UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C.  20549








FORM
      8-K





CURRENT
      REPORT





Pursuant
      to Section 13 or 15(d) of the


Securities
      Exchange Act of 1934








Date
                      of Report (date of earliest event reported):
                  March
                      27, 2007








TERABEAM,
                INC.(Exact
                name of registrant as specified in its
                charter)








Delaware
              000-29053
              04-2751645(State
                  or other jurisdiction of incorporation)
              (Commission
                  file number)
              (IRS
                  employer identification no.)








2115
                  O’Nel Drive, San Jose, CA
              95131(Address
                  of principal executive offices)
              (Zip
                  code)








Registrant’s
                telephone number, including area code:
            (408)
                731-2700








Not
                  Applicable(Former
                  name or former address, if changed since last
                  report)










Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2. below):




o  Written
      communications pursuant to Rule 425 under the Securities Act (17 CFR
      230.425)




o  Soliciting
      material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)




o  Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-2(b))




o  Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))











Item
                5.02.
            Departure
                of Directors or Certain Officers; Election of Directors; Appointment
                of
                Certain Officers; Compensatory Arrangements of Certain
                Officers.





On
      March
      27, 2007, the Board of Directors of Terabeam, Inc. took the following actions,
      each of which was recommended by Terabeam’s Compensation Committee of the Board
      of Directors.





1.           Bonuses
      for Fiscal Year 2006.  The Board of Directors approved the award
      of the following cash bonus payouts for 2006 performance, as measured against
      previously established objectives and tenure for the following executive
      officers of Terabeam, Inc.:





Robert
                            E. Fitzgerald
                        $105,060*Chief
                            Executive Officer*Pankaj
                            Manglik
                        $34,400*President
                            & Chief Operating Officer*Brian
                            J. Sereda
                        $11,333*Chief
                            Financial Officer*David
                            L. Renauld
                        $31,450*Vice
                            President, Corporate Affairs & General Counsel*





Mr.
      Fitzgerald is entitled to receive
      an annual performance bonus based on actual attainment of performance targets
      approved by the board of directors.  At target performance levels, Mr.
      Fitzgerald shall receive a cash bonus equal to 100% of his base salary ($309,000
      at the time the bonus was approved).  The board decided that Mr.
      Fitzgerald’s bonus for 2006 would be based on the following components with the
      following weightings:  revenue (25%), operating income/loss (15%),
      gross margin (10%), working capital (10%), stock price (10%), net income/loss
      (5%), earnings per share (5%), compliance with requirements of the
      Sarbanes-Oxley Act of 2002 (5%), compliance with Securities and Exchange
      Commission filing requirements (5%), product availability (5%), and employee
      development (5%).  Based on those components and the board’s
      determination of achievement of those components, the board granted Mr.
      Fitzgerald a bonus of $105,060 for 2006.





Messrs.
      Manglik, Renauld, and Sereda
      also are eligible for annual performance bonuses.  At target
      performance levels, Messrs. Manglik and Renauld are eligible for a cash bonus
      equal to 50% of their base salaries ($330,000 and $185,000, respectively, at
      the
      time the bonuses were approved) and Mr. Sereda is eligible for a cash bonus
      of
      $50,000.  In awarding 2006 bonuses to these three officers, the board
      decided to apply Mr. Fitzgerald’s bonus criteria and percentage achievement
      thereof to these three officers as well.  For Messrs. Manglik and
      Sereda, the board pro-rated the bonus amounts that would have been paid if
      those
      two officers had been employees for the entire year 2006 for the approximately
      eight months each of those officers actually was a Terabeam employee in
      2006.





2.           2007
      Objectives.  The Board of Directors approved performance targets
      for fiscal year 2007 which will be used to determine the amount of cash bonus
      Mr. Fitzgerald will receive for 2007.  The board decided that Mr.
      Fitzgerald’s bonus for 2007 would be based on the following components with the
      following weightings:  revenue (25%), operating income/loss (25%),
      gross margin (10%), working capital (10%), stock price (10%), net income/loss
      (5%), earnings per share (5%), internal controls (5%), and product availability
      (5%).  These components and weightings are subject to adjustment by
      the board if the board determines appropriate due to changed
      circumstances.  As was done in determining 2006 bonuses, the board may
      choose to apply these components and weightings to establish bonuses for other
      executive officers.





3.           Base
      Salary Increases.  The Compensation Committee of the Board of
      Directors annually assesses and evaluates the performance of Terabeam’s
      executive officers and considers any appropriate base salary
      increases.  On that committee’s recommendation, the Board of Directors
      approved the following executive officer base salary increases beginning April
      1, 2007:






2





Robert
                              E. Fitzgerald
                          $330,000
                              (increased from $309,000)*Chief
                              Executive Officer*David
                              L. Renauld
                          $194,250
                              (increased from $185,000)*Vice
                              President, Corporate Affairs & General Counsel*






SIGNATURE





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.





TERABEAM,
                INC.Dated:
                April 2, 2007
            By:    /s/
                David L. RenauldDavid L. RenauldVice President









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