment is required in determining when technological
      feasibility of a product is established. NextWave has determined that
      technological feasibility is reached when a working model of the software is
      completed and has been confirmed by testing, which is generally shortly before
      the products are available for general release to customers. Through December
      30, 2006, costs incurred after technological feasibility is established are
      not
      material, and accordingly, NextWave has expensed all research and development
      costs when incurred.




***Business
      Realignment Costs***




Business
      realignment costs for the period from inception (April 13, 2005) to December
      31,
      2005 were $13.0 million and include non-cash impairment costs of $5.9 million
      for certain hardware and service costs deemed to have no value in consideration
      of current technology and marketing trial plans in Henderson, Nevada. The
      impairment loss recognized was equal to the carrying value of impaired assets.
      Additionally, upon emergence, NextWave assumed certain future purchasing
      obligations regarding the procurement of network services, up to a contract
      value of $30.0 million, which had a termination liability equal to $9.0 million,
      less 30% of the contract value utilized subsequent to emergence and prior to
      termination. In October 2005, upon completion of a business review of its
      planned market trial plans in Henderson, Nevada and other markets, NextWave
      determined that it could not reasonably foresee meeting its minimum purchase
      obligations under this agreement. Therefore, an accruable event was deemed
      to
      have occurred and a $7.1 million impairment loss was recognized in October
      2005.
      In the fourth quarter of 2006, this reserve was reversed as a result of a
      contract renegotiation reducing the contract value to $10.0 million and
      extending the term of the agreement to 2016. NextWave is presently contracting
      certain network services with this vendor and believes it now will fulfill
      its
      obligation under the terms of the amended contract.




***Income
      Taxes***




Income
      taxes are determined in accordance with SFAS 109, Accounting for Income Taxes.
      Deferred tax assets and liabilities are recognized for future tax consequences
      attributable to differences between the financial statement carrying amounts
      and
      the corresponding tax carrying amounts of assets and liabilities. Deferred
      tax
      assets are also recognized for tax loss and tax credit carryforwards. A
      valuation allowance is recorded to reduce deferred tax assets when it is more
      likely than not that a tax benefit will not be realized based on available
      evidence weighted toward evidence that is objectively verifiable. Deferred
      taxes
      are not provided on the undistributed earnings of subsidiaries as such amounts
      are considered to be permanently invested. In accordance with SFAS 142, deferred
      tax liabilities arising on assets with an indefinite life are not netted against
      deferred tax assets when establishing a valuation allowance. Future realization
      of the tax benefit of an existing deductible temporary difference or
      carryforward ultimately depends on the existence of sufficient taxable income
      of
      the appropriate character (for example, ordinary income or capital gain) within
      the carryforward period available under the tax law.




***Comprehensive
      Loss***




Accumulated
      other comprehensive loss includes unrealized gains and loses that are excluded
      from the consolidated statements of operations and are reported as a separate
      component in stockholders’/members’ equity. These unrealized gains and losses
      represent those on marketable securities that are classified as
      available-for-sale.




***Net
      Loss Per Common Share, Pro Forma Net Loss and Pro Forma Net Loss Per Common
      Share Information***




Basic
      net
      loss per share information is computed by dividing net loss for the year ended
      December 30, 2006 by the weighted average number of membership units outstanding
      prior to the Corporate Conversion Merger, on a converted basis as if the
      Corporate Conversion Merger occurred on January 1, 2006, combined with the
      weighted average number of shares of common stock outstanding after the
      Corporate Conversion Merger. The pro forma basic per share information for
      the
      period from inception (April 13, 2005) to December 31, 2005 is computed by
      dividing net loss by the weighted average number of shares of common stock
      outstanding during the period as if the Corporate Conversion Merger occurred
      at
      the beginning of the period. Diluted earnings per share assumes that outstanding
      common shares were increased by shares issuable upon exercise of those stock
      options and warrants for which market price exceeds the exercise price, less
      shares which could have been purchased by NextWave with the related proceeds,
      unless anti-dilutive. Contingently issuable stock, such as restricted stock,
      is
      also included in the diluted loss per share calculations unless anti-dilutive.
      For the periods presented below, diluted loss per share is computed on the
      same
      basis as basic loss per share as the inclusion of potential shares outstanding
      would be anti-dilutive.




81




Due
      to
      NextWave’s historical net losses from inception, which result in a full
      valuation allowance for deferred income tax assets, there is no adjustment
      for
      income taxes on a pro forma basis. The pro forma net loss assumes that the
      Corporate Conversion Merger occurred as of the beginning of the periods
      presented and that NextWave was a corporation from the beginning of those
      periods.




The
      computations for basic and diluted loss per share and pro forma basic and
      diluted loss per share are as follows:




*(in
                thousands, except per share data)*
            
            **Year
                Ended December 30,**
              **2006**
            
            **(Pro
                Forma) Inception**
              **(April
                13, 2005) to December 31,**
              **2005**Net
                loss
            
            $
            (105,020
            )
            $
            (45,952
            )Basic
                and diluted loss per common share
            
            $
            (1.28
            )Pro
                forma basic and diluted loss per common share
            
            
            
            
            $
            (0.56
            )Weighted
                average shares used in per share calculation
            
            
            81,841
            
            
            —Pro
                forma weighted average shares used in per share
                calculation
            
            
            —
            
            
            81,445Weighted
                average securities that could potentially dilute earnings per share
                in the
                future that are not included above as they are
                antidilutive:Outstanding
                stock options
            
            
            9,209
            
            
            —Common
                stock warrants
            
            
            2,313
            
            
            —Restricted
                stock
            
            
            149
            
            
            —Pro
                forma outstanding stock options
            
            
            —
            
            
            5,934Pro
                forma common stock warrants
            
            
            —
            
            
            220







***Cash
      and Cash Equivalents, Short-Term Investments and Restricted
      Cash***




NextWave
      considers all highly liquid investments with original maturities of three months
      or less to be cash equivalents. Cash equivalents at December 30, 2006, consisted
      primarily of money market funds. Cash equivalents at December 31, 2005 consisted
      primarily of money market funds and commercial paper. The carrying amounts
      approximate fair value due to the short maturities of these instruments.




Restricted
      cash at December 30, 2006 represents $75.0 million in a restricted collateral
      account which is required to be maintained at all times while the 7% Senior
      Secured Notes remain outstanding. The cash may be invested in U.S. Treasury
      or
      agency obligations, municipal securities, commercial paper, certificates of
      deposit or bankers’ acceptances, all with maturities less than one year and with
      certain minimum credit ratings. The restricted cash is reported as a non-current
      asset in the Consolidated Balance Sheet at December 30, 2006, as it secures
      NextWave’s 7% Senior Secured Notes, which are non-current.




At
      December 30, 2006 and December 31, 2005, all short-term investments have been
      categorized as available-for-sale and are reported at fair value. Fair value
      is
      determined using quoted market prices. Unrealized gains and losses are reported
      in other comprehensive income in stockholders’/members’ equity, unless the
      decline in value is deemed to be other-than-temporary, in which case the loss
      is
      charged to expense. Realized gains and losses are included in interest income
      in
      the Consolidated Statements of Operations. The cost of securities sold is based
      on the specific identification method and gross realized gains and losses
      related to sales of available-for-sale investments during the year ended
      December 30, 2006 totaled $4,000 and $18,000, respectively. There were no gross
      realized gains or losses for the period from inception (April 13, 2005) to
      December 31, 2005. Gross unrealized gains (losses) are as follows:




82




**Gross
                Unrealized***(in
                thousands)*
            
            **Amortized
                Cost**
            
            **Gains**
            
            **Losses**
            
            **Fair
                Value****December
                30, 2006**Municipal
                securities
            
            $
            177,442
            
            $
            —
            
            $
            (6
            )
            $
            177,436U.S.
                Treasury and Agency obligations
            
            
            39,251
            
            
            —
            
            
            (200
            )
            
            39,051Corporate
                notes
            
            
            25,845
            
            
            —
            
            
            (151
            )
            
            25,694Money
                market funds
            
            
            500
            
            
            —
            
            
            —
            
            
            500Cash
            
            
            24
            
            
            —
            
            
            —
            
            
            24Total
                portfolio
            
            
            243,062
            
            
            —
            
            
            (357
            )
            
            242,705Less
                restricted portion
            
            
            (75,000
            )
            
            —
            
            
            —
            
            
            (75,000
            )Total
                unrestricted short-term investments
            
            $
            168,062
            
            $
            —
            
            $
            (357
            )
            $
            167,705**December
                31, 2005**Municipal
                securities
            
            $
            280,767
            
            $
            1
            
            $
            (34
            )
            $
            280,734U.S.
                Treasury and Agency obligations
            
            
            55,117
            
            
            —
            
            
            (451
            )
            
            54,666Corporate
                notes
            
            
            30,524
            
            
            —
            
            
            (342
            )
            
            30,182Total
                short-term investments
            
            $
            366,408
            
            $
            1
            
            $
            (827
            )
            $
            365,582




Contractual
      maturities for all investments held at December 30, 2006 are as
      follows:




*(in
                thousands)*
            
            **Amortized
                Cost**
            
            **Fair
                Value**Due
                in less than one year
            
            $
            79,476
            
            $
            79,119Due
                in 1 to 5 years
            
            
            3,521
            
            
            3,521Due
                in greater than 5 to 10 years
            
            
            7
            
            
            7Due
                in greater than 10 years
            
            
            160,058
            
            
            160,058$
            243,062
            
            $
            242,705




NextWave
      regularly monitors and evaluates the realizable value of its short-term
      investments. When assessing short-term investments for other-than-temporary
      declines in value, NextWave considers such factors as, among other things,
      how
      significant the decline in value is as a percentage of the original cost, how
      long the market value of the investment has been less than its original cost,
      analyst recommendations, any news that has been released specific to the
      investee and the outlook for the overall industry in which the investee
      operates. If events and circumstances indicate that a decline in the value
      of
      these assets has occurred and is other than temporary, NextWave records a charge
      to investment expense which is reported in interest income in the statements
      of
      operations.




Investments
      considered to be temporarily impaired at December 30, 2006 are as
      follows:




**Less
                than 12 months of Temporary Impairment**
            
            **12
                months or More of Temporary Impairment**
            
            **Total***(dollars
                in thousands)*
            
            **Number
                of investments**
            
            **Fair
                Value**
            
            **Gross
                Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized**
              **Losses**Municipal
                securities
            
            
            5
            
            $
            11,411
            
            $
            (6
            )
            $
            —
            
            $
            —
            
            $
            11,411
            
            $
            (6
            )U.S.
                Treasury and Agency obligations
            
            
            3
            
            
            4,031
            
            
            (1
            )
            
            34,797
            
            
            (199
            )
            
            38,828
            
            
            (200
            )Corporate
                notes
            
            
            3
            
            
            —
            
            
            —
            
            
            25,141
            
            
            (151
            )
            
            25,141
            
            
            (151
            )Total
                portfolio
            
            
            
            
            $
            15,442
            
            $
            (7
            )
            $
            59,938
            
            $
            (350
            )
            $
            75,380
            
            $
            (357
            )





83




***Accounts
      Receivable and Allowance for Doubtful Accounts***




Accounts
      receivable are recorded according to contractual agreements. Credit terms for
      payment of products and services are extended to customers in the normal course
      of business and no collateral is required.




The
      allowance for doubtful accounts is estimated based on NextWave’s historical
      losses, the existing economic conditions, and the financial stability of its
      customers. Receivables are written-off in the period that they are deemed
      uncollectible.




At
      December 30, 2006, gross accounts receivable consisted of $4.6 million and
      $0.8
      million in billed and unbilled receivables, respectively. At December 31, 2005,
      gross accounts receivable consisted of $4.0 million and $0.1 million in billed
      and unbilled receivables, respectively.




***Wireless
      Licenses, Goodwill and Other Intangible Assets***




Wireless
      licenses that are purchased from third parties or in spectrum auctions held
      by
      the FCC are initially recorded at fair value, which is the purchase price paid
      for the license at the time of acquisition plus legal costs incurred to acquire
      the intangible asset. NextWave has determined that its Broadband Radio Service
      (“BRS”) and Wireless Communication Service (“WCS”) wireless spectrum licenses
      meet the definition of indefinite-lived intangible assets under SFAS No. 142,
      “Goodwill and Other Intangible Assets.” The wireless spectrum licenses from the
      FCC may be renewed every ten years for a nominal fee, provided that NextWave
      continues to meet the service and geographic coverage provisions required by
      the
      FCC .




Wireless
      licenses for which NextWave has acquired lease rights from third parties or
      from
      foreign countries where the renewal terms are not yet established are considered
      to have finite lives. The asset and related liability are recorded at the
      present value of future cash flows using NextWave’s incremental borrowing rate
      at the time of acquisition. The wireless license asset is amortized over the
      contractual life of the lease. Such licenses in the United States are the
      Educational Broadband Service (“EBS”) licenses for which NextWave has entered
      into long-term leases.




Goodwill
      represents the excess of purchase price and related costs over the value
      assigned to the net tangible and identifiable intangible assets of businesses
      acquired.




Intangible
      assets consist of the following:





**December
                30, 2006**
            
            **December
                31, 2005***(dollars
                in thousands)*
            
            **Weighted
                Average Life**
              **(in
                Years)**
            
            **Gross
                Carrying Amount**
            
            **Accumulated
                Amortization**
            
            **Weighted
                Average Life**
              **(in
                Years)**
            
            **Gross
                Carrying Amount**
            
            **Accumulated
                Amortization**Amortized
                intangible assets:Leased
                wireless spectrum licenses
            
            
            14.1
            
            $
            82,385
            
            $
            4,438
            
            
            15.0
            
            $
            31,347
            
            $
            1,510Purchased
                technology
            
            
            7.0
            
            
            9,614
            
            
            1,821
            
            
            7.0
            
            
            8,600
            
            
            555Purchased
                customer base
            
            
            8.0
            
            
            5,960
            
            
            1,044
            
            
            8.0
            
            
            5,700
            
            
            321Non-compete
                agreements
            
            
            4.0
            
            
            2,800
            
            
            1,193
            
            
            4.0
            
            
            2,800
            
            
            537Other
            
            
            7.4
            
            
            2,002
            
            
            252
            
            
            3.0
            
            
            16
            
            
            3$
            102,761
            
            $
            8,748
            
            
            
            
            $
            48,463
            
            $
            2,926Intangible
                assets not subject to amortization:Wireless
                spectrum licenses
            
            
            
            
            $
            450,051
            
            
            
            
            
            
            
            $
            15,630Goodwill
            
            
            
            
            
            32,184
            
            
            
            
            
            
            
            
            24,782Purchased
                tradenames and trademarks
            
            
            
            
            
            2,504
            
            
            
            
            
            
            
            
            2,400$
            484,739
            
            
            
            
            
            
            
            $
            42,812




84




In
      July
      2006, NextWave completed its acquisition of WCS Wireless, Inc. which resulted
      in
      the addition of $236.4 million of wireless spectrum licenses not subject to
      amortization. The acquisition of WCS Wireless, Inc. was accounted for as an
      acquisition of assets rather than as an acquisition of a business based on
      guidance under EITF 98-3, “Determining Whether a Nonmonetary Transaction
      Involves Receipt of Productive Assets or of a Business.” The value assigned to
      the wireless spectrum includes the cash purchase price of $160.5 million, legal
      costs of $0.1 million, and $75.8 million in associated deferred tax liabilities
      as determined in accordance with EITF 98-11, “Accounting for Acquired Temporary
      Differences in Certain Purchase Transactions That Are Not Accounted for as
      Business Combinations.” During the year ended December 30, 2006, NextWave
      acquired other licensed spectrum rights for $245.0 million in cash and $4.0
      million through the assumption of lease liabilities.




The
      $7.4
      million increase in goodwill in the consolidated balance sheets from December
      31, 2005 to December 30, 2006, resulted from current year business acquisitions.




The
      estimated aggregate amortization expense for amortized intangible assets owned
      as of December 30, 2006 is expected to be $8.4 million, $8.7 million, $8.3
      million, $8.0 million, $7.9 million and $52.7 million during fiscal years 2007,
      2008, 2009, 2010, 2011 and thereafter, respectively.




***Property
      and Equipment***




Property
      and equipment is recorded at cost and depreciated or amortized using the
      straight-line method over their estimated useful lives. Leasehold improvements
      are amortized over the shorter of their estimated useful lives or the remaining
      term of the related lease. Direct external costs of developing software for
      internal use are capitalized through implementation of the software.
      Maintenance, repairs, and minor renewals and betterments are charged to expense
      as incurred.




Upon
      the
      retirement or disposition of property and equipment, the related cost and
      accumulated depreciation or amortization are removed, and a gain or loss is
      recorded.




Property
      and equipment, net, consists of the following:




*(dollars
                in thousands)*
            
            **Estimated**
              **Useful
                Life**
              **(in
                years)**
            
            **December
                30,**
              **2006**
            
            **December
                31,**
              **2005**Furniture
                and equipment
            
            
            2-7
            
            $
            13,626
            
            $
            7,071Purchased
                software
            
            
            2-3
            
            
            7,296
            
            
            3,459Leasehold
                improvements
            
            
            1-5
            
            
            2,358
            
            
            879Construction
                in progress
            
            
            N/A
            
            
            846
            
            
            38024,126
            
            
            11,789Less:
                Accumulated depreciation
            
            
            
            
            
            (6,597
            )
            
            (697
            )Total
                property and equipment, net
            
            
            
            
            $
            17,529
            
            $
            11,092




***Long-Lived
      Assets***




In
      accordance with Statement of Financial Accounting Standards No. 142, or SFAS
      No.
      142, “Goodwill and Other Intangible Assets,” NextWave does not amortize goodwill
      and certain spectrum licenses. In lieu of amortization, NextWave is required
      to
      perform an annual review for impairment, or more frequently if impairment
      indicators arise. Goodwill and intangible assets not subject to amortization
      are
      considered to be impaired if NextWave determines that the carrying value of
      the
      asset exceeds its fair value.




