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

                                    FORM 10-K

(Mark One)
  [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
                                     OR
  [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______


                         Commission File Number: 0-25356

                                   P-COM, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


                    DELAWARE                            77-0289371
       --------------------------------   ------------------------------------
       (State or Other Jurisdiction of    (IRS Employer Identification Number)
        Incorporation or Organization)

            3175 S. WINCHESTER BOULEVARD, CAMPBELL, CALIFORNIA 95008
                                 (408) 866-3666
          -------------------------------------------------------------
          (Address and Telephone Number of Principal Executive Offices)

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

           Securities Registered Pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $0.003 PAR VALUE
                         PREFERRED STOCK PURCHASE RIGHTS

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. YES [ ]  NO [X]

Indicate by check mark whether the registrant is an accelerated filer as defined
in the Exchange Act Rule 12b-2. YES [ ]  NO [X]

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of June 30, 2004 was approximately $11.2 million.

         On March 21, 2005, approximately 11,844,748 shares of the Registrant's
Common Stock, $0.003 par value, were outstanding.

<PAGE>

           The following information contains forward-looking statements, which
involve risks and uncertainties. Forward-looking statements are characterized by
words such as "plan," "expect," "believe," "intend," "would", "will" and similar
words. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
set forth under, "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Certain Risk Factors Affecting the Company," and
elsewhere in this Annual Report on Form 10-K.

                                     PART I

ITEM 1.      BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

           P-Com, Inc. was organized on August 23, 1991 as a Delaware
Corporation. Our executive offices are located at 3175 S. Winchester Boulevard,
Campbell, California 95008, and our telephone number is (408) 866-3666.

           Since early 2000, we have experienced reduced revenues, incurred
substantial operating losses from continuing operations and used substantial
cash in our operations. For the years ended December 31, 2004, 2003, and 2002,
P-Com recorded net losses from continuing operations of ($3.3) million, ($10.7)
million, and ($44.9) million, respectively, and used ($9.1) million, ($5.9)
million, and ($14.5) million cash, respectively, in its operating activities.
The decline in our business is principally the result of a prolonged downturn in
the telecommunications industry that we believe is related to reduced capital
spending by large carriers and network integrators of telecommunications
systems, and substantial competition from other telecommunications product
suppliers. In addition, we have experienced reduced demand for many of our
product lines as new products are introduced by our competitors at lower average
selling prices.

          As a result of our ongoing need to reduce operating costs, and provide
working capital to fund our operating losses, we have continued our
restructuring initiatives, and raised debt and equity capital, during the year
ended December 31, 2004, as follows:

      o     On June 15, 2004, we restructured our Italian operations conducted
            by P-Com Italia, S.p.A. Under the restructuring plan, P-Com Italia
            will continue to focus on research and development, and the
            manufacturing of specific component parts, while outsourcing certain
            repair operations to NORT S.r.L, an Italian third-party contract
            manufacturer staffed by former employees of P-Com Italia. The
            restructuring involved the sale of P-Com Italia's 36,000 square foot
            facility in Tortona, Italy and a reduction in workforce of
            approximately ten employees who were rehired by NORT. We received
            approximately $732,000 from the sale of the facility, and our
            operating expenses are expected to decrease by approximately
            $500,000 annually as a result of this strategy.

      o     On July 19, 2004, we effected a 1-for-30 reverse split of our common
            stock. At the effective time of the reverse stock split, each 30
            shares of our issued and outstanding common stock were combined into
            one share of P-Com common stock.

      o     For a period of 15 days ending June 25, 2004, we temporarily lowered
            the exercise price of our issued and outstanding Series A, B, and
            C-2 warrants to $1.50 per share (the "Special Warrant Offer"). The
            exercise prices of the Series A, B and C-2 warrants prior to the
            Special Warrant Offer, and following its conclusion, are $3.60,
            $6.00, and $5.40, respectively. In order to exercise the Series C-2
            warrants at the reduced exercise price of $1.50 per share, the
            holders of these warrants were required to exercise the same number
            of Series C-1 warrants via a cashless exercise provision whereby the
            holder received one share of P-Com common stock for every two Series
            C-1 warrants exercised. The participating holders of the Series A
            and B warrants were allowed to exercise up to one-half of their
            warrants at the reduced exercise price of $1.50 per share if they
            also exercised the remaining half of their warrants via a cashless
            exercise provision whereby the holder received one share of P-Com
            common stock for every two warrants exercised (the "Special Warrant
            Offer"). In connection with the Special Warrant Offer, we raised
            working capital of approximately $2.6 million.


                                       1
<PAGE>

      o     On September 17, 2004, we renewed our credit facility (the "Credit
            Facility") with Silicon Valley Bank (the "Bank") through September
            17, 2005. The Credit Facility consists of a Loan and Security
            Agreement for a $1.0 million borrowing line based on domestic
            receivables, and a Loan and Security Agreement under the
            Export-Import ("EXIM") program for a $3.0 million borrowing line
            based on export related inventories and receivables. The Credit
            Facility provides for cash advances equal to 75% of eligible
            accounts receivable balances for both the EXIM program and domestic
            lines, and up to $750,000 for eligible inventories (limited to 25%
            of eligible EXIM accounts receivable), under the EXIM program.
            Advances under the Credit Facility bear interest at the Bank's prime
            rate plus 3.5% per annum. The Credit Facility is secured by all of
            our receivables, deposit accounts, general intangibles, investment
            properties, inventories, cash, property, plant and equipment. We
            also issued a $4.0 million secured promissory note underlying the
            Credit Facility to the Bank. No amounts were outstanding under the
            Credit Facility as of December 31, 2004.

      o     On November 3, 2004, we entered into a Note and Warrant Purchase
            Agreement (the "Purchase Agreement") with a purchaser ("Purchaser")
            whereby the Purchaser agreed to purchase debentures in the aggregate
            principal amount of up to $5,000,000 (the "Notes") (the "Debenture
            Financing"). In addition, the Company agreed to issue warrants to
            purchase in the aggregate up to 800,000 shares of the Company's
            common stock. The warrants have an initial exercise price of $1.50
            and a term of five years. The Purchase Agreement provided that the
            Notes and warrants be issued in two closings. The first closing took
            place on November 26, 2004 and consisted of $3,300,000 principal
            amount of Notes. The Purchase Agreement originally contemplated that
            the second closing would take place no later than December 30, 2004.
            While no assurances can be given, the parties are currently
            negotiating the conditions necessary to obtain the additional
            $1,700,000 under the Purchase Agreement, in light of our
            deteriorating financial condition and results from operations.

      o     On November 30, 2004, Agilent Financial Services ("Agilent") entered
            into an agreement with us to restructure the $1,725,000 due Agilent
            on December 31, 2004. Under the terms of the agreement, we paid
            Agilent an initial payment of $250,000 on December 1, 2004; and are
            required to pay monthly payments of $92,187 for sixteen months, from
            January 1, 2005, up to and including April 1, 2006. In addition, we
            issued Agilent a warrant to purchase 178,571 shares of our common
            stock. The warrant has an initial exercise price of $0.56 and a term
            of five years.

         Because the restructuring initiatives effected in 2004 are inadequate
to return P-Com to profitability given the current level of sales, we are
actively engaged in the development of a formal restructuring plan that will
significantly curtail current spending, and substantially reduce liabilities and
operating and other costs. The plan is anticipated to include the divestiture of
certain unprofitable product lines, which may include certain of our licensed
wireless products. We will, however, continue the sale of refurbished licensed
products in connection with our repair and maintenance business. The plan is
subject to the approval of the Company's Board of Directors, and is expected to
be presented for approval before the end of the first fiscal quarter of 2005.


                                       2
<PAGE>

FINANCIAL INFORMATION ABOUT PRODUCTS AND GEOGRAPHIC SEGMENTS

INFORMATION ABOUT OUR PRODUCTS

           Our products consist of microwave radios for point - to - point,
spread spectrum, and point - to - multipoint networks. The contribution of each
product line to total sales was as follows:

                                                 YEAR ENDED DECEMBER 31,
PRODUCT LINE                                2004          2003           2002
------------------------------------------------------------------------------
Point - to - Point                           79%           79%            71%
Spread  Spectrum                             21%           19%            21%
Point - to - Multipoint                      --             2%             8%
                                         --------       -------       ---------
                  Total                     100%          100%           100%
                                         --------       -------       ---------

INFORMATION ABOUT OUR GEOGRAPHIC SEGMENTS

           Because our products integrate into our customers' network
configurations, we follow a geographic approach to management of our segment
information, rather than a product approach. Information about our Geographic
Segments can be found in Note 9 to the Consolidated Financial Statements
included in this Annual Report.

           Our sales by geographic segment for each year ended December 31, 2004
are as follows (in thousands):

Sales                                      2004      2004       2003       2002
--------------------------------------------------------------------------------
North America .....................         11%    $ 2,579    $ 3,042    $ 2,949
United Kingdom ....................         23%      5,583      6,349      5,894
Continental Europe ................         21%      5,178      3,693      4,487
Asia ..............................         14%      3,386      5,831     15,018
Other Geographic Regions ..........         31%      7,449      1,926      1,338
                                         -------   -------    -------    -------
                                           100%    $24,175    $20,841    $29,686
                                         =======   =======    =======    =======

NARRATIVE DESCRIPTION OF OUR BUSINESS

           We currently develop, manufacture and market microwave radios for
point - to - point, spread spectrum and point - to - multipoint applications for
telecommunications networks worldwide. Cellular and personal communications
service providers employ our point-to-point systems to transmit data between
remote tower sites and switching centers. Network service providers and Internet
service providers are able, through the deployment of our equipment and systems,
to respond to the demands for high-speed wireless access services, such as
Internet access associated with business-to-business and e-commerce business
processes. Through deployment of our systems, network providers can quickly and
efficiently establish integrated Internet, data, voice and video communications
for their customers, then expand and grow those services as demand increases.

INDUSTRY BACKGROUND

           During the 1990s, the demand for additional multimedia
infrastructure, due in particular to Internet usage growth, fueled network
expansion using both wireline and wireless protocols. Speed, reliability and
economies of scale are the key elements inherent in commercially successful
networked systems. Broadband wireless access was found to supply an efficient
and particularly economical means to meet this growing demand for information
transfer. Wireless networks are constructed using microwave radios and other
equipment to connect cell sites, wireline and other fixed asset systems. Our
broadband wireless products are targeted to add value to the integrated service
providers and wireless telephone operators globally. Our products are designed
to be frequency specific by country, if required.


                                       3
<PAGE>

           The broadband wireless market developed into two commercially
recognized architectures for voice and data transmission: point - to - point and
point - to - multipoint. We have developed and sold equipment in commercial
quantities for both formats. We do not provide products for wireline sub-sectors
of the telecommunications market, including wireline systems and cable systems.
Since 2000, system build-out has suffered a significant slowdown in the United
States, Latin America, and European telecommunications markets. Demand for
wireless broadband products remains deeply depressed relative to the sales
levels experienced prior to 2000. We cannot ensure the proliferation of our
products or guarantee a given market share of the global telecommunications
equipment market in future years. Additionally, there are competing technologies
that service the telecommunication sector's hardware demands.

BROADBAND WIRELESS IMPLEMENTATION

           Global deregulation of telecommunications markets and the related
allocation of radio frequencies for broadband wireless access transmission has
spurred competition to supply wireless-based systems as a cost-effective
alternative to traditional wireline service delivery systems. Broadband wireless
systems are competitive due to the relatively short set-up and deployment time,
high return on capital investment, and ability to connect customers quickly once
the transmission hardware and software infrastructure are in place. Moreover,
network operators can mitigate the risk of "stranded capital costs" inherent in
wireline hardware. Such systems do not scale as well as the wireless
alternatives as users' needs expand or change over time.

           End users who need to transport information from one location to
another have a choice of wired or wireless solutions. Wired solutions typically
take the form of lines that are leased from telephone companies. The associated
lease payments tend to be less attractive than the cost of ownership of a
wireless digital microwave system. Wireless transmission of voice, data and
video traffic has become a desirable alternative to wired solutions due to its
advantages in cost, speed of deployment, reliability, range, and ease of
installation, especially in developing countries. Incumbent telephone companies
also are historically slow to deploy leased lines, especially when the user is a
cellular operator who essentially competes directly with them. Wireless digital
microwave radios, on the other hand, can be deployed immediately upon receiving
location rights. P-Com believes, particularly in a time of stringent capital
asset rationalization, the wireless choice will be the preferred choice because
it is both economical and effective.

GLOBAL PRIVATIZATION AND DEREGULATION: STIMULI TO BROADBAND WIRELESS ACCESS
GROWTH

           In many parts of the world, telecommunications services are
inadequate, unreliable or non-existent due to the lack of existing
infrastructure. Additionally, many such countries have privatized the
state-owned telecommunications monopoly and have opened their markets to
competitive network service providers. We believe competitive service providers
in such markets often find deployment of wireless broadband the quickest, most
economical and scalable means of providing reliable, modern telecommunications
services.

NETWORK ARCHITECTURE BOTTLENECKS

           Fiber optic networks have received much attention because of the
speed and quality associated with the technology. Increasingly, network service
providers are constructing fiber optic interoffice backbones to meet the
significant demand created by Internet and data, video conferencing, and voice
services. To satisfy the growing user demand for high-speed access, the fiber
optic channels would (if not supplemented by other systems) have to extend all
the way into the buildings in which the users reside. The fiber optic channel
usually ends short of the building, at the beginning of the "last mile." Thus,
users are often forced to use slower dial-up modem connections and ISDN
(Integrated Services Digital Network) services, or ADSL (Asymmetrical Digital
Subscriber Line) service, with its inherent distance limitations. This local
access "bottleneck" denies users the real benefits afforded by fiber optic
backbones because the highest speed that users can experience is limited by the
local access portion of their end-to-end connection. To overcome such
limitations in a quick and efficient manner, we believe a broadband wireless
solution is attractive to incumbent and competitive carriers alike because the
local access speed restrictions are eliminated with broadband wireless
equipment.


                                       4
<PAGE>

THE P-COM STRATEGY

           Our current strategy is to be a leading worldwide supplier of
high-performance point - to - point licensed band and spread spectrum point - to
- point and point - to - multipoint license - exempt band wireless access
equipment. To accomplish this objective, we intend to:

      o     Focus on point - to - point licensed and spread spectrum point -to -
            point and point-to-multipoint microwave markets. We design products
            specifically for the millimeter wave (licensed band) and spread
            spectrum (unlicensed band) microwave frequency bands. We have
            designed its core architecture to optimize the systems for operation
            at millimeter and microwave frequencies.

      o     Continue expansion of our identified global market opportunities. We
            have met the standards established by the European
            Telecommunications Standards Institute ("ETSI") and achieved
            regulatory approval for P-Com systems in Argentina, Australia,
            Austria, Brazil, Canada, China, the Czech Republic, Latvia, France,
            Germany, Greece, Hungary, Italy, Japan, Jordan, Mexico, Saudi
            Arabia, Spain, and the United Kingdom, as well as the United States.
            We continue to seek approval in other countries as the markets
            develop and the need arises. We maintain international sales and/or
            support offices in Italy, Brazil, China, Singapore and the United
            Kingdom. In addition, we have formed a joint venture with Nanjing
            Putian, one of China's largest manufacturers and suppliers of
            telecom equipment, to market our licensed and unlicensed products to
            large mobile carriers and corporate customers in China.

      o     Build and sustain manufacturing cost advantage. We design our system
            architecture to reduce the number of components incorporated into
            each system, thereby allowing for the use of common components and
            "building blocks" across the range of our products. This approach
            reduces our manufacturing costs enabling us to take advantage of
            volume purchases and a standardized manufacturing process.

      o     Outsource manufacturing to reduce costs. Beginning in January 2004,
            we outsourced the manufacture of the SPEEDLAN product to a contract
            manufacturer. We also entered into an arrangement to outsource
            manufacturing of our point - to - point products. Utilization of
            turnkey contract manufacturers eliminates expensive in-house
            manufacturing assembly, and provides us with the ability to scale up
            or down as market conditions dictate.

      o     Source innovative products from third party providers. During 2004,
            we launched Encore S and Encore SX, which were the outcome of a
            strategic relationship that we forged with a partner that provides
            us with state of the art, high capacity bandwidth delivery
            technology at the lowest cost in the industry. We currently intend
            to continue with this strategy leading up to the planned
            introduction of new products beginning in the third quarter of 2005.

      o     Position our products for the anticipated convergence of carrier
            class and unlicensed technology. We believe that our technology and
            experience in both the licensed and unlicensed markets will allow us
            to rapidly develop network solutions for the anticipated convergence
            of carrier grade and unlicensed technology.

      o     Leverage and maintain software leadership. We differentiate our
            systems through proprietary software embedded in the Indoor Unit,
            Outdoor Unit, and in the Windows and SNMP-based software tools. This
            software is designed to allow P-Com to deliver to its customers a
            high level of functionality that can be easily reconfigured by the
            customer to meet changing needs. Software tools are also used to
            facilitate network management.

       Our current strategy may be affected as a result of management's
restructuring plan, which is currently being developed. The plan is anticipated
to include the divestiture of certain unprofitable product lines, which may
include certain of our licensed wireless products. We will, however, continue
the sale of refurbished licensed products in connection with our repair and
maintenance business. This plan may also include the cessation of further
development of new licensed spectrum products. The plan is subject to the
approval of the Company's Board of Directors, and is expected to be presented
for approval before the end of the first fiscal quarter of 2005.


                                       5
<PAGE>

RANGE OF PRODUCT CHOICES

           Overview. We currently offer access providers around the world a
range of wireless systems that encompass point - to - point wireless broadband,
and point - to - point and point - to - multipoint spread spectrum systems, with
each product targeting a specific market.

           Point - to - point wireless broadband systems are typically deployed
by cellular operators for wireless cellular interconnect and backhaul. Cellular
interconnect comprises any of the wireless connections between a Base Station
Transceiver, Base Station Controller, and Mobile Switching Center. Backhaul, or
the transport of cellular traffic between mobile wireless towers and the mobile
switching office on cellular phone networks, is a typical application for point
- to - point equipment.

           Point - to - point wireless broadband is a dedicated link wireless
technology enabling voice and data services between a subscriber and the
network. For each new subscriber using this service, the network service
provider provides a separate set of dedicated access equipment. As mobile
service usage continues to grow, cellular service providers will have to
continue to scale down existing cells into smaller ones to reuse precious
spectrum. With each such division of cells comes opportunity for new wireless
point - to - point applications because of the need for more backhaul.

           Internet service providers and system operators typically use point -
to - multipoint where bandwidth availability is critical to profitable system
operation. Point - to - multipoint broadband wireless service is a wireless
technology that provides high-speed access service. This service can be rapidly
deployed; it is highly efficient, reliable and scalable; it is cost-effective
because it can serve many subscribers from one hub; and it can be expanded as
demand for service dictates. Nonetheless, neither our competitors' or our point
- to - multipoint products, operating in the high bandwidth licensed spectrum,
have gained sufficient market share in the wireless broadband market, and it is
unclear when sales of these products will materialize, if ever. However, the
unlicensed point - to - multipoint market remains strong, especially with the
recent popularity of wireless Internet products.

           The greater the number of frequencies provided for by the wireless
broadband manufacturer, the greater the manufacturer's potential market
penetration. Our systems utilize a common architecture in the millimeter wave
and spread spectrum microwave frequencies, including 2.4 GHz, 5.7 GHz, 6/7 GHz,
13 GHz, 14 GHz, 15 GHz, 18 GHz, 23 GHz, 24 GHz, 26 GHz, 28 GHz, 31 GHz, 38 GHz
and 50 GHz.

       New Products. We currently intend to introduce two new licensed spectrum
products beginning in the third quarter of 2005 - the Encore CP and XP. The
Encore CP is aimed at the cost sensitive low and medium capacity high volume
emerging markets, including China and India where low cost and robust
performance drive the purchase decisions. The Encore XP is designed as a cost
effective, feature-rich product for applications requiring spectrally efficient
systems with medium to high band width, dynamic band width allocation, and an
Ethernet port.

       Management is currently evaluating a restructuring plan that may include
the divestiture of certain unprofitable product lines, which may include certain
of our licensed wireless products. This plan may also include the cessation of
further development of new licensed spectrum products. The plan is subject to
the approval of the Company's Board of Directors, and is expected to be
presented for approval before the end of the first fiscal quarter of 2005.

           SPEEDLAN. We offer additional wireless broadband equipment to serve
the enterprise market with our unlicensed spectrum SPEEDLAN product line, which
currently consists of the SPEEDLAN 9100 and 9200. The SPEEDLAN products are high
performance wireless routers that provide the wireless connectivity for local
area networks utilizing mesh, point-to-point and point-to-multipoint topologies.
Introduced in 2002, SPEEDLAN 9100 was the very first mesh product to market. The
mesh topology creates networks that use multi-hop connections to transmit IP
packets between the initiation and termination points. The ability to use
different paths between any two points, based on the detected conditions, allows
path redundancy and, in essence, a self-healing wireless network.

Our SPEEDLAN 9100 utilizes 802.11 standards to communicate at 11 Mbps per
second in the 2.4 GHz band. The SPEEDLAN 9200, released in September 2004, also
utilizes 802.11 standards to communicate at 54 Mbps in both the 5.8 GHz and 2.4


                                       6
<PAGE>

GHz bands. The SPEEDLAN 9200 utilizes near line-of-site Orthogonal Frequency
Division Multiplexing (OFDM) technology that, in conjunction with the
self-healing mesh topology, creates a highly reliable and available wireless
network.

Both the SPEEDLAN 9100 and 9200 models are outdoor units designed for the most
severe environmental conditions. Both models offer outstanding security by using
AES encryption for communication between units.

Our targeted markets are security, surveillance, wireless Internet Service
Providers and other private networks for a myriad of IP-based applications. Our
products are sold primarily through systems integrators and value-added
resellers.