NextWave
      tests goodwill for impairment at a reporting unit level using a two-step
      process. NextWave has selected October 1, 2006 for its annual impairment test.
      As of October 1, 2006, NextWave had two reporting units as defined by SFAS
      142
      containing goodwill that were tested for impairment. The first step of the
      impairment test involves comparing the fair values of the applicable reporting
      units with their aggregate carrying values, including goodwill. If the carrying
      amount of a reporting unit exceeds the reporting unit’s fair value, the second
      step of the goodwill impairment test is performed to determine the amount of
      the
      impairment loss. The second step involves comparing the implied fair value
      of
      the affected reporting unit’s goodwill with the carrying value of that goodwill.
      If the carrying amount of goodwill exceeds the implied fair value of that
      goodwill, an impairment loss is recognized in an amount equal to that excess.




85




NextWave
      tests indefinite-lived intangible assets by making a determination of the fair
      value of the intangible asset. If the fair value of the intangible asset is
      less
      than its carrying value, an impairment loss is recognized in an amount equal
      to
      the difference. NextWave also evaluates the remaining useful life of its
      intangible assets that are not subject to amortization on an annual basis to
      determine whether events and circumstances continue to support an indefinite
      useful life. If an intangible asset that is not being amortized is subsequently
      determined to have a finite useful life, that asset is tested for impairment.
      After recognition of the impairment, if any, the asset is amortized
      prospectively over its estimated remaining useful life and accounted for in
      the
      same manner as other intangible assets that are subject to amortization.




Any
      required impairment losses are recorded as a reduction in the carrying value
      of
      the related asset and charged to results of operations. At October 1, 2006
      and
      2005, NextWave’s intangible assets not subject to amortization and goodwill were
      evaluated for impairment and NextWave determined that no impairment existed
      at
      that date.




At
      December 30, 2006 and December 31, 2005, intangible assets subject to
      amortization were evaluated for impairment as required by SFAS No. 144,
“Accounting for Impairment or Disposal of Long-Lived Assets,” which requires the
      recognition of an impairment loss when the carrying amount of an intangible
      asset is not recoverable and its carrying amount exceeds its fair value, and
      NextWave determined that no impairment existed at that date.




For
      the
      period from inception (April 13, 2005) to December 31, 2005, business
      realignment costs in the consolidated statement of operations includes
      impairment losses of $5.9 million. The impairment loss recognized was equal
      to
      the carrying value of impaired assets.




***Deferred
      Financing Costs, Debt Discount and Debt-Related Warrants***




Costs
      incurred to issue debt are deferred and included in other assets in the
      consolidated balance sheet and are amortized over the expected term of the
      related debt using the effective interest method. Debt discounts and the fair
      value of any warrants issued in conjunction with the debt are recorded as a
      reduction to debt balance and accreted over the expected term of the debt to
      interest expense using the effective interest method.




***Accrued
      Expenses***




Accrued
      expenses consist of the following:




*(in
                thousands)*
            
            **December
                30, 2006**
            
            **December
                31, 2005**Accrued
                interest
            
            $
            11,178
            
            $
            —Accrued
                payroll and related expenses
            
            
            9,417
            
            
            3,426Accrued
                professional fees
            
            
            3,746
            
            
            720Accrued
                expenses
            
            
            4,870
            
            
            715Accrued
                equity distributions payable
            
            
            2,034
            
            
            —Other
            
            
            2,292
            
            
            291Total
                accrued liabilities
            
            $
            33,537
            
            $
            5,152




***Employee
      Share-Based Compensation***




NextWave
      adopted SFAS 123(R) on January 1, 2006. SFAS 123(R) requires the recognition
      of
      the fair value of share-based compensation in the statement of operations.
      NextWave recognizes share-based compensation expense over the requisite service
      period of the individual grants, which generally equals the vesting period.
      Compensation expense for awards with graded vesting is recognized on a
      straight-line basis with adjustments to at least equal the measured cost of
      the
      vested tranches. Prior to January 1, 2006, NextWave accounted for employee
      equity awards using APB 25 and related interpretations in accounting for
      share-based compensation.




NextWave
      has adopted the provisions of SFAS 123(R)
      using the prospective transition method, whereby it will continue to account
      for
      nonvested equity awards to employees outstanding at December 31, 2005 using
      APB
      25, and apply SFAS 123(R) to all awards granted or modified after that date.
      In
      accordance with the prospective method transition rules of SFAS 123(R), NextWave
      no longer provides the pro forma disclosures in reports issued for periods
      ending after December 31, 2005 as SFAS 123(R) precludes companies that used
      the
      minimum value method for pro forma disclosure from continuing to provide those
      pro forma disclosures for outstanding awards accounted for under the intrinsic
      value method of APB 25.




86




Under
      the
      provisions of SFAS 123(R), NextWave recognized $2.8 million in employee
      share-based compensation expense for the year ended December 30, 2006. The
      CYGNUS plan, as amended in February 2006, provided for the conversion of each
      CYGNUS option, whether issued or unissued, into the right to purchase .05097
      shares of NextWave common stock upon the Corporate Conversion Merger. The
      exchange of 314,000 outstanding options held by 68 employees was accounted
      for
      as an acquisition of minority interest resulting from an exchange of options
      in
      a business combination that occurred upon the Corporate Conversion Merger.
      The
      fair value of the vested portion of the new options, valued at $0.9 million,
      was
      added to the purchase price of CYGNUS and the fair value of the unvested portion
      of the new options, valued at $1.2 million, is amortized over the remaining
      vesting periods.




NextWave
      utilized the Black-Scholes valuation model for estimating the fair value of
      stock awards to employees during the year ended December 30, 2006, at the date
      of grant or modification, with the following assumptions for the NextWave
      Wireless Inc. 2005 Stock Incentive Plan, the CYGNUS Communications, Inc. 2004
      Stock Option Plan, which options were exercisable for shares of common stock
      of
      CYGNUS Communications, Inc. prior to the Corporate Conversion and were converted
      into options exercisable for common shares of NextWave at the date of the
      Corporate Conversion and the PacketVideo Corporation 2005 Equity Incentive
      Plan,
      which options are exercisable for common shares of PacketVideo Corporation,
      a
      subsidiary of NextWave:




**Options
              for
              NextWave Wireless Inc**
            
            **Options
              for
              NextWave Wireless Inc. Common Stock Issued Upon Conversion
              of**
            
            **Options
              for
              CYGNUS Communications, Inc. Common**
            
            **Options
              for
              PacketVideo****Common
                Stock**
            
            **CYGNUS
                Plan****(1)**
            
            **Stock****(2)**
            
            **Common
                Stock**Risk-free
                interest rate
            
            
            4.36%-5.11
            %
            
            4.62%-5.03
            %
            
            4.35%-4.39
            %
            
            4.36%-5.11
            %Expected
                term (in years)
            
            
            1.5-5.5
            
            
            0-4.7
            
            
            2.5-5.9
            
            
            2.5-5.5Expected
                and weighted average stock price volatility
            
            
            50
            %
            
            50
            %
            
            50
            %
            
            50
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %Weighted
                average grant-date fair value of options granted
            
            $
            2.59
            
            $
            7.51
            
            $
            2.61
            
            $
            0.42







(1)
            Represents
                assumptions used as of the conversion date to value options to purchase
                common stock of NextWave Wireless Inc. that were issued to holders
                of
                options to purchase common stock of CYGNUS Communications,
                Inc.


(2)
            Represents
                assumptions used to value options to purchase common stock of CYGNUS
                Communications, Inc. prior to the Corporate Conversion Merger, at
                converted values.




The
      risk-free interest rates are based on the implied yield available on U.S.
      Treasury constant maturities in effect at the time of the grant with remaining
      terms equivalent to the respective expected terms of the options. As none of
      the
      plans have sufficient history for estimating the term from grant date to full
      exercise of the option, NextWave has considered expected terms applied, in
      part,
      by peer companies to determine the expected life of each grant. Expected
      volatility is based on an average of peer companies’ expected volatilities due
      to lack of trading history of NextWave common stock or its subsidiaries’ shares.
      The dividend yield of zero is based on the fact that NextWave has never paid
      cash dividends and has no present intention to pay cash dividends on its common
      stock.




NextWave
      has assumed an annualized forfeiture rate of 10% for its options based on a
      combined review of industry and employee turnover data, as well as an analytical
      review performed of historical pre-vesting forfeitures occurring over the
      previous year. Under the true-up provisions of SFAS 123(R), NextWave will record
      additional expense if the actual forfeiture rate is lower than estimated, and
      will record a recovery of prior expense if the actual forfeiture rate is higher
      than estimated.




Total
      compensation cost of options granted to employees since January 1, 2006 but
      not
      yet vested, as of December 30, 2006, was $8.6 million, which is expected to
      be
      recognized over a weighted average period of 3.4 years.




87




Share-based
      compensation expense of $0.6 million was recognized during the year ended
      December 30, 2006, for common stock issued to employee shareholders of one
      of
      the CYGNUS subsidiaries, stemming from a prior acquisition by CYGNUS, for the
      attainment of certain product development milestones. The share based payments
      were recognized as compensation expense in accordance with EITF 95-8,
“Accounting for Contingent Consideration Paid to the Shareholders of an Acquired
      Enterprise in a Purchase Business Combination.”




***Litigation***




NextWave
      is currently involved in certain legal proceedings. Although there can be no
      assurance that unfavorable outcomes in any of these matters would not have
      a
      material adverse effect on operating results, liquidity or financial position,
      NextWave believes the claims are without merit and intends to vigorously defend
      the actions. NextWave estimates the range of liability related to pending
      litigation where the amount and range of loss can be estimated. NextWave records
      its best estimate of a loss when the loss is considered probable. Where a
      liability is probable and there is a range of estimated loss with no best
      estimate in the range, NextWave records the minimum estimated liability related
      to the claim. As additional information becomes available, NextWave assesses
      the
      potential liability related to its pending litigation and revises its estimates.
      As of December 30, 2006, NextWave has not recorded any accrual for contingent
      liabilities associated with its legal proceedings based on its belief that
      a
      liability, while possible, is not probable. Further, any possible range of
      loss
      cannot be estimated at this time. Revisions in NextWave’s estimates of the
      potential liability could materially impact results of operations.




***Foreign
      Currency***




NextWave’s
      foreign subsidiaries use the U.S. dollar as their functional currency.
      Accordingly, monetary assets and liabilities are remeasured into U.S. dollars
      at
      the exchange rate in effect at the balance sheet date. Revenues, expenses,
      gains
      and losses associated with monetary assets and liabilities are translated at
      the
      rates of exchange that approximate the rates in effect at the transaction date.
      Non-monetary assets and liabilities and related elements of revenues, expenses,
      gains and losses are remeasured at historical rates. Resulting exchange gains
      or
      losses of these foreign investees are recognized in the consolidated statements
      of operations in cost of revenues and other income and expense, net, depending
      on the nature of the gain or loss.




Net
      foreign currency exchange losses included in NextWave’s consolidated statement
      of operations totaled $0.1 million and $20,000 for the year ended December
      30,
      2006 and for the period from inception (April 13, 2005) to December 31, 2005,
      respectively.




***Segments
      of a Business Enterprise***




SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information”
(“SFAS 131”) provides public business enterprises with standards for reporting
      information about operating segments in annual and interim financial reports,
      including disclosures of profit or loss and total assets for each reportable
      segment. As of December 30, 2006, NextWave operated in one reportable segment,
      an early-stage wireless technology business, with PacketVideo, which was
      acquired in July 2005, providing nearly all of NextWave revenues during the
      period from inception (April 13, 2005) to December 30, 2006.




***Recent
      Accounting Pronouncements***




In
      June
      2006, the FASB Issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”), effective
      for NextWave’s fiscal year beginning December 31, 2006. FIN 48 clarifies the
      accounting for uncertainty in income taxes recognized in financial statements
      in
      accordance with FASB Statement No. 109, “Accounting for Income Taxes,” and
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. NextWave’s management believes that adoption of this
      interpretation will not have a material impact on its financial statements.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the
      principle that fair value should be based on the assumptions market participants
      would use when pricing an asset or liability and establishes a fair value
      hierarchy that prioritizes the information used to develop those assumptions.
      Under the standard, fair value measurements would be separately disclosed by
      level within the fair value hierarchy. SFAS 157 is effective for NextWave’s
      fiscal year beginning December 30, 2007, with early adoption permitted.
      NextWave’s management is in the process of evaluating the impact of the adoption
      of SFAS No. 157.




88




***Reclassifications***




To
      conform to the current presentation in the consolidated balance sheet at
      December 30, 2006, a reclassification of $0.9 million in deferred contract
      costs
      was made from prepaid expenses and other current assets to deferred contract
      costs in the consolidated balance sheet at December 31, 2005. To conform to
      the
      current presentation in the consolidated statement of cash flows for the year
      ended December 30, 2006, a reclassification of $1.8 million in changes in
      deferred revenue was made from changes in deferred credits and reserves in
      the
      consolidated statement of cash flows for the period from inception (April 13,
      2005) to December 31, 2005. These reclassifications had no effect on reported
      current assets or net cash used in operating activities.




**2.
      Business Combinations and Joint Ventures**




***Acquisition
      of CYGNUS***




On
      February 2, 2006, NextWave acquired all of the outstanding shares of common
      stock of CYGNUS and the minority interests of one of its subsidiaries, which
      are
      already included in the consolidated financial statements as NextWave is deemed
      to be the primary beneficiary in accordance with FIN 46(R). The total cost
      of
      the acquisition was determined as follows:




*(in
                  thousands)*Advances
                  to CYGNUS, including interest
              
              $
              18,145Accumulated
                  CYGNUS losses while consolidated in
                accordance
                  with FIN 46R
              
              
              (8,550
              )Conversion
                  of convertible preferred stock into common stock
              
              
              1,884Membership
                  interests issued
              
              
              1,558Fair
                  value of stock options exchanged
              
              
              904Cash
                  paid
              
              
              53Less
                  cash acquired
              
              
              (4,190
              )Total
                  acquisition cost
              
              $
              9,804




Under
      the
      purchase method of accounting, the purchase price was allocated to the assets
      acquired and liabilities assumed based upon their estimated fair values at
      the
      date of acquisition as follows:




*(in
                thousands)*Accounts
                receivable
            
            $
            196Prepaid
                expenses and other current assets
            
            
            511Property
                and equipment
            
            
            704Goodwill
            
            
            5,447Intangible
                assets
            
            
            3,680Deposits
                and other noncurrent assets
            
            
            658Accounts
                payable, accrued expenses and other current liabilities
            
            
            (613
            )Unfavorable
                lease liability
            
            
            (692
            )Long-term
                obligations
            
            
            (87
            )Total
                acquisition cost
            
            $
            9,804




The
      purchase price allocation included values assigned to certain specific
      identifiable intangible assets aggregating $3.7 million. In-process research
      and
      development was valued by determining future discounted cash flows using the
      excess earnings methodology. Purchased technology was valued using the
      relief-from-royalty methodology which considers estimated future discounted
      cash
      flows to be derived from the products that existed at the date of the
      acquisition. The purchased tradenames and trademarks were valued using future
      discounted cash flows using the relief-from-royalty methodology which assumes
      value to the extent that NextWave is relieved of the obligation to pay royalties
      for the benefits received from the use of the tradenames and trademarks. A
      value
      of $5.4 million, representing the difference between the total purchase price
      and the aggregate fair values assigned to the net tangible assets acquired
      and
      liabilities assumed and the identifiable intangible assets acquired, was
      assigned to goodwill. The amount allocated to intangible assets and their
      respective amortizable lives is as follows:




89




*(dollars
                in thousands)*
            
            **Life**
            
            **Amount**In-process
                research and development
            
            
            none
            
            $
            1,890Purchased
                technology
            
            
            7
                years
            
            
            1,680Purchased
                tradenames and trademarks
            
            
            5
                years
            
            
            110$
            3,680


Purchased
      in-process research and development costs relate to development projects which
      had not yet reached technological feasibility and had no alternative future
      uses
      at the date of acquisition. These costs were expensed in the consolidated
      statement of operations in December 2006, upon completion of the purchased
      intangible asset valuation. An experienced technological employee base and
      technology that could ultimately provide an underlying infrastructure for
      NextWave’s wireless broadband service offerings and accelerate the development
      of WiMAX chips were among the factors that contributed to a purchase price
      resulting in the recognition of goodwill.