We currently intend to broaden the SPEEDLAN product offerings with additional
features and capabilities for new markets, including developing a next
generation of fixed wireless broadband products that will continue to be
standards based.

TECHNOLOGY

           Our technological approach to point - to - point and spread spectrum
digital microwave radio systems is different from conventional approaches.
Through the use of proprietary designs, we can quickly produce highly
integrated, feature-rich systems. The results of these integrated designs are
reliability, ability to customize customer specific designs and continuing
ability to be cost competitive, particularly in the current market.

           Our products are optimized for streamlined components, immunity to
noise and interference, ease of high-volume manufacturing and installation. Yet,
our radios contain superior features. Equally important, because critical
components and building blocks perform common functions across different product
lines, our philosophy is to design sections of each radio in a way that enables
the designs to be reused with little or no modification in a different product
line.

           Our point - to - point and certain of our spread spectrum microwave
radios consist of three primary assemblies: the Indoor Unit, the Outdoor Unit
and the antenna. The Indoor Unit houses the digital signal processing and
interfaces to the Outdoor Unit via a single coaxial cable. The Outdoor Unit, a
radio frequency drum or enclosure, which is installed outdoors, establishes the
specific frequencies for transmitting and receiving data. The antenna interfaces
directly with the Outdoor Unit via proprietary technology. Our SPEEDLAN product
family consists of an Outdoor Unit only.

           Software embedded in our systems allows the user to easily configure
and adjust system settings such as frequency, power, and capacity without manual
tuning and mechanical adjustments. Software provided with our systems includes
PC-based sophisticated diagnostics, maintenance, network management, and system
configuration tools.

           Competing systems also employ the Indoor Unit/Outdoor Unit concept
but our products are differentiated by how we implement the components within
the Indoor Unit and Outdoor Unit. By moving many frequency-sensitive components
to the Outdoor Unit, the user is afforded improved reliability, lower cost and
easier interchangeability.

           We believe that our spread spectrum products are industry leaders,
especially with our latest product release of the SPEEDLAN 9002 in September
2004, which delivers 54 Mbps per second signaling rate at 5.8 GHz and 2.4 GHz
utilizing mesh networking, non-line of site OFDM modulation, and mobility.

MANUFACTURING AND TESTING

           Our Campbell, California facility received its initial ISO 9001
registration in December 1993, and maintains a current certification. Our ISO
9001 registration for the United Kingdom sales and customer support facility was
received in 1996 and it has current certifications; our ISO 9001 registration
for the Tortona facility in Italy was first received in 1996 and it has current
certification. Our production facility in Melbourne, Florida was ISO 9001
certified in 1999. On December 15, 2003, we successfully upgraded to ISO
9001:2000.


                                       7
<PAGE>

           Once a system reaches commercial status we contract with one or more
of several turnkey manufacturers to build radio system units in commercial
quantities. For example, in February 2004, we entered into an agreement with
Velocitech to provide full turnkey production of our SPEEDLAN family of
products. In addition, we entered into an agreement with Able Electronics
Corporation to provide full turnkey production of our Encore product line in the
second quarter of 2004. Utilization of these manufacturers relieves us of costly
investments in manufacturing facilities, equipment, and parts inventories. This
strategy enables us to quickly scale to meet varying customer demands and
changes in technology.

           We test and manufacture certain of our systems in our California,
Italy and Florida locations prior to shipment to our customers. Testing includes
the complete Indoor-Outdoor unit assembly, thereby providing customers with a
completely tested end-to-end system.

           Our designs make every effort to use components that are readily
available from multiple sources, but in some cases, components that are single
source or sole source must be used. Most manufacturers provide us with advanced
notice of the discontinuation of a device, but in the current depressed economy,
some manufacturers have discontinued components with little or no notice. When
components are discontinued, it may cause a significant expense to redevelop a
replacement component and may even disrupt the flow of products from our
manufacturing facilities.

SALES CHANNELS AND OUR CUSTOMERS

           Our wireless access systems are sold internationally and domestically
directly through our own sales force, as well as through strategic partners,
distributors, systems integrators, and original equipment manufacturers.

         For the years ended December 31, 2004, 2003, and 2002, our significant
customers, and their respective percent contribution to our sales are as
follows:

         Customer                                2004       2003       2002
---------------------------------------------------------------------------
MynTahl Corporation                               --         13%        14%
Orange Personal Communications System             13%        18%        11%
Vodafone (Mannesmann)                             15%        13%         7%
T-Mobile                                          12%        12%         4%
TelCel                                            25%         7%        --
Total                                             65%        63%        36%

            During 2004, sales to TelCel and Vodafone accounted for 25% and 15%
of our total sales, respectively. We currently anticipate that sales to TelCel
will decrease significantly in 2005 relative to the sales levels achieved in
2004. We also expect that sales to a relatively small number of customers will
continue to account for a high percentage of our sales in the foreseeable
future. Although the composition of our largest customer group may vary from
period to period, the loss of a significant customer or a major reduction in
orders by any significant customer, through reductions due to market, economic
or competitive conditions in the telecommunications industry, may adversely
affect our business, financial condition, and results of operations. Our ability
to maintain or increase our sales in the future will depend, in part, upon our
ability to obtain orders from new customers as well as the financial condition
and success of our customers, and the economy in general.

           Our primarily operations are located in the United States, with
contract manufacturing and/or sales support operations in Italy, the United
Kingdom, Singapore, and China. We develop, manufacture and/or market network
access systems for use in the worldwide wireless telecommunications market. We
are in the process of developing additional sales channels into the China
market, including the recently formed joint venture with Nanjing Putian.

RESEARCH AND DEVELOPMENT

           We have a research and development program to enhance our existing
systems and related software tools and to introduce new systems. We invested
approximately $5.0 million, $6.1 million and $12.7 million in 2004, 2003, and
2002, respectively, in research and development efforts. We expense research and
development costs as they are incurred. We expect to continue to invest material
resources in research and development to maintain superior features creating
value for its customers.


                                       8
<PAGE>

         Our research and development efforts can be classified into two
distinct efforts: (1) increasing the functionality of our point - to - point,
point - to -multipoint and spread spectrum radio systems under development by
adding additional frequencies and capacities to our product lineup, our network
management system software offering, and developing other advancements to radio
systems, and (2) integrating new functionality to extend the reach of our
products into the customers' networks, such as access technology that allows the
customer to manage telecommunications services at its site and to integrate
voice, data, video and facsimile into one offering. Our current efforts may not
result in new product introductions or material modifications to existing
products. The wireless telecommunications market is subject to rapid
technological change, frequent new product introductions and enhancements,
product obsolescence, changes in end-user requirements and evolving industry
standards globally.

         Our ability to be competitive in this market will depend in significant
part upon our ability to successfully develop, introduce, and sell new systems
and enhancements and related software tools on a timely and cost-effective basis
that respond to changing customer requirements. We have experienced and may
continue to experience delays from time to time in completing development and
introduction of new systems, and enhancements for related software tools. Our
Product Qualification / Quality Assurance structure ensures product acceptance
in the marketplace before and after commencement of commercial shipments.

       Management is currently evaluating a restructuring plan that may include
the cessation of further development of new licensed spectrum products. The plan
is subject to the approval of the Company's Board of Directors, and is expected
to be presented for approval before the end of the first fiscal quarter of 2005.

SALES AND MARKETING

         Our sales and marketing efforts are directed from our corporate offices
in Campbell, California. We have sales operations and customer support
facilities in the United Kingdom and Italy that serve the European market, and
in China and Singapore for the Asian markets. Internationally, we use a variety
of sales channels, including system integrators, original equipment
manufacturers, dealers, and local agents. We also sell directly to our
customers. We have established agent relationships in numerous other countries
in the Asia/Pacific region, the Middle East, Latin America, and Europe.

         Typically, our sales process commences with the solicitation of bids by
prospective customers. If selected to proceed further, we may provide systems
for incorporation into system trials, or we may proceed directly to contract
negotiations. We can not record revenue until system trials are successfully
completed, and we then negotiate a contract with the customer to set technical
and commercial terms of sale. These terms of sale govern the purchase orders
issued by the customer as the network is deployed and/or enhanced.

         Due to the complexity of our radio systems, a high level of technical
sophistication is required on the part of our sales and marketing personnel. In
addition, we believe that post-sale customer service programs are fundamental to
customer satisfaction and the potential for follow-on business. New customers
are provided engineering assistance for installation of the initial units as
well as varying degrees of field training depending upon the customer's
technical aptitude. All customers are provided telephone support via a 24-hour
customer service help desk. Our customer service efforts are supplemented by our
system providers.

COMPETITION

         The worldwide wireless communications market is extremely competitive.
Our wireless radio systems compete with other wireless telecommunications
products and alternative telecommunications transmission media, including copper
and fiber optic cable. We have experienced competition worldwide from a number
of leading telecommunications companies that offer a variety of competitive
products and services, including Alcatel Network Systems, Alvarion, Stratex
Networks, Ericsson, Fresnel, Harris-Farinon Division, NEC, Nokia, Nortel, Sagem,
SIAE, and Proxim. Many of these companies have substantially greater installed
bases, financial resources and production, marketing, manufacturing, engineering
and other capabilities than P-Com.


                                       9
<PAGE>

         We may also face competition in the future from new market entrants
offering competing technologies. Our operating results may depend in part upon
the extent to which customers who choose to rely on wireless strategies, elect
to purchase from outside sources rather than develop and manufacture their own
radio systems. Customers may choose not to rely on, or expand, their reliance on
us as an external source of supply for their radio systems. Recently, some of
our competitors have announced the introduction of competitive products,
including related software tools, and the acquisition of other competitors and
competitive technologies.

         Competition is especially intense during the current period of
depressed demand for telecommunications infrastructure equipment relative to the
demand experienced prior to 2000. We expect our competitors to continue to
improve the performance and lower the price of their current products and to
introduce new products or new technologies that provide added functionality and
other features. New product introductions and enhancements by our competitors
has caused a significant decline in our sales or loss of market acceptance of
our systems, and in certain cases, has made our systems or technologies obsolete
or noncompetitive. We have experienced significant price competition and expect
price competition to intensify in view of the continued market downturn. This
has adversely affected our business, financial condition and results of
operations. We believe that our ability to continue to compete successfully is
based on factors both within and outside of our control. Timing of new product
line introductions, performance characteristics of our equipment and the ability
of our customers to be successful all play key roles. In order to remain
competitive, we will be required to continue to expend significant resources on
new product development, cost reduction and enhancements.

         The principal elements of competition in our market, and the basis upon
which customers may select our systems, include price, performance, software
functionality, and ability to meet delivery requirements and customer service
and support.

GOVERNMENT REGULATION

         Radio telecommunications are subject to extensive regulation by the
United States and foreign governmental agencies and international treaties. Our
products must conform to a variety of domestic and international requirements
established to, among other things, avoid interference among users of radio
frequencies and to permit interconnection of equipment. Each country has a
different regulatory process. Historically, in many developed countries, the
limited availability of frequency spectra has inhibited growth of wireless
telecommunications networks.

         In order for us to operate within a specific country's jurisdiction, we
must obtain regulatory approval for our systems and comply with different
regulations in each jurisdiction. Regulatory bodies worldwide continue to adopt
new standards for wireless telecommunications products. The delays inherent in
this governmental approval process may cause the cancellation, postponement or
rescheduling of the installation of communications systems, which in turn may
have prevented or delayed the recognition of the sale of our systems.

         The failure to comply with current or future regulations or changes in
the interpretation of existing regulations could result in suspension or
cessation of operations in that particular jurisdiction. These regulations and
changes could require us to modify our products and incur substantial costs and
delays to comply with these time-consuming regulations and changes. In addition,
we are also affected by the regulation, allocation and auction of radio
frequency spectrum by domestic and international authorities. Equipment to
support new services can be marketed only if permitted by suitable frequency
allocations, auctions and regulations, and the process of establishing new
regulations is complex and lengthy. If personal communications service operators
and others are delayed in deploying their systems, we could experience delays in
orders for our products. Failure by the regulatory authorities to allocate
suitable frequency spectrum could adversely affect our business, financial
condition and results of operations.

         The regulatory environment in which we operate is subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly impact our operations by
restricting the development efforts of our customers, making current systems
obsolete or increasing the opportunity for additional competition. Any of these
regulatory changes, including changes in the allocation of available spectrum,
could adversely affect our business and results of operations. We might modify
our systems in order to operate in compliance with applicable regulations. These
modifications could be costly and time consuming to implement.


                                       10
<PAGE>

INTELLECTUAL PROPERTY

         We rely on our ability to obtain and enforce a combination of patents,
trademarks, trade secrets, copyrights, and a variety of other measures to
protect our intellectual property rights, including patents and copyrights on
our proprietary software. We generally enter into confidentiality and
nondisclosure agreements with service providers, customers and others, and limit
access to and distribution of our proprietary technology. We also enter into
software license agreements with our customers and others. However, these
measures may not provide adequate protection for our trade secrets and other
proprietary information. Disputes over the ownership of our intellectual
property rights may still arise and our trade secrets and proprietary technology
may otherwise become known or be independently developed by competitors. Any
patent we own may be invalidated, circumvented or challenged, the rights granted
thereunder may not provide competitive advantages or any of our pending or
future patent applications may not be issued with the scope of the claims
sought, if at all. Furthermore, others may develop similar products or software,
duplicate our products or software or design around the patents, or third
parties may assert intellectual property infringement claims against us. In
addition, foreign intellectual property laws may not adequately protect our
intellectual property rights abroad. Failure to protect our proprietary rights
could adversely affect our business, financial condition, and results of
operations.

         Litigation may be necessary to enforce our patents, copyrights, and
other intellectual property rights, to protect our trade secrets, to determine
the validity of and scope of the proprietary rights of others or to defend
against claims of infringement or invalidity. This litigation could result in
substantial costs and diversion of resources and could adversely affect our
business, financial condition and results of operations regardless of the
outcome of the litigation. Infringement, invalidity, right to use or ownership
claims by third parties or claims for indemnification resulting from
infringement claims may be asserted in the future and these assertions may
adversely affect our business, financial condition, and results of operations.
If any claims or actions are asserted against us, we may seek to obtain a
license under a third party's intellectual property rights. However, a license
may not be available under reasonable terms or at all. In addition, if we decide
to litigate these claims, the litigation could be extremely expensive and time
consuming and could adversely affect our business, financial condition and
results of operations, regardless of the outcome of the litigation.

EMPLOYEES

         As of March 1, 2005, we employed a total of 125 employees, including 47
in Operations, 28 in Research and Development, 32 in Sales and Marketing and 18
in Administration. We believe that future success will depend in large part on
our ability to attract and retain highly skilled employees. No employees are
represented by a labor union, and we have not experienced any work stoppages.


ITEM 2.    PROPERTIES

<TABLE>
<CAPTION>
                                                                Square
Location of Leased Facility    Functions                        Footage       Date Lease Expires
------------------------------------------------------------------------------------------------
<S>                            <C>                               <C>          <C>
Headquarters, Campbell, CA     Administration/Customer
                               Support/Sales/Engineering;
                               Manufacturing                     61,000       November 2005

Redditch, England              Warehouse/Operations               6,800       September 2007

Melbourne, FL                  Research/Development/Warehouse     8,697       August 2005

Beijing, China                 Sales/Customer Support             3,180       July 2005

Sarasota, FL                   Sales/Customer Support            16,522       November 2015

Shanghai, China                Sales/Customer Support             1,115       August 2004(1)

Tortona, Italy                 Research/Development/Warehouse     7,136       July 2010
</TABLE>

(1)This lease currently continues on a month-to-month basis.


                                       11
<PAGE>

ITEM 3.    LEGAL PROCEEDINGS

         On June 20, 2003, Agilent Financial Services, Inc. ("Agilent") filed a
complaint against us for Breach of Lease, Claim and Delivery and Account Stated,
in the Superior Court of the State of California, County of Santa Clara. The
amount claimed in the complaint is $2,512,509, and represents accelerated
amounts due under the terms of capitalized equipment leases. On June 27, 2003,
the parties filed a Stipulation for Entry of Judgment and Proposed Order of
Dismissal of Action Without Prejudice, which was amended on November 30, 2004.
Pursuant to the amended Stipulation, we paid Agilent $250,000 on December 1,
2004, and are required to make monthly payments of $92,187.50 for sixteen
months, from January 1, 2005, up to and including April 1, 2006. In addition, on
the earlier of (i) May 1, 2006 or (ii) within thirty (30) days of full payment
to Agilent of all amounts due Agilent under the amended Stipulation, we are
required to pay Agilent any and all interest that has accrued pursuant to the
Stipulation to Amend. Interest shall accrue on the unpaid balance at the rate of
10.25% per annum from December 1, 2004. We also issued a warrant to purchase
178,571 shares of Common Stock.

         In June 2000, two former consultants to P-Com Italia S.p.A. filed a
complaint against P-Com Italia in the Civil Court of Rome, Italy seeking payment
of certain consulting fees allegedly due the consultants totaling approximately
$615,000. The Civil Court of Rome has appointed a technical consultant in order
to determine the merit of certain claims made by the consultants. We believe
that the claims are without merit and, while no assurances can be given, that
the claims will be rejected.

         In the event we are unable to satisfactorily resolve these and other
proceedings that might arise, our financial position and results of operations
may be materially affected.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         At our Annual Meeting of Stockholders held on October 8, 2004, the
following individuals were elected to the Board of Directors:

                                        VOTES FOR         VOTES WITHHELD
                                       ----------         --------------
          George P. Roberts            11,318,884             267,366
          Brian T. Josling             11,320,254             265,747

         Messrs. Fred R. Fromm's and R. Craig Roos' term of office as a director
continues until the 2005 Annual Meeting of Stockholders, and Mr. Sam Smookler's
term of office as a director continues until the 2006 Annual Meeting of
Stockholders. Mr. Josling resigned from the Board of Directors on February 28,
2005.

The following proposals were also approved at our Annual Meeting:

<TABLE>
<CAPTION>
                                                                     Shares Voted   Shares Voted     Shares       Broker
                                                                         For          Against      Abstaining   Non-Votes
                                                                     ------------   ------------   ----------   ---------
<S>                                                                    <C>             <C>           <C>        <C>
Approve the proposal to amend P-Com's Certificate of
Incorporation to increase the number of shares of authorized
Common Stock from 23,333,333 shares to 35,000,000 shares               11,251,306      316,185       18,758

Approve the proposal to remove certain limitations on the
exercise of P-Com's outstanding warrants                                7,684,563      242,517       19,855     3,639,315

Approve the proposal to adopt P-Com's 2004 Equity Incentive Plan
which shall replace P-Com's 1995 Stock Option/Stock Issuance Plan       7,379,162      446,979      123,515     3,636,593

Approve the appointment of Aidman, Piser &Company as independent
accountants for the fiscal year ended December 31, 2004                11,276,130      194,549      115,571

Approve the proposal granting P-Com's management discretionary
authority to adjourn the annual meeting to a date(s) not later
than October 31, 2004, to solicit additional proxies in favor
of the proposals listed above                                          11,126,536      347,621       66,099
</TABLE>


                                       12
<PAGE>

                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock was quoted in the Nasdaq SmallCap Market under the
symbol PCOM, until March 10, 2003. Because we did not meet certain listing
requirements, including a minimum bid price of $1.00 per share, our common stock
was delisted from the SmallCap Market and now trades on the OTC Bulletin Board
operated by the National Association of Securities Dealers, Inc. This status
change could result in a less liquid market available for existing and potential
stockholders to trade shares of our stock and could ultimately further depress
the trading price of our common stock. In addition, our common stock is subject
to the Securities Exchange Commission's ("SEC") "penny stock" regulation. For
transactions covered by this regulation, broker-dealers must make a special
suitability determination for the purchase of the securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, the rules
generally require the delivery, prior to the transaction, of a risk disclosure
document mandated by the SEC relating to the penny stock market. The
broker-dealer is also subject to additional sales practice requirements.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell our common stock and may affect the ability of holders to sell the
common stock in the secondary market, and the price at which a holder can sell
the common stock. Effective July 19, 2004, we effected a thirty for one reverse
stock split. Effective as of July 19, 2004, our common stock trades under the
symbol PCMC on the OTC Bulletin Board.

         The following table sets forth the range of high and low sale prices of
our common stock, as reported on the Nasdaq SmallCap Market and OTC Bulletin
Board for each quarter in 2004 and 2003. These quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not necessarily
represent actual transactions. All price numbers have been adjusted to reflect
the reverse stock split effective July 19, 2004.

         As of March 4, 2005, there were 824 stockholders of record of P-Com's
common stock.

                                           PRICE RANGE OF COMMON STOCK
                                           ---------------------------
                                               HIGH           LOW
                                             --------      --------
Year Ended December 31, 2003:
   First Quarter                             $   9.30      $   2.70
   Second Quarter                                3.90          1.80
   Third Quarter                                10.20          2.70
   Fourth Quarter                                8.40          4.20

Year Ended December 31, 2004:
   First Quarter                             $   6.00      $   1.80
   Second Quarter                                2.31          1.17
   Third Quarter                                 1.26          0.63
   Fourth Quarter                                0.66          0.38

RECENT SALES OF UNREGISTERED SECURITIES

         In November 2004, we issued warrants to purchase 528,000 shares of our
common stock to SDS Capital SPC Ltd, in connection with the Debenture Financing.
Also, in November 2004, we issued warrants to purchase 178,571 shares of our
common stock to Agilent Financial Services in connection with the restructuring
of a capital lease obligation.


                                       13
<PAGE>

         No underwriters were involved in the foregoing stock transactions. The
securities issued in connection with each of the above financings were issued
private transactions, in reliance on an exemption from registration under
Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D
promulgated thereunder, because each offering was a non-public offering to
accredited investors.

DIVIDENDS

         To date, we have not paid any cash dividends on shares of our common
stock or Series C Preferred Stock. Holders of Series C Preferred Stock are
entitled to receive, out of legally available funds, dividends at the rate of 6%
per annum beginning on the second anniversary of their date of issuance, or
November 2004 with respect to the first tranche, and December 2004 with respect
to the second and final tranche. We do not anticipate that funds will be legally
available to make the required dividend payments in the foreseeable future, and
such obligations therefore will accrue in arrears until such time as we have
legally available funds to make the required distributions.


EQUITY COMPENSATION PLANS

         The following table sets forth the securities reserved for issuance
under equity compensation plans at December 31, 2004:

<TABLE>
<CAPTION>
                                        Number of securities                         Number of securities remaining
                                         to be issued upon       Weighted-average     available for future issuance
                                              exercise of       exercise price of       under equity compensation
                                        outstanding options,   outstanding options     plans (excluding securities
                                        warrants and rights    warrants and rights      reflected in column (a))

Plan Category                                   (a)                    (b)                          (c)

<S>                                            <C>                  <C>                          <C>
Equity compensation plans approved by
security holders                               1,167,854            $23.30                       1,792,929

Equity compensation plans not approved
by security holders                            2,702,539            $ 4.44                          N/A

Total                                          3,870,393            $10.13                       1,792,929
</TABLE>

         In December 2004, the Financial Accounting Standards Board (FASB)
revised its Statements on Financial Accounting Standards, SFAS No. 123 ("SFAS
No. 123R"), Accounting for Share Based Payments. The revision establishes
standards for the accounting of transactions in which an entity exchanges its
equity instruments for employee services in share-based payment transactions.
The revised statement will require us to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. We have historically used the intrinsic approach to
measurement of compensation. That fair value cost is to be recognized over the
period during which the employee is required to provide service in exchange for
the award. The provisions of the revised statement are effective for our
financial statements issued for the interim reporting period beginning with
September 30, 2005. We are currently evaluating the methodology for adoption on
the impending effective date and the transition charges, if any. Since we have
not issued material options in recent years, we do not expect this Standard to
have a material impact on our financial condition or results of operation.


ITEM 6.     SELECTED FINANCIAL DATA

         Our selected financial data for the years ended December 31, 2004, 2003
and 2002 and as of December 31, 2004 and 2003, set forth below, has been derived
from our audited financial statements. This information should be read in
conjunction with the Notes to Selected Financial Data and our "Consolidated
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this report.


                                       14
<PAGE>

                          STATEMENT OF OPERATIONS DATA
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                2004         2003         2002         2001         2000
                                             ---------    ---------    ---------    ---------    ---------
<S>                                          <C>          <C>          <C>          <C>          <C>
Sales                                        $  24,175    $  20,841    $  29,686    $  73,236    $ 183,606
Cost of sales (1)                               18,720       20,604       30,777       94,890      160,965
                                             ---------    ---------    ---------    ---------    ---------
Gross profit (loss)                              5,455          237       (1,091)     (21,654)      22,641

Operating expenses:
 Research and development                        4,976        6,099       12,745       19,800       20,241
 Selling and marketing                           6,772        3,557        6,621        7,636       11,371
 General and administrative (2)                  4,552        5,607       10,750       26,070       18,181
 Goodwill impairment and amortization (3)           --           --       11,409        8,034       19,550
 Restructuring and other charges (4)                --        3,712           --           --           --
                                             ---------    ---------    ---------    ---------    ---------
Total operating expenses                        16,300       18,975       41,525       61,540       69,343
                                             ---------    ---------    ---------    ---------    ---------

Income (loss) from operations                  (10,845)     (18,738)     (42,616)     (83,194)     (46,702)
 Interest expense                                 (687)      (2,249)      (2,457)      (1,946)      (4,629)
 Gain on sale of a subsidiary (5)                   --           --           --        9,814           --
 Gain on extinguishment of debts                    --        6,499        1,393           --        1,890
 Other income (expense), net (6)                 8,252        3,739       (1,312)        (619)      (3,736)
                                             ---------    ---------    ---------    ---------    ---------
Income (loss) from continuing
 operations before income taxes,
 and cumulative effect of change
 in accounting principle                        (3,280)     (10,749)     (44,992)     (75,945)     (53,177)
Provision (benefit) for income
 taxes (7)                                          --           --         (470)        (618)      10,917
                                             ---------    ---------    ---------    ---------    ---------
Loss from continuing
 operations before cumulative
 effect of change in accounting principle       (3,280)     (10,749)     (44,522)     (75,327)     (64,094)
Discontinued operations (8:
Loss from operations                               (40)        (581)      (4,284)        (211)      (4,321)
Loss on disposal                                    --       (1,556)          --           --           --
                                             ---------    ---------    ---------    ---------    ---------
                                                (3,320)     (12,886)     (48,806)     (75,538)     (68,415)
Cumulative effect of changes in
accounting principles (9)                           --           --       (5,500)          --       (1,534)
                                             ---------    ---------    ---------    ---------    ---------

Net loss                                        (3,320)     (12,886)     (54,306)     (75,538)     (69,949)
                                             ---------    ---------    ---------    ---------    ---------

Preferred stock accretions (10)                 (2,392)      (1,521)          --           --           --
Preferred stock dividends                         (156)          --           --           --           --
                                             ---------    ---------    ---------    ---------    ---------
Net loss attributable to common
stockholders                                 $  (5,868)   $ (14,407)   $ (54,306)   $ (75,538)   $ (69,949)
                                             =========    =========    =========    =========    =========
PER SHARE DATA (11):

Basic and diluted  (loss) from continuing
 operations per common share                 $   (0.56)   $   (6.80)   $  (52.28)   $ (136.54)   $ (123.15)
Basic and diluted (loss) from discontinued
 operations per common share                     (0.00)       (1.18)       (5.03)       (0.38)       (8.30)
Cumulative effect changes in
 accounting principles                              --           --        (6.46)          --        (2.95)
                                             ---------    ---------    ---------    ---------    ---------
Basic and diluted net loss per
 common share                                $   (0.56)   $   (7.98)   $  (63.77)   $ (136.92)   $ (134.40)
</TABLE>


                                       15
<PAGE>

                    BALANCE SHEET DATA (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                     2004        2003        2002         2001        2000
                                  ----------------------------------------------------------
<S>                               <C>         <C>         <C>          <C>         <C>
Cash and cash equivalents         $   2,280   $   6,185   $   1,616    $   7,103   $  27,541
                                  =========   =========   =========    =========   =========
Working capital                       1,283      (2,075)     (2,356)     (10,185)     76,823
                                  =========   =========   =========    =========   =========
Total assets                         25,423      34,565      35,723       92,234     216,219
                                  =========   =========   =========    =========   =========
Long-term debt                           --          --      24,488          769      30,290
                                  =========   =========   =========    =========   =========
Redeemable preferred stock (10)       6,106       4,231          --           --          --
                                  =========   =========   =========    =========   =========
Accumulated deficit                (368,885)   (363,174)   (348,766)    (294,460)   (218,922)
                                  =========   =========   =========    =========   =========
Stockholders' equity (deficit)    $   7,508   $   9,753   $ (15,350)   $  24,256   $  95,247
                                  =========   =========   =========    =========   =========
</TABLE>

                        NOTES TO SELECTED FINANCIAL DATA

(1) In 2004, this caption reflects charges of approximately $1.1 million for
contractual losses and obsolescence of uncontracted inventory purchases. In
2003, this caption reflects charges of approximately $3.4 million related to
excess and obsolete inventory. In 2002, this caption reflects charges of
approximately $5.8 million related to excess and obsolete inventory. In 2001,
this caption reflects charges of approximately $30 million related to excess
inventory and inventory purchase commitments. In 2000, this caption reflects
charges of $21.7 million related to excess inventory and purchase commitments.

(2) In 2001, this caption reflects a $11.6 million charge for bad debt arising
from the bankruptcy of a customer.

(3) In 2002, 2001 and 2000, this caption reflects impairment and amortization
charges made to our goodwill carrying value of $11.4 million, $8.0 million and
$19.6 million, respectively.

(4) In 2003, this caption reflects restructuring charges that were recorded due
to exiting certain product lines. Restructuring charges were expensed when the
loss was estimable and incurred.

(5) In 2001, this caption reflects a realized gain on the sale of our RT Masts
subsidiary.

(6) In 2004, this caption reflects a restructuring gain of $7.5 million related
to a contract settlement.

(7) In 2000, this caption includes a $9.9 million charge to income tax expense,
representing an increase in the valuation allowance against the carrying value
of deferred tax assets.

(8) We sold our PCNS subsidiary in 2003, which resulted in a loss of $1.5
million and accounted for the transaction as a discontinued operation. In
accordance with applicable accounting standards, we restated our financial
statements for all periods presented to exclude the operations of PCNS from
continuing operations for all periods presented.

(9) In 2002, this caption reflects a $5.5 million charge representing the
cumulative effect of our change in accounting principle for accounting for
goodwill. In 2002, this caption reflects a non-cash charge of approximately $1.5
million for the cumulative effect of the accounting change made to comply with
SEC revenue recognition standards contained in Staff Accounting Bulletin
SAB.101.

(10) The carrying value of our redeemable preferred stock is discounted for the
allocation of proceeds to warrants that were issued concurrent with the sale of
redeemable preferred stock and beneficial conversion features embedded in the
convertible instrument. We are accreting the redeemable preferred stock to its
redemption value through periodic accretions that increase preferred stock and
decrease retained earnings. We are required to display preferred stock
accretions as an increase to loss applicable to common stockholders.

(11) The per share amounts have been restated to give effect to a one-for-30
reverse stock split on July 19, 2004. The numerator for calculation of net loss
per common share from continuing operations is our net loss from continuing


                                       16
<PAGE>

operations for the respective period, less preferred stock dividends and
accretions. The numerator for the calculation of net loss per common share from
discontinued operations is our net loss from discontinued operations. The
numerator for calculation of the per common share effect of the cumulative
effects of accounting changes is the charge associated with the change in
accounting principle. In all instances, the denominator, weighted average common
shares outstanding, does not include stock options with an exercise price that
exceeds the average fair market value of the underlying Common Stock or other
dilutive securities because the effect would be anti-dilutive.



                                       17
<PAGE>

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

         Management's discussion and analysis of financial condition and results
of operations contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth in the section entitled "Risk Factors" beginning on page 28 of
this Annual Report on Form 10-K.

OVERVIEW

         We currently supply broadband wireless equipment and services for use
in telecommunications networks. We currently ship 2.4 GHz and 5.8 GHz spread
spectrum (unlicensed) radio systems, as well as 7 GHz, 13 GHz, 14 GHz, 15 GHz,
18 GHz, 23 GHz, 26 GHz, and 38 GHz point-to-point radio systems. In the first
quarter of 2003, we decided to exit the services business. Accordingly, this
business is reported as a discontinued operation.

         Summary of Operations.

         We have incurred substantial losses in recent years. During the years
ended December 31, 2004, 2003, and 2002, we recorded net losses from continuing
operations of ($3.3) million, ($10.7) million, and ($44.9) million,
respectively. While we achieved revenue growth in the year ended December 31,
2004 compared to the year ended December 31, 2003, lower average selling prices
have continued to impact our operating results in 2004 compared to 2003 and
prior periods. As a result, we continued to reduce operating and other costs
throughout 2004. For example, in the second quarter of 2004, we restructured our
Italian operations conducted by P-Com Italia, S.p.A. Under the restructuring
plan, certain refurbishment operations have been outsourced to NORT S.r.L, an
Italian third-party contract manufacturer. The outsourcing arrangement is in
addition to arrangements to outsource manufacturing of our point - to - point
and spread spectrum products entered into in the first quarter of 2004, which
resulted in lower costs of manufacturing those product lines.

         The continued curtailments in capital spending among telecommunication
carriers in the United States, Europe, and many parts of Asia and Latin America
countries, together with our customer concentration, and the intense competition
from leading telecommunications equipment and technology suppliers, has resulted
in lower average selling prices. As a result, it is uncertain whether we will be
able to achieve sales volumes for certain of our point - to - point products in
2005 necessary to justify continued development of these products. Because of
this uncertainty, management is currently evaluating whether to continue to
support the development of these products. See Restructuring Activities below.
In the interim, management is focused on increasing sales of our unlicensed
products and certain of our higher margin license products (including
refurbished licensed products), and strengthening our relationship with third
party product providers. In the event that we are unable to materially increase
sales as a result of these efforts, and in the absence of a material
restructuring of our product lines, we will continue to incur substantial net
operating losses.

         Summary of Liquidity and Capital Resources.

         We used ($9.1) million, ($5.9) million and ($14.5) million cash,
respectively, in supporting our operating activities during the years ended
December31, 2004, 2003 and 2002, respectively. Our financing activities
generated $4.7 million, $11.9 million and $8.0 million during the years ended
December 31, 2004, 2003 and 2002, respectively. Based upon current internal
projections at current operating levels, and taking account of current working
capital, we will have a cash shortfall of approximately $4.0 million in our
operations during the year ended December 31, 2005. In addition, we estimate
that our current cash reserves will be exhausted by the second quarter of the
year ended December 31, 2005. There are currently no committed funding
arrangements to support this projected cash shortfall. Our projected sources of
working capital that were utilized in our operating model includes the
following:

      o     We have an unused $4.0 million line of credit with Silicon Valley
            Bank that expires in September 2005. This Credit Facility has
            significant terms and conditions that will limit our ability to draw
            funds. Available borrowing under the Credit Facility is based on our
            accounts receivable. At December 31, 2004, available borrowings
            under the Credit Facility were approximately $1.8 million, and are
            declining.


                                       18
<PAGE>

      o     We have an outstanding commitment for $1.7 million in debenture
            financing, which, according to the original terms was due to us by
            December 31, 2004. We are currently negotiating the conditions
            necessary to obtain the $1.7 million financing, in light of our
            deteriorating financial condition and results of operations. There
            are no assurances that we will receive these funds.

         Our ability to continue as a going concern for a reasonable period at
current operating levels is dependent upon acquiring additional cash through
financing arrangements. While we are actively seeking additional equity and/or
debt financing, there are currently no commitments. There can be no assurances
that any additional financing will be available on acceptable terms, if at all.
Accordingly, we are actively engaged in the development of a formal
restructuring plan that will significantly curtail current spending, and
substantially reduce liabilities and operating and other costs. The plan is
subject to the approval of the Company's Board of Directors, and is expected to
be presented for approval before the end of the first fiscal quarter of 2005.
See Restructuring Activities below.

ESTIMATES AND CRITICAL ACCOUNTING POLICIES

         Management's discussion and analysis of out financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. 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 related disclosure of
contingent assets and liabilities. We evaluate our estimates frequently. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

         We believe the following critical accounting policies are significant
in the preparation of our consolidated financial statements:

Revenue Recognition

         Revenue from product sales is recognized upon transfer of title and
risk of loss, which is upon shipment of the product, provided no significant
obligations remain and collection is probable. Revenue from out-of-warranty
repair is recognized upon replacement of the defective unit with a repaired unit
to the customers. Provisions for estimated warranty repairs, returns and other
allowances are recorded at the time revenue is recognized.

Allowance for Doubtful Accounts

         We maintain an allowance for doubtful accounts for estimated losses on
customer accounts. We evaluate our allowance for doubtful accounts based on the
aging of our accounts receivable, the financial condition of our customers and
their payment history, our historical write-off experience and other
assumptions. In order to limit our credit exposure, we often require irrevocable
letters of credit and even prepayment from certain of our customers before
commencing production.

Inventory

         Our inventory is required to be stated at the lower of our cost or
recoverable value. Demand from our customers is highly unpredictable, and can
fluctuate significantly as a result of factors beyond our control. In addition,
our inventories include parts and components that are specialized and subject to
rapid technological obsolescence. Finally, we may purchase inventories in
advance of a customer's formal order if we believe the risk of loss is not
probable. As a result of these conditions, we maintain an allowance for
inventories. We assess our inventory carrying value and reduce it if necessary,
on a specific identification basis. However, such process requires subjective
estimates.


                                       19
<PAGE>

Impairment of Long Lived Assets, Other Than Goodwill

         In the event that certain facts and circumstances indicate that the
long-lived assets or goodwill may be impaired, an evaluation of recoverability
would be performed. When an evaluation of long lived assets other than goodwill
becomes necessary, we conduct a probability analysis based on the weighted
future undiscounted cash flows associated with the asset or at the lowest
discernable level of cash flows. The results are then compared to the carrying
amounts to determine if impairment charges require calculation. The cash flow
analysis for the property and equipment is performed over the shorter of the
expected useful lives of the assets, or the expected life cycles of our product
line.

Impairments of Goodwill

         Goodwill resulting from the purchase of substantially all the assets of
Speedcom Wireless Corporation will not be amortized into operations. Rather,
such amounts will be tested for impairment at least annually. This impairment
test is calculated at the reporting unit level, which is at the enterprise
level. The annual goodwill impairment test has two steps. The first step
identifies potential impairments by comparing the fair value of the Company, as
determined using its trading market prices, with its carrying value, including
goodwill. If the fair value exceeds the carrying amount, goodwill is not
impaired and the second step is not necessary. If the carrying value exceeds the
fair value, the second step calculates the possible impairment loss by comparing
the implied fair value of goodwill with the carrying amount. If the implied
goodwill is less than the carrying amount, a write-down will be recorded. In the
event that we determine that the value of goodwill has become impaired using
this approach, an accounting charge for the amount of the impairment will be
recorded. No impairment of goodwill resulted from this measurement approach
during the current year.

Accounting For Income Tax Valuation Allowances

         We record a valuation allowance to reduce our deferred tax assets to
the amount that is more likely than not to be realized in future periods. We
consider historical levels of income, expectations and risks associated with
estimates of future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. In the event that
we determine that we would be able to realize deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the deferred tax asset
would increase income in the period that determination was made.

YEARS ENDED 2004, 2003 AND 2002

Sales

         In 2004, 2003 and 2002, our sales were approximately $24.2 million,
$20.8 million and $29.7 million, respectively. The 16% increase in sales from
2003 to 2004 was primarily due to increased shipments to one customer, which
generated approximately 25% of our total sales, or $6.2 million. We do not
anticipate generating the same level of sales to this customer in 2005.

         Sales of licensed products in 2004, including refurbished radios, was
$19.1 million, or 79% of total sales, while sales of unlicensed products was
$5.1 million, or 21% of total sales. We currently expect the demand for
unlicensed wireless equipment to increase, as unlicensed equipment is generally
less expensive and the spectrum is free. Demand for licensed wireless equipment
has not significantly increased since 2000, when spending on telecommunications
equipment peaked, and competition has intensified. We are currently evaluating
divesting certain unprofitable product lines, which may include certain of our
licensed wireless products. We will, however, continue the sale of refurbished
licensed products in connection with our repair and maintenance business. See
Restructuring Activities, below. Divesting certain product lines would reduce
our future revenue. Any divestiture activities would be subject to the approval
of our Board of Directors.

         Sales of refurbished licensed products in 2004 were $11.2 million, or
46% of total sales, and 58% of total sales of licensed products. As a percentage
of total sales and total sales of licensed products, sales of refurbished
licensed products are anticipated to increase in 2005 relative to 2004 as a
result of the decrease in sales of new licensed products anticipated in 2005.


                                       20
<PAGE>

         The 30% decrease in sales from 2002 to 2003 was primarily due to
decreased shipments to China and South East Asia, which decreased to $5.8
million in 2003, compared to $15.0 million in 2002. The decrease was principally
caused by the increased competition in the region, and economic conditions
exacerbated by the SARS epidemic.

         Sales to Orange Personal Communications Services accounted for 13%, 18%
and 11% of total sales in 2004, 2003 and 2002, respectively. Sales to MynTahl
Corporation accounted for 0%, 13% and 14% of total sales in 2004, 2003 and 2002,
respectively. Sales to T-Mobile (previously known as Mercury-One-to-One)
accounted for 12%, 12% and 4% of 2004, 2003 and 2002 sales, respectively.

         During 2004, we generated 11% of our sales in the United States, 23% in
the United Kingdom, 21% in continental Europe, 14% in Asia, 25% in Latin America
and 6% in other geographical regions. During 2003, we generated 8% of our sales
in the United States, 31% in the United Kingdom, 18% in continental Europe, 32%
in Asia, 7% in Mexico and 4% in other geographical regions. During 2002, we
generated 10% of our sales in the United States, 20% in the United Kingdom, 15%
in continental Europe, 51% in Asia, and 4% in other geographical regions.

Gross Profit

         Cost of sales consists primarily of costs related to materials, labor
and overhead, freight and duty. Cost of sales amounted to $18.7 million, $20.6
million and $30.8 million during the years ended December 31, 2004, 2003, and
2002, respectively. In 2004, 2003, and 2002, gross profit (loss) was $5.5
million, $0.2 million, and $(1.1) million, respectively, or 23%, 1%, and (4%),
respectively.

         In 2004, 2003 and 2002, cost of sales and gross margins were negatively
affected by inventory and other related charges of $.9 million, $3.7 million,
and $5.8 million, respectively (see "Restructuring and Other Charges" below).
Product gross profit as a percentage of product sales, not including the effect
of the inventory charges described above, was approximately 26%, 19%, and 15%,
in 2004, 2003, and 2002, respectively. The higher gross margin in 2004 was
principally due to higher levels of revenue attributable to sales of higher
margin refurbished licensed product sales and the lower cost of outsourced
manufacturing by NORT in our former Italian operations. The NORT arrangement,
which was executed in June 2004 is expected to have a continuing beneficial
effect on gross margins. The higher gross margin in 2003 over 2002 was
principally due to a higher percentage of revenue attributable to refurbished
licensed product sales, which contributes a higher gross margin than the gross
margin attributable to new product sales.