In
      connection with the acquisition, NextWave recorded an unfavorable lease
      liability of $0.7 million resulting from the exit of a duplicate facility leased
      by CYGNUS. The facility was subsequently subleased, resulting in a $0.4 million
      reduction in the liability. Activity for this liability is as
      follows:




*(in
                thousands)*
            
            **Opening**
              **Balance
                Sheet**
              **Accrual**
            
            **Adjustment
                to Goodwill**
            
            **Interest
                Accretion**
            
            **Amounts
                Paid in Cash**
            
            **Balance
                at December 30,**
              **2006**Unfavorable
                lease liability
            
            $
            692
            
            $
            (374
            )
            $
            4
            
            $
            (31
            )
            $
            291




The
      CYGNUS Communications, Inc. 2004 Stock Option Plan., as amended in February
      2006, provided for the conversion of each CYGNUS option into .05097 shares
      of
      NextWave common stock upon the Corporate Conversion Merger. NextWave was deemed
      to have acquired the CYGNUS stock option plan upon the Corporate Conversion
      Merger and, therefore, the fair value of the vested portion of the new options,
      valued at $0.9 million, was added to the purchase price of CYGNUS and the fair
      value of the unvested portion of the new options, valued at $1.2 million, is
      amortized over the remaining vesting periods.




In
      connection with the acquisition of the minority interests of one of CYGNUS’
subsidiaries, NextWave agreed to pay $0.4 million and $0.5 million in cash,
      and
      issue 37,000 and 37,000 in common shares to certain employee shareholders in
      December 2006 and December 2007, respectively, or earlier if certain product
      development milestones are attained. These payments are amortized as
      compensation expense over the period earned in accordance with EITF 95-8,
“Accounting for Contingent Consideration Paid to the Shareholders of an Acquired
      Enterprise in a Purchase Business Combination.” Compensation expense totaled
      $1.2 million during the year ended December 30, 2006. The remaining unamortized
      portion of $0.3 million related to the December 2007 cash payment is recorded
      as
      deferred compensation in prepaid and other current assets in the consolidated
      balance sheet at December 30, 2006. The fair value of the common shares will
      be
      remeasured at the end of each reporting period until issued, when the final
      fair
      value is determined. Unamortized estimated share-based compensation totaled
      $0.2
      million at December 30, 2006, and will be charged to the results of operations
      with an offsetting increase to additional paid-in-capital in the consolidated
      balance sheets over the remaining service periods.




***Other
      2006 Acquisitions and Investments***




During
      the year ended December 30, 2006, NextWave completed three acquisitions and
      one
      joint venture investment. The results of operations have been included in the
      consolidated financial statements from the respective dates of the
      acquisitions.




The
      aggregate cost of the three acquisitions was $9.6 million, consisting of $8.3
      million in cash, including acquisition costs of $0.3 million, deferred earnout
      payments totaling $0.7 million and the assumption of debt totaling $0.3 million.
      The excess of purchase price over the acquired net tangible assets and
      liabilities was $9.9 million, of which $6.9 million was assigned to goodwill
      and
      $3.0 million was assigned to identifiable intangible assets, including $1.6
      million that was assigned to in-process research and development costs and
      expensed during the year ended December 30, 2006.




In
      January 2006, NextWave acquired 51% of the equity securities of newly formed
      Inquam Broadband for $1.6 million. NextWave also has the right to designate
      three of the five members of the board of directors. The primary reason for
      the
      investment is to provide NextWave with an entry into the wireless broadband
      telecommunications market in Germany and Switzerland. Under the subscription
      and
      shareholder agreement, NextWave has agreed to provide additional funding up
      to
      1.4 million Euros ($1.7 million at December 30, 2006), of which $1.1 million
      has
      been funded through December 30, 2006. Under a separate note agreement
      established for the purpose of funding Inquam Broadband’s bids at wireless
      spectrum auctions in Germany and Switzerland, NextWave has agreed to loan up
      to
      17.6 million Euros and 7.1 million Swiss Francs ($28.9 million at December
      30,
      2006) to a wholly-owned subsidiary of Inquam Broadband, of which $22.7 million
      was outstanding at December 30, 2006. The note, which is eliminated in
      consolidation, bears interest at 8% per year and is secured by wireless spectrum
      licenses with a net book value totaling $23.1 million at December 30,
      2006.




90




NextWave
      also has the option to acquire a 51% interest in a subsidiary of Inquam-BMR
      GP,
      the holder of the remaining 49% interest in Inquam Broadband, for 9.7 million
      Euros ($12.7 million at December 30, 2006). The option price is subject to
      adjustment for changes in liabilities or subsequent funding provided to the
      subsidiary by Inquam Broadband. The option expires in April 2007. At any time
      prior to the expiration of the option in April 2007, Inquam-BMR GP has the
      right
      to purchase an interest between 25% and 49% in the note agreement, at which
      time
      both Inquam-BMR GP’s s and NextWave’s note interests would simultaneously
      convert into ordinary shares of Inquam Broadband on a pro rata basis. In lieu
      of
      this right and at any time prior to the expiration of the option, Inquam-BMR
      GP
      has the right to require NextWave to purchase all Inquam Broadband shares then
      held by Inquam-BMR GP for 1,000 Euros per share ($2.1 million at December 30,
      2006). In the event that Inquam-BMR GP does not exercise either of these rights
      prior to the expiration of NextWave’s option in April 2007, NextWave must elect
      to either convert the note into shares of Inquam Broadband equal to the note
      amount divided by 1,000 or purchase all Inquam Broadband shares then held by
      Inquam-BMR GP for 1,000 Euros per share ($2.1 million at December 30, 2006).




***Acquisition
      of PacketVideo***




On
      July
      19, 2005, NextWave acquired all of the outstanding common and preferred stock
      of
      PacketVideo Corporation (“PacketVideo”), a provider of multimedia software for
      mobile handsets and other converged devices. The primary reason for the
      acquisition is intended to accelerate the time-to-market and growth plans for
      embedded multimedia software products and services, which fits NextWave’s
      overall strategy of rapidly increasing the capability of wireless devices and
      affording wireless carriers and subscriber handset manufacturers opportunities
      for product differentiation and revenue enhancements.




The
      total
      cost of the acquisition of $46.7 million included cash paid for common and
      preferred stock of $46.5 million and closing costs of $0.5 million, less cash
      acquired of $0.3 million. Under the purchase method of accounting, the purchase
      price was allocated to the assets acquired and liabilities assumed based upon
      their estimated fair values at the date of acquisition in accordance with SFAS
      141 as follows:




*(in
                thousands)*Accounts
                receivable
            
            $
            3,498Deferred
                contract costs
            
            
            474Prepaid
                expenses and other current assets
            
            
            792Property
                and equipment
            
            
            679Goodwill
            
            
            20,238Intangible
                assets
            
            
            26,100Deposits
                and other noncurrent assets
            
            
            825Accounts
                payable, accrued expenses and other current liabilities
            
            
            (3,047
            )Deferred
                revenue
            
            
            (2,343
            )Noncurrent
                deferred rent
            
            
            (520
            )Total
                acquisition cost
            
            $
            46,696




The
      purchase price allocation included values assigned to certain specific
      identifiable intangible assets aggregating $26.1 million. The fair value
      assigned to existing technology was determined by estimating the future
      discounted cash flows to be derived from the products that existed at the date
      of the acquisition. The fair value assigned to certain customer relationships
      existing on the acquisition date was based upon an estimate of the future
      discounted cash flows that would be derived from those customers. The fair
      value
      of the in-process research and development was estimated utilizing a discounted
      cash flow model and was based on estimates of operating results and capital
      expenditures and a risk adjusted discount rate. The non-compete agreements
      were
      valued based on estimates of the probability of competition and resulting impact
      on sales. The purchased trade names were valued using the relief-from-royalty
      method which assumes future discounted cash flows to be derived from royalties
      received as a result of licensing the PacketVideo name. A value of $20.2
      million, representing the difference between the total purchase price and the
      aggregate fair values assigned to the net tangible assets acquired and
      liabilities assumed and the identifiable intangible assets acquired, was
      assigned to goodwill. The amount allocated to intangible assets and their
      respective amortizable lives is attributed to the following
      categories:




91




*(dollars
                in thousands)*
            
            **Life**
            
            **Amount**Purchased
                technology
            
            
            7
                years
            
            $
            8,600Customer
                relationships
            
            
            8
                years
            
            
            5,700In-process
                research and development
            
            
            none
            
            
            6,600Non-compete
                agreements
            
            
            4
                years
            
            
            2,800Purchased
                tradenames and trademarks
            
            
            indefinite
            
            
            2,400$
            26,100




Purchased
      in-process research and development costs relate to development projects which
      had not yet reached technological feasibility and had no alternative future
      uses
      at the date of acquisition. These costs were expensed in the consolidated
      statement of operations at the date of acquisition. An experienced technological
      employee base and operations in a specialized niche in the wireless industry
      were among the factors that contributed to a purchase price resulting in the
      recognition of goodwill.




The
      results of PacketVideo’s operations have been included in the accompanying
      consolidated financial statements from the date of acquisition.




***Pro
      Forma Results***




The
      following unaudited pro forma information assumes that the acquisition of
      PacketVideo occurred at inception (April 13, 2005). These unaudited pro forma
      results have been prepared for comparative purposes only and do not purport
      to
      be indicative of the results of operations that would have actually resulted
      had
      the acquisition occurred on April 13, 2005, or of future results of operations.
      The unaudited pro forma results for the period from inception (April 13, 2005)
      to December 31, 2005 are as follows:




*(in
                thousands)**(unaudited)*Revenues
            
            $
            8,449Net
                loss(1)
            
            $
            (48,659
            )







(1)
      Includes a nonrecurring charge of $6.6 million for the write-off of purchased
      in-process research and development costs.





**3.
      Concentrations of Risks and Geographic Areas**




***Concentration
      of Risks***




A
      significant portion of NextWave’s revenues is concentrated with a limited number
      of customers within the wireless telecommunications market. For the year ended
      December 30, 2006, PacketVideo’s revenues from Verizon Wireless accounted for
      64% of NextWave’s consolidated revenues and for the period from inception (April
      13, 2005) to December 31, 2005, PacketVideo’s revenues from Verizon Wireless,
      Fujitsu and Nokia accounted for 22%, 14% and 11% respectively, of NextWave’s
      consolidated revenues. Aggregated accounts receivable from two customers
      accounted for 42% and 11% of total gross accounts receivable at December 30,
      2006. No other single customer accounted for 10% or more of revenues during
      the
      year ended December 30, 2006 or during the period from inception (April 13,
      2005) to December 31, 2005 or gross accounts receivable at December 30, 2006.




NextWave
      maintains its cash and cash equivalents in accounts which, at times, exceed
      federally insured deposit limits. NextWave has not experienced any losses in
      these accounts and believes it is not exposed to any significant credit risk
      on
      these accounts.




***Geographic
      Areas***




Revenues
      by geographic area are as follows:




*(in
                thousands)*
            
            **Year
                Ended December 30,**
              **2006**
            
            **Inception**
              **(April
                13, 2005) to December 31,**
              **2005**Revenues
                from customers located in:United
                States
            
            $
            16,511
            
            $
            1,858Japan
            
            
            4,657
            
            
            1,324Europe
            
            
            2,459
            
            
            552Rest
                of the world
            
            
            657
            
            
            410Total
                revenues
            
            $
            24,284
            
            $
            4,144





92




Long-lived
      assets consist of property and equipment, non current deposits and prepaid
      assets and an investment in an unconsolidated business and comprised 83%, 12%
      and 5% of total long-lived assets in the United States, India and all other
      foreign countries, respectively, at December 30, 2006.




**4.
      Related Party Transactions**




On
      July
      18, 2005, NextWave issued options to purchase 83,000 common shares to Manchester
      Financial Group LP ("Manchester Financial") as consideration for services
      rendered in connection with NextWave's acquisition of certain licensed spectrum
      leases. Douglas Manchester, a member of NextWave’s board of directors, is the
      controlling shareholder of the general partner of Manchester Financial. The
      options were immediately vested with a one year term at an exercise price of
      $6.00 per share and were subsequently exercised in 2006. The fair value of
      these
      options was estimated at the date of grant to be $108,000 using the “Black
      Scholes” method of option pricing with the following assumptions: risk free
      interest rate of 3.64%, dividend yield of 0%, expected volatility of 51% and
      an
      expected life of 1 year. The fair value was recorded to general and
      administrative expense at the date of grant.




**5.
      Long-Term Obligations**




Long-term
      obligations consist of the following:




*(dollars
                in thousands)*
            
            **December
                30,**
              **2006**
            
            **December
                31,**
              **2005**7%
                Senior Secured Notes, $350,000 due 2010, net of unamortized discount
                and
                fair value of warrants of $69,325, interest payable semiannually
                in
                January and July each year, secured by $525,643 in FCC licenses and
                spectrum leases and $75,000 in restricted cash
            
            $
            280,675
            
            $
            —Wireless
                spectrum leases, weighted average imputed interest of 8.43% at December
                30, 2006, scheduled maturities ranging from 2011 through 2019, net
                of
                unamortized discounts of $9,758 and $9,353, respectively, with three
                to
                five renewal options ranging from 10 to 15 years each, secured by
                $39,194
                in wireless spectrum licenses
            
            
            20,091
            
            
            17,047Other
            
            
            329
            
            
            87Total
                long-term obligations
            
            
            301,095
            
            
            17,134Less
                current portion
            
            
            (3,065
            )
            
            (2,200
            )Long-term
                portion
            
            $
            298,030
            
            $
            14,934




Payments
      due on these obligations during each of the five years subsequent to December
      30, 2006 are as follows:




*(in
                thousands)*Fiscal
                Years:2007
            
            $
            3,0652008
            
            
            3,0702009
            
            
            2,6742010
            
            
            352,5182011
            
            
            2,411Thereafter
            
            
            16,440380,178Less
                unamortized discount
            
            
            (79,083
            )Less
                current portion
            
            
            (3,065
            )Total
                long-term obligations
            
            $
            298,030




93




On
      July
      17, 2006, NextWave issued 7% Senior Secured Notes due July 17, 2010 (the
“Notes”) in the aggregate principal amount of $350.0 million. The Notes were
      issued at a fifteen percent (15%) original issue discount, resulting in gross
      proceeds of $297.5 million. After the payment of transaction related expenses,
      NextWave received net proceeds of $295.0 million available for the sole purpose
      of financing spectrum acquisitions and leases. Costs incurred to issue the
      Notes, which totaled $2.5 million, have been deferred and included in other
      assets in the consolidated balance sheet and are amortized over the expected
      term of the Notes using the effective interest method. The unamortized balance
      of the issuance costs was $2.2 million at December 30, 2006.




The
      purchasers of the Notes were investment funds and other institutional investors,
      including affiliates of Avenue Capital Group, among others. Robert T. Symington,
      a member of NextWave’s Board of Managers, is a Portfolio Manager at Avenue
      Capital Group. Neither Mr. Symington nor Avenue Capital Group or its affiliates
      received any compensation in connection with the financing. The Notes are
      guaranteed by certain of NextWave’s subsidiaries, including NextWave Broadband
      and PacketVideo. In addition, after NextWave’s Corporate Conversion Merger, the
      Notes are guaranteed by NextWave Wireless Inc. No scheduled principal payments
      will be due on the Notes before the maturity date of July 17, 2010. The Notes
      are pre-payable at NextWave’s option at specified premiums to the principal
      amount that will decline over the term of the Notes from 105% to 100%, plus
      a
      make-whole amount applicable until July 17, 2008. The obligations under the
      Notes are secured by first priority liens on certain pledged equity interests,
      FCC licenses, spectrum leases, securities accounts, proceeds from any of the
      foregoing as well as proceeds derived in any way from foreign licenses. NextWave
      is required to maintain $75.0 million in cash or cash equivalents from funds
      other than the proceeds of the Notes in a restricted collateral account at
      all
      times while the Notes remain outstanding. The purchase agreement contains
      representations and warranties, affirmative and negative covenants (including,
      without limitation, NextWave’s obligation to (i) maintain in full force and
      effect its FCC licenses and spectrum leases, (ii) to use the note proceeds
      for
      the acquisition of spectrum, not to exceed $0.25 per MHz-POP, (iii) not to
      become liable to any additional indebtedness, subject to certain exceptions
      including the ability to enter into spectrum leases or to incur $25.0 million
      of
      acquired company debt or purchase money indebtedness and (iv) not make
      restricted payments to holders of subordinated debt or equity securities,
      including cash dividends, that are customary in similar types of transactions.
      The purchase agreement also contains customary events of default and additional
      events of default including the termination, cancellation or rescission of
      any
      FCC license owned or leased by NextWave, necessary for NextWave’s operation of a
      wireless communications system. At December 30, 2006, NextWave was not in
      compliance with the types of investments required to be held in its restricted
      collateral account. This default was subsequently cured by NextWave on its
      own
      accord and no waiver was required.




The
      net
      proceeds from the Notes were used to acquire WCS Wireless, Inc. for $160.5
      million, 154 spectrum licenses from the FCC aggregating $115.6 million and
      two
      new EBS leases for $22.1 million.




In
      connection with the issuance of the Notes and on the date of the Corporate
      Conversion Merger in November 2006, NextWave issued 4.1 million warrants to
      the
      purchasers of the Notes to purchase common stock at an exercise price of $0.01
      per share. The warrants are exercisable at any time from the date of issuance
      until July 15, 2009, and have anti-dilution protection provisions. The fair
      value of the warrants was determined to be $24.6 million and is being accreted
      along with the discount to the note balance and amortized over the expected
      term
      of the Notes to interest expense using the effective interest method. The fair
      value of the warrants was measured using the Black-Scholes option-pricing model
      based on the following weighted average assumptions: contractual option term
      of
      3 years, expected volatility of 50%, expected dividend yield of zero and a
      risk-free rate of 5.07%, resulting in a weighted average fair value of $5.99
      per
      warrant. The remaining unaccreted balance totaled $22.1 million at December
      30,
      2006. NextWave received $8,000 in cash from the exercise of 1.5 million of
      the
      warrants during the year ended December 30, 2006. At December 30, 2006, 2.6
      million warrants remain outstanding and exercisable.




In
      addition to the wireless spectrum lease obligations, beginning in 2007 and
      extending through any renewal periods, one of the lease agreements provides
      for
      the payment of royalties based on 0.25% of gross revenues, subject to a cap
      of
      100% of the annual rent for years 2007-2020, a cap of 150% of the annual rent
      for years 2021-2035 and no cap during any remaining lease years. Beginning
      in
      2009, a second lease agreement provides for the payment of royalties based
      on
      .25% of NextWave’s gross revenues, subject to an annual cap of $2.7
      million




Additionally,
      all agreements require NextWave to construct, operate and maintain wireless
      services so as to satisfy the FCC’s substantial service deadline by May 1, 2011.
      Certain agreements require NextWave to make network connections available for
      the lessor’s use that are equivalent to a specified percentage of the
      transmission capacity created by NextWave.




94




**6.
      Fair Values of Financial Instruments**




The
      following methods and assumptions were used by NextWave in estimating its fair
      value disclosures for financial instruments:




*Cash
      and cash equivalents* :
      The
      carrying amount reported in the balance sheet for cash and cash equivalents
      approximates its fair value.




*Investment
      securities* :
      The
      values for marketable debt securities are based on quoted market
      prices.




*Restricted
      cash* :
      The
      values for marketable debt securities included in restricted cash are based
      on
      quoted market prices.




*Long-term
      debt:* The fair
      values of NextWave’s long-term debt are estimated using discounted cash flow
      analysis, based on NextWave’s current incremental borrowing rates for similar
      types of borrowing arrangements.




The
      carrying amounts and fair values of financial instruments are as
      follows:




**December
                30, 2006**
            
            **December
                31, 2005***(in
                thousands)*
            
            **Carrying
                Amount**
            
            **Fair
                Value**
            
            **Carrying
                Amount**
            
            **Fair
                Value**Financial
                assets:Cash
                and cash equivalents
            
            $
            32,980
            
            $
            32,980
            
            $
            93,649
            
            $
            93,649Investment
                securities
            
            
            167,705
            
            
            167,705
            
            
            365,582
            
            
            365,582Restricted
                cash
            
            
            75,000
            
            
            75,000
            
            
            —
            
            
            —Financial
                liabilities:7%
                Senior Secured Notes
            
            
            280,675
            
            
            280,675
            
            
            —
            
            
            —Wireless
                spectrum leases
            
            
            20,091
            
            
            15,785
            
            
            17,047
            
            
            17,047




It
      was
      not practicable to estimate the fair value of NextWave’s 60% investment in the
      preferred stock of another company because of the lack of a quoted market price
      and the inability to estimate fair value without incurring excessive costs.
      The
      $2.8 million carrying amount at December 30, 2006 represents the original cost
      of the investment less losses incurred from inception, which management believes
      is not impaired. No dividends were received from the period from inception
      (April 13, 2005) to December 30, 2006.




**7.
      Commitments and Contingencies**




***Business
      Acquisition***




In
      December 2006, PacketVideo signed a share purchase agreement to acquire all
      of the shares of SDC Secure Digital Container AG for cash of $19.0 million.
      The
      acquisition was completed in January 2007 and will be accounted for in the
      first
      quarter of 2007 using the purchase method of accounting whereby the total
      purchase price, including any transaction related expenses, will be allocated
      to
      tangible and intangible assets acquired based upon their respective fair
      values.




***Services
      and Other Agreements***




NextWave
      enters into non-cancelable software license agreements and agreements for the
      purchase of software development and engineering services to facilitate and
      expedite the development of software modules and applications required in its
      WiMAX development activities. The services agreements contain provisions for
      minimum commitments based on the number of team members and their respective
      billing rates. Amounts paid under these contracts, which expire on various
      dates
      through 2009, totaled $2.5 million and $2.1 million during the year ended
      December 30, 2006 and during the period from inception (April 13, 2005) to
      December 31, 2005, respectively. Estimated future minimum payments due under
      the
      terms of these agreements at December 30, 2006, are as follows:




*(in
                thousands)*Fiscal
                Years:2007
            
            $
            7,5352008
            
            
            4,0442009
            
            
            1,350Total
            
            $
            12,929




95




***Capital
      Expenditures***




In
      2005,
      in order to consolidate current operations from two leased facilities into
      one
      building, NextWave entered into a purchase agreement to acquire a build-to-suit
      office building in Henderson, Nevada for $8.2 million, which included an
      allowance for the construction of related interior improvements. In addition,
      NextWave planned to install furniture, fixtures and equipment costing
      approximately $3.6 million. This purchase agreement was amended in March 2007,
      reducing the cost of the building to $6.9 million (not including interior
      improvements) as the result of construction delay penalties. NextWave expects
      to
      pay the $6.9 million in the second quarter of 2007. A separate agreement was
      entered into in March 2007 for the construction of the interior improvements
      in
      the amount of $2.6 million and further agreements will be entered into in the
      second quarter of 2007 for the acquisition of furniture, fixtures and equipment
      for approximately $1.9 million. Construction is expected to be completed during
      the second quarter of 2007, at which time NextWave expects to occupy the
      facility and pay the remaining costs associated with occupancy.





***Operating
      Leases***




NextWave
      leases its office and research facilities, cell sites and certain office
      equipment under noncancellable operating leases expiring on various dates
      through 2015. NextWave recognizes rent expense on a straight-line basis over
      the
      respective lease terms. As a result, any differences between recognized rent
      expense and required upfront rental payments upon execution that reduce future
      rental payments is recorded as unapplied prepaid rent and any difference between
      rent expense and rent payments that are reduced by cash or rent abatements
      is
      recognized as deferred rent. At December 30, 2006, unapplied prepaid rent
      totaled $0.4 million and is included in prepaid expenses and other current
      assets in the consolidated balance sheet and deferred rent totaled $0.7 million,
      of which $0.3 million is included in other current liabilities and $0.4 million
      is included in long-term deferred credits and reserves in the consolidated
      balance sheet.




Certain
      commitments have renewal options extending through the year 2031. Rent expense
      under these operating leases was $6.9 million and $2.7 million for the year
      ended December 30, 2006 and for the period from inception (April 13, 2005)
      through December 31, 2005, respectively. Sublease income totaled $1.7 million
      and $0.7 million for the year ended December 30, 2006 and for the period from
      inception (April 13, 2005) through December 31, 2005, respectively.




Future
      minimum lease payments under noncancellable operating leases, net of sublease
      rentals at December 30, 2006, are as follows:




*(in
                thousands)*
            
            **Lease
                Commitments**
            
            **Sublease
                Rentals**
            
            **Net**Fiscal
                Years:2007
            
            $
            7,037
            
            $
            (1,099
            )
            $
            5,9382008
            
            
            6,429
            
            
            (198
            )
            
            6,2312009
            
            
            4,450
            
            
            -
            
            
            4,4502010
            
            
            2,808
            
            
            -
            
            
            2,8082011
            
            
            276
            
            
            -
            
            
            276Thereafter
            
            
            362
            
            
            -
            
            
            362$
            21,362
            
            $
            (1,297
            )
            $
            20,065




***Indemnification
      of NextWave Telecom Inc. and Verizon Wireless Corp.***




In
      connection with the sale of NTI and its subsidiaries to Verizon Wireless Inc.
      (“Verizon”), NextWave agreed to indemnify NTI and its subsidiaries against all
      pre-closing liabilities of NTI and its subsidiaries and against any violation
      of
      the Bankruptcy Court injunction against persons having claims against NTI and
      its subsidiaries, with no limit on the amount of such indemnity. NextWave is
      not
      currently aware of any such liabilities that remain following the plan of
      reorganization and Verizon has not made any indemnity claims.




96




As
      part
      of the plan of reorganization, NextWave issued $148.5 million of Non-Recourse
      Secured Notes (the “Notes”) to the former equity holders of NTI. The Notes were
      not recourse against NextWave or its assets; however, they were secured by
      a
      second priority interest in an indemnification escrow account established by
      NextWave and Verizon in connection with the Verizon transaction described above
      (the “Verizon Escrow Account”).




A
      total
      of $165.0 million was deposited into escrow (the “Verizon Escrow Amount”) in
      order to satisfy any amounts due to Verizon in the event that the consolidated
      net loss (the “CNOL”) of the NextWave Telecom group for the taxable year
      commencing on January 1, 2005, and ending on April 13, 2005 was, subject to
      certain adjustments, less than $1.362 billion, to cover any tax deficiencies
      for
      the pre-closing tax period, and to cover other indemnifiable losses relating
      to
      NTI and its subsidiaries, as described above.




On
      December 6, 2006, following the completion of the CNOL review by the Internal
      Revenue Service, Verizon and AirTouch Cellular, the assignee of Verizon under
      the Verizon transaction, entered into an agreement (the “Settlement Agreement”)
      (i) to settle the amounts payable under the Verizon Escrow Account as a result
      of the CNOL review, and (ii) to release the Escrow Amount plus accrued interest
      on the terms described herein. NextWave is not currently aware of any other
      indemnifiable losses that remain following the effective date of the sale to
      Verizon, and Verizon has not made any related claims therefore.




Under
      the
      terms of the Note Indenture, the portion of the Escrow Amount that NextWave
      received was applied to redeem, pro rata, the Notes. Accordingly, the full
      amount of the face amount of the Notes, was paid directly into an escrow account
      that funded the redemption of the Notes.




***Legal
      Proceedings***




NextWave
      is currently a party to various legal proceedings that arise in the ordinary
      course of its business. While management presently believes that the ultimate
      outcome of these proceedings, individually and in the aggregate, will not have
      a
      material adverse effect on NextWave’s financial position, cash flows or overall
      trends in results of operations, litigation is subject to inherent
      uncertainties, and unfavorable rulings could occur. For example, NextWave is
      currently engaged in a dispute relating to a lease of EBS spectrum covering
      the
      Toms River, New Jersey geographic area. The lessor has claimed that NextWave
      is
      in breach of the terms of the lease and that the lease has been terminated.
      NextWave believes that these claims are without merit, and, in any event, any
      adverse resolution would not have a material adverse effect on its business,
      results of operations or financial condition.




**8.
      Income Taxes**




NextWave’s
      loss before provision for income taxes and minority interest is as
      follows:




*(in
                thousands)*
            
            **Year
                Ended December 30,**
              **2006**
            
            **Inception**
              **(April
                13, 2005) to December 31,**
              **2005**United
                States
            
            $
            (103,272
            )
            $
            (43,737
            )Foreign
            
            
            (3,391
            )
            
            (1,925
            )$
            (106,663
            )
            $
            (45,662
            )




NextWave’s
      income tax provision (benefit) is as follows:




*(in
                thousands)*
            
            **Year
                Ended December 30,**
              **2006**
            
            **Inception**
              **(April
                13, 2005) to December 31,**
              **2005**Current
                income tax expense (benefit):Federal
            
            $
            (265
            )
            $
            258State
            
            
            10
            
            
            7Foreign
            
            
            220
            
            
            152Total
                provision (benefit) for taxes
            
            $
            (35
            )
            $
            417





97




Amounts
      are reflected in the preceding table based on the jurisdiction of the taxing
      authorities. Changes in enacted rates impact the tax provision in the year
      a
      rate change is enacted.




Deferred
      income taxes are provided for the effects of temporary differences between
      the
      amounts of assets and liabilities recognized for financial reporting purposes
      and the amounts recognized for income tax purposes. The deferred tax assets
      and
      liabilities are determined by applying the enacted jurisdictional tax rate
      in
      the year in which the temporary difference is expected to
      reverse.




The
      tax
      effects of the major items recorded as deferred income tax assets and
      liabilities are as follows:




*(in
                thousands)*
            
            **December
                30, 2006**
            
            **December
                31, 2005**Current
                deferred income tax assets:Deferred
                revenue
            
            $
            4,777
            
            $
            1,709Other
                current reserves and accruals
            
            
            1,802
            
            
            811Total
                current deferred income tax assets
            
            
            6,579
            
            
            2,520Noncurrent
                deferred income tax assets:Net
                operating losses
            
            
            48,453
            
            
            26,390Research
                and development and other credit carryforwards
            
            
            298
            
            
            2,234Capitalized
                start-up expenses
            
            
            24,613
            
            
            13,635Capitalized
                research and experimentation expenditures
            
            
            761
            
            
            2,544Other
                noncurrent reserves and accruals
            
            
            2,532
            
            
            246Total
                noncurrent deferred income tax assets
            
            
            76,657
            
            
            45,049Noncurrent
                deferred income tax liabilities:Fixed
                assets and other intangible assets
            
            
            (580
            )
            
            (6,155
            )Intangible
                assets not subject to amortization
            
            
            (75,774
            )
            
            —Total
                noncurrent deferred income tax liabilities
            
            
            (76,354
            )
            
            (6,155
            )Valuation
                allowance
            
            
            (82,656
            )
            
            (41,414
            )Net
                deferred income tax liability
            
            $
            (75,774
            )
            $
            —




Reconciliations
      of the U.S. statutory income tax rate to the effective tax rate are as
      follows:




**Year
                Ended December 30, 2006**
            
            **Inception**
              **(April
                13, 2005) to December 31, 2005**Federal
                statutory rate
            
            
            (35.0
            )%
            
            (35.0
            )%State
                taxes, net of federal effect
            
            
            0.0
            
            
            0.0Effect
                of non-consolidated affiliates
            
            
            3.2
            
            
            (1.3
            )In-process
                research and development
            
            
            1.2
            
            
            4.1Increase
                in valuation allowance
            
            
            30.1
            
            
            37.6Other
            
            
            0.5
            
            
            (4.5
            )Total
                provision for taxes
            
            
            0.0
            %
            
            0.9
            %








As
      of
      December 30, 2006, the NextWave’s U.S. operations are included in a consolidated
      federal income tax return. The amount of current and deferred income tax expense
      is computed on a separate entity basis for each member of the group based on
      applying the principles of SFAS 109. Prior to the corporate conversion
      transaction on November 13, 2006, the assets and liabilities of NextWave
      Wireless Inc. were recorded on the balance sheet of NextWave Wireless LLC,
      which
      was classified as a partnership for U.S. federal and state income tax purposes.
      Therefore, NextWave Wireless LLC’s income or loss generally was not subject to
      federal or state income tax or benefit at the entity level. Accordingly,
      NextWave's provision for income taxes consists of the aggregate of income tax
      or
      benefit generated by its corporate subsidiaries, without including taxes or
      benefit on income or loss of NextWave Wireless LLC. Foreign taxes are recorded
      on a separate entity level based on applicable jurisdictional income tax
      rates.




98




As
      of
      December 30, 2006 NextWave had $111.0 million in federal net operating losses
      that will begin to expire beginning 2018. As of December 30, 2006, NextWave
      had $103.9 million in state net operating loss carryforwards that will begin
      to
      expire beginning 2010 and $3.7 million in foreign net operating loss
      carryforwards, a majority of which will expire in 2007 and
      2008. Utilization of certain net operating loss carryforwards are subject
      to an annual limitation due to the ownership change limitations provided by
      Internal Revenue Code Section 382 and similar state provisions. In addition,
      NextWave has a limited history of operations and it is uncertain at this time
      whether it will be able to utilize these carryforwards. As of December 30,
      2006
      NextWave had $0.3 million of foreign investment tax credit carryforwards which
      will begin to expire in 2011.




NextWave
      increased its federal, state and foreign valuation allowance during 2006 by
      $41.3 million, from $41.4 million to $82.7 million, due to the increase in
      its
      net deferred tax asset balance. The increase consists of $42.6 million related
      to the valuation allowance for amounts recorded in income from continuing
      operations and $0.1 million related to amounts recorded in other comprehensive
      income. The increases are offset by a decrease of $1.4 million related to the
      valuation allowance for amounts recorded as goodwill, which relate primarily
      to
      the Corporate Conversion Merger and acquisition of PacketVideo Corporation.
      At
      December 30, 2006, the balance of the valuation allowance the reversal of which
      would be offset by goodwill equals $22.2 million.




In
      2006,
      in accordance with SFAS 142, a deferred income tax liability for U.S. and state
      and local income taxes of $75.8, related to intangible assets with an indefinite
      life, was not netted against deferred tax assets when establishing the above
      valuation allowance. The valuation allowances as of December 30, 2006 and
      December 31, 2005 are attributable to deferred tax assets related to income
      tax
      loss carryforwards, mostly in the U.S., including certain states, as well as
      other net deferred tax assets, for which it is more likely than not that the
      related tax benefits will not be realized. It is NextWave’s policy that the
      valuation allowance is decreased or increased in the year management determines
      that it is more likely than not that the deferred tax assets will be realized
      or
      not.




At
      December 30, 2006, NextWave had undistributed foreign earnings of
      $0.6 million, which it intends to be permanently reinvested and,
      accordingly, a deferred income tax liability has not been established on those
      earnings.




As
      of
      December 30, 2006 and December 31, 2005, in accordance with SFAS 5, NextWave
      reviewed its tax positions in the U.S. and foreign jurisdictions and determined
      that an additional liability for potential assessments is not needed. If any
      liability had been recorded, it would have increased NextWave’s effective income
      tax rate in 2006 or 2005. The provisions of Financial Interpretation Number
      48
      (“FIN48”) will be effective for NextWave’s accounting year beginning December
      31, 2006 and will supersede the guidance provided in SFAS 5 for measuring and
      recording liabilities in the financial statements related to tax positions
      taken
      or expected to be taken on a tax return. FIN 48 will prescribe revised criteria
      for a recognition threshold and measurement process for recording in the
      financial statements uncertain tax positions taken or expected to be taken
      in a
      tax return. NextWave believes that the adoption of FIN 48 will not have a
      material effect on its financial statements.