         As further discussed under Restructuring Activities, below, our
impending restructuring plans are expected to include the divestiture of certain
licensed product lines, other than refurbished licensed products, which will
have the effect of further reducing our overall operating costs. Divesting
certain product lines may result in inventories becoming excessive and subject
to markdown. If markdowns are necessary, such amounts will be recorded as a
component of cost of sales when they are estimable.

Research and Development

         Research and development expenses consist primarily of costs associated
with new product development. Our research and development activities include
the development of additional radio products, frequencies and upgrading
operating features, and related software tools. Software development costs
incurred prior to the establishment of technological feasibility are expensed as
incurred. Software development costs incurred after the establishment of
technological feasibility and before general release to customers are
capitalized, if material.

         In 2004, 2003 and 2002, research and development expenses were
approximately $5.0 million, $6.1 million and $12.7 million, respectively. As a
percentage of product sales, research and development expenses decreased from
29% in 2003 to 20% in 2004, primarily due to increased revenue and decreases in
research and development spending. As a percentage of sales, research and
development expenses decreased from 43% in 2002 to 29% in 2003, primarily due to
discontinuation of research on the point-to-multipoint product line. Research
and development expenses in 2002 were significant due to the substantial final


                                       21
<PAGE>

development efforts on the new Encore point - to - point and AirPro Gold spread
spectrum products in preparation for commercial rollout of this product line in
2003.

Selling and Marketing

         Selling and marketing expenses consist of salaries, sales commissions,
travel expenses, customer service and support expenses, and costs related to
business development and trade shows. In 2004, 2003, and 2002, selling and
marketing expenses were $6.8 million, $3.6 million, and $6.6 million,
respectively. As a percentage of sales, selling and marketing expenses increased
from 17% in 2003 to 28% in 2004, primarily due to increased payroll, travel and
commissions expenses. As a percentage of sales, selling and marketing expenses
decreased from 22% in 2002 to 17% in 2003, primarily due to headcount reductions
and cost cutting programs that were put in place during the restructuring.

General and Administrative

         General and administrative expenses consist primarily of salaries and
other expenses for management, as well as finance, accounting, data processing,
public company costs, legal, and other professional services. In 2004, 2003, and
2002, general and administrative expenses, were $4.6 million, $5.6 million, and
$10.7 million, respectively. As a percentage of sales, general and
administrative expenses decreased from 27% in 2003 to 19% in 2004 due to reduced
consulting, underwriting fees and other services. As a percentage of sales,
general and administrative expenses decreased from 36% in 2002 to 27% in 2003
due to headcount reductions, lower levels of external professional fees, and
other cost cutting programs implemented during the year.

         On March 10, 2005, the Company's Chief Executive Officer, Samuel
Smookler, resigned as Chief Executive Officer and a director of the Company. The
Board of Directors is currently negotiating the terms of his severance
arrangements. Under the terms of his existing Agreement, Mr. Smookler may be
entitled to receive severance payments totaling $250,000. In addition, his
incentive stock option to acquire 80,000 shares of common stock vests
immediately. The Company will record the negotiated severance expense effective
with the date of termination during the first fiscal quarter in the year ended
December 31, 2005. The acceleration in vesting of Mr. Smookler's incentive stock
options is not considered a modification and, therefore, no expense will be
recorded, because acceleration upon termination was provided for in his original
employment agreement. See also Restructuring Activities, below.

Restructuring Activities

         We are actively engaged in the development of a formal restructuring
plan that will significantly curtail current spending, and substantially reduce
liabilities and operating and other costs. The plan is subject to the approval
of our Board of Directors, and is expected to be presented for approval before
the end of the first fiscal quarter of 2005.

         The restructuring plan is expected to include significant reductions in
costs, including the suspension or curtailment of certain research and
development efforts, reductions in headcount, restructuring of committed costs,
such as leasing arrangements, and the curtailment of activities in certain
foreign locations. The plan is also expected to include the divestiture of
certain unprofitable product lines, which will have the effect of further
reducing overall costs. Finally, the plan will likely include the designation of
additional preferred stock that will be used to restructure certain liabilities
and existing preferred stock of the Company.

         Many of the individual components of the restructuring plan will result
in charges to operations and, in some instances, the use of a portion of the
Company's remaining cash reserves. The associated amounts have not yet been
determined. However, under current accounting standards for restructuring and
exit activities, the Company will generally be required to determine the amounts
and the timing of recognition of the cost components individually. Expenses
associated with employee severance costs will not be recorded before the date
that the Board of Directors approves the formal plan (the "Commitment Date").
Subsequently, severance costs will be recognized when employee groups are
identified and the severance benefits are communicated. Divesting certain
product lines may result in inventories becoming excessive and subject to
markdown evaluation. If markdowns are necessary, such amounts will be recorded
as a component of cost of sales when estimable. Other costs associated with the


                                       22
<PAGE>

restructuring plan, such as lease restructuring or other exit costs, generally
will be recognized when the costs are incurred through contract execution or
otherwise.

         Certain time sensitive elements of our restructuring plan have been
initiated at the direction or approval of the Board of Directors. As noted in
General and Administrative above, on March 10, 2005, our Chief Executive
Officer, Samuel Smookler, resigned, and our former Acting Chief Financial
Officer and General Counsel, Daniel W. Rumsey, was appointed Chief Restructuring
Officer. We have also commenced efforts to exit or modify certain facilities and
operating lease arrangements, as well restructure certain debts and other
obligations of the Company.

Restructuring and Other Charges

         We continually monitor our inventory carrying value in the light of the
slowdown in the global telecommunications market. This has resulted in a $2.0
million charge to cost of sales for our point - to - multipoint, Tel-Link point
- to - point and Air-link spread spectrum inventories during the second quarter
of 2003. In the first quarter of 2003, we recorded a $3.4 million inventory
related charge to cost of sales, of which $2.0 million was related to its point
- to - multipoint inventories. These charges were offset by credits of $1.8
million in the second quarter associated with a restructurings of accounts
payable and purchase commitment liabilities arising from vendor settlements.

         In the event that certain facts and circumstances indicate that the
long-lived assets may be impaired, an evaluation of recoverability would be
performed. When an evaluation occurs, management conducts a probability analysis
based on the weighted future undiscounted cash flows associated with the asset.
The results are then compared to the asset's carrying amount to determine if
impairment is necessary. The cash flow analysis for the property and equipment
is performed over the shorter of the expected useful lives of the assets, or the
expected life cycles of our product line. An impairment charge is recorded if
the net cash flows derived from the analysis are less than the asset's carrying
value. We deem that the property and equipment is fairly stated if the future
undiscounted cash flows exceed its carrying amount. In the first and second
quarter of 2003, P-Com continued to reevaluate the carrying value of property
and equipment relating to its point - to - multipoint product line, that are
held for sale. The evaluation resulted in a $2.5 million provision for asset
impairment in the second quarter of 2003, and $0.6 million provision in the
first quarter of 2003. As a result of these adjustments, there is no remaining
net book value of property and equipment related to the point - to - multipoint
product line.

         A summary of inventory reserve activities is as follows:

                                                                Inventory
                                                                 Reserve
                                                                ---------
              Balance at January 1, 2004                        $  27,119
              Additions charged to Statement of Operations            916
              Deductions from reserves                             (3,746)
                                                                ---------
              Balance at December 31, 2004                      $  24,289

         In the fourth quarter of 2002, we determined that there was a need to
reevaluate our inventory carrying value in light of the continuing worldwide
slowdown in the global telecommunications market, especially with regard to an
assessment of future demand for our point - to - multipoint product range. This
resulted in a $5.8 million inventory charge to product cost of sales, of which
$5.0 million was for point - to - multipoint inventories, and $0.8 million was
for spread spectrum inventories.

Change in Accounting Principle

         Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies accounted for as purchase business
combinations. We adopted SFAS 142 on January 1, 2002, and, as a result,
discontinued recording goodwill amortization; although we did record a
transitional impairment charge of $5.5 million in the first quarter of 2002,
representing the difference between the fair value of expected cash flows from
the services business unit, and its book value.


                                       23
<PAGE>

Goodwill Amortization and Impairment

         We accounted for the SPEEDCOM purchase transaction using the purchase
method of accounting. Under the purchase method of accounting, the total
purchase price, plus the fair value of assumed liabilities, is allocated to the
net tangible and identifiable intangible assets acquired, based upon their
respective fair values. The total purchase price of approximately $7,514,000
consisted of 2,116,666 shares of our Common Stock, valued using market values
for such shares around the commitment date ($3.42). The acquisition resulted in
goodwill of approximately $12.0 million, because the value of the assumed
liabilities exceeded the value of the tangible assets acquired.

         In accordance with Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, goodwill resulting from the purchase, if
any, will not be amortized into operations. Rather, such amounts will be tested
for impairment at least annually. In the event that we determine that the value
of goodwill has become impaired, an accounting charge for the amount of the
impairment will be recorded. No impairment of goodwill was recorded in 2004 or
2003 because the enterprise value of the combined business units exceeded the
goodwill-carrying amount.

         In 2002, we reviewed the carrying value of goodwill related to the
services business unit, and based upon its assessment of future cash value of
revenue flows and the current depressed business condition of the
telecommunications services market, recorded an $11.4 million impairment charge
in the fourth quarter of 2002.

Loss on Discontinued Business

         In the first quarter of 2003, we decided to exit our service business,
P-Com Network Services, Inc. ("PCNS"). Accordingly, this business is reported as
a discontinued operation and we recorded losses from its operations for the year
ended December 31, 2003 and 2002. On April 30, 2003, we entered into an Asset
Purchase Agreement with JKB Global, LLC to sell certain assets of PCNS. P-Com
guaranteed PCNS' obligations under its premises lease, through July 2007. As
part of the sale to JKB Global, LLC, JKB Global, LLC agreed to sublet the
premises from PCNS for one year beginning May 1, 2003. The terms of the sublease
required JKB Global, LLC to pay less than the total amount of rent due under the
terms of the master lease. As a result, we remained liable under the terms of
the guaranty for the deficiency, and the total obligation under the terms of the
master lease was approximately $1.5 million. This amount was accrued in the
second quarter of 2003 as loss on disposal of discontinued operations. In
September 2003, we entered into an agreement to terminate the premises lease in
consideration for the payment to the landlord of $240,000.

Interest Expense

         In 2004, 2003 and 2002, interest expense was $0.7 million, $2.2 million
and $2.5 million, respectively. In 2004 and 2003, interest expense primarily
related to the borrowings on the credit facility with the Bank, the issuance of
the Convertible Notes, amortization of discount on promissory notes, and
interest on equipment leases. In 2002, interest expense primarily related to the
borrowings under the Credit Facility, the 4.25% Convertible Subordinated Notes,
the issuance of the Convertible Notes, note conversion expenses and interest on
equipment leases. Approximately $0.8 million was charged to interest expense in
2002 related to conversion of the 4.25% Convertible Subordinated Notes to Common
Stock, in compliance with SFAS 84.

Other Income (Expense), Net

           In 2004, other income, net, related primarily to a gain on the
settlement of a contract of $7.5 million. In 2003, other income, net, related
primarily to exchange gain arising from the depreciation of the United States
dollar against the Euro and British pound of $0.9 million, gain on disposals of
property and equipment of $1.1 million, and gain on vendor settlements of $2.2
million. These were partially offset by miscellaneous other losses.

         In 2002, other expense, net, related primarily to losses on vendor
settlements of $1.2 million, and writing-off of a notes receivable of $0.8
million. These were partially offset by exchange gain arising from Euro and
British pound denominated receipts when these currencies appreciated against the
United States dollar and other miscellaneous income.


                                       24
<PAGE>

Gain (loss) on Debt Extinguishment

         In the second quarter of 2003, we repurchased a portion of our 7%
Convertible Subordinated Notes with a face value of $2.3 million, in exchange
for property and equipment valued at $0.8 million, resulting in a gain of $1.5
million. In the third quarter of 2003, we redeemed the remaining 7% Convertible
Notes plus interest totaling $21.1 million, in exchange for Series B Preferred
Stock with a valuation of $11.6 million. The amount of unamortized deferred
financing expense of $750,000 was also written-off as part of this transaction,
which resulted in a gain of $8.8 million. In the fourth quarter of 2003, we
converted Series C Preferred Stock with a face value of $2.2 million, in
exchange for Common Stock valued at $6.0 million on the commitment date of the
transaction, resulting in a loss of $3.8 million.

         In the second quarter of 2002, we repurchased 4.25% Convertible
Subordinated Notes with a face value of $1.75 million for approximately $367,000
in cash.

Provision (Benefit) For Income Taxes

         There was no provision for income tax in 2004 and 2003, because the
Company incurred net operating losses during the year and the realization of
benefits is future years does not rise to the more likely than not standard. In
2002, P-Com recorded a net tax benefit of $(0.5) million, relating to recovery
of prior year's federal income tax, offset by income taxes attributable to
foreign jurisdictions that had local taxable income for the year.

LIQUIDITY AND CAPITAL RESOURCES

         Since our inception in August 1991, we have financed our operations and
capital requirements principally through net proceeds of approximately $97.2
million from its initial and two follow-on public offerings of our Common Stock;
$113.1 million from private placements of our Common Stock and the exercise of
Warrants; $44.6 million from five Preferred Stock financings; $97.5 million from
the 4.25% Notes issued in 1997; $3.3 million from the issuance of debentures;
and borrowings under bank lines of credit and equipment lease arrangements.

         Cash Used in Operations. In 2004, we used approximately $9.1 million of
cash in operating activities, primarily due to our net loss of $3.3 million, a
non-recurring gain on vendor settlements of approximately $8.5 million, and
reductions in accounts payable and other accrued liabilities of $2.3 million,
offset by depreciation expenses and inventory charges of $2.4 million and lower
receivables, and other assets of $2.4 million.

         In 2003, we used approximately $5.9 million of cash in operating
activities, primarily due to our net loss of $14.4 million, and a $6.5 million
non-cash gain arising from the redemption of the Convertible Notes, plus a $2.1
million of non-cash gain from vendor settlements. These amounts were offset by a
$3.7 million non-cash loss related to inventory and related charges, $3.1
million of property and equipment impairment charges, and depreciation expenses
of $3.9 million. Significant contributions to cash flow resulted from a net
reduction in inventories of $2.5 million, a net reduction in prepaid and other
current assets of $1.2 million, offset by a net decrease of other accruals and
accounts payable totaling $2.1 million.

         Cash from Investing Activities. During 2004, we received $0.6 million
from the sale of property and equipment of $0.9 million, offset by new
acquisitions of $0.3 million. In 2003, we used approximately $0.7 million of
cash from investing activities, due principally to $1.6 million paid for the
acquisition of SPEEDCOM Wireless Corporation, plus $0.2 million related to the
acquisition of property and equipment, offset by changes in the net assets of
discontinued operations of $0.6 million.

         Cash from Financing Activities. In 2004, we received $4.7 million
through financing activities. This was due primarily to $3.3 million of proceeds
from the issuance of debentures and $2.4 million net proceeds from the Special
Warrant Offering, offset by $1.0 million of capital lease payments.

         In 2003, we generated $11.9 million of cash flows from financing
activities, primarily through the receipt of $15.1 million from Preferred Stock
and bridge note financings, as more particularly described below, and $0.3
million from the receipt of proceeds from the sale of Common Stock. These were
offset by payments of $2.6 million to the Bank under the Credit Facility, a


                                       25
<PAGE>

payment of $0.8 million to redeem certain promissory notes assumed as a result
of the acquisition of Wave Wireless, and payments of $0.2 million to lessors
under capital leases.

         On March 26, May 28, and July 18, 2003, we completed bridge financing
transactions in which it issued $1.5 million, $0.3 million and $0.9 million,
respectively, of 10% convertible promissory notes with a maturity date of one
year from the date of issuance (the "Bridge Notes"). The Bridge Notes were
subordinated to amounts due under the Credit Facility, but senior to the
Convertible Notes. The Bridge Notes were converted into shares of Series C
Convertible Preferred Stock, in connection with the Series C Financing, as
discussed below.

         On August 4, 2003, as a result of the restructuring of its Convertible
Notes, the principal amount and accrued interest of $21,138,000 was converted
into approximately 1,000,000 shares of Series B Convertible Preferred Stock with
a stated value of $21.138 per share.

         On October 3 and December 18, 2003, we raised approximately $13.8
million from the issuance and sale of its Series C Convertible Preferred Stock
(the "Series C Financing"), resulting in net proceeds of approximately $9.9
million after deducting expenses related to the Series C Financing, and payment
of certain claims related to our restructuring.

         Contractual Obligations. The following summarizes P-Com's contractual
obligations at December 31, 2004, and the effect such obligations are expected
to have on its liquidity and cash flow in future periods:

<TABLE>
<CAPTION>
                             Less Than   One to      Three to     After
 Obligations (in $000):      One Year  Three Years  Five Years  Five Years    Total
------------------------------------------------------------------------------------
<S>                          <C>         <C>         <C>         <C>         <C>
Non-cancelable operating
  lease obligations          $ 1,750     $   638     $   638     $ 1,599     $ 4,625
Agilent note payable           1,103         300          --          --       1,403
Siemens note payable             300         100          --          --         400
Promissory note                1,676       1,441          --                   3,117
Purchase order commitments     2,391          --          --          --       2,391
                             -------     -------     -------     -------     -------
Total                        $ 7,220     $ 2,479     $   638     $ 1,599     $11,936
                             -------     -------     -------     -------     -------
</TABLE>

         We do not have any material commitments for capital equipment.
Additional future capital requirements will depend on many factors, including
our working capital requirements for our operations and our internal free cash
flow from operations.

         Available Borrowing. On September 17, 2004, we renewed our Credit
Facility with the Bank for an additional year, until September 17, 2005. The
Credit Facility consists of a Loan and Security Agreement for a $1.0 million
borrowing line based on domestic receivables, and a Loan and Security Agreement
under the Export-Import ("EXIM") program for a $3.0 million borrowing line based
on export related inventories and receivables. The Credit Facility provides for
cash advances equal to 75% of eligible accounts receivable balances for both the
EXIM program and domestic lines, and up to $750,000 for eligible inventories
(limited to 25% of eligible EXIM accounts receivable), under the EXIM program.
Advances under the Credit Facility bear interest at the Bank's prime rate plus
3.5% per annum. The Credit Facility is secured by all receivables, deposit
accounts, general intangibles, investment properties, inventories, cash,
property, plant and equipment of P-Com. P-Com has also issued a $4.0 million
secured promissory note underlying the Credit Facility to the Bank. As of
December 31, 2004, no amounts were due the Bank under the Credit Facility.

         We have an unsecured overdraft line with a bank in Italy, for
borrowings up to $83,000, based on domestic trade receivables. Borrowings under
this line bear interest at 4.5% per annum. As of December 31, 2004, there were
no amounts drawn under this facility.

         Current Liquidity. At December 31, 2004, we had working capital of
approximately $1.3 million, compared to negative working capital of
approximately $2.1 million at December 31, 2003.


                                       26
<PAGE>

         Our principal sources of liquidity at December 31, 2004 consisted of
available borrowings under our Credit Facility, and approximately $2.3 million
of cash and cash equivalents, compared to approximately $6.2 million in cash and
cash equivalents at December 31, 2003. Available borrowings under the Credit
Facility as of December 31, 2004 were approximately $1.8 million. The existing
cash balance is principally derived from the issuance of debentures in the
principal amount of $3.3 million in November 2004.

         Our cash position is deteriorating. Considering our projected cash
requirements based upon current operating levels, our available cash resources
will be insufficient by approximately $4.0 million to allow us to continue as a
going concern at current operating levels. In addition, at current operating
levels, management estimates that our current cash reserves will be exhausted by
the second quarter of the Company's year ended December 31, 2005. We will be
required to borrow from our existing Credit Facility, which has limitations, as
well as raise additional equity and/or debt financing in order to continue.
There are currently no formal committed financing arrangements to support this
projected cash shortfall. These negative trends and conditions raise substantial
doubt about our ability to continue as a going concern for a reasonable period.

         Our ability to continue as a going concern for a reasonable period at
current operating levels is dependent upon acquiring additional cash through
financing arrangements. While we are actively seeking additional equity and/or
debt financing, there are currently no commitments. There can be no assurances
that any additional financing will be available on acceptable terms, if at all.
Accordingly, as discussed under Restructuring Activities, above, we are actively
engaged in the development of a formal restructuring plan that will
significantly curtail current spending, and substantially reduce our liabilities
and operating and other costs. The plan is subject to the approval of the
Company's Board of Directors, and is expected to be presented for approval
before the end of the first fiscal quarter of 2005.

         There can be no assurance that our restructuring plan will be
successful. Accordingly, we are also evaluating the merits of a strategic
acquisition or other transaction that would substantially improve our liquidity
and capital resource position, as well as the merits of an outright sale of our
business. If ultimately required, there can also be no assurances that these
actions will be successful.

         Our consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
to amounts or to amounts and classification of liabilities that may be necessary
if the Company is unable to continue as a going concern.

RECENT ACCOUNTING PRONOUNCEMENTS

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The
statement amends Accounting Research Bulletin ("ARB") No. 43, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material. ARB No. 43 previously
stated that these costs must be "so abnormal as to require treatment as
current-period charges." SFAS No. 151 requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overhead to the costs of conversion be based on the normal capacity
of the production facilities. The statement is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005, with earlier
application permitted for fiscal years beginning after the issue date of the
statement. The adoption of SFAS No. 151 is not expected to have any significant
impact on the Company's current financial condition or results of operations.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - An Amendment of APB Opinion No. 29." APB Opinion No. 29,
"Accounting For Nonmonetary Transactions," is based on the opinion that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No. 153 amends Opinion No. 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception of nonmonetary assets whose results are not expected to
significantly change the future cash flows of the entity. The adoption of SFAS
No. 153 is not expected to have any impact on the Company's current financial
condition or results of operations.