**9.
      Stockholders’/Members’ Equity**




***NextWave
      Wireless Inc. Preferred and Common Stock***




NextWave
      has authorized 25 million shares of preferred stock, of which no shares were
      issued or outstanding at December 30, 2006. Shares of the preferred stock may
      be
      issued in any number of series as determined by the board of directors. The
      board of directors is also authorized to define the terms of the preferred
      shares, including voting rights, liquidation preferences, conversion and
      redemption provisions and dividend rates.




NextWave
      has authorized 400 million shares of common stock, of which 83.7 million were
      issued and outstanding at December 30, 2006, including 232,000 restricted shares
      and 1,000 shares held in treasury. At December 30, 2006, NextWave had the
      following common shares reserved for future issuance upon the exercise or
      issuance of the respective equity instruments:




*(in
                thousands)*Stock
                options:Granted
                and outstanding
            
            
            10,934Available
                for future grants
            
            
            1,747Warrants
            
            
            3,10615,787




99




***NextWave
      Wireless LLC Membership Interests***




Prior
      to
      the corporate conversion in November 2006, NextWave was a limited liability
      company under the Delaware Limited Liability Company Act (the “Act”) and capital
      consisted of LLC interests, of which 488.7 million LLC interests were issued
      and
      outstanding at December 31, 2005. Distributions to members, as declared by
      the
      board of managers, were made in accordance with the member’s percentage interest
      in NextWave. Distributions to members were made when required to satisfy their
      tax liability attributable to allocations of income, gain, loss, deduction
      and
      credit of NextWave in any calendar year for which an allocation was required.
      Because NextWave Wireless LLC was classified as a partnership for federal income
      tax purposes, each member was required, in determining its own taxable income,
      to take into account its pro rata share of NextWave’s income, loss deduction or
      credit, generally with the same character as if realized directly by such
      member, regardless of the amount of cash, if any, distributed by NextWave to
      such member in such taxable year. Distributions declared during the period
      from
      January 1, 2006 to the date of the corporate conversion totaled $3.5 million,
      of
      which $2.0 million was payable as of December 30, 2006. No distributions were
      made during the period from inception (April 13, 2005) to December 31,
      2005.




**10.
      Equity Compensation Plans**




***NextWave
      Stock Option Plans***




NextWave
      has two stock option plans: the NextWave Wireless Inc. 2005 Stock Incentive
      Plan
      and the CYGNUS Communications, Inc. 2004 Stock Option Plan. These plans provide
      for the issuance of nonqualified stock options, or restricted,
      performance-based, bonus, phantom or other share-based awards to eligible
      employees, directors and consultants to purchase shares of NextWave’s common
      stock. The prices, terms and conditions of the options and awards granted under
      the 2005 Stock Incentive Plan are established by the compensation committee
      of
      the board of directors at the time of each grant. All options granted under
      this
      plan prior to the Corporate Conversion Merger provide for the early exercise
      of
      unvested options, provided that shares from the exercise of an unvested option
      be held in escrow by NextWave subject to right of repurchase conditions as
      described in the respective agreement. The prices, terms and conditions of
      the
      options granted under the 2004 Stock Option Plan are determined by the board
      of
      directors of CYGNUS at the time of each grant. Outstanding options generally
      vest over four years and have a maximum term of 10 years.




In
      June
      2006, the NextWave Wireless LLC board of managers and members holding a majority
      of NextWave Wireless LLC’s membership interests approved an amendment to the
      plan to provide the equivalent of an additional 3.3 million common shares for
      awards under the 2005 Stock Incentive Plan. The CYGNUS plan, as amended in
      February 2006, provided for the conversion of each CYGNUS option, whether issued
      or unissued, into the right to purchase .05097 shares of NextWave common stock
      upon the Corporate Conversion Merger. The exchange of 314,000 options
      outstanding at the time of conversion was accounted for as a modification
      resulting from an exchange of options in a business combination under SFAS
      123(R). At December 30, 2006, NextWave may issue up to 12,681,000 common shares
      under its two plans, of which 10,934,000 are granted and outstanding options
      and
      1,747,000 are available for future grants.




The
      following table summarizes the status of these plans at December 30, 2006 and
      activity during the year ended December 30, 2006:




**Options**
              **(in
                thousands)**
            
            **Weighted
                Average Exercise Price per Share**
            
            **Weighted
                Average Remaining Contractual Term**
              **(in
                Years)**
            
            **Aggregate
                Intrinsic Value**
              **(in
                thousands)**Outstanding
                at December 31, 2005
            
            
            6,611
            
            $
            5.78Granted
            
            
            5,283
            
            $
            6.43Exercised
            
            
            (267
            )
            $
            5.45Cancellation
                of awards modified
            
            
            (314
            )
            $
            2.23Canceled
            
            
            (379
            )
            $
            5.71Outstanding
                at December 30, 2006
            
            
            10,934
            
            $
            6.20
            
            
            8.8
            
            $
            49,477Exercisable
                at December 30, 2006
            
            
            10,132
            
            $
            5.91
            
            
            8.7
            
            $
            48,800





100




The
      following table summarizes the status of unvested options under these two plans
      as of December 30, 2006 and changes during the year ended December 30,
      2006:




**Options**
              **(in
                thousands)**
            
            **Weighted
                Average Grant Date Fair Value per Share**Unvested
                at December 31, 2005
            
            
            5,522
            
            $
            —(1)Granted
            
            
            5,283
            
            $
            3.13Vested
            
            
            (2,907
            )
            $
            1.03(1)Effective
                cancellation of unvested awards modified
            
            
            (174
            )
            $
            0.02(1)Canceled
            
            
            (368
            )
            $
            0.35(1)Early
                exercise of unvested options
            
            
            (5
            )
            $
            1.14(1)Unvested
                at December 30, 2006
            
            
            7,351
            
            $
            1.82(1)




(1)  The
      weighted average grant date fair value per share includes options granted prior
      to January 1, 2006 which have no grant date fair value assigned as NextWave
      has
      adopted the provisions of SFAS 123(R) using the prospective transition method,
      whereby it continues to account for unvested equity awards to employees
      outstanding at December 31, 2005 using APB 25, and apply SFAS 123(R) to all
      awards granted or modified after that date.




NextWave
      received cash from the exercise of stock options under these plans of $1.5
      million and $0.1 million, with no related tax benefits, during the year ended
      December 30, 2006 and during the period from inception (April 13, 2005) to
      December 31, 2005, respectively. The intrinsic value of options exercised during
      the year ended December 30, 2006, and for the period from inception (April
      13,
      2005) to December 31, 2005, totaled $53,000 and $105,000,
      respectively.




***PacketVideo
      2005 Equity Incentive Plan***




The
      PacketVideo 2005 Equity Incentive Plan provides for the issuance of stock
      options, stock bonuses or restricted stock to employees, directors and
      consultants of PacketVideo or its affiliates. Outstanding options generally
      vest
      over four years, and have a maximum term of 10 years. In September 2006, the
      PacketVideo board of directors approved an amendment to the plan to provide
      an
      additional 1,750,000 shares for awards under the plan. At December 30, 2006,
      PacketVideo may issue up to 11,000,000 shares of common stock of PacketVideo
      under this plan, of which 9,399,000 are granted and outstanding options and
      1,601,000 are available for future grants.




The
      following table summarizes the status of the PacketVideo plan at December 30,
      2006 and activity during the year ended December 30, 2006:




**Options**
              **(in
                thousands)**
            
            **Weighted
                Average Exercise Price per Share**
            
            **Weighted
                Average Remaining Contractual Term**
              **(in
                Years)**
            
            **Aggregate
                Intrinsic Value (in thousands)**Outstanding
                at December 31, 2005
            
            
            8,225
            
            $
            1.00Granted
            
            
            1,459
            
            $
            1.00Forfeited
            
            
            (285
            )
            $
            1.00Outstanding
                at December 30, 2006
            
            
            9,399
            
            $
            1.00
            
            
            5.7
            
            $
            7,426Exercisable
                at December 30, 2006
            
            
            2,812
            
            $
            1.00
            
            
            5.6
            
            $
            2,222




101




The
      following table summarizes the status of PacketVideo’s unvested options as of
      December 30, 2006 and changes during the year ended December 30,
      2006:




**Options**
              **(in
                thousands)**
            
            **Weighted
                Average Grant Date Fair Value per Share**Unvested
                at December 31, 2005
            
            
            8,225
            
            $
            —(1)Granted
            
            
            1,459
            
            $
            0.42Vested
            
            
            (2,815
            )
            $
            —(1)Forfeited
            
            
            (282
            )
            $
            0.04(1)Unvested
                at December 30, 2006
            
            
            6,587
            
            $
            0.09(1)




(1)  The
      weighted average grant date fair value per share includes options granted prior
      to January 1, 2006 which have no grant dat e
      fair
      value assigned as NextWave has adopted the provisions of SFAS 123(R) using
      the
      prospective transition method, whereby it continues to account for unvested
      equity awards to employees outstanding at December 31, 2005 using APB 25, and
      apply SFAS 123(R) to all awards granted or modified after that
      date.




There
      were no exercises of stock options under this plan during the year ended
      December 30, 2006 or during the period from inception (April 13, 2005) to
      December 31, 2005. On January 3, 2007, concurrent with the listing of NextWave’s
      common stock on Nasdaq, an option to purchase one share of common stock of
      NextWave for $6.00 per share was issued for every six options to purchase shares
      of common stock of PacketVideo. The exchange will be accounted for as a
      modification under SFAS 123(R) during fiscal year 2007 and is expected to result
      in additional compensation expense.




**Non-Employee
      Share-Based Compensation**




NextWave
      issues options from its 2005 Stock Incentive Plan, warrants and restricted
      stock
      to members of its Technical Developments Steering Committee and other strategic
      advisors. The following table summarizes the status of non-employee options
      and
      warrants at December 30, 2006 and activity during the year ended December 30,
      2006:




**Options
                and Warrants**
              **(in
                thousands)**
            
            **Weighted
                Average Exercise Price per Share**
            
            **Weighted
                Average Remaining Contractual Term**
              **(in
                Years)**
            
            **Aggregate
                Intrinsic Value**
              **(in
                thousands)**Outstanding
                at December 31, 2005
            
            
            500
            
            $
            6.00Granted
            
            
            287
            
            $
            7.97Outstanding
                at December 30, 2006
            
            
            787
            
            $
            6.72
            
            
            5.9
            
            $
            3,155Exercisable
                at December 30, 2006
            
            
            500
            
            $
            6.00
            
            
            5.6
            
            $
            2,365







The
      following table summarizes the status of unvested non-employee options and
      warrants as of December 30, 2006 and changes during the year ended December
      30,
      2006:




**Options
                and Warrants**
              **(in
                thousands)**
            
            **Weighted
                Average Fair Value per Share**Unvested
                at December 31, 2005
            
            
            333
            
            $
            2.48Granted
            
            
            287
            
            $
            7.24Vested
            
            
            (184
            )
            $
            2.91Unvested
                at December 30, 2006
            
            
            436
            
            $
            6.84





102




Under
      a
      related Subscription Agreement, the chairman of the Steering Committee purchased
      167,000 restricted common shares in July 2006 for $6.00 per share. NextWave
      has
      the right to repurchase these shares at $6.00 per share. This right lapses
      in
      equal monthly amounts through July 2010 while the technical advisor continues
      to
      provide services under the Steering Committee Agreement. At December 30, 2006,
      NextWave had the right to repurchase 149,000 of the interests and 18,000 of
      the
      repurchase rights had lapsed. No restricted shares were repurchased during
      the
      year ended December 30, 2006.




Share-based
      compensation expense related to these non-employee options, warrants and
      restricted shares was measured using the fair value method as prescribed by
      SFAS
      No. 123(R) and EITF 96-18, “Accounting for Equity Instruments That Are Issued to
      Other than Employees for Acquiring, or in Conjunction with Selling Goods or
      Services,” and totaled $0.8 million and $0.7 million during the year ended
      December 30, 2006 and during the period from inception (April 13, 2005) to
      December 31, 2005, respectively. The fair value assigned to the vested
      increments of these awards was estimated at the date of vesting and, for the
      unvested increments, at December 30, 2006, using the Black-Scholes
      option-pricing model based on the following weighted average assumptions applied
      during the year ended December 30, 2006:




**Options**
            
            **Warrants**
            
            **Restricted
                Common Shares**Risk-free
                interest rate
            
            
            4.54%-4.79
            %
            
            4.58%-4.68
            %
            
            4.57%-4.78
            %Expected
                life (in years)
            
            
            6.0-9.9
            
            
            3.0-4.0
            
            
            0.1-3.9Expected
                stock price volatility
            
            
            50
            %
            
            50
            %
            
            50
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %Weighted
                average fair value of awards
            
            $
            7.24
            
            $
            4.42
            
            $
            5.42




The
      fair
      value of the unvested increments will be remeasured at the end of each reporting
      period until vested, when the final fair value of the vesting increment is
      determined. Unamortized estimated share-based compensation totaled $3.5 million
      at December 30, 2006, and will be charged to results of operations with an
      offsetting increase to additional paid in capital in the consolidated balance
      sheet over a weighted average period of 2.6 years. None of these options or
      warrants were exercised during the year ended December 30, 2006 or during the
      period from inception (April 13, 2005) to December 31, 2005.




In
      connection with the warrants issued, under a related advisory services
      agreement, the advisor earned warrant exercise credits of $416,665 in January
      2006, and continues to earn $83,333 on the first day of each month thereafter,
      through the date of expiration of the agreement in September 2008. As of
      December 30, 2006, $1.3 million credits were earned. The warrant exercise
      credits may be used only as credits against the exercise price of the warrants.
      Expense related to the warrant exercise credits totaled $1.0 million and $0.3
      million during the year ended December 30, 2006 and during the period from
      inception (April 13, 2005) to December 31, 2005, respectively. Unamortized
      expense totaled $1.7 million at December 30, 2006, and will be charged to the
      results of operations with an offsetting increase to additional paid in capital
      in the consolidated balance sheet over the remaining vesting periods. Under
      the
      agreement, in the event that the advisor makes a significant contribution to
      a
      transaction in which NextWave acquires the use of a substantial amount of
      certain types of spectrum as specified in the agreement, NextWave would issue
      to
      the advisor 833,333 shares of common stock upon the completion of such
      transaction.




**11.
      401(k) Savings Plans**




NextWave
      maintains a defined contribution savings plan under Section 401(k) of
      the Internal Revenue Code covering substantially all of the employees of
      NextWave Broadband, Inc. NextWave also assumed PacketVideo’s and CYGNUS’ 401(k)
      defined contribution plans covering substantially all of the employees of
      PacketVideo and CYGNUS, respectively. Employees may make voluntary contributions
      to their respective plan as a percent of compensation, but not in excess of
      the
      maximum amounts allowed under the Internal Revenue Code. Employer contributions
      to the respective plans are discretionary and are not required. No employer
      contributions were made to these plans during the year ended December 30, 2006
      or during the period from inception (April 13, 2005) to December 31,
      2005.




103




**12.
      Supplemental Cash Flow Information**




Supplemental
      disclosure of cash flow information for the year ended December 30, 2006 and
      for
      the period from inception (April 13, 2005) to December 31, 2005 is as
      follows:




*(in
                thousands)*
            
            **Year
                Ended December 30,**
              **2006**
            
            **Inception**
              **(April
                13, 2005) to December 31,**
              **2005**Cash
                paid for income taxes
            
            $
            124
            
            $
            152Cash
                paid for interest
            
            
            —
            
            
            —Noncash
                investing and financing activities:Fair
                value of warrants issued in connection with the issuance of 7% Senior
                Secured Notes
            
            
            24,626
            
            
            —Wireless
                spectrum licenses acquired with lease obligations
            
            
            4,039
            
            
            —Membership
                interests issued for business acquisition
            
            
            1,558
            
            
            —




**13.
      Restatement of Previously Reported Interim Financial Statements and Quarterly
      Financial Data (unaudited)**




On
      March
      23, 2007, NextWave announced the need to adjust its financial results
      for the first three quarters of 2006 to reflect a correction in its accounting
      for certain revenue contracts and for the incorrect capitalization of certain
      engineering costs in its PacketVideo subsidiary. Specifically, NextWave
      determined that it was incorrectly deferring engineering design,
      maintenance and support and royalty revenues on contracts where post-contract
      customer support (“PCS”) was required and no separate objective evidence of its
      fair value, specific to Packet Video, existed for the PCS. NextWave also
      determined that it had incorrectly deferred certain engineering costs prior
      to
      achieving technological feasibility. The change has been made to defer
      revenue and related costs determined to be related to the PCS portion of the
      contract and to expense previously capitalized engineering costs.




The
      following interim unaudited condensed consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States for interim financial information and with the instructions to
      SEC
      Form 10-Q and Article 10 of SEC Regulation S-X. In NextWave’s opinion, this
      information has been prepared on a basis consistent with that of its audited
      consolidated financial statement and all necessary material adjustments,
      consisting of normal recurring accruals and adjustments, have been included
      to
      present fairly the unaudited quarterly and year-to-date financial data.
      NextWave’s quarterly results of operations for these periods are not necessarily
      indicative of future results of operations. They do not include all of the
      information and footnotes required by generally accepted account principles
      for
      complete financial statements. Therefore, these condensed consolidated financial
      statements should be read in conjunction with NextWave’s audited consolidated
      financial statements and notes thereto for the year ended December 30, 2006
      included in this Annual Report on Form 10-K.




The
      following table presents the impact of the change in revenues and related costs
      on NextWave’s previously reported consolidated statements of operations for the
      first three quarters of 2006:




**Three
                  Months Ended****April
                  1, 2006**
              
              **July
                  1, 2006**
              
              **September
                  30, 2006***(in
                  thousands)*
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated**
              
              **As
                  Reported**
              
              **Adjustments**
              
              **As
                  Restated****Consolidated
                  Statements of Operations**Revenues
              
              $
              5,673
              
              $
              (1,768
              )
              $
              3,905
              
              $
              8,331
              
              $
              (2,038
              )
              $
              6,293
              
              $
              8,051
              
              $
              (1,381
              )
              $
              6,670Operating
                  expenses:Cost
                  of revenues
              
              
              2,686
              
              
              (879
              )
              
              1,807
              
              
              3,198
              
              
              (560
              )
              
              2,638
              
              
              4,568
              
              
              (1,062
              )
              
              3,506Engineering,
                  research and development
              
              
              10,233
              
              
              856
              
              
              11,089
              
              
              12,601
              
              
              693
              
              
              13,294
              
              
              11,455
              
              
              179
              
              
              11,634General
                  and administrative
              
              
              8,492
              
              
              —
              
              
              8,492
              
              
              12,140
              
              
              —
              
              
              12,140
              
              
              14,896
              
              
              —
              
              
              14,896Sales
                  and marketing
              
              
              1,613
              
              
              —
              
              
              1,613
              
              
              2,539
              
              
              —
              
              
              2,539
              
              
              2,992
              
              
              —
              
              
              2,992Purchased
                  in-process research and development
              
              
              —
              
              
              —
              
              
              —
              
              
              1,648
              
              
              —
              
              
              1,648
              
              
              —
              
              
              —
              
              
              —Total
                  operating expenses
              
              
              23,024
              
              
              (23
              )
              
              23,001
              
              
              32,126
              
              
              133
              
              
              32,259
              
              
              33,911
              
              
              (883
              )
              
              33,028Loss
                  from operations
              
              
              (17,351
              )
              
              (1,745
              )
              
              (19,096
              )
              
              (23,795
              )
              
              (2,171
              )
              
              (25,966
              )
              
              (25,860
              )
              
              (498
              )
              
              (26,358
              )Other
                  income (expense)Interest
                  income
              
              
              3,187
              
              
              —
              
              
              3,187
              
              
              3,197
              
              
              —
              
              
              3,197
              
              
              3,419
              
              
              —
              
              
              3,419Interest
                  expense
              
              
              (308
              )
              
              —
              
              
              (308
              )
              
              (366
              )
              
              —
              
              
              (366
              )
              
              (9,010
              )
              
              —
              
              
              (9,010
              )Other
                  income and expense, net
              
              
              (92
              )
              
              —
              
              
              (92
              )
              
              216
              
              
              —
              
              
              216
              
              
              (26
              )
              
              —
              
              
              (26
              )Total
                  other income (expense), net
              
              
              2,787
              
              
              —
              
              
              2,787
              
              
              3,047
              
              
              —
              
              
              3,047
              
              
              (5,617
              )
              
              —
              
              
              (5,617
              )Loss
                  before provision for income taxes and minority interest
              
              
              (14,564
              )
              
              (1,745
              )
              
              (16,309
              )
              
              (20,748
              )
              
              (2,171
              )
              
              (22,919
              )
              
              (31,477
              )
              
              (498
              )
              
              (31,975
              )Income
                  tax benefit (provision)
              
              
              209
              
              
              —
              
              
              209
              
              
              —
              
              
              —
              
              
              —
              
              
              (93
              )
              
              —
              
              
              (93
              )Minority
                  interest
              
              
              657
              
              
              —
              
              
              657
              
              
              214
              
              
              —
              
              
              214
              
              
              265
              
              
              —
              
              
              265Net
                  loss
              
              $
              (13,698
              )
              $
              (1,745
              )
              $
              (15,443
              )
              $
              (20,534
              )
              $
              (2,171
              )
              $
              (22,705
              )
              $
              (31,305
              )
              $
              (498
              )
              $
              (31,803
              )




104




The
      following table presents the impact of the change in revenues and related costs
      on NextWave’s previously-reported consolidated balance sheets for the first
      three interim reporting dates in 2006:




**April
                1, 2006**
            
            **July
                1, 2006**
            
            **September
                30, 2006***(in
                thousands)*
            
            **As
                Reported**
            
            **Adjustments**
            
            **As
                Restated**
            
            **As
                Reported**
            
            **Adjustments**
            
            **As
                Restated**
            
            **As
                Reported**
            
            **Adjustments**
            
            **As
                Restated****Consolidated
                Balance Sheets****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            99,871
            
            $
            —
            
            $
            99,871
            
            $
            30,643
            
            $
            —
            
            $
            30,643
            
            $
            25,371
            
            $
            —
            
            $
            25,371Short-term
                investments
            
            
            266,716
            
            
            —
            
            
            266,716
            
            
            309,794
            
            
            —
            
            
            309,794
            
            
            196,801
            
            
            —
            
            
            196,801Accounts
                receivable, net
            
            
            2,235
            
            
            —
            
            
            2,235
            
            
            5,206
            
            
            —
            
            
            5,206
            
            
            5,728
            
            
            —
            
            
            5,728Deposits
                for wireless spectrum bids
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            142,866
            
            
            —
            
            
            142,866Deferred
                contract costs
            
            
            1,456
            
            
            21
            
            
            1,477
            
            
            2,105
            
            
            (110
            )
            
            1,995
            
            
            2,242
            
            
            772
            
            
            3,014Prepaid
                expenses and other current assets
            
            
            5,745
            
            
            —
            
            
            5,745
            
            
            8,518
            
            
            —
            
            
            8,518
            
            
            7,252
            
            
            —
            
            
            7,252Total
                current assets
            
            
            376,023
            
            
            21
            
            
            376,044
            
            
            356,266
            
            
            (110
            )
            
            356,156
            
            
            380,260
            
            
            772
            
            
            381,032Restricted
                cash
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            76,792
            
            
            —
            
            
            76,792Wireless
                spectrum licenses, net
            
            
            130,889
            
            
            —
            
            
            130,889
            
            
            130,374
            
            
            —
            
            
            130,374
            
            
            374,137
            
            
            —
            
            
            374,137Goodwill
            
            
            27,001
            
            
            —
            
            
            27,001
            
            
            32,936
            
            
            —
            
            
            32,936
            
            
            32,829
            
            
            —
            
            
            32,829Other
                intangible assets, net
            
            
            17,449
            
            
            —
            
            
            17,449
            
            
            16,846
            
            
            —
            
            
            16,846
            
            
            16,306
            
            
            —
            
            
            16,306Property
                and equipment, net
            
            
            15,040
            
            
            —
            
            
            15,040
            
            
            14,632
            
            
            —
            
            
            14,632
            
            
            16,796
            
            
            —
            
            
            16,796Prepaid
                expenses and other noncurrent assets
            
            
            7,708
            
            
            —
            
            
            7,708
            
            
            6,761
            
            
            —
            
            
            6,761
            
            
            8,279
            
            
            —
            
            
            8,279Total
                assets
            
            $
            574,110
            
            $
            21
            
            $
            574,131
            
            $
            557,815
            
            $
            (110
            )
            $
            557,705
            
            $
            905,399
            
            $
            772
            
            $
            906,171**LIABILITIES
                AND MEMBERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            4,488
            
            $
            —
            
            $
            4,488
            
            $
            2,274
            
            $
            —
            
            $
            2,274
            
            $
            2,369
            
            $
            —
            
            $
            2,369Accrued
                expenses
            
            
            7,058
            
            
            —
            
            
            7,058
            
            
            12,104
            
            
            —
            
            
            12,104
            
            
            19,465
            
            
            —
            
            
            19,465Current
                portion of long-term obligations
            
            
            2,575
            
            
            —
            
            
            2,575
            
            
            2,822
            
            
            —
            
            
            2,822
            
            
            2,681
            
            
            —
            
            
            2,681Deferred
                revenue
            
            
            4,021
            
            
            1,766
            
            
            5,787
            
            
            3,100
            
            
            3,806
            
            
            6,906
            
            
            2,867
            
            
            5,186
            
            
            8,053Current
                tax liability
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            40
            
            
            —
            
            
            40Other
                current liabilities and deferred credits
            
            
            755
            
            
            —
            
            
            755
            
            
            1,009
            
            
            —
            
            
            1,009
            
            
            961
            
            
            —
            
            
            961Total
                current liabilities
            
            
            18,897
            
            
            1,766
            
            
            20,663
            
            
            21,309
            
            
            3,806
            
            
            25,115
            
            
            28,383
            
            
            5,186
            
            
            33,569Deferred
                income tax liabilities
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            67,673
            
            
            —
            
            
            67,673Long-term
                deferred credits and reserves
            
            
            8,203
            
            
            —
            
            
            8,203
            
            
            8,575
            
            
            —
            
            
            8,575
            
            
            8,243
            
            
            —
            
            
            8,243Long-term
                obligations
            
            
            15,311
            
            
            —
            
            
            15,311
            
            
            15,661
            
            
            —
            
            
            15,661
            
            
            292,310
            
            
            —
            
            
            292,310Minority
                interest in subsidiary
            
            
            889
            
            
            —
            
            
            889
            
            
            1,143
            
            
            —
            
            
            1,143
            
            
            884
            
            
            —
            
            
            884Commitments
                and contingenciesMembers’
                equity:Membership
                interests
            
            
            591,452
            
            
            —
            
            
            591,452
            
            
            592,389
            
            
            —
            
            
            592,389
            
            
            619,966
            
            
            —
            
            
            619,966Accumulated
                other comprehensive loss
            
            
            (992
            )
            
            —
            
            
            (992
            )
            
            (1,078
            )
            
            —
            
            
            (1,078
            )
            
            (571
            )
            
            —
            
            
            (571
            )Accumulated
                deficit
            
            
            (59,650
            )
            
            (1,745
            )
            
            (61,395
            )
            
            (80,184
            )
            
            (3,916
            )
            
            (84,100
            )
            
            (111,489
            )
            
            (4,414
            )
            
            (115,903
            )Total
                members’ equity
            
            
            530,810
            
            
            (1,745
            )
            
            529,065
            
            
            511,127
            
            
            (3,916
            )
            
            507,211
            
            
            507,906
            
            
            (4,414
            )
            
            503,492Total
                liabilities and members’ equity
            
            $
            574,110
            
            $
            21
            
            $
            574,131
            
            $
            557,815
            
            $
            (110
            )
            $
            557,705
            
            $
            905,399
            
            $
            772
            
            $
            906,171




105




The
      following table summarizes NextWave’s operating results by quarter for the year
      ended December 30, 2006, which have been restated for the item discussed above,
      and for the period from inception (April 13, 2005) to December 31,
      2005:




*(in
                thousands, except per share data)*
            
            **First**
              **Quarter**
            
            **Second**
              **Quarter**
            
            **Third**
              **Quarter**
            
            **Fourth**
              **Quarter**
            
            **Total****Year
                Ended December 30, 2006(1)(2):**
            
            **(Restated)**
            
            **(Restated)**
            
            **(Restated)**Revenues
            
            $
            3,905
            
            $
            6,293
            
            $
            6,670
            
            $
            7,416
            
            $
            24,284Net
                loss
            
            $
            (15,443
            )
            $
            (22,705
            )
            $
            (31,803
            )
            $
            (35,069
            )
            $
            (105,020
            )Basic
                and diluted net loss per common share(3)
            
            $
            (0.19
            )
            $
            (0.28
            )
            $
            (0.39
            )
            $
            (0.43
            )
            $
            (1.28
            )**First****Quarter**
            
            
            **Second**
              **Quarter**
            
            
            **Third**
              **Quarter**
            
            
            **Fourth**
              **Quarter**
            
            
            **Total****Period
                from Inception (April 13, 2005) to December 31,
                2005(2):**Revenues
            
            
            N/A
            
            $
            148
            
            $
            1,202
            
            $
            2,794
            
            $
            4,144Net
                loss(3)
            
            
            N/A
            
            $
            (2,948
            )
            $
            (16,653
            )
            $
            (26,351
            )
            $
            (45,952
            )




(1)
            Effective
                January 1, 2006, NextWave changed its fiscal year end and quarterly
                reporting periods from quarterly calendar periods ending on December
                31 to
                a 52-53 week fiscal year ending on the Saturday nearest to December
                31 of
                the current calendar year or the following calendar year. Fiscal
                year 2006
                is a 52-week year ending on December 30, 2006 and each of the four
                quarters in 2006 include 13 weeks.




(2)
            The
                results of operations of PacketVideo Corporation and Inquam Broadband
                Holding, Inc. are included as of July 19, 2005 and January 6, 2006,
                the
                respective dates of the acquisitions, which affects the comparability
                of
                the Quarterly Financial Data. During 2006, NextWave also completed
                other
                acquisitions that were not material and their results of operations
                have
                been included from their respective dates of
                acquisition.




(3)
            Loss
                per share information is not presented for the period from inception
                (April 13, 2005) to December 31, 2005 as it would not be meaningful
                due to
                the Corporate Conversion Merger.




**14.
      Subsequent Events**




On
      March
      28, 2007, NextWave issued and sold 355,000 shares of its Series A Senior
      Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of
      $1,000 per share. The Series A Preferred Stock was issued in a private placement
      transaction exempt from the registration requirements of the Securities Act
      of
      1933. NextWave received $351 million in
      net
      proceeds from the sale of the Series A Preferred Stock. The net proceeds will
      be
      used to fund operations, accelerate the development of new wireless
      technologies, expand the company’s business and enable future strategic
      acquisitions. The purchasers of the Series A Preferred Stock include, in
      addition to other investment funds and institutional investors, Navation, Inc.,
      an entity owned by Allen Salmasi, NextWave’s Chairman and Chief Executive
      Officer, Manchester Financial Group, L.P., an entity indirectly owned and
      controlled by Douglas F. Manchester, a member of NextWave’s Board of Directors,
      and affiliates of Avenue Capital, of which a member of NextWave’s Board of
      Directors, Robert Symington, is a portfolio manager.




The
      Series A Preferred Stock has an initial liquidation preference of $1,000 per
      share, subject to increase for accrued dividends as described below. The
      liquidation preference would become payable upon redemption, as described below,
      upon a liquidation or dissolution of NextWave, or upon deemed liquidation events
      including a change in control, merger or sale of all or substantially all
      NextWave’s assets, in which case the Series A Preferred Stock will be entitled
      to receive an amount per share equal to the greater of 120% of the liquidation
      preference or the amount that would have been received if such share had
      converted into common stock in connection with such deemed liquidation
      event.




106




Each
      share of Series A Preferred Stock is convertible into a number of shares of
      NextWave’s common stock equal to the liquidation preference then in effect
      divided by $11.05 and is convertible at any time at the option of the holder,
      or
      at NextWave’s election after the 18-month anniversary of issuance, subject to
      the trading price of NextWave’s common stock reaching $22.10 for a specified
      period of time, subject to adjustment. NextWave will not be entitled to convert
      the Series A Preferred Stock at its election unless a shelf registration
      statement covering the shares of common stock issued upon conversion is then
      effective or the shares are no longer considered restricted securities under
      the
      Securities Act.




The
      Series A Preferred Stock is entitled to receive quarterly dividends on the
      liquidation preference at a rate of 7.5% per annum. Until the fourth anniversary
      of issuance, NextWave can elect whether to declare dividends in cash or to
      not
      declare and pay dividends, in which case the per share dividend amount will
      be
      added to the liquidation preference. From and after the fourth anniversary
      of
      issuance, NextWave must declare dividends in cash each quarter, subject to
      applicable law. The dividend rate is subject to adjustment to 10% per annum
      if
      NextWave defaults in its dividend payment obligations, or certain registration
      obligations. The dividend rate is subject to adjustment to 15% per annum if
      NextWave fails to comply with the protective covenants of the Series A Preferred
      Stock described below and to 18% per annum if NextWave fails to convert or
      redeem the Series A Preferred Stock when required to do so.




Pursuant
      to the terms of the Series A Preferred Stock, so long as at least 25% of the
      issued shares of Series A Preferred Stock remain outstanding, and until the
      date
      on which NextWave elects to redeem all shares of Series A Preferred Stock in
      connection with an asset sale, as described below, NextWave must receive the
      approval of the holders of shares representing at least 75% of the Series A
      Preferred Stock then outstanding to (i) incur indebtedness in excess of $500
      million, subject to certain adjustments and exceptions, (ii) create any capital
      stock that is senior to or on a parity with the Series A Preferred Stock, or
      (iii) consummate asset sales involving the receipt of gross proceeds of, or
      the
      disposition of assets worth, $500 million or more. In addition, so long as
      at
      least 25% of the issued shares of Series A Preferred Stock remain outstanding,
      NextWave may not distribute rights or warrants to all holders of its common
      stock entitling them to purchase shares of its common stock, or consummate
      any
      sale of its common stock, for an amount less than the fair market value on
      the
      date of issuance, with certain exceptions. With respect to other matters
      requiring stockholder approval, the shares of Series A Preferred Stock will
      be
      entitled to vote as one class with the common stock on an as-converted
      basis.