         In December 2004, the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards


                                       27
<PAGE>

for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award. The
provisions of the revised statement are effective for financial statements
issued for the first interim or annual reporting period beginning after June 15,
2005, with early adoption encouraged. The Company is currently evaluating the
methodology for adoption on the impending effective date

                      CERTAIN RISK FACTORS AFFECTING P-COM

           An investment in our Common Stock is subject to many risks. You
should carefully consider the risks described below, together with all of the
other information included in this Annual Report, including the financial
statements and the related notes, before you decide whether to invest in our
Common Stock. Our business, operating results and financial condition could be
harmed by any of the following risks. The trading price of our Common Stock
could decline due to any of these risks, and you could lose all or part of your
investment.

           RISKS RELATED TO P-COM'S FINANCIAL CONDITION AND OPERATIONS

WE NEED ADDITIONAL FINANCING.

Our core business product sales are still significantly below levels necessary
to achieve positive cash flow, and have deteriorated. From inception to December
31, 2004, our aggregate net loss is approximately $368 million. Our cash
position has declined to $2.3 million at December 31, 2004, and is
deteriorating. We had positive working capital of $1.3 million as of December
31, 2004. We recently obtained a commitment for an additional $5.0 million in
debt financing (the "Debenture Facility"), and have borrowed $3.3 million as of
December 31, 2004 under the Debenture Facility. The parties are currently
negotiating the conditions necessary to obtain the additional $1.7 million under
the Debenture Facility, in light of our deteriorating financial condition and
results from operations. Even if we are able to borrow the additional $1.7
million under the Debenture Facility, existing borrowing availability under our
credit facility and available cash are anticipated to meet our liquidity
requirements through the end of the first quarter, requiring us to secure
additional debt or equity capital and/or significantly restructure our business
to continue as a going concern beyond such period. To address our liquidity
requirements, we are actively engaged in the development of a formal
restructuring plan that will significantly curtail current spending, and
substantially reduce liabilities and operating and other costs. We also
currently plan to raise additional equity and/or debt capital. No assurances can
be given that we will be successful in our restructuring plans, or in our
attempts to raise additional debt or equity financing.

OUR CURRENT BUSINESS AND FINANCIAL CONDITION RAISE DOUBTS ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.

Our independent accountants' opinion on our 2004 consolidated financial
statements includes an explanatory paragraph indicating substantial doubt about
our ability to continue as a going concern. The financial statements included in
this annual report have been prepared assuming that the Company will continue as
a going concern. The financial statements do not include adjustments that might
result if the Company were required to cease operations. These adjustments would
include, among other things, a write-down in the value of the Company's assets
from book value to liquidation value.

To continue as a going concern, we will have to significantly increase our
sales, decrease costs and possibly induce creditors to forebear or to convert to
equity, raise additional equity and/or debt financing, or significantly
restructure our business. We may not accomplish these tasks. If we are unable to
raise additional debt or equity financing, or significantly restructure our
business, we will be unable to continue as a going concern.

OUR BUSINESS CANNOT BE SUSTAINED AT THE CURRENTLY DEPRESSED SALES LEVELS.

Our customers, particularly systems operators and integrated system providers,
have not significantly increased their capital spending and orders to suppliers
such as us, and in general are not currently building out any significant


                                       28
<PAGE>

additional infrastructure. We do not believe that our core products sales levels
can sufficiently recover unless there is significant improvement in the
worldwide telecommunications equipment industry, which may never happen. Until
product sales levels can sufficiently recover, our business, financial condition
and results of operations will continue to be adversely affected. We must obtain
additional financing and/or significantly restructure our operations to sustain
our business at the currently depressed sales levels.

OUR PROSPECTS FOR OBTAINING ADDITIONAL FINANCING ARE UNCERTAIN AND FAILURE TO
OBTAIN NEEDED FINANCING WILL AFFECT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

In the event we are unable to raise additional debt or equity financing during
the next thirty days, significantly restructure our business, or otherwise
improve our liquidity position, we will not be able to continue as a going
concern. Our future capital requirements will depend upon many factors,
including the general state of the telecommunications equipment industry,
development costs of new products and related software, potential acquisition
opportunities, maintenance of adequate manufacturing facilities and contract
manufacturing agreements, progress of research and development efforts,
expansion of marketing and sales efforts, and status of competitive products.
Additional financing may not be available in the future on acceptable terms or
at all. The Company's history of substantial operating losses could also
severely limit our ability to raise additional financing.

If the Company is unable to increase sales, or obtain additional equity or debt
financing, the Company may be required to close business or product lines,
further restructure or refinance our debt or delay, or further scale back or
eliminate our research and development program, or manufacturing operations. We
may also need to obtain funds through arrangements with partners or others that
may require us to relinquish our rights to certain technologies or potential
products or other assets. Our inability to obtain capital, or our ability to
obtain additional capital only upon onerous terms, could seriously damage our
business, operating results and financial condition.

WE MAY NOT BE ABLE TO REPAY OUR EXISTING DEBT AND ANY REPAYMENT OF OUR DEBT WITH
SHARES OR BY RAISING ADDITIONAL FUNDS MAY RESULT IN SIGNIFICANT DILUTION TO OUR
STOCKHOLDERS.

At March 3, 2005, the Company owed, excluding accrued but unpaid interest, an
aggregate amount of $3.3 million to SDS Capital Group SPC, Ltd ("SDS"), and it
is anticipated that such indebtedness will increase to $5.0 million prior to the
end of the second quarter of 2005. Interest accrues on such debt at an annual
interest rate of 7%, increasing to 8% on July 1, 2005 and 10% on April 1, 2006
through the maturity date of the loan, December 31, 2006. If the Company is
unable to generate sufficient cash flow from its operations, secure funds from
the capital markets or lenders or restructure its debt to SDS, the Company will
not be able to continue as a going concern.

We may make the principal and interest payments under our Debenture Facility in
either shares of the Company's common stock, cash or a combination of both. The
number of shares of common stock that may be used to pay the quarterly
installments is capped at 6,000,000 shares of common stock. We currently do not
have enough cash to make the required payments under the Debenture Facility and
anticipate making the vast majority if not all of the payments in shares of our
common stock. In addition, given the recent price for our common stock, if we
make the required amortization payments on the Debenture Financing using our
common stock, or raise additional funds by issuing equity securities, additional
significant dilution to our stockholders will result.

WE MAY NOT BE ABLE TO REPAY THE DEBENTURE FACILITY INSTALLMENT PAYMENTS IN
SHARES OF OUR COMMON STOCK.

Under our Debenture Facility, we may not issue shares of common stock to make
the quarterly installment payments if the issuance of such shares would result
in SDS beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act) more than 9.9% of all of the common stock outstanding at such
time. SDS may waive this ownership blocker but it is not obligated to do so. In
the event that we are prevented from making an installment payment in shares of
common stock due to the ownership blocker and SDS does not waive compliance with
this provision, then we may default on our payment obligations under the
Debenture Facility. Also, the terms of the Debenture Facility limit the number
of shares of common stock that we may issue as quarterly installment payments to
6,000,000 shares. If we make the required payments in shares of common stock,
given the Company's current stock price, we will reach the share cap. In such


                                       29
<PAGE>

event, if SDS does not waive the share cap, then we may default on our payment
obligations under the Debenture Facility.

WE RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A MATERIAL PORTION OF OUR SALES AND
WITH RESPECT TO MANY OF OUR PRODUCTS, OUR SALES CYCLE IS LENGTHY. THE LOSS OF OR
REDUCTION IN SALES TO ANY OF OUR CUSTOMERS COULD HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATION.

For the year ended December 31, 2004 and December 31, 2003, sales to our top
four customers accounted for 65% and 56% of total sales, respectively. One of
those customers, representing approximately 25% of total sales during the twelve
months ended December 31, 2004, has recently advised the Company of its intent
to purchase products from another provider. We expect that a limited number of
customers will continue to account for a significant portion of our sales for
the foreseeable future. The loss of any one of these customers would have an
immediate and material adverse effect on our sales. Our ability to maintain or
increase our sales in the future will depend, in part on our ability to obtain
orders from new customers as well as the financial condition and success of our
existing customers, the telecommunications equipment industry and the global
economy. The length of time it takes to establish a new customer relationship
with respect to our licensed products typically ranges from two to over twelve
months. If we are unsuccessful in obtaining significant new customers or if one
of our top customers or several small customers cancel or delay their orders for
our products, then our business and prospects could be harmed which may cause
the price of our common stock to decline. Our customer concentration also
results in concentration of credit risk. As of December 31, 2004, five customers
accounted for 56% of our total accounts receivable balances. If any one of these
customers is unable to fulfill its payment obligations to us, our revenue could
decline significantly.

WE ARE INCREASINGLY DEPENDENT ON THE SALE OF REFURBISHED LICENSED PRODUCTS, AND
A REDUCTION IN SUCH SALES WILL MATERIALLY HARM P-COM'S RESULTS OF OPERATIONS.

Sales of refurbished licensed products in 2004 were $11.2 million, or 46% of
total sales, and 58% of total sales of licensed products. As a percentage of
total sales and total sales of licensed products, sales of refurbished licensed
products are anticipated to increase in 2005 relative to 2004 as a result of the
decrease in sales of new licensed products anticipated in 2005. Total sales of
refurbished licensed products may decline over time in the event our customers
determine to replace existing radios with new product, rather than send them to
us for continued repair and maintenance. In addition, our customers may elect to
source refurbished licensed products from third parties rather than us, as was
the case in the fourth quarter of 2004 when one of our customers elected to
contract with a third party for its refurbished licensed product requirements.
Although we were ultimately able to recapture that customer's business, no
assurances can be given that we will not lose customers in the future, or that
customers will not elect to purchase new licensed products rather than send them
to us for repair and maintenance. In the event of a reduction in the sale of
refurbished licensed products, our results of operations will be materially
harmed.

P-COM FACES SUBSTANTIAL COMPETITION AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY.

We face intense competition worldwide from a number of leading
telecommunications equipment and technology suppliers. These companies offer a
variety of competitive products and services. These companies include Alcatel
Network Systems, Alvarion, Stratex Networks, Ceragon, Ericsson Limited, Harris
Corporation-Farinon Division, NEC, Sagem, Nortel, Nokia Telecommunications,
SIAE, Siemens, and Proxim. Many of these companies have greater installed bases,
financial resources and production, marketing, manufacturing, engineering and
other capabilities than P-Com. We face actual and potential competition not only
from these established companies, but also from start-up companies that are
developing and marketing new commercial products and services. Some of our
current and prospective customers and partners have developed, are currently
developing or could manufacture products competitive with our products.

The principal elements of competition in our market and the basis upon which
customers may select our systems include price, performance, software
functionality, perceived ability to continue to be able to meet delivery
requirements, and customer service and support. Recently, certain competitors


                                       30
<PAGE>

have announced the introduction of new competitive products, including related
software tools and services, and the acquisition of other competitors and
competitive technologies. We expect competitors to continue to improve the
performance and lower the price of their current products and services and to
introduce new products and services or new technologies that provide added
functionality and other features. New product and service offerings and
enhancements by our competitors could cause a decline in our sales or loss of
market acceptance of our systems. New offerings could also make our systems,
services or technologies obsolete or non-competitive. In addition, we are
experiencing significant price competition and we expect that competition will
intensify.

P-COM'S OPERATING RESULTS HAVE BEEN ADVERSELY AFFECTED BY DETERIORATING GROSS
MARGINS AND SALES VOLUMES.

The intense competition for our licensed products has resulted in a continued
reduction in average selling prices. These reductions have not been offset by a
corresponding decrease in cost of goods sold, resulting in deteriorating gross
margins in some of our product lines. These deteriorating gross margins will
continue in the short term. Reasons for the decline include the maturation of
the systems, the effect of volume price discounts in existing and future
contracts, the intensification of competition, and the recent decrease in sales
volumes.

If we cannot significantly reduce costs, develop new products in a timely manner
or in the event we fail to achieve increased sales of new products at a higher
average selling price, then we will be unable to offset declining average
selling prices in many of our product lines. If we are unable to offset
declining average selling prices, or achieve corresponding decreases in
manufacturing operating expenses, our gross margins will continue to decline.

OUR OPERATING RESULTS HAVE BEEN ADVERSELY AFFECTED BY CONTINUED DECLINE IN
CAPITAL SPENDING IN THE TELECOMMUNICATIONS EQUIPMENT INDUSTRY.

The telecommunications equipment industry has experienced a decline in capital
spending in recent years, which may continue in the future. Our business has
suffered as a result of this decline and will continue to suffer if there is not
a significant increase in the amount of capital spending by our customers. We
believe that future growth in telecommunications infrastructure will be
generated by the entrance of new service providers. However, these new providers
may not have the financial resources of existing service providers and may be
unable to adequately finance their operations. As a result, these providers may
cancel or delay orders for our services and products. Moreover, we often accept
purchase orders for our services and products far in advance of shipment, and
typically permit orders to be modified or canceled with limited or no penalties.
As a result, we are at risk for curtailment or cancellation of purchase orders,
which can lead to adverse operating results. Ordering materials and building
inventory based on customer forecasts or non-binding orders can also result in
large inventory write-offs, such as what occurred in 2000, 2001, 2003 and 2004.

P-COM DOES NOT HAVE THE CUSTOMER BASE OR OTHER RESOURCES OF MORE ESTABLISHED
COMPANIES, WHICH MAKES IT DIFFICULT FOR IT TO ADDRESS THE LIQUIDITY AND OTHER
CHALLENGES IT FACES.

Although P-Com has installed and has in operation over 150,000 radio units
globally, it has not developed a large installed base of its equipment or the
kind of close relationships with a broad base of customers of a type enjoyed by
larger, more developed companies, which would provide a base of financial
performance from which to launch strategic initiatives and withstand business
reversals. In addition, P-Com has not built up the level of capital often
enjoyed by more established companies, so from time to time, it faces serious
challenges in financing its continued operations. P-Com may not be able to
successfully address these risks.

FAILURE TO MAINTAIN ADEQUATE LEVELS OF INVENTORY COULD RESULT IN A REDUCTION OR
DELAY IN SALES AND HARM P-COM'S RESULTS OF OPERATIONS.

P-Com's customers have increasingly been demanding short turnaround on orders
rather than submitting purchase orders far in advance of expected shipment
dates. This practice requires that P-Com keep inventory on hand to meet market
demands. Given the variability of customer needs and purchasing power, it is
difficult to predict the amount of inventory needed to satisfy customer demand.
If P-Com over-estimates or under-estimates inventory requirements to fulfill
customer needs, or if purchase orders are terminated by customers, P-Com's


                                       31
<PAGE>

results of operations could continue to be adversely affected. In particular,
increases in inventory or cancellation of purchase orders could adversely affect
operations if the inventory is ultimately not used or becomes obsolete. This
risk was realized in the large inventory write-downs from 1999 to 2004.

WE RELY ON THIRD PARTY MANUFACTURERS AND SUPPLIERS AND ANY FAILURE OF OR
INTERRUPTION IN THE MANUFACTURING, SERVICES OR PRODUCTS PROVIDED BY THESE THIRD
PARTIES COULD HARM OUR BUSINESS.

We rely on third-party manufacturers for the manufacturing of a substantial
portion of our products. We have limited internal manufacturing capacity, which
may not be sufficient to fulfill customers' orders, particularly in times of
high capital spending and rapid system deployment. Our contract manufacturers
may not be able to react to our demands on a timely basis. In addition, certain
components and subassemblies necessary for the manufacture of our systems are
obtained from a sole supplier or a limited group of suppliers. Many of these
suppliers are in difficult financial positions as a result of the significant
slowdown in the telecommunications equipment industry.

Our reliance on third-party manufacturers and suppliers involves risks. From
time to time, we have experienced an inability to obtain, or to receive in a
timely manner, an adequate supply of finished products and required components
and subassemblies. This inability has been due to a variety of factors,
including, in some cases, our financial condition. As a result of our reliance
on these third parties, we have reduced control over the price, timely delivery,
reliability and quality of finished products, components and subassemblies. Any
failure by us, or our contract manufacturers to manufacture, assemble and ship
systems and meet customer demands on a timely and cost-effective basis could
damage relationships with customers and have a material adverse effect on our
business, financial condition and results of operations.

P-COM'S BUSINESS DEPENDS ON THE ACCEPTANCE OF ITS PRODUCTS AND SERVICES, AND IT
IS UNCERTAIN WHETHER THE MARKET WILL ACCEPT AND DEMAND ITS PRODUCTS AND SERVICES
AT LEVELS NECESSARY FOR SUCCESS.

P-Com's future operating results depend upon the continued growth and increased
availability and acceptance of micro-cellular, personal communications
networks/personal communications services and wireless local loop access
telecommunications services, in the U.S. and internationally. The volume and
variety of wireless telecommunications services or the markets for and
acceptance of the services may not continue to grow as expected. The growth of
these services may also fail to create anticipated demand for P-Com's systems.
Predicting which segments of these markets will develop and at what rate these
markets will grow is difficult.

Certain current and prospective customers are delivering services and features
that use competing transmission media, such as fiber optic and copper cable,
particularly in the local loop access market. To successfully compete with
existing products and technologies, P-Com must offer systems with superior price
and performance characteristics and extensive customer service and support.
Additionally, P-Com must supply these systems on a timely and cost-effective
basis, in sufficient volume to satisfy these prospective customers'
requirements, in order to induce them to transition to P-Com's technologies. Any
delay in the adoption of P-Com's systems and technologies may result in
prospective customers using alternative technologies in their next generation of
systems and networks. P-Com's financial condition may prevent P-Com from meeting
this customer demand or may dissuade potential customers from purchasing from
P-Com. Prospective customers may design their systems or networks in a manner
that excludes or omits P-Com's products and technology. Existing customers may
not continue to include P-Com's systems in their products, systems or networks
in the future. P-Com's technology may not replace existing technologies and
achieve widespread acceptance in the wireless telecommunications market. Failure
to achieve or sustain commercial acceptance of P-Com's currently available radio
systems or to develop other commercially acceptable radio systems would
materially adversely affect P-Com's business, financial condition and results of
operations.

DUE TO OUR INTERNATIONAL SALES AND OPERATIONS, WE ARE EXPOSED TO BUSINESS,
POLITICAL, REGULATORY, OPERATIONAL, FINANCIAL AND ECONOMIC RISKS, ANY OF WHICH
COULD INCREASE OUR COSTS AND HINDER OUR GROWTH.

As a result of our current heavy dependence on international markets, especially
in the United Kingdom, the European continent, the Middle East, China, and Latin


                                       32
<PAGE>

America, we face business, political, regulatory, operational, financial and
economic risks that are often more volatile than those commonly experienced in
the United States. Approximately 92% and 89% of our sales in the year ended
December 31, 2003 and December 31, 2004, respectively, were made to customers
located outside of the United States.

Risks inherent in our international business activities, include the following:

      o     availability of suitable export financing, particularly in the case
            of large projects which we must ship in short periods;

      o     multiple, conflicting and changing laws and regulations, including
            complications due to unexpected changes in regulatory requirements,
            foreign laws, tax schemes, international import and export
            legislation, trading and investment policies, foreign currency
            fluctuations, exchange controls and tariff and other trade barriers;

      o     difficulties in enforcing our rights under foreign laws;

      o     costs and risks of localizing systems (homologation) in foreign
            countries;

      o     timing and availability of export licenses, tariffs and other trade
            barriers;

      o     difficulties in managing distributors;

      o     political, economic and social instability, including terrorist
            activities and the consequences of future geopolitical events, which
            may adversely affect the markets in which we operate and our ability
            to insure against these risks;

      o     difficulty in accounts receivable collections;

      o     challenges caused by distance, language and cultural differences;

      o     protectionist laws and business practices that favor local
            businesses in some countries;

      o     foreign tax consequences;

      o     foreign exchange controls that might prevent us from repatriating
            income earned in countries outside the United States;

      o     price controls;

      o     higher costs associated with doing business internationally; and

      o     difficulties in staffing and managing international operations.

Due to political and economic instability in new markets, economic, political
and foreign currency fluctuations may be even more volatile than conditions in
developed countries. Countries in the Asia/Pacific, African, and Latin American
regions have in recent years experienced weaknesses in their currency, banking
and equity markets. These weaknesses have adversely affected and could continue
to adversely affect demand for our products.

WE FACE RISKS ASSOCIATED WITH CURRENCY EXCHANGE RATE FLUCTUATIONS.

Approximately 89% and 92% of our sales in the year ended December 31, 2004 and
December 31, 2003 were made to customers located outside of the United States
and a larger portion of our revenues is denominated in foreign currencies.
Historically, our international sales have been denominated in British pounds
sterling, Euros or United States dollars. Conducting business in currencies
other than U.S. dollars subjects us to fluctuations in currency exchange rates


                                       33
<PAGE>

that could have a negative impact on our reported operating results.
Fluctuations in the value of the U.S. dollar relative to other currencies impact
our revenues, cost of revenues and operating margins and result in foreign
currency translation gains and losses. For example, a decrease in the value of
British pounds or Euros relative to United States dollars, if not hedged, will
result in an exchange loss for us if we have Euro or British pounds sterling
denominated sales. Conversely, an increase in the value of Euro and British
pounds sterling will result in increased margins for us on Euro or British
pounds sterling denominated sales as our functional currency is in United States
dollars. For international sales that we would require to be United States
dollar-denominated, such a decrease in the value of foreign currencies could
make our systems less price-competitive if competitors choose to price in other
currencies and could adversely affect our financial condition. We fund our
Italian subsidiary's operating expenses, which are denominated in Euros. The
current strength of the value of the Euro relative to the U.S. dollar results in
more costly funding for our Italian operations, and, as a result, higher cost of
production to it as a whole. Conversely, a decrease in the value of the Euro
will result in cost savings for us.

Historically, we have not engaged in exchange rate hedging activities. Although
we may implement hedging strategies to mitigate this risk, these strategies may
not eliminate our exposure to foreign exchange rate fluctuations and involve
costs and risks of their own, such as ongoing management time and expertise,
external costs to implement the strategy and potential accounting implications.