NextWave
      will be required to redeem all outstanding shares of Series A Preferred Stock,
      if any, on March 28, 2017, at a price equal to the liquidation preference plus
      unpaid dividends. If NextWave elects to convert the Series A Preferred Stock
      after its common stock price has reached the qualifying threshold, NextWave
      must
      redeem the shares of holders of Series A Preferred Stock who elect not to
      convert into common stock at a price equal to 130% of the liquidation
      preference. However, NextWave is not required to redeem more than 50% of the
      shares of Series A Preferred Stock subject to any particular conversion notice.
      In the event that NextWave fails to obtain approval of the holders of Series
      A
      Preferred Stock to an asset sale transaction, NextWave must either not
      consummate such asset sale or elect to redeem all shares of Series A Preferred
      Stock at a redemption price equal to 120% of the liquidation preference. Holders
      will be entitled to opt-out of such a redemption.




***Acquisitions***




In
      December 2006, PacketVideo signed a share purchase agreement to acquire all
      of the shares of SDC Secure Digital Container AG for cash of $19.0 million.
      The
      acquisition was completed in January 2007 and will be accounted for in the
      first
      quarter of 2007 using the purchase method of accounting whereby the total
      purchase price, including any transaction related expenses, will be allocated
      to
      tangible and intangible assets acquired based upon their respective fair
      values.




In
      February 2007, NextWave acquired all of the outstanding common stock and
      warrants of GO Networks, Inc., a privately-held company headquartered in
      Mountain View, CA with research and development facilities in Tel Aviv, Israel
      for $13.2 million plus the assumption of $6.7 million in debt, of which $1.3
      million was paid at closing. GO Networks develops advanced mobile Wi-Fi network
      solutions for service providers. The primary reason for the acquisition is
      intended to complement NextWave’s WiMAX product line with wide-area and
      local-area wireless broadband services using stand-alone or integrated
      Wi-Fi/WiMAX solutions that utilize both licensed and license-exempt spectrum.
      Additional purchase consideration of up to $25.7 million may be paid in shares
      of NextWave common stock, subject to the achievement of certain operational
      milestones in the 18-month period subsequent to the closing of the acquisition.
      The acquisition will be accounted for in the first quarter of 2007 using the
      purchase method of accounting whereby the total purchase price, including any
      transaction related expenses, will be allocated to tangible and intangible
      assets acquired based upon their respective fair values. NextWave also adopted
      the GO Networks Employee Stock Bonus Plan, whereby a select group of employees
      may receive up to an aggregate of $5.0 million in shares of NextWave common
      stock upon the achievement of certain operational milestones in the 18-month
      period subsequent to the closing of the acquisition.




107




In
      March
      2007, NextWave acquired all of the outstanding shares of common stock of 4253311
      Canada Inc., a Canadian company. The total cost of the acquisition is expected
      to be approximately $26.0 million in cash. The assets of the company are
      comprised almost entirely of wireless spectrum.




108




**NEXTWAVE
      WIRELESS INC.**




**Schedule
      II—Valuation and Qualifying Accounts**




*(in
                thousands)*
            
            **Balance
                at Beginning of Period**
            
            **Net
                Additions Charged (Credited) to Expense**
            
            **Additions**
              **Acquired**
              **from
                Business**
              **Combinations**
            
            **Deductions****(1)**
            
            **Balance
                at**
              **End
                of**
              **Period****Year
                Ended December 30, 2006:**Allowance
                for doubtful accounts
            
            $
            391
            
            $
            236
            
            $
            —
            
            $
            (306
            )
            $
            321Reserve
                for contract termination fee
            
            $
            7,121
            
            $
            (7,121
            )
            $
            —
            
            $
            —
            
            $
            —Unfavorable
                lease liability
            
            $
            1,037
            
            $
            75
            
            $
            318
            
            $
            (442
            )
            $
            988**Period
                from Inception (April 13, 2005) to December 31,
                2005:**Allowance
                for doubtful accounts
            
            $
            —
            
            $
            218
            
            $
            195
            
            $
            (22
            )
            $
            391Reserve
                for contract termination fee
            
            $
            —
            
            $
            7,121
            
            $
            —
            
            $
            —
            
            $
            7,121Unfavorable
                lease liability
            
            $
            1,260
            
            $
            67
            
            $
            —
            
            $
            (290
            )
            $
            1,037





(1) 
       Deduction for allowance for doubtful accounts is for accounts receivable
      balances written-off. Deduction for the unfavorable lease liability
      represents amounts paid in cash.




109




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





Not
      applicable.





**ITEM 9A.**  **Controls
      and Procedures**





**Conclusion
      Regarding the Effectiveness of Disclosure Controls and
      Procedures**




We
      maintain disclosure controls and procedures, as such term is defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”), that are designed to provide reasonable assurance
      that information required to be disclosed by us in the reports that we file
      or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC rules and forms, and that such
      information is accumulated and communicated to our management, including our
      principal executive officer and principal financial officer, as appropriate,
      to
      allow timely decisions regarding required financial disclosures. Because of
      inherent limitations, our disclosure controls and procedures, no matter how
      well
      designed and operated, can provide only reasonable, and not absolute, assurance
      that the objectives of such disclosure controls and procedures are
      met.




As
      of the
      end of the period covered by this Report, our principal executive officer and
      principal financial officer concluded that our disclosure controls and
      procedures were not effective as of December 30, 2006. In particular, in
      connection with the restatement of our previously issued unaudited quarterly
      financial statements, management identified certain control deficiencies that
      represent a material weakness in our internal control over financial reporting,
      as more fully described below. As a result of the restatement of our previously
      issued unaudited quarterly financial statements and notwithstanding the material
      weakness described below, management believes that the consolidated financial
      statements included in this Report fairly present, in all material respects,
      our
      financial position, results of operations and cash flows for the periods
      presented.




Management
      determined that its unaudited financial statements for the quarterly periods
      ended March 31, 2006, June 30, 2006 and September 30, 2006 should no longer
      be
      relied upon as a result of a required correction in its revenue recognition
      under certain software contracts of our PacketVideo Corporation (“PacketVideo”)
      subsidiary and the incorrect deferral of certain software development costs
      at
      PacketVideo.





PacketVideo
      recognized revenue from certain software arrangements that provide for ongoing
      maintenance and support in the incorrect reporting periods. The contracts
      subject to the restatement typically include engineering and development work,
      royalty revenue and postcontract customer support (“PCS”). The total revenue
      recognized over the term of the arrangements will remain unchanged. The
      Company has made an adjustment to the timing of the recognition of
      revenue, and the related costs, under software contracts which contain PCS.
      The
      Company will recognize the revenue and associated costs over the entire PCS
      period. In addition, the Company has also adjusted the quarterly results to
      expense previously deferred costs, classified as pre-contract development costs,
      into engineering, research and development.





Additionally,
      the Company has determined that there was a material weakness in its internal
      control over financial reporting relating to revenue recognition pursuant to
      software contracts of PacketVideo. The Company’s failure to properly apply
      software revenue recognition principles resulted from a lack of a sufficient
      number of employees with appropriate levels of knowledge, expertise and training
      in the application of generally accepted accounting principles relevant to
      software revenue recognition. The Company will be required to provide an
      assessment of the effectiveness of the Company’s internal control structure and
      procedures for financial reporting when it files its Annual Report on Form
      10-K
      for the fiscal year ended December 29, 2007. Management will promptly take
      action to remediate the material weakness described above based on an evaluation
      of the accounting staffing, systems, policies and procedures relating to revenue
      recognition at PacketVideo.





**ITEM 9B.**  **Other
      Information**








**I****ssuance
      of Series A Senior Convertible Preferred Stock**




On
      March
      28, 2007, we issued and sold 355,000 shares of our Series A Senior Convertible
      Preferred Stock (the “Series A Preferred Stock”) at a price of $1,000 per share.
      We received $355 million in gross product from the sale of the Series A
      Preferred Stock, which after reduction for financial advisor fees of
      approximately $3.4 million and additional fees resulted in $351 million in
      net
      proceeds. The net proceeds will be used to fund operations, accelerate the
      development of new wireless technologies, expand the company’s business, and
      enable future strategic acquisitions. The purchasers of the Series A Preferred
      Stock include, in addition to other investment funds and institutional
      investors, Navation, Inc., an entity owned by Allen Salmasi, our Chairman and
      Chief Executive Officer, Manchester Financial Group, L.P., an entity indirectly
      owned and controlled by Douglas F. Manchester, a member of our Board of
      Directors, and affiliates of Avenue Capital, of which a member of our Board
      of
      Directors, Robert Symington, is a portfolio manager. None of the affiliated
      purchasers received any compensation in connection with the financing and all
      investors were subject to the same terms and conditions in connection with
      the
      investment. An independent committee of our Board of Directors reviewed and
      approved the Series A Preferred Stock issuance and the participation of the
      affiliated investors.




110




The
      Series A Preferred Stock has an initial liquidation preference of $1,000 per
      share, subject to increase for accrued dividends as described below. The
      liquidation preference would become payable upon redemption, as described below,
      upon a liquidation or dissolution of our company, or upon deemed liquidation
      events including a change in control, merger or sale of all or substantially
      all
      our assets, unless the holders of Series A Preferred Stock provide a 75% vote
      to
      not treat a covered event as a deemed liquidation. Upon a deemed liquidation
      event, the Series A Preferred Stock will be entitled to receive an amount per
      share equal to the greater of 120% of the liquidation preference or the amount
      that would have been received if such share had converted into common stock
      in
      connection with such event.





Each
      share of Series A Preferred Stock is convertible into a number of shares of
      our
      common stock equal to the liquidation preference then in effect divided by
      $11.05. If all shares of Series A Preferred Stock were to be converted, we
      would
      be obligated to issue 32,126,696 shares of our common stock. The Series A
      Preferred Stock is convertible at any time at the option of the holder, or
      at
      our election after the 18-month anniversary of issuance, subject to the trading
      price of our common stock reaching $22.10 for a specified period of time, except
      that such threshold price will be reduced to $16.575 on the earlier of the
      third
      anniversary of issuance or our consummation of a qualified public offering.
      We
      will not be entitled to convert the Series A Preferred Stock at our election
      unless a shelf registration statement covering the shares of common stock issued
      upon conversion is then effective or the shares are no longer considered
      restricted securities under the Securities Act.





The
      Series A Preferred Stock is entitled to receive quarterly dividends on the
      liquidation preference at a rate of 7.5% per annum. Until the fourth anniversary
      of issuance, we can elect whether to declare dividends in cash or to not declare
      and pay dividends, in which case the per share dividend amount will be added
      to
      the liquidation preference. From and after the fourth anniversary of issuance,
      we must declare dividends in cash each quarter, subject to applicable law.
      The
      dividend rate is subject to adjustment to 10% per annum if we default in our
      dividend payment obligations, fail to file a shelf registration statement with
      the Securities and Exchange Commission on or prior to July 31, 2007 or fail
      to
      cause the shelf registration statement to be declared effective on or prior
      to
      November 30, 2007. The dividend rate is also subject to adjustment to 15% per
      annum if we fail to comply with the protective covenants of the Series A
      Preferred Stock described below and to 18% per annum if we fail to convert
      or
      redeem the Series A Preferred Stock when required to do so.





Pursuant
      to the terms of the Series A Preferred Stock, so long as at least 25% of the
      issued shares of Series A Preferred Stock remain outstanding, and until the
      date
      on which we elect to redeem all shares of Series A Preferred Stock in connection
      with an asset sale, as described below, we must receive the approval of the
      holders of shares representing at least 75% of the Series A Preferred Stock
      then
      outstanding to (i) incur indebtedness in excess of $500 million, subject to
      certain adjustments and exceptions, (ii) create any capital stock that is senior
      to or on a parity with the Series A Preferred Stock in terms of dividends,
      distributions or other rights, or (iii) consummate asset sales involving the
      receipt of gross proceeds of, or the disposition of assets worth, $500 million
      or more based on their fair market value. In addition, so long as at least
      25%
      of the issued shares of Series A Preferred Stock remain outstanding, we may
      not
      distribute rights or warrants to all holders of our common stock entitling
      them
      to purchase shares of our common stock, or consummate any sale of our common
      stock, for an amount less than the fair market value on the date of issuance,
      with certain exceptions. With respect to other matters requiring stockholder
      approval, the shares of Series A Preferred Stock will be entitled to vote as
      one
      class with the common stock on an as-converted basis.





We
      will
      be required to redeem all outstanding shares of Series A Preferred Stock, if
      any, on March 28, 2017, at a price equal to the liquidation preference plus
      unpaid dividends. If we elect to convert the Series A Preferred Stock after
      our
      common stock price has reached the qualifying threshold, we must redeem the
      shares of holders of Series A Preferred Stock who elect not to convert into
      common stock at a price equal to 130% of the liquidation preference. However,
      we
      are not required to redeem more than 50% of the shares of Series A Preferred
      Stock subject to any particular conversion notice. In the event that we fail
      to
      obtain approval of the holders of Series A Preferred Stock to an asset sale
      transaction, we must either not consummate such asset sale or elect to redeem
      all shares of Series A Preferred Stock at a redemption price equal to 120%
      of
      the liquidation preference. Holders will be entitled to opt-out of such a
      redemption.




111




The
      Series A Preferred Stock was issued in a private placement transaction exempt
      from the registration requirements of the Securities Act of 1933 pursuant to
      Regulation D thereof, and the shares of Series A Preferred Stock and common
      stock issuable upon conversion may not be transferred absent an exemption from
      registration or pursuant to an effective registration statement. To establish
      the Regulation D exemption, we obtained certifications from each investor to
      the
      effect that such investor qualified as an “accredited investor” under Regulation
      D, and did not engage in any general solicitation in connection with the
      placement. In connection with the issuance of the Series A Preferred Stock,
      we
      entered into a registration rights agreement pursuant to which we agreed to
      file
      a shelf registration statement for the resale of the Series A Preferred Stock
      and common stock issuable upon conversion with the Securities and Exchange
      Commission by no later than July 31, 2007.





**PART III**


**ITEM 10.**  **Directors,
      Executive Officers and Corporate Governance**




**Executive
      Officers and Directors**




Our
      Board
      of Directors has adopted a Code of Business Conduct and Ethics that applies
      to
      our directors, officers and employees. A copy of our Code of Business Conduct
      and Ethics is available on our website at www.nextwave.com. We will also provide
      a copy of our Code of Business Conduct and Ethics, without charge, to any
      stockholder who so requests in writing.





Except
      for the information regarding executive officers required by Item 401 of
      Regulation S-K, which is included in Part I of this Annual Report on Form 10-K
      under Item 10, we incorporate the information required by this by reference
      to
      our definitive proxy statement for our annual meeting of shareholders presently
      scheduled to be held in May 2007.  We refer to this proxy statement as the
“2007 Proxy Statement”.





**ITEM
      11.**  **Executive
      Compensation**





We
      incorporate the information required by this item by reference to the section
      entitled “Executive Compensation” in the 2007 Proxy Statement. Nothing in this
      report shall be construed to incorporate by reference the Board Compensation
      Committee Report on Executive Compensation or the Performance Graph, which
      are
      contained in the Proxy Statement, but expressly not incorporated
      herein.





**ITEM
      12.**  **Security
      Ownership of Certain Beneficial Owners and Management**





**Securities
      Authorized for Issuance Under Equity Compensation Plans**





We
      incorporate the information required by this item by reference to the section
      entitled “Security Ownership of Certain Beneficial Owners and Management” in the
      2007 Proxy Statement.





**ITEM
      13.**  **Certain
      Relationships and Related Transactions**





We
      incorporate the information required by this item by reference to the section
      entitled “Corporate Governance and Related Matters - Certain Relationships and
      Related Party Transactions” in the 2007 Proxy Statement.




**ITEM
      14.**  **Principal
      Accountant Fees and Services**





We
      incorporate the information required by this item by reference to the section
      entitled “Audit Fees” in the 2007 Proxy Statement.





**PART IV**




**ITEM 15.**  **Exhibits
      and Financial Statement Schedule**





(a) Financial
      Statements and Supplementary Data, Financial Statement Schedules and Exhibits.





1.
      Financial Statements and Schedules—See Index to Consolidated Financial Schedule
      at Item 8 on page [ ] of this report on Form 10-K.






112




(b)
      Exhibits




Exhibits
      submitted with this annual report on Form 10-K, as filed with the Securities
      and
      Exchange Commission and those incorporated by reference to other filings are
      listed below.





113




**DESCRIPTION**


**No.**2.1
            Third
                Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
                of
                NextWave Personal Communications Inc., NextWave Power Partners Inc.,
                NextWave Partners Inc., NextWave Wireless Inc. and NextWave Telecom
                Inc.,
                dated January 21, 2005 (incorporated by reference to Exhibit 2.1
                to the
                Registration Statement on Form 10 of NextWave Wireless LLC filed
                May 1,
                2006 (the “Form 10”))3.1
            Amended
                and Restated Certificate of Incorporation of NextWave Wireless Inc.,
                as
                restated on November 6, 2006 (incorporated by reference to Exhibit
                3.1 to
                the Company’s Registration Statement on Form S-4/A filed November 7,
                2006)3.2
            Amended
                and Restated By-laws of NextWave Wireless Inc., adopted on September
                12,
                2006 (incorporated by reference to Exhibit 3.2 to the Company’s
                Registration Statement on Form S-4/A filed November 7,
                2006)4.1
            Specimen
                common stock certificate (incorporated by reference to Exhibit 4.1
                to the
                Company’s Registration Statement on Form S-4/A filed November 7,
                2006)4.2
            Form
                of Station 4, LLC Warrant (incorporated by reference to Exhibit 4.2
                to the
                Registration Statement on Form 10 of NextWave Wireless LLC filed
                May 1,
                2006 (the “Form 10”))4.3
            Warrant
                Agreement, dated as of July 17, 2006, among NextWave Wireless Inc.
                and the
                Holders listed on Schedule I thereto (incorporated by reference to
                Exhibit
                4.2 to the Current Report on Form 8-K of NextWave Wireless LLC filed
                July
                21, 2006 (the "July 21, 2006 Form 8-K"))4.4
            Certificate
                of Designations for NextWave Wireless Inc.'s Series A Senior Convertible
                Preferred Stock.10.1
            Agreement
                and Plan of Merger, dated November 7, 2006, by and among NextWave
                Wireless
                Inc., NextWave Wireless LLC and NextWave Merger LLC (incorporated
                by
                reference to Exhibit 2.1 to the Current Report on Form 8-K of NextWave
                Wireless Inc. filed November 7, 2006)10.2
            Agreement
                and Plan of Merger, dated as of December 31, 2006, by and among NextWave
                Wireless Inc., Go Acquisition Corp., GO Networks, Inc. and Nechemia
                J.
                Peres, as Stockholder Representative (incorporated by reference to
                Exhibit
                2.1 to the Current Report on Form 8-K of NextWave Wireless Inc. filed
                January 3, 2007).10.3
            Agreement
                and Plan of Merger, dated as of May 24, 2005, by and among NextWave
                Wireless LLC, PVC Acquisition Corp., PacketVideo Corporation and
                William
                D. Cvengros, as the Stockholder Representative (incorporated by reference
                to Exhibit 2.2 to Amendment #1 to the Registration Statement on Form
                10 of
                NextWave Wireless LLC filed June 29, 2006 (“Amendment #1 to Form 10”)).10.4
            Purchase
                Agreement, dated as of July 17, 2006, among NextWave Wireless LLC,
                as
                issuer, NextWave Broadband Inc., NW Spectrum Co., AWS Wireless Inc.,
                and
                PacketVideo Corporation, as subsidiary guarantors, the note purchasers
                party thereto and The Bank of New York, as collateral agent (incorporated
                by reference to Exhibit 4.1 to the Current Report on Form 8-K/A of
                NextWave Wireless LLC filed September 8, 2006)10.5
            Registration
                Rights Agreement, dated as of July 17, 2006, among NextWave Wireless
                Inc.
                and the Purchasers listed on Schedule I thereto (incorporated by
                reference
                to Exhibit 4.3 to the July 21, 2006 Form 8-K)10.6
            NextWave
                Wireless Inc. 2005 Stock Incentive Plan (incorporated by reference
                to
                Exhibit 99.1 to the Company’s Post-Effective Amendment No. 1 on Form S-8
                filed January 19, 2007)10.7
            CYGNUS
                Communications, Inc. 2004 Stock Option Plan (incorporated by reference
                to
                Exhibit 10.3 to the Form 10)10.8
            PacketVideo
                Corporation 2005 Equity Incentive Plan (incorporated by reference
                to
                Exhibit 10.2 to the Company’s Registration Statement on Form 10 filed on
                May 1, 2006)




114




10.9
            NextWave
                Wireless Inc. 2005 Stock Incentive Plan Award Agreement (incorporated
                by
                reference to Exhibit 99.3 to the Company’s Registration Statement on Form
                S-8 filed December 7, 2006)10.10
            Acquisition
                Agreement by and among NextWave Telecom Inc., Cellco Partnership
                D/B/A
                Verizon Wireless and VZW Corp., dated as of November 4, 2004 (incorporated
                by reference to Exhibit 10.4 to the Form 10)10.11
            Acquisition
                Agreement, dated as of May 9, 2006, by and among (i) NextWave Wireless
                LLC, (ii) NW Spectrum Co., (iii) WCS Wireless, Inc., (iv) Columbia
                WCS
                III, Inc., (v) TKH Corp., (vi) Columbia Capital Equity Partners III
                (Cayman), L.P., the sole stockholder of Columbia WCS III, Inc., (vii)
                each
                of the stockholders of TKH Corp., namely, Aspen Partners Series A,
                Series
                of Aspen Capital Partners, L.P., Oak Foundation USA, Inc., Enteraspen
                Limited, and The Reed Institute dba Reed College and (viii) Columbia
                Capital, LLC, as the Stockholder Representative (incorporated by
                reference
                to Exhibit 10.7 to Amendment #1 of the Form 10)10.12
            Spectrum
                Acquisition Agreement, dated as of October 13, 2005, between NextWave
                Broadband Inc. and Bal-Rivgam, LLC (incorporated by reference to
                Exhibit
                10.8 to Amendment #1 of the Form 10)10.13
            Guaranty,
                dated as of July 17, 2006, by and among NextWave Broadband, Inc.,
                NW
                Spectrum Co., AWS Wireless Inc., PacketVideo Corporation and The
                Bank of
                New York, as Collateral Agent (incorporated by reference to Exhibit
                10.1
                to the July 21, 2006 Form 8-K)10.14
            Parent
                Guaranty, dated as of July 17, 2006, between NextWave Wireless Inc.
                and
                The Bank of New York, as Collateral Agent (incorporated by reference
                to
                Exhibit 10.2 to the July 21, 2006 Form 8-K)10.16
            Pledge
                and Security Agreement, dated as of July 17, 2006, by and among NextWave
                Wireless LLC, the undersigned direct and indirect subsidiaries of
                NextWave
                Wireless LLC, each additional Grantor that may become a party thereto
                and
                The Bank of New York, as Collateral Agent (incorporated by reference
                to
                Exhibit 10.3 to the July 21, 2006 Form 8-K)10.17
            NextWave
                Wireless Inc. 2007 New Employee Stock Incentive Plan(1)10.18
            GO
                Networks, Inc. Stock Bonus Plan(1)10.19
            Securities
                Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
                Inc. and the Purchasers listed on Schedule I (the “Purchasers”)
                thereto(1)10.20
            Registration
                Rights Agreement, dated March 28, 2007, among NextWave Wireless Inc.
                and
                the Purchasers(1)14.1
            NextWave
                Wireless Inc. Code of Business Conduct and Ethics (available on the
                Company’s website at http://www.nextwave.com)21.1
            Subsidiaries
                of the Registrant23.1
            Consent
                of Ernst & Young LLP, Independent Registered Public Accounting
                Firm(1)24.1
            Power
                of Attorney (included in signature page)31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Allen Salmasi, Chief Executive
                Officer(1)31.2
            Rule
                13a-14(a)/15d-14(a) Certification of George C. Alex, Chief Financial
                Officer(1)32.1
            Section 1350
                Certification of Allen Salmasi, Chief Executive Officer(1)32.2
            Section
                1350 Certification of George C. Alex, Chief Financial
                Officer(1)


____________


(3)  (1)
      FILED
      HEREWITH




115





**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15 (d) of the Securities Exchange
      Act of 1934, the Registrant has duly caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized on March 30, 2007.




NEXTWAVE
              WIRELESS
              INC.By:
            /s/
                Allen SalmasiAllen
                Salmasi
              *Chief
                Executive Officer*
              *and
                President*




**POWER
      OF ATTORNEY**




KNOW
      ALL
      MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints
      each of Frank A. Cassou, George C. Alex and Roseann Rustici, or any of them,
      each acting alone, his true and lawful attorney-in-fact and agent, with full
      power of substitution and resubstitution, for such person and in his name,
      place
      and stead, in any and all capacities, to sign this Annual Report on
      Form 10-K, and to file the same, with all exhibits thereto, and other
      documents in connection therewith, with the Securities and Exchange Commission,
      granting unto said attorneys-in-fact and agents, each acting alone, full power
      and authority to do and perform each and every act and thing requisite and
      necessary to be done in and about the premises, as fully to all intents and
      purposes as he might or could do in person, hereby ratifying and confirming
      that
      any such attorney-in-fact and agent, or his/her substitute or substitutes,
      may
      lawfully do or cause to be done by virtue hereof.




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




**Signature**
              
              **Title**
              
              **Date**/s/
                  Allen
                  Salmasi
              
              Chairman
                  of the Board of Directors, Chief Executive Officer and
                  President
                *(Principal
                  Executive Officer)*
              
              March
                  30, 2007Allen
                  Salmasi/s/
                  George
                  C. Alex
              
              Executive
                  Vice President - Chief Financial Officer*(Principal Financial Officer)*
              
              March
                  30, 2007George
                  C. Alex/s/
                    Fran
                    J. Harding
              
              Senior
                  Vice President - Corporate Controller (*Principal
                  Accounting Officer*)
              
              March
                  30, 2007Fran
                  J. Harding/s/
              
              Director
              
              March
                  30, 2007Frank
                  A. Cassou/s/
                  Kevin
                  M. Finn
              
              Director
              
              March
                  30, 2007Kevin
                  M. Finn
  116
  **Signature**
              
              **Title**
              
              **Date**Director
              
              March
                  30, 2007Douglas
                  Manchester/s/
                  Jack
                  Rosen
              
              Director
              
              March
                  30, 2007Jack
                  Rosen/s/
                    Robert
                    T. Symington
              
              Director
              
              March
                  30, 2007Robert
                  T. Symington/s/
                    William
                    H. Webster
              
              Director
              
              March
                  30, 2007William
                  H. Webster
  117




**INDEX
      TO EXHIBITS**


2.1
            Third
                Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
                of
                NextWave Personal Communications Inc., NextWave Power Partners Inc.,
                NextWave Partners Inc., NextWave Wireless Inc. and NextWave Telecom
                Inc.,
                dated January 21, 2005 (incorporated by reference to Exhibit 2.1
                to the
                Registration Statement on Form 10 of NextWave Wireless LLC filed
                May 1,
                2006 (the “Form 10”))3.1
            Amended
                and Restated Certificate of Incorporation of NextWave Wireless Inc.,
                as
                restated on November 6, 2006 (incorporated by reference to Exhibit
                3.1 to
                the Company’s Registration Statement on Form S-4/A filed November 7,
                2006)3.2
            Amended
                and Restated By-laws of NextWave Wireless Inc., adopted on September
                12,
                2006 (incorporated by reference to Exhibit 3.2 to the Company’s
                Registration Statement on Form S-4/A filed November 7,
                2006)4.1
            Specimen
                common stock certificate (incorporated by reference to Exhibit 4.1
                to the
                Company’s Registration Statement on Form S-4/A filed November 7,
                2006)4.2
            Form
                of Station 4, LLC Warrant (incorporated by reference to Exhibit 4.2
                to the
                Registration Statement on Form 10 of NextWave Wireless LLC filed
                May 1,
                2006 (the “Form 10”))4.3
            Warrant
                Agreement, dated as of July 17, 2006, among NextWave Wireless Inc.
                and the
                Holders listed on Schedule I thereto (incorporated by reference to
                Exhibit
                4.2 to the Current Report on Form 8-K of NextWave Wireless LLC filed
                July
                21, 2006 (the "July 21, 2006 Form 8-K"))4.4
            Certificate
                of Designations for NextWave Wireless Inc.'s Series A Senior Convertible
                Preferred Stock.10.1
            Agreement
                and Plan of Merger, dated November 7, 2006, by and among NextWave
                Wireless
                Inc., NextWave Wireless LLC and NextWave Merger LLC (incorporated
                by
                reference to Exhibit 2.1 to the Current Report on Form 8-K of NextWave
                Wireless Inc. filed November 7, 2006)10.2
            Agreement
                and Plan of Merger, dated as of December 31, 2006, by and among NextWave
                Wireless Inc., Go Acquisition Corp., GO Networks, Inc. and Nechemia
                J.
                Peres, as Stockholder Representative (incorporated by reference to
                Exhibit
                2.1 to the Current Report on Form 8-K of NextWave Wireless Inc. filed
                January 3, 2007).10.3
            Agreement
                and Plan of Merger, dated as of May 24, 2005, by and among NextWave
                Wireless LLC, PVC Acquisition Corp., PacketVideo Corporation and
                William
                D. Cvengros, as the Stockholder Representative (incorporated by reference
                to Exhibit 2.2 to Amendment #1 to the Registration Statement on Form
                10 of
                NextWave Wireless LLC filed June 29, 2006 (“Amendment #1 to Form 10”)).10.4
            Purchase
                Agreement, dated as of July 17, 2006, among NextWave Wireless LLC,
                as
                issuer, NextWave Broadband Inc., NW Spectrum Co., AWS Wireless Inc.,
                and
                PacketVideo Corporation, as subsidiary guarantors, the note purchasers
                party thereto and The Bank of New York, as collateral agent (incorporated
                by reference to Exhibit 4.1 to the Current Report on Form 8-K/A of
                NextWave Wireless LLC filed September 8, 2006)10.5
            Registration
                Rights Agreement, dated as of July 17, 2006, among NextWave Wireless
                Inc.
                and the Purchasers listed on Schedule I thereto (incorporated by
                reference
                to Exhibit 4.3 to the July 21, 2006 Form 8-K)10.6
            NextWave
                Wireless Inc. 2005 Stock Incentive Plan (incorporated by reference
                to
                Exhibit 99.1 to the Company’s Post-Effective Amendment No. 1 on Form S-8
                filed January 19, 2007)10.7
            CYGNUS
                Communications, Inc. 2004 Stock Option Plan (incorporated by reference
                to
                Exhibit 10.3 to the Form 10)10.8
            PacketVideo
                Corporation 2005 Equity Incentive Plan (incorporated by reference
                to
                Exhibit 10.2 to the Company’s Registration Statement on Form 10 filed on
                May 1, 2006)




118




10.9
            NextWave
                Wireless Inc. 2005 Stock Incentive Plan Award Agreement (incorporated
                by
                reference to Exhibit 99.3 to the Company’s Registration Statement on Form
                S-8 filed December 7, 2006)10.10
            Acquisition
                Agreement by and among NextWave Telecom Inc., Cellco Partnership
                D/B/A
                Verizon Wireless and VZW Corp., dated as of November 4, 2004 (incorporated
                by reference to Exhibit 10.4 to the Form 10)10.11
            Acquisition
                Agreement, dated as of May 9, 2006, by and among (i) NextWave Wireless
                LLC, (ii) NW Spectrum Co., (iii) WCS Wireless, Inc., (iv) Columbia
                WCS
                III, Inc., (v) TKH Corp., (vi) Columbia Capital Equity Partners III
                (Cayman), L.P., the sole stockholder of Columbia WCS III, Inc., (vii)
                each
                of the stockholders of TKH Corp., namely, Aspen Partners Series A,
                Series
                of Aspen Capital Partners, L.P., Oak Foundation USA, Inc., Enteraspen
                Limited, and The Reed Institute dba Reed College and (viii) Columbia
                Capital, LLC, as the Stockholder Representative (incorporated by
                reference
                to Exhibit 10.7 to Amendment #1 of the Form 10)10.12
            Spectrum
                Acquisition Agreement, dated as of October 13, 2005, between NextWave
                Broadband Inc. and Bal-Rivgam, LLC (incorporated by reference to
                Exhibit
                10.8 to Amendment #1 of the Form 10)10.13
            Guaranty,
                dated as of July 17, 2006, by and among NextWave Broadband, Inc.,
                NW
                Spectrum Co., AWS Wireless Inc., PacketVideo Corporation and The
                Bank of
                New York, as Collateral Agent (incorporated by reference to Exhibit
                10.1
                to the July 21, 2006 Form 8-K)10.14
            Parent
                Guaranty, dated as of July 17, 2006, between NextWave Wireless Inc.
                and
                The Bank of New York, as Collateral Agent (incorporated by reference
                to
                Exhibit 10.2 to the July 21, 2006 Form 8-K)10.16
            Pledge
                and Security Agreement, dated as of July 17, 2006, by and among NextWave
                Wireless LLC, the undersigned direct and indirect subsidiaries of
                NextWave
                Wireless LLC, each additional Grantor that may become a party thereto
                and
                The Bank of New York, as Collateral Agent (incorporated by reference
                to
                Exhibit 10.3 to the July 21, 2006 Form 8-K)10.17
            NextWave
                Wireless Inc. 2007 New Employee Stock Incentive Plan(1)10.18
            GO
                Networks, Inc. Stock Bonus Plan(1)10.19
            Securities
                Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
                Inc. and the Purchasers listed on Schedule I (the “Purchasers”)
                thereto(1)10.20
            Registration
                Rights Agreement, dated March 28, 2007, among NextWave Wireless Inc.
                and
                the Purchasers(1)14.1
            NextWave
                Wireless Inc. Code of Business Conduct and Ethics (available on the
                Company’s website at http://www.nextwave.com)21.1
            Subsidiaries
                of the Registrant23.1
            Consent
                of Ernst & Young LLP, Independent Registered Public Accounting
                Firm(1)24.1
            Power
                of Attorney (included in signature page)31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Allen Salmasi, Chief Executive
                Officer(1)31.2
            Rule
                13a-14(a)/15d-14(a) Certification of George C. Alex, Chief Financial
                Officer(1)32.1
            Section 1350
                Certification of Allen Salmasi, Chief Executive Officer(1)32.2
            Section
                1350 Certification of George C. Alex, Chief Financial
                Officer(1)




____________


(1)
      FILED
      HEREWITH




119