OUR SUCCESS IN MANY FOREIGN MARKETS WILL DEPEND ON OUR ABILITY TO ESTABLISH
RELATIONSHIPS WITH LOCAL PROVIDERS OF TELECOMMUNICATIONS SERVICES.

In many cases, local regulatory authorities own or strictly regulate
international telephone companies. Established relationships between
government-owned or government-controlled telephone companies and their
traditional indigenous suppliers of telecommunications often limit access to
these markets. The successful expansion of our international operations in some
markets will depend on our ability to locate, form and maintain strong
relationships with established companies providing communication services and
equipment in designated regions. The failure to establish these regional or
local relationships or to successfully market or sell our products in specific
international markets could limit our ability to compete in today's highly
competitive local markets for broadband wireless equipment.

GOVERNMENTAL REGULATIONS AFFECTING MARKETS IN WHICH P-COM COMPETES COULD
ADVERSELY AFFECT ITS BUSINESS AND RESULTS OF OPERATIONS.

Radio communications are extensively regulated by the United States and foreign
governments as well as by international treaties. P-Com's systems must conform
to a variety of domestic and international requirements established to, among
other things, avoid interference among users of radio frequencies and to permit
interconnection of equipment. Historically, in many developed countries, the
limited availability of radio frequency spectrum has inhibited the growth of
wireless telecommunications networks. Each country's regulatory process differs.
To operate in a jurisdiction, P-Com must obtain regulatory approval for its
systems and comply with differing regulations.

Regulatory bodies worldwide continue to adopt new standards for wireless
telecommunications products. The delays inherent in this governmental approval
process may cause the cancellation, postponement or rescheduling of the
installment of communications systems by P-Com's customers and P-Com. The
failure to comply with current or future regulations or changes in the
interpretation of existing regulations could result in the suspension or
cessation of operations. Those regulations or changes in interpretation could
require P-Com to modify its products and services and incur substantial costs in
order to comply with the regulations and changes.

In addition, P-Com is also affected by domestic and international authorities'
regulation of the allocation and auction of the radio frequency spectra.
Equipment to support new systems and services can be marketed only if permitted
by governmental regulations and if suitable frequency allocations are auctioned
to service providers. Establishing new regulations and obtaining frequency
allocation at auction is a complex and lengthy process. If PCS operators and
others are delayed in deploying new systems and services, P-Com could experience
delays in orders. Similarly, failure by regulatory authorities to allocate
suitable frequency spectrum could have a material adverse effect on P-Com's
results. In addition, delays in the radio frequency spectra auction process in
the United States could delay P-Com's ability to develop and market equipment to
support new services.


                                       34
<PAGE>

P-Com operates in a regulatory environment subject to significant change.
Regulatory changes, which are affected by political, economic and technical
factors, could significantly impact P-Com's operations by restricting its
development efforts and those of its customers, making current systems obsolete
or increasing competition. Any such regulatory changes, including changes in the
allocation of available spectra, could have a material adverse effect on P-Com's
business, financial condition and results of operations. P-Com may also find it
necessary or advisable to modify its systems and services to operate in
compliance with these regulations. These modifications could be expensive and
time-consuming.

P-COM MAY ENTER INTO AGREEMENTS TO MERGE OR CONSOLIDATE WITH OTHER COMPANIES,
AND IT MAY INCUR SIGNIFICANT COSTS IN THE PROCESS, WHETHER OR NOT THESE
TRANSACTIONS ARE COMPLETED.

P-Com is currently evaluating options to consolidate, seek a strategic partner
or engage in some other corporate transaction intended to increase stockholder
value, any of which could be material to our business, operating results and
financial condition. Corporate transactions, including mergers and acquisitions,
are risky, are subject to a lengthy process to close and could divert
management's time and focus from operating our business. P-Com may not be able
to close any strategic transaction on the timetable it anticipates, if at all.
If P-Com is unable to complete a corporate transaction, P-Com will incur
significant non-recoverable expenses that may have a material adverse effect on
P-Com's financial position. If a transaction is completed, it could result in
unanticipated operating difficulties and expense and the anticipated benefits of
the transaction may not materialize.

OUR BUSINESS AND GROWTH MAY SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL WHO ARE IN HIGH DEMAND.

We depend on the continued contributions of our senior management and other key
personnel, including Daniel W. Rumsey, the Chief Restructuring Officer, and Don
Meiners, the Company's President. The loss of the services of any of either of
these executives, or any of our key personnel could harm our business. We do not
maintain key person life insurance policies on any of our executive officers.
Competition for senior management in our industry is intense and we may not be
able to retain our senior management or attract and retain new personnel in the
future. Volatility or lack of performance in our stock price may also affect our
ability to attract and retain our key personnel. Our future success also depends
on our ability to identify, attract and retain highly skilled technical,
managerial, finance and marketing personnel. Qualified individuals are in high
demand, and we may incur significant costs to attract them. If we are unable to
attract or retain the personnel we need to succeed, our business may suffer.

OUR OPERATING RESULTS HAVE FLUCTUATED IN THE PAST AND MAY DO SO IN THE FUTURE,
WHICH COULD MAKE OUR RESULTS OF OPERATIONS DIFFICULT TO PREDICT OR CAUSE THEM TO
FALL SHORT OF EXPECTATIONS.

Our prior operating results have fluctuated due to changes in our business and
our industry. Similarly, our future operating results may vary significantly
from quarter to quarter due to a variety of factors, many of which are beyond
our control and could cause our results to be below investors' expectations,
causing the price of our common stock to fall. Our historical operating results
may not be useful to you in predicting our future operating results. Factors
that may increase the volatility of our operating results include the following:

      o     the addition of new customers or the loss of existing customers;

      o     changes in demand and pricing for our products and services;

      o     changes in the economic prospects of our customers, which could
            increase the time it takes us to close sales with customers;

      o     customer decisions to delay implementation of our products;

      o     the timing of new product introductions and product enhancements by
            us and our competitors;


                                       35
<PAGE>

      o     the publication of opinions concerning us, our products or our
            services by industry analysts;

      o     changes in foreign currency exchange rates; and

      o     domestic and international economic and political conditions.

One or more of these factors may cause our operating expenses to be
disproportionately high or our gross revenues to be disproportionately low
during any given period, which could cause our net revenue and operating results
to fluctuate significantly.

THIRD PARTIES MAY SUE US FOR INTELLECTUAL PROPERTY INFRINGEMENT THAT, IF
SUCCESSFUL, COULD REQUIRE US TO PAY SIGNIFICANT DAMAGE AWARDS OR LICENSING FEES.

We cannot be certain that we do not and will not infringe the intellectual
property rights of others. We may be subject to legal proceedings and claims in
the ordinary course of our business and third parties may sue us for
intellectual property infringement or initiate proceedings to invalidate our
intellectual property. Any intellectual property claims, whether or not
meritorious, could result in costly litigation and could divert management
resources and attention. Moreover, should we be found liable for infringement,
we may be required to enter into licensing agreements (if available on
acceptable terms or at all), pay damages or limit or curtail our product or
service offerings. Moreover, we may need to redesign some of our products to
avoid future infringement liability. Any of the foregoing could prevent us from
competing effectively and harm our business and results of operations.

IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES, WE COULD LOSE
CUSTOMERS AND OUR SALES MAY DECLINE.

The telecommunications equipment industry is characterized by rapidly changing
technologies, evolving industry standards, frequent new product and service
introductions and changing customer demands. The introduction of new products
and services embodying new technologies and the emergence of new industry
standards and practices can render existing products and services obsolete and
unmarketable or require unanticipated investments in technology. Our future
success will depend on our ability to internally develop, source or license
leading technologies to enhance our existing products and services, to develop
new products and services that address the changing demands of our customers,
and to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. We may experience difficulties
that could delay or prevent the successful design, development, introduction or
marketing of new products and services. Any new products, services or
enhancement that we develop will need to meet the requirements of our current
and prospective customers and may not achieve significant market acceptance.

             RISK RELATING TO CAPITAL MARKETS AND P-COM COMMON STOCK

THE NASDAQ SMALL CAP MARKET HAS DELISTED OUR STOCK AND OUR COMMON STOCK IS
DEEMED TO BE "PENNY STOCK," WHICH MAY SEVERELY LIMIT THE ABILITY OF STOCKHOLDERS
TO SELL OUR COMMON STOCK.

NASDAQ moved our stock listing from the NASDAQ National Market to the NASDAQ
Small Cap Market effective August 27, 2002 due to our failure to meet certain
listing requirements, including a minimum bid price of $1.00 per share. We
subsequently failed to meet certain NASDAQ Small Cap Market quantitative listing
standards, including a minimum $1.00 per share bid price requirement, and the
NASDAQ Listing Qualifications Panel determined that our stock would no longer be
listed on the NASDAQ Small Cap Market. Effective March 10, 2003, our Common
Stock commenced trading electronically on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. This move could result in a less liquid
market available for existing and potential stockholders to trade shares of our
Common Stock and could ultimately further depress the trading price of our
Common Stock.

Our Common Stock is subject to the Securities Exchange Commission's "penny
stock" regulation. For transactions covered by this regulation, broker-dealers


                                       36
<PAGE>

must make a special suitability determination for the purchase of the securities
and must have received the purchaser's written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a penny stock, the
rules generally require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer is also subject to additional sales practice requirements.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the company's Common Stock and may affect the ability of holders to sell
the Common Stock in the secondary market, and the price at which a holder can
sell the Common Stock.

OUR STOCK PRICE HAS BEEN VOLATILE AND HAS EXPERIENCED SIGNIFICANT DECLINE, AND
MAY CONTINUE TO BE VOLATILE AND DECLINE.

Our common stock currently trades sporadically on the OTC Bulletin Board. The
market for our common stock may continue to be an inactive market, and the
market price of our common stock may experience significant volatility. In
recent years, the stock market in general, and the market for shares of small
capitalization technology stocks in particular, have experienced extreme price
fluctuations. These fluctuations have often negatively affected small cap
companies such as ours, and may impact our ability to raise equity capital in
periods of liquidity crunch. Companies with liquidity problems also often
experience downward stock price volatility. We believe that factors such as
announcements of developments related to our business (including any financings
or any resolution of liabilities), announcements of technological innovations or
new products or enhancements by us or our competitors, developments in the
emerging countries' economies, sales by competitors, sales of significant
volumes of our Common Stock into the public market, developments in our
relationships with customers, partners, lenders, distributors and suppliers,
shortfalls or changes in revenues, gross margins, earnings or losses or other
financial results that differ from analysts' expectations, regulatory
developments, fluctuations in results of operations could and have caused the
price of our Common Stock to fluctuate widely and decline over the past two
years. The market price of our Common Stock may continue to decline, or
otherwise continue to experience significant fluctuations in the future,
including fluctuations that are unrelated to our performance, and our
stockholders may not be able to resell shares of our Common Stock at or above
the price paid for those shares.

ISSUING SECURITIES AS A MEANS OF RAISING CAPITAL AND THE FUTURE SALES OF THESE
SECURITIES IN THE PUBLIC MARKET COULD LOWER P-COM'S STOCK PRICE AND ADVERSELY
AFFECT ITS ABILITY TO RAISE ADDITIONAL CAPITAL IN SUBSEQUENT FINANCINGS.

P-Com has traditionally relied on debt and equity financings to meet its working
capital needs including the issuances of Series B Convertible Preferred Stock in
August 2003 and Series C Convertible Preferred Stock in October and December
2003. In addition, as a result of borrowings under the Debenture Facility, P-Com
anticipates issuing up to an additional 6.0 million shares of Common Stock in
connection with the scheduled amortization payments. When the shares of Common
Stock that are issuable upon conversion of our preferred stock, or paid in
connection with required amortization payments, are subsequently sold in the
public market, the trading price of P-Com Common Stock may be negatively
affected. As of December 31, 2004, the last reported sale price of P-Com common
stock was $0.44. Future sales of P-Com's Common Stock or the perception that
future sales will occur could have a significant negative effect on the market
price of P-Com's Common Stock. If the market price of P-Com Common Stock
continues to decrease, P-Com may not be able to conduct additional financings in
the future on acceptable terms or at all, and its ability to raise additional
capital will be significantly limited.

THE CONVERSION OR EXERCISE OF P-COM'S OUTSTANDING CONVERTIBLE SECURITIES WILL
HAVE A SIGNIFICANT DILUTIVE EFFECT ON P-COM'S EXISTING STOCKHOLDERS.

In March, May and July 2003, P-Com issued warrants to purchase approximately
293,333 shares of its Common Stock. In August 2003, P-Com's remaining 7%
Convertible Subordinated Notes due 2005 were converted into approximately one
million shares of Series B Convertible Preferred Stock, of which approximately
891,594 shares were converted into approximately 3.1 million shares of Common
Stock in December 2003. The remaining outstanding shares of Series B Convertible
Preferred Stock are convertible into approximately 381,916 shares of P-Com
Common Stock.

In October and December 2003, P-Com issued approximately 10,000 shares of Series
C Convertible Preferred Stock together with warrants to purchase approximately


                                       37
<PAGE>

4.64 million shares of Common Stock. These shares of Series C Convertible
Preferred Stock are convertible into approximately 5.8 million shares of Common
Stock. In December 2003, P-Com issued 2,000 shares of Series D Convertible
Preferred Stock, which, in turn, are convertible into approximately 444,444
million shares of Common Stock. The conversion or exercise of these securities
will result in substantial dilution to P-Com's existing stockholders.

In December 2003, P-Com also issued 2,116,667 shares of its Common Stock in
connection with the SPEEDCOM Acquisition. This issuance resulted in substantial
dilution to P-Com's existing stockholders. P-Com may issue additional shares of
common stock in the future, which would further dilute its stockholders.

P-COM HAS ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN
ACQUISITION OF P-COM.

P-Com's stockholder rights plan, certificate of incorporation, equity incentive
plans, bylaws and Delaware law may have a significant effect in delaying,
deferring or preventing a change in control and may adversely affect the voting
and other rights of other holders of P-Com Common Stock.

The rights of the holders of P-Com Common Stock will be subject to, and may be
adversely affected by, the rights of any other preferred stock that may be
issued in the future, including the Series A Junior Participating Preferred
Stock that may be issued pursuant to the stockholder rights plan, upon the
occurrence of certain triggering events. In general, the stockholder rights plan
provides a mechanism by which the share position of anyone that acquires 15% or
more (or 20% or more in the case of the State of Wisconsin Investment Board and
Firsthand Capital Management) of P-Com's Common Stock will be substantially
diluted. Future issuance of stock or additional preferred stock could have the
effect of making it more difficult for a third party to acquire a majority of
P-Com's outstanding voting stock.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

         We generate international sales, purchases and possess international
facilities. We are, therefore, subject to foreign currency rate exposure.
Historically, our international sales have been denominated in British pounds
sterling, Euro and United States dollars. The functional currencies of our
wholly-owned foreign subsidiaries are the local currencies. Assets and
liabilities of these subsidiaries are translated into United States dollars at
exchange rates in effect at the balance sheet date. Income and expense items are
translated at average exchange rates for the period. Accumulated net translation
adjustments are recorded in stockholders' equity. Foreign exchange transaction
gains and losses are included in the results of operations, and a loss of
$165,000 was recorded for the year ended December 31, 2004, due to the
approximately 9% depreciation of the United States dollar against the Euro and
British pound in the year. Foreign exchange transactions gains and losses were
not material to the results for the year ended December 31, 2003 and December
31, 2002. Based on our overall currency rate exposure at December 31, 2004, a
near-term 10% appreciation or depreciation of the United States dollar could
have an approximately $130,000 effect on our financial position, results of
operations and cash flows over the next fiscal year. We do not use derivative
financial instruments for speculative or trading purposes.

INTEREST RATE RISK

           As of December 31, 2004, we have no indebtedness or other financial
instruments that would expose it to interest rate risk.


                                       38
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS

                                   P-COM, INC.

Index to Consolidated Financial Statements and Financial Statement Schedule


                                                                            Page
Financial Statements:

         Report of Aidman, Piser & Company P.A..............................  40

         Report of PricewaterhouseCoopers LLP...............................  41

         Consolidated Balance Sheets at December 31, 2004 and 2003..........  42

         Consolidated Statements of Operations for the years ended
         December 31, 2004, 2003, and 2002..................................  43

         Consolidated Statements of Stockholders' Equity (Deficit) and
         Comprehensive Loss for the years ended December 31, 2004,
         2003, and 2002...................................................... 44

         Consolidated Statements of Cash Flows for the years ended
         December 31, 2004, 2003, and 2002..................................  46

         Notes to Consolidated Financial Statements.........................  47

Financial Statement Schedule:

         Schedule II - Valuation and Qualifying Accounts....................  79

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



                                       39
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
P-Com, Inc.

We have audited the accompanying consolidated balance sheets of P-Com, Inc. and
subsidiaries as of December 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders' equity (deficit) and comprehensive loss,
and cash flows for the years then ended. Our audit also included the financial
statement schedule listed in the Index at Item 8. These consolidated financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of P-Com, Inc. and
subsidiaries as of December 31, 2004 and 2003 and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

The Company has incurred recurring net losses, has used significant cash in
support of its operating activities and, based upon current operating levels,
requires additional capital or significant reconfiguration of its operations to
sustain its operations beyond June 30, 2005. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Further
information and management's plans with regard to this uncertainty, including
management's specific plans for restructuring and exit activities, are discussed
in the footnotes. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

The accompanying consolidated financial statements for the year ending 2003 have
been restated to give effect to a one-for-thirty reverse stock split that became
effective on July 19, 2004.


                                          /s/ Aidman, Piser & Company, P.A.

Tampa, Florida
January 26, 2005, except for Note 17, as to which
                  the date is March 10, 2005



                                       40
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF P-COM, INC.

In our opinion, the accompanying consolidated statements of operations,
stockholders' deficit and comprehensive loss and cash flows present fairly, in
all material respects, the results of operations and cash flows of P-Com, Inc.
and subsidiaries for the year ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the accompanying financial statement schedule for the
year ended December 31, 2002 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements 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. An audit 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
audit provides a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has an accumulated deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill effective January 1, 2002.

The accompanying financial statements for the year ended December 31, 2002 have
been restated to give effect to a one-for-thirty reverse stock split that became
effective July 19, 2004.


/s/ PricewaterhouseCoopers LLP
San Jose, California
March 31, 2003, except for Note 1 (Discontinued Operations), as to which the
date is September 3, 2003 and for Note 1 (Restatements), as to which the date is
July 19, 2004



                                       41
<PAGE>

                                   P-COM, INC.
                           CONSOLIDATED BALANCE SHEETS
                     (In thousands, except per share amount)


                                                              DECEMBER 31,
                                                           2004         2003
                                                        ---------    ---------
ASSETS
Current assets:
   Cash and cash equivalents                            $   2,280    $   6,185
   Accounts receivable, net of allowances
     of $430 and $310 respectively                          2,828        4,801
   Inventory                                                4,722        5,258
   Prepaid expenses and notes receivable                    1,519        2,216
   Assets of discontinued operations                           --           40
                                                        ---------    ---------
            Total current assets                           11,349       18,500

Property and equipment, net                                 1,755        3,807
Goodwill and other assets                                  12,319       12,258
                                                        ---------    ---------
            Total assets                                $  25,423    $  34,565
                                                        =========    =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
 STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                     $   3,139    $   4,035
   Other accrued liabilities                                3,500       16,226
   Loan payable to bank                                        --            1
   Liabilities of discontinued operations                     249          313
   Notes payable current                                    3,178           --
                                                        ---------    ---------
            Total current liabilities                      10,066       20,575
   Other long-term liabilities                              1,743            6
                                                        ---------    ---------
            Total liabilities                              11,809       20,581
                                                        ---------    ---------
Commitments and contingencies (notes 13 and 14)
Redeemable preferred stock:
   Series B preferred stock                                 1,569        1,361
   Series C preferred stock                                 2,537          870
   Series D preferred stock                                 2,000        2,000
                                                        ---------    ---------
            Total preferred stock                           6,106        4,231
                                                        ---------    ---------

Stockholders' equity:
   Common stock, par value $0.003 per share:
    35 million shares authorized; 11,877 and 6,820
    shares issued; 11,847 and 6,790 shares
    outstanding, respectively                                  35           20
Treasury stock, at cost; 30 shares                            (74)         (74)
Additional paid-in capital                                376,430      373,186
Accumulated deficit                                      (368,885)    (363,173)
Accumulated other comprehensive loss                            2         (206)
                                                        ---------    ---------
            Total stockholders' equity                      7,508        9,753
                                                        ---------    ---------
Total liabilities, redeemable preferred stock
  and stockholders' equity                              $  25,423    $  34,565
                                                        ---------    ---------

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


                                       42
<PAGE>

                                   P-COM, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                             2004        2003        2002
                                                           --------    --------    --------
<S>                                                        <C>         <C>         <C>
Sales                                                      $ 24,175    $ 20,841    $ 29,686
Cost of sales                                                18,720      20,604      30,777
                                                           --------    --------    --------
Gross profit (loss)                                           5,455         237      (1,091)
                                                           --------    --------    --------
Operating expense:
 Research and development                                     4,976       6,099      12,745
 Selling and marketing                                        6,772       3,557       6,621
 General and administrative                                   4,552       5,607      10,750
 Goodwill impairment and amortization                            --          --      11,409
 Restructuring charges                                           --       3,712          --
                                                           --------    --------    --------
   Total operating expenses                                  16,300      18,975      41,525
                                                           --------    --------    --------

Loss from operations                                        (10,845)    (18,738)    (42,616)
Other income (expenses):
 Interest expense                                              (687)     (2,249)     (2,457)
 Gain on debt extinguishment, net                                --       6,499       1,393
 Other income (expense), net                                  8,252       3,739      (1,312)
                                                           --------    --------    --------
Loss before discontinued operations, income taxes,
 and cumulative effect of change in accounting principle     (3,280)    (10,749)    (44,992)
Income tax benefit                                               --          --        (470)
                                                           --------    --------    --------
Loss before discontinued operations and cumulative
 effect of change in accounting principle                    (3,280)    (10,749)    (44,522)
Loss from discontinued operations                               (40)     (2,137)     (4,284)
                                                           --------    --------    --------
Loss from continuing operations before
 cumulative effect of accounting change                      (3,320)    (12,886)    (48,806)
Cumulative effect of change in accounting principle              --          --      (5,500)
                                                           --------    --------    --------
Net loss                                                     (3,320)    (12,886)    (54,306)
                                                           --------    --------    --------
Preferred stock accretions                                   (2,392)     (1,521)         --
Preferred stock dividends in arrears                           (156)         --          --
                                                           --------    --------    --------
Net loss attributable to common stockholders               $ (5,868)   $(14,407)   $(54,306)
                                                           ========    ========    ========

Basic and diluted loss per common share:
 Loss from continuing operations                           $  (0.56)   $  (6.80)   $ (52.28)
 Loss from discontinued operations                               --       (1.18)      (5.03)
 Cumulative effect of change in accounting principle             --          --       (6.46)
                                                           --------    --------    --------
Basic and diluted loss per common share                    $  (0.56)      (7.98)   $ (63.77)
                                                           ========    ========    ========
Shares used in basic and diluted per share computation       10,429       1,805         852
                                                           ========    ========    ========
</TABLE>

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


                                       43
<PAGE>

                                   P-COM, INC.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
                               COMPREHENSIVE LOSS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                            Accumulated
                                                                               Other
                                   Common Stock    Additional               Comprehensive Comprehensive
                                  ---------------   Paid-In    Accumulated     Income        Income
                                  Shares   Amount   Capital      Deficit       (Loss)        (Loss)       Total
                                  ------   ------  ----------  -----------  ------------  -------------  ------
<S>                                  <C>    <C>    <C>         <C>           <C>           <C>           <C>
Balance at December 31, 2001         566    $ 8    $319,994    $(294,460)    $(1,286)      $     --      $24,256
Issuance of Common Stock for cash,
 net of issuance costs of $821       493      7       7,706           --          --             --        7,713
Issuance of warrants for Common
 Stock in conjunction with line of
 credit borrowings                    --     --          65           --          --             --           65
Issuance of Common Stock as
 part of vendor settlements           42      1       1,273           --          --             --        1,274
Conversion of notes payable to
 Common Stock                         46     --       4,187           --          --             --        4,187
Issuance of warrants for Common
 Stock for services rendered          --     --         480           --          --             --          480
Issuance of Common Stock under
 employee stock purchase plan          1     --          35           --          --             --           35
Cumulative translation adjustment     --     --          --           --         946            946          946
Net loss                              --     --          --      (54,306)                   (54,306)     (54,306)
                                                                                           --------
Comprehensive loss                                                                         $(53,360)
                                  ------    ---    --------    ---------     -------       ========     --------
Balance at December 31, 2002       1,148    $16    $333,740    $(348,766)    $  (340)                   $(15,350)
                                  ======    ===    ========    =========     =======                    ========
</TABLE>


                                       44
<PAGE>

                                   P-COM, INC.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
                         COMPREHENSIVE LOSS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                Accumulated
                                                                                                   Other
                                                                                                   Compre-     Net
                                                                Additional                        hensive    Compre-
                                                Common  Stock    Paid-in   Treasury  Accumulated   Income   hensive
                                                Shares  Amount   Capital     Stock    Deficit      (Loss)     Loss      Total
                                                ------ --------  --------  --------  ----------- ---------- --------  ---------
<S>                                             <C>    <C>       <C>       <C>       <C>         <C>        <C>       <C>
Balance at December 31, 2002                    1,148  $     16  $333,740            $(348,766)  $    (340) $     --  $(15,350)
Non-monetary exchange of common stock
 for equipment                                    (31)                     $   (74)                                        (74)
Issuance of common stock for cash,                 70                 307                                                  307
 net of expenses
Discount on convertible promissory notes           --                 693                                                  693
Issuance of common stock for professional
 services rendered                                150                 450                                                  450
Issuance of common stock for vendor
 settlement                                       159                 558                                                  558
Exercise of warrants for common stock              36                   1                                                    1
Issuance of common stock to SpeedCom
 for business purchase                          2,117         6     7,232                                                7,238
Warrant amortization expenses                      --                 367                                                  367
Conversion of Series B preferred stock
 to common stock                                3,141         9    10,909                                               10,918
Discount on Series C preferred stock,
 related to beneficial conversion feature                          18,918                                               18,918
Accretions of preferred stock; $651 related
 to Series B, and $870 related to Series C                                              (1,521)                         (1,521)
Foreign currency translation adjustments                                                               134       134       134
Other changes                                               (11)       11                                                   --
Net loss                                                                               (12,886)              (12,886)  (12,886)
                                                                                                            --------
Comprehensive loss                                                                                          $(12,752)
                                               ======  ========  ========  =======   =========   =========  ========  ========

Balance at December 31, 2003                    6,790  $     20  $373,186  $   (74)  $(363,173)  $    (206) $     --  $  9,753
Preferred series C conversion                   2,275         6       517                                                  517
Placement warrants converted to common stock      182         1                                                              1
Warrant issuance net of expense of $187K        2,600         8     2,420                                                2,434
Warrants issued in connection with debentures                         307                                                  307
Accretion of preferred stock:
 $208 Related to series B and
 $2,184 related to series C                                                             (2,392)                         (2,392)
Foreign currency translation adjustments                                                               208       208       208
Net loss                                                                                (3,320)               (3,320)   (3,320)
                                                                                                            --------
Comprehensive loss                                                                                          $ (3,112)
                                                                                                            ========
                                               ======  ========  ========  =======   =========   =========            ========

Balance at December 31, 2004                   11,847  $     35  $376,430  $   (74)  $(368,885)  $       2            $  7,508
                                               ======  ========  ========  =======   =========   =========            ========
</TABLE>


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


                                       45
<PAGE>

                                   P-COM, INC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                     Years ended December 31,
                                                                  2004        2003        2002
                                                                --------    --------    --------
<S>                                                             <C>         <C>         <C>
Cash flows from operating activities:
Net loss                                                        $ (3,320)   $(12,886)   $(54,306)
Adjustments to reconcile net loss to net cash flows from
operating activities:
  Gain on retirement of convertible notes                             --      (6,499)     (1,393)
  Depreciation expense                                             1,489       3,890       6,602
  Inventory valuation and other charges                              916       3,734       5,770
  Asset impairment and other restructuring charges                    --       3,712          --
  Loss on discontinued operations                                     40       2,137       4,284
  Goodwill impairment charge                                          --          --      11,409
  Cumulative effect of change in accounting principle                 --          --       5,500
  Gain on vendor settlements,  included in other income
    (expenses), net                                                 (964)     (2,060)         --
  Gain on settlement of contract                                  (7,500)         --          --
  Stock compensation expenses for consultants                         --         779          --
  Amortization of  discount on promissory notes                       --         731          --
  (Gain) loss on disposal of equipment, included in other
    income (expenses), net                                           167        (635)        153
  Notes conversion expense                                            --          --         771
  Amortization of stock warrants                                     138         367         546
  Write-off of notes receivable                                       --         100         159
  Increase (decrease) in cash resulting from changes in:
        Accounts receivable, net of reserve                        2,048         144         979
        Inventory                                                   (172)      2,487      12,664
        Prepaid expenses and other assets                            349         846       3,874
        Accounts payable                                          (1,011)     (1,181)        440
        Other accrued liabilities                                 (1,327)     (1,539)    (11,963)
                                                                --------    --------    --------
      Net cash flows from operating activities                    (9,147)     (5,873)    (14,511)
                                                                --------    --------    --------

Cash flows from investing activities:
   Acquisition of property and equipment                            (321)       (182)       (596)
   Proceeds from sale of property and equipment                      829          --         251
   Proceeds from sales of Speedcom common stock                      100          --
   Change in restricted cash                                          --         415       2,496
   Cash paid for Speedcom business purchase                           --      (1,580)         --
   Net asset of discontinued operation                                --         635       2,900
                                                                --------    --------    --------
      Net cash flows from investing activities                       608        (712)      5,051
                                                                --------    --------    --------

Cash flows from financing activities:
   Payments of notes payable                                          --        (750)     (2,111)
   Proceeds from issuance of common stock, net of expenses            --         307       7,713
   Proceeds from issuance of preferred stock, net of expenses         --      15,108          --
   Proceeds from Employee Stock Purchase Plan                         --          --          35
   Proceeds from (repayment of) loan payable to bank                  (1)     (2,603)      2,604
   Proceeds from exercise of warrant offers, net of expenses       2,434          --          --
   Proceeds from debentures                                        3,300          --          --
   Payments under capital lease obligations                       (1,052)       (186)       (497)
                                                                --------    --------    --------
      Net cash flows from financing activities                     4,681      11,876       7,744
                                                                --------    --------    --------

   Effect of exchange rate changes on cash                           (47)         33          52
                                                                --------    --------    --------
Net increase (decrease) in cash and cash equivalents              (3,905)      5,324      (1,664)
Cash and cash equivalents at beginning of the year                 6,185         861       2,525
                                                                --------    --------    --------
Cash and cash equivalents at end of the year                    $  2,280    $  6,185    $    861
                                                                --------    --------    --------
</TABLE>


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


                                       46
<PAGE>

                                   P-COM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY. P-Com, Inc. ("P-Com" or the "Company") was incorporated in Delaware
on August 23, 1991 to engage in the design, manufacture and marketing of
millimeter network access wave radio systems for use in the worldwide wireless
telecommunications market. See Note 9 for sales and other information by
geographic area.

 BUSINESS ACQUISITION. As more fully discussed in Note 12, on December 10, 2003,
P-Com acquired substantially all of the operating assets and certain liabilities
of the Wave Wireless Division of SPEEDCOM Wireless Corporation ("Wave Wireless")
in a transaction accounted for using the purchase method. Wave Wireless is
engaged in the design, manufacture, configuration and delivery of a variety of
broadband fixed-wireless products that are intended to complement the Company's
current product line and geographic presence. Under the purchase method of
accounting, the results of operations are included in the Company's results
commencing on the date of acquisition.

DISCONTINUED OPERATIONS. Prior to March 31, 2003, P-Com's services business unit
provided network services including system and program planning and management,
path design, and installation for the wireless communication market through its
service sales segment. As disclosed in Note 8, the services business was sold
and, accordingly, the consolidated financial statements for December 31, 2003,
2002 and 2001 have been reclassified to reflect P-Com's services business unit
as a discontinued operation.

LIQUIDITY AND MANAGEMENT'S PLANS

The Company has been experiencing challenging operating conditions in recent
years as a result of the continuing depressed telecommunications equipment
market; such conditions have persisted since approximately 2000. These
conditions, coupled with a significant continuing legacy cost structure, which
includes, among other costs, higher than market occupancy costs, have resulted
in substantial losses and the use of substantial amounts of cash in operations.
Notwithstanding significant liability restructuring activities in recent years,
during the years ended December 31, 2004, 2003, and 2002, the Company recorded
losses from continuing operations of ($3.3) million, ($10.7) million, and
($44.5) million, respectively, and used ($9.1) million, ($5.9) million, and
($14.5) million cash, respectively, in supporting its operating activities at
their current levels. As of December 31, 2004, the Company had cash and cash
equivalents of $2.3 million and working capital of $1.3 million. At current
operating levels, internal projections reflect an aggregate cash shortfall of
approximately $4.0 million for the year ended December 31, 2005. In addition, at
current operating levels, management estimates that its cash reserves will be
exhausted by or near the end of the first quarter of the year ended December 31,
2005. There are currently no formal, committed financing arrangements available
to the Company, other than a highly-restricted bank line of credit, to balance
this projected cash shortfall. These negative trends and conditions raise
substantial doubt about the Company's ability to continue as a going concern for
a reasonable period.

The Company's ability to continue as a going concern for a reasonable period at
current operating levels is dependent upon acquiring additional cash through
financing arrangements. While management is actively seeking additional equity
and/or debt financing, there are currently no commitments. There can be no
assurances that any additional financing will be available on acceptable terms,
if at all. Accordingly, management is actively engaged in the development of a
formal restructuring plan that will significantly curtail current spending, and
substantially reduce liabilities and operating and other costs. The plan is
subject to the approval of the Company's Board of Directors, and is expected to
be presented for approval before the end of the first fiscal quarter of 2005.

The restructuring plan is expected to include significant reductions in costs,
including the suspension or curtailment of certain research and development
efforts, reductions in headcount, restructuring of committed costs, such as
leasing arrangements, and the curtailment of activities in certain foreign
locations. The plan is also expected to include the divestiture of certain
unprofitable product lines, which will have the effect of further reducing
overall costs. Finally, the plan will likely include the designation of
additional preferred stock that will be used to restructure certain liabilities
and existing preferred stock of the Company.


                                       47
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

Many of the individual components of the restructuring plan will result in
charges to operations and, in some instances, the use of a portion of the
Company's remaining cash reserves. The associated amounts have not yet been
determined. However, under current accounting standards for restructuring and
exit activities, the Company will generally be required to determine the amounts
and the timing of recognition of the cost components individually. Expenses
associated with employee severance costs will not be recorded before the date
that the Board of Directors approves the formal plan (the "Commitment Date").
Subsequently, severance costs will be recognized when employee groups are
identified and the severance benefits are communicated. Divesting certain
product lines may result in inventories becoming excessive and subject to
markdown evaluation. If markdowns are necessary, such amounts will be recorded
as a component of cost of sales when estimable. Other costs associated with the
restructuring plan, such as lease restructuring or other exit costs, generally
will be recognized when the costs are incurred through contract execution or
otherwise.

There can be no assurance that the aforementioned restructuring plan will be
successful. Accordingly, management is also evaluating the merits of a strategic
acquisition or other transaction that would substantially improve its liquidity
and capital resource position and the merits of an outright sale of the
Company's operation. If ultimately required, there can also be no assurances
that these actions will be successful.

The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or to amounts
and classification of liabilities that may be necessary if the Company is unable
to continue as a going concern.



                                       48
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

RESTATEMENTS

All share and per share information in the accompanying consolidated financial
statements for the years ended December 31, 2003 and 2002 have been restated to
give effect to a one-for-thirty reverse stock split that became effective on
July 19, 2004.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MANAGEMENT'S USE OF ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of P-Com and its
wholly-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated.

FOREIGN CURRENCY

The value of the United States dollar rises and falls day-to-day on foreign
currency exchanges. Since the Company does business in foreign countries, these
fluctuations affect the Company's financial position and results of operations.
Assets and liabilities of our foreign subsidiaries are translated from their
local currencies into United States dollars at exchange rates in effect at the
respective balance sheet date. Income and expense accounts are translated from
their local currencies into United States dollars at average exchange rates for
the respective period.

 Accumulated net translation adjustments are recorded as a component of
comprehensive income (loss) in stockholders' equity (deficit). Foreign exchange
transaction gains and losses are included in the results of operations in the
periods incurred, and were not material in all periods presented. The Company
does not enter into any contracts to hedge the effects of foreign currency
exchange fluctuations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of cash, accounts receivable and payable, debt and
accrued liabilities at December 31, 2004 and 2003 approximated their respective
historical cost due to the short maturities.

CASH AND CASH EQUIVALENTS

P-Com considers all highly liquid debt instruments with a maturity when acquired
of three months or less to be cash equivalents.


                                       49
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
   ACCOUNTING POLICIES (CONTINUED)

ACCOUNTS RECEIVABLE

P-Com records an allowance for doubtful accounts receivable based on our general
collection history and specifically identified amounts that management believed
to be uncollectible. P-Com has a limited number of customers with individually
large amounts due at any given balance sheet date. However, any unanticipated
change in one of those customer's credit worthiness could have a material
adverse effect on P-Com's results of operations in the period in which such
changes or events occur and losses become estimable. After all attempts to
collect a receivable have failed, the receivable is written off against the
allowance.

REVENUE RECOGNITION

Revenue from product sales is recognized upon transfer of title and risk of
loss, which is upon shipment of the product provided no significant obligations
remain and collection is probable. Shipping and handling costs related to our
product sales are included as a component of cost of sales. The Company has not
experienced material returns of products. The Company warrants its products and
provides parts and labor to repair any manufacturing defects on its equipment
for a period of one year to three years. Provisions for estimated warranty
repairs, returns and other allowances are recorded at the time revenue is
recognized. (See Note 3)

INVENTORY

Inventory is stated at the lower of cost or market; cost is determined on a
first-in, first-out basis.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based upon the useful lives of the assets ranging from
three to seven years. Leasehold improvements are amortized using the
straight-line method based upon the shorter of the estimated useful lives of the
respective improvements or the lease term.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

GOODWILL

Goodwill at December 31, 2004 and 2003 represents the excess of the purchase
price over the fair values of net assets acquired in connection with the Wave
Wireless acquisition. In accordance with Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), goodwill
resulting from the purchase will not be amortized into operations. Rather, such
amounts will be tested for impairment at least annually. This impairment test is
calculated at the reporting unit level, which, for P-Com is at the enterprise
level. The annual goodwill impairment test has two steps. The first identifies
potential impairments by comparing the fair value of P-Com, as determined using
its trading market prices, with its carrying value, including goodwill. If the
fair value exceeds the carrying amount, goodwill is not impaired and the second
step is not necessary. If the carrying value exceeds the fair value, the second
step calculates the possible impairment loss by comparing the implied fair value
of goodwill with the carrying amount. If the implied goodwill is less than the
carrying amount, a write-down will be recorded. In the event that P-Com's
management determines that the value of goodwill has become impaired using this
approach, P-Com will record a charge for the amount of the impairment. No
impairment of goodwill resulted from this measurement approach immediately
following the Wave Wireless acquisition. P-Com will perform this test annually,
on the first day of the fourth quarter of each year. No impairments arose during
2004.


                                       50
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

During the year ended December 31, 2002, management reviewed the carrying value
of goodwill related to the services business unit, and based upon its assessment
of future cash value of revenue flows and the current depressed business
condition of the telecommunications services market, recorded a ($11.4) million
impairment charge in the fourth quarter of 2002. In addition, effective upon the
adoption of SFAS 142, the Company recorded ($5.5) million of transitional
impairment charges in the first quarter of the year ended December 31, 2002,
which represented the difference between the fair value of expected cash flows
from the services business unit, and its book value on the effective date of the
then newly-issued pronouncement.

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and circumstances indicate that the long-lived assets,
other than goodwill, may be impaired, an evaluation of recoverability would be
performed to determine whether impairments were present by comparing the net
book value of long-lived assets, other than goodwill, to projected undiscounted
cash flows at the lowest discernable level for which cash flow information can
be projected. In the event that undiscounted cash flows are insufficient to
recover the net carrying value over the remaining useful lives, impairment
charges are calculated and recorded in the period first estimable using
discounted cash flows or other fair value information, whichever is more
appropriate. During the year ended December 31, 2003, an impairment charge of
($3.7) million was reflected in the caption, "Restructuring charges on the
consolidated statement of operations."

COMPREHENSIVE INCOME (LOSS)

Under Statements on Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), P-Com is required to display comprehensive
income and its components as part of our full set of financial statements.
Comprehensive income comprises net income (loss) and other comprehensive income
(loss) items Other comprehensive income (loss) includes certain changes in
equity of P-Com that are excluded from net income (loss). Specifically, SFAS 130
requires adjustments arising from P-Com's foreign currency translation, which
were reported separately in stockholders' equity, to be included in accumulated
other comprehensive income (loss). Comprehensive income (loss) in 2004, 2003 and
2002 has been reflected in the Consolidated Statement of Stockholders' Equity
(Deficit) and Comprehensive Loss.

ACCOUNTING FOR STOCK-BASED COMPENSATION

P-Com accounts for and reports its stock-based employee compensation
arrangements using the intrinsic value method as prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
No. 25"), Financial Accounting Standards Board Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation ("FIN 44"), and Statement
of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure ("SFAS 148"). Accordingly, compensation
cost for stock options is measured as the excess, if any, of the fair value of
its stock at the date of grant over the stock option exercise price. P-Com
accounts for stock issued to non-employees in accordance with the provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). Under SFAS 123, stock awards issued to non-employees
are accounted for at their fair value on the date issued.


                                       51
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

The following table reflects supplemental financial information related to
stock-based employee compensation, as required by SFAS 148 for each year ending
December 31:

<TABLE>
<CAPTION>
                                                         2004      2003      2002
                                                        ---------------------------
<S>                                                     <C>       <C>       <C>
Stock-based employee compensation costs used in the
determination of net income (loss) attributable to
common stockholders, as reported                        $    --   $    --   $    --
                                                        ===========================
Loss attributable to common stockholders, as reported   $ 5,868   $14,407   $54,306

Stock-based employee compensation costs that would
have been included in the determination of net loss
if the fair value method (SFAS 123) had been applied
to all awards                                           $ 1,940   $ 1,967   $ 2,747
                                                        ---------------------------

Unaudited pro forma net loss attributable to common
stockholders, if the fair value method had been
applied to all awards                                   $ 7,808   $16,374   $57,053
                                                        ===========================
Net  loss attributable to common stockholders per
common share, as reported                               $  0.56   $  7.98   $ 63.77
                                                        ===========================
Unaudited pro forma net loss attributable to common
Stockholders per common share, if the fair value
method had been applied to all awards                   $  0.75   $  9.07   $ 67.00
                                                        ===========================
</TABLE>

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMER INFORMATION

Financial instruments that potentially subject P-Com to significant
concentrations of credit risk consist principally of cash equivalents and trade
accounts receivable. As of December 31, 2003, P-Com had in excess of $2.0
million on deposit in Silicon Valley Bank. The failure of this bank may result
in a substantial loss of these deposits.

P-Com has sold most of its products in international markets. Sales to several
customers have been denominated in British Pounds Sterling and Euro. At December
31, 2004, 2003 and 2002, accounts receivable from these customers represented
40%, 30%, and 29%, respectively, of total accounts receivable. Any gains or
losses that arise in the translation of foreign denominated financial
instruments are included in operations each period when measurable.

P-Com performs credit evaluations of its customers' financial condition to
determine the customer's credit-worthiness. Sales are then generally made either
on 30 to 90 day payment terms, COD or pursuant to letters of credit. P-Com
extends payment terms to international customers of up to 90 days, which is
consistent with prevailing business practices.

At December 31, 2004 and 2003, approximately 44% and 50%, respectively, of trade
accounts receivable represent amounts due from three customers, respectively.
For the year ended December 31, 2004, 2003 and 2002, five, four, and two
customers accounted for 56%, 54%, and 26% of total sales, respectively.



                                       52
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. THE COMPANY, LIQUIDITY AND MANAGEMENT'S PLANS, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The statement
amends Accounting Research Bulletin ("ARB") No. 43, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. ARB No. 43 previously stated that these
costs must be "so abnormal as to require treatment as current-period charges."
SFAS No. 151 requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this statement requires that allocation of fixed production overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005, with earlier application permitted
for fiscal years beginning after the issue date of the statement. The adoption
of SFAS No. 151 is not expected to have any significant impact on the Company's
current financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An Amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting For
Nonmonetary Transactions," is based on the opinion that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
of nonmonetary assets whose results are not expected to significantly change the
future cash flows of the entity. The adoption of SFAS No. 153 is not expected to
have any impact on the Company's current financial condition or results of
operations.

In December 2004, the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award. The
provisions of the revised statement are effective for financial statements
issued for the first interim or annual reporting period beginning after June 15,
2005, with early adoption encouraged. The Company is currently evaluating the
methodology for adoption on the impending effective date.


                                       53
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2.         CHANGE IN ACCOUNTING PRINCIPLE

GOODWILL

Effective January 1, 2002, P-Com adopted Statements of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Pursuant
to the impairment recognition provisions of SFAS 142, P-Com conducted an
evaluation of the impact of adopting SFAS 142. Accordingly, under the
transitional provisions of SFAS 142, a goodwill impairment loss of $5.5 million
was recorded related to P-Com's services segment during the first quarter of
2002, representing the difference between the fair value of expected cash flows
from the services business unit, and its book value. The fair value of the
services segment was estimated using a discounted cash flows model over a
four-year period from 2002 to 2005. A residual value was calculated assuming
that the services business unit will continue as a going concern beyond the
discrete projected period. A discount factor of 25% was used to compute the
present value of expected future cash flows. The residual of the goodwill
balance amount of $11.4 million was also assessed to be impaired in the fourth
quarter of 2002, and a charge was recorded for the same amount.

The following table sets forth a reconciliation of net loss and loss per share
information for the year ended December 31, 2002, as adjusted for the
non-amortization provisions of SFAS 142 (in thousands, except per share
amounts):

                                                            FOR THE YEAR
                                                         ENDED DECEMBER 31,
                                                               2002
                                                         ------------------
Reported net loss attributable to common stockholders ...     $(54,306)
  Add back: Goodwill amortization .......................           --
                                                              --------
Adjusted net loss .......................................      (54,306)
                                                              --------
Basic and diluted loss per share attributable to common
stockholders:
Reported net loss .......................................     $ (63.77)
  Add back: Goodwill amortization .......................           --
                                                              --------
Adjusted net loss .......................................     $ (63.77)
                                                              ========
Weighted average number of shares .......................          852
                                                              ========

Changes in the carrying amount of goodwill for the year ended December 31, 2004,
2003 and 2002 are as follows (in $000):

                                                   2004       2003       2002
                                                 --------   --------   --------
Balance at January 1, ........................   $ 11,981   $     --   $ 16,909
Purchased goodwill during the year ...........         --     11,981         --
Goodwill amortization expense ................         --         --         --
Transition impairment ........................         --         --     (5,500)
Impairment charge ............................         --         --    (11,409)
                                                 --------   --------   --------
Balance at December 31, ......................   $ 11,981   $ 11,981   $     --
                                                 ========   ========   ========


                                       54
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3.   SELECTED BALANCE SHEET AND STATEMENT OF OPERATIONS COMPONENTS

Inventory consists of the following (in thousands of dollars):

                                               As of December 31,
                                                2004       2003
                                               ------     ------
Raw materials ..............................   $  475     $3,219
Work-in-process ............................      299      1,682
Finished goods .............................    3,948        277
Inventory at customer sites ................       --         80
                                               ------     ------
                                               $4,722      5,258
                                               ======     ======

Property and equipment consists of the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                            As of December 31,
                                                                          --------------------
                                                           Useful life      2004         2003
                                                           -----------    --------    --------
<S>                                               <C>                     <C>         <C>
Tooling and test equipment .....................           3 - 5 years    $ 27,188    $ 27,196
Computer equipment .............................               3 years       6,065       6,480
Furniture and fixtures .........................               5 years       2,307       2,360
Land and buildings and leasehold improvements...  5 to 7, and 33 years         642       1,736
Construction in process ........................                               147          14
                                                                          --------    --------
                                                                            36,349      37,786
Less: Accumulated depreciation and amortization                            (34,594)    (33,979)
                                                                          --------    --------
                                                                          $  1,755    $  3,807
                                                                          ========    ========
</TABLE>

Depreciation expense for the years ended December 31, 2004, 2003 and 2002
amounted to $1,489 thousand, $3,890 thousand, and $6,602 thousand, respectively.

The above amounts include leasehold improvements under capital leases and
related accumulated amortization of $6,994 thousand and $6,021 thousand at
December 31, 2004, $6,994 thousand and $4,889 thousand at December 31, 2003, and
$6,990 thousand and $3,370 thousand at December 31, 2002, respectively. In 2003,
P-Com recorded a provision for impairment of equipment relating to the point -
to - multipoint product lines, of which $5,550 thousand was financed on capital
leases as of December 31, 2003 and this equipment was secured with the lessor.

Other accrued liabilities consist of the following (in thousands):

                                                       As of December 31,
                                                      -------------------
                                                        2004        2003
                                                      -------     -------
Purchase commitment .............................     $   278     $ 1,238
Deferred contract obligations (a) ...............          --       8,000
Deferred revenue ................................         112         243
Accrued employee benefits .......................         987       1,092
Accrued warranty (b) ............................         491       1,110
Lease obligations ...............................          --       2,335
Accrued rent ....................................         308         497
Customer advance ................................         298         468
Other ...........................................       1,026       1,243
                                                      -------     -------
                                                      $ 3,500     $16,226
                                                      =======     =======
(a) Deferred contract obligations


                                       55
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3.    SELECTED BALANCE SHEET AND STATEMENT OF OPERATIONS COMPONENTS (CONTINUED)

Under a joint license and development contract, P-Com determined that an
Original Equipment Manufacturer agreement with a vendor provided for payments of
$8.0 million, specifically earmarked for marketing our products under a joint
license and development contract. Accordingly, beginning in 1998, the Company
had recorded a liability of $3.0 million, and this was increased to $8.0 million
in 1999. As of December 31, 2003 and 2002, the liability of $8.0 million under
this arrangement remained. The Company entered into a settlement agreement with
the vendor in July 2004 whereby the Company was obligated to pay the vendor
$500,000. As of December 31, 2004, the liability of $400,000 under this
arrangement remained, with a payment of $100,000 due January 1, 2005, and twelve
monthly installments of $25,000 per month beginning on January 31, 2005.

(b) A summary of product warranty reserve activity is as follows (in thousands):

                                               2004         2003         2002
                                             -------      -------      -------
Balance at January 1,                        $ 1,110      $   936      $ 2,843
Additions relating to product sold               367          729          430
Payments                                        (984)        (555)      (2,337)
                                             -------      -------      -------
Balance at December 31,                      $   493      $ 1,110      $   936
                                             =======      =======      =======

c) Other long-term liabilities consist of the following (in thousands):

                                                 December 31,
                                             -------------------
                                               2004        2003
                                             -------      ------
Capital lease obligations .............      $ 1,743           6
                                             -------      ------
                                             $ 1,743           6
                                             =======      ======

Other income (expense), net consists of the following for each year ended
December 31:

<TABLE>
<CAPTION>
                                                                      2004         2003       2002
                                                                     -------     -------     -------
<S>                                                                  <C>         <C>         <C>
Gains (losses) on settlements of accounts payable and liabilities    $ 8,300     $ 2,194     $(1,254)
Gains (losses) on disposals of property and equipment                    (30)      1,061        (217)
Gains (losses) on transactions denominated in foreign currencies        (143)        852         148
Write-off advance to an ex-employee                                       --        (100)       (159)
Write-off notes receivable from Spectrasite                               --          --        (791)
Accruals write-back                                                       --          --         416
Other income (expenses), net                                             125        (268)        545
                                                                     -------     -------     -------
  Total other income (expenses), net                                 $ 8,252     $ 3,739     $(1,312)
                                                                     =======     =======     =======
</TABLE>


                                       56
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4.    BORROWING ARRANGEMENTS

NOTES PAYABLE

On November 3, 2004, we entered into a Note and Warrant Purchase Agreement (the
"Purchase Agreement") with a purchaser ("Purchaser") whereby the Purchaser
agreed to purchase debentures in the aggregate principal amount of up to
$5,000,000 (the "Notes") (the "Debenture Financing"). From the date of issuance,
the outstanding principal balance of the Notes bear interest, in arrears, at a
rate per annum equal to seven percent (7%), increasing to eight percent (8%) on
July 1, 2005 and ten percent (10%) on April 1, 2006 through the maturity date of
December 31, 2006. Interest shall be payable on a quarterly basis commencing on
March 31, 2005.

In addition, the Company agreed to issue warrants to purchase in the aggregate
up to 800,000 shares of the Company's common stock (the "Warrants"). The
Warrants will have an initial exercise price of $1.50 and a term of five years.
The Purchase Agreement provided that the Notes and Warrants be issued in two
closings. The first closing took place on November 26, 2004 and consisted of
$3,300,000 principal amount of Notes. The Purchase Agreement originally
contemplated that the second closing would take place no later than December 30,
2004. While no assurances can be given, the parties are currently negotiating
the conditions necessary to obtain the additional $1,700,000 under the Purchase
Agreement, in light of our deteriorating financial condition and results from
operations.

On November 30, 2004, Agilent Financial Services ("Agilent") entered into an
agreement with us to restructure the $1.725 million due Agilent on December 31,
2004. Under the terms of the agreement, we paid Agilent an initial payment of
$250,000 on December 1, 2004. Interest shall accrue on the $1.725 million at a
rate of 10.25% per annum from December 1, 2004 through April 1, 2006. We are
required to pay monthly payments equal to $92,187, for sixteen months, from
January 1, 2005, up to and including April 1, 2006. On the earlier of May 1,
2006 or within thirty (30) days of full repayment of the $1.725 million, we
shall pay any and all interest accrued. In addition, we issued Agilent a warrant
to purchase 178,571 shares of our common stock. The warrant has an initial
exercise price of $0.56 and a term of five years.

On September 17, 2004, the Company renewed its Credit Facility with Silicon
Valley Bank (the "Bank") until September 17, 2005. The Credit Facility consists
of a Loan and Security Agreement for a $1.0 million borrowing line based on
domestic receivables, and a Loan and Security Agreement under the Export-Import
("EXIM") program for a $3.0 million borrowing line based on export related
inventories and receivables. The Credit Facility provides for cash advances
equal to 75% of eligible accounts receivable balances for both the EXIM program
and domestic lines, and up to $750,000 for eligible inventories (limited to 25%
of eligible EXIM accounts receivable), under the EXIM program. Advances under
the Credit Facility bear interest at the Bank's prime rate plus 3.5% per annum.
The Credit Facility is secured by all receivables, deposit accounts, general
intangibles, investment properties, inventories, cash, property, plant and
equipment of the Company. The Company has also issued a $4.0 million secured
promissory note underlying the Credit Facility to the Bank. As of December 31,
2004, there was no balance outstanding under this Credit Facility. The Company
has however issued Letter of Credits totaling $ 294 thousand with maturity to
April 2005 to certain vendors under this Credit Facility. The Letter of Credits
have not been drawn upon yet, as of December 31, 2004.

The Company has an unsecured overdraft line with a bank in Italy, for borrowings
of up to $83,000, based on domestic trade receivables. Borrowings under this
line bear interest at 4.5% per annum. At December 31, 2004, there were no
amounts drawn under this facility.

CONVERTIBLE SUBORDINATED NOTES

On November 5, 1997, P-Com issued $100 million in 4.25% Convertible Subordinated
Notes due November 1, 2002. The 4.25% Convertible Subordinated Notes were
convertible into shares of P-Com Common Stock. Interest on the 4.25% Convertible
Subordinated Notes was due semi-annually on May 1 and November 1 of each year.
During the period following issuance, through November 1, 2002, holders
exercised conversion options reducing the carrying amount to $22.4 million.
During the year ended December 31, 2002, certain conversions resulted in a gain
on debt extinguishment of $1.3 million.

                                       57
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4.     BORROWING ARRANGEMENTS (CONTINUED)

On November 1, 2002, P-Com issued $22.4 million aggregate face value of 7%
Convertible Subordinated Notes due November 1, 2005, in exchange for the 4.25%
Convertible Subordinated Notes. The 7% Convertible Subordinated Notes were
originally convertible into P-Com's Common Stock at $63.00 per share. On May 28,
2003, $2.3 million of the Convertible Subordinated Notes were redeemed through
an exchange for property and equipment that resulted in a gain of $1.5 million,
included in the caption, "Gain on Debt Extinguishments, net," in the
Consolidated Statements of Operations for the year ended December 31, 2003. On
August 4, 2003, the remaining principal and accrued interest of the Convertible
Subordinated Notes totaling $21.1 million was converted into approximately
1,000,000 shares of Series B Convertible Preferred Stock that resulted in a gain
of $8.8 million included in the caption, "Gain on Debt Extinguishments, net" in
the Consolidated Statements of Operations for the year ended December 31, 2003.

BRIDGE NOTES

The Company received $2.7 million in bridge note financings during the year
ended December 31, 2003 in advance of the sale of Series C Preferred Stock,
discussed in Note 5. The bridge notes were convertible into Series C Preferred
Stock, and included detachable Series A Warrants to purchase 2.5 million shares
of Common Stock and Series B Warrants to acquire 3.5 million shares of the
Company's Common Stock. The proceeds from the bridge notes was allocated between
the notes and warrants based upon their relative fair values on the commitment
date, resulting in a debt carrying value of $2.0 million. Neither the original
conversion rate nor the adjusted conversion rate, giving effect to the
allocation of proceeds to warrant equity, resulted in a beneficial conversion
charge. During the year ended December 31, 2003, the discounted bridge notes
were accreted to a balance of $2.2 million, through periodic charges to interest
expense. During the fourth quarter, the holders of the bridge notes converted
their balances into Series C Preferred stock at an induced, beneficial
conversion rate, that resulted in a charge of $3.8 million included in the
caption, "Gain on Debt Extinguishments, net," in the Consolidated Statements of
Operations for the year ended December 31, 2003.

5.     STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK

The authorized capital stock of P-Com is 35 million shares of Common Stock,
$0.003 par value (the "Common Stock"), and 2 million shares of Preferred Stock,
$0.0001 par value (the "Preferred Stock"), including 500,000 shares of which
have been designated Series A Junior Participating Preferred Stock (the "Series
A") pursuant to the Stockholder Rights Agreement (see discussion below),
1,000,000 shares as Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), 10,000 shares as Series C Convertible Preferred Stock (the
"Series C Preferred Stock"), and 2,000 shares as Series D Convertible Preferred
Stock (the "Series D Preferred Stock"). Effective July 19, 2004, P-Com effected
a one for thirty reverse stock split. All numbers have been restated to reflect
the stock split.

       PREFERRED STOCK

The Board of Directors is authorized to issue shares of Preferred Stock in one
or more series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting rights,
term of redemption, including sinking fund provisions, redemption price or
prices, liquidation preferences and the number of shares constituting any series
or designations of any series, without further action by the holders of Common
Stock.


                                       58
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.     STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

       SERIES B CONVERTIBLE PREFERRED STOCK

On August 4, 2003, as a result of the restructuring of its Convertible Notes,
the principal amount and accrued interest of $21,138,000 was converted into
approximately 1,000,000 shares of Series B Convertible Preferred Stock with a
stated value of $21.138 per share. Each share of Series B Convertible Preferred
Stock converts into a number of shares of the Company's Common Stock equal to
the stated value divided by $6.00. Certain holders of Series B Convertible
Preferred Stock agreed to convert the Series B Convertible Preferred Stock into
Common Stock upon receipt of stockholder approval to increase the number of
authorized shares of the Company's Common Stock to allow for conversion of the
Series B Preferred Stock. The Company received the stockholder approval on
December 2, 2003 and these holders converted their Series B Convertible
Preferred Stock into Common Stock. If declared, the holders of the Series B
Preferred Stock shall be entitled to receive dividends payable out of funds
legally available therefore. Holders of Series B Preferred Stock shall share pro
rata in all dividends and other declared distributions. The basis of
distribution shall be the number of shares of Common Stock that the holders
would hold if all of the outstanding shares of Series B Preferred Stock had
converted into Common Stock.

Any time after January 31, 2004 and subject to certain limitations, the Company
may require the holders of Series B Preferred Stock to convert all outstanding
shares of Series B Preferred Stock into shares of Common Stock, in accordance
with the optional conversion formula, and all of the following conditions are
met:

      o     Closing bid price of the Common Stock for 10 consecutive trading
            days prior to delivery of the mandatory conversion Notice equals or
            exceeds $12.00;

      o     Company shall have filed a registration statement covering all
            shares of Common Stock issuable upon conversion of the Series B
            Preferred Stock, declared effective by the SEC, and continuing
            effectiveness through and including the date of the mandatory
            conversion;

      o     All shares of Common Stock issuable upon conversion of Series B
            Preferred Stock are authorized and reserved for issuance; registered
            for resale under the 1933 Act; and listed on the Bulletin Board or
            other national exchange; and

      o     All amounts, if any, accrued or payable under the Certificate of
            Designation, Rights and Preferences of the Series B Preferred Stock
            ("Certificate of Designation") shall have been paid.

Upon the occurrence of the following events, the holders of Series B Preferred
Stock may require the Company to purchase their shares of Series B Preferred
Stock for cash:

      o     Company fails to remove any restrictive legend on any Common Stock
            certificate issued to Series B Preferred stockholders upon
            conversion as required by the Certificate of Designation;

      o     Company makes an assignment for creditors or applies for appointment
            of a receiver for a substantial part of its business/property or
            such receiver is appointed;

      o     Bankruptcy, insolvency, reorganization or liquidation proceedings
            shall be instituted by or against the Company;

      o     Company sells substantially all of its assets;


                                       59
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.    STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

      SERIES B CONVERTIBLE PREFERRED STOCK (CONTINUED)

      o     Company merges, consolidates or engages in a business combination
            with another entity that is required to be reported pursuant to Item
            1 of Form 8-K (unless the Company is the surviving entity and its
            capital stock is unchanged);

      o     Company engages in transaction(s) resulting in the sale of
            securities whereby such person or entity would own greater than 50%
            of the outstanding shares of Common Stock of the Company (on a
            fully-diluted basis);

      o     Company fails to pay any indebtedness of more than $250,000 to a
            third party, or cause any other default which would have a material
            adverse effect on the business or its operations.

The Series B Preferred Stock ranks senior to the Common Stock and the Series A
Preferred Stock. The consent of the majority holders of the Series B Preferred
Stock is required to create any securities that rank senior or pari passu to the
Series B Preferred Stock. Upon a liquidation event, any securities senior to the
Series B Preferred Stock shall receive a distribution prior to the Series B
Preferred Stock and pursuant to the rights, preferences and privileges thereof,
and the Series B Preferred Stock shall receive the liquidation preference with
respect to each share. If the assets and funds for distribution are insufficient
to permit the holders of Series B Preferred Stock and any pari passu securities
to receive their preferential amounts, then the assets shall be distributed
ratably among such holders in proportion to the ratio that the liquidation
preference payable on each share bears to the aggregate liquidation preference
payable on all such shares. If the outstanding shares of Common Stock are
increased/decreased by any stock splits, stock dividends, combination,
reclassification, reverse stock split, etc., the conversion price shall be
adjusted accordingly. Upon certain reclassifications, the holders of Series B
Preferred Stock shall be entitled to receive such shares that they would have
received with respect to the number of shares of Common Stock into which the
Series B Preferred Stock would have converted. If the Company issues any
securities convertible for Common Stock or options, warrants or other rights to
purchase Common Stock or convertible securities pro rata to the holders of any
class of Common Stock, the holders of Series B Preferred Stock shall have the
right to acquire those shares to which they would have been entitled upon the
conversion of their shares of Series B Preferred Stock into Common Stock. The
Series B Preferred Stock does not have voting rights.



                                       60
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.    STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

      SERIES B CONVERTIBLE PREFERRED STOCK (CONTINUED)

         A summary of Series B Preferred Stock activity is as follows (in
thousands):

                                                            Shares       Amount
                                                            ------     --------
       Activity during the year ended December 31, 2003:
         Issuance of Series B preferred stock                1,000     $ 11,619

         Preferred stock accretions to accrete the
         Fair value to the stated value (b)                                 651

         Conversion of Series B preferred stock for 3,141
         Shares of common stock                               (892)     (10,909)
                                                            ------     --------

         Balances as of December 31, 2003 (c) (d)              108     $  1,361

       Activity during the year ended December 31, 2004:
         Preferred stock accretions to accrete the fair
         value to the stated value (b)                                      208
                                                            ------     --------
         Balances as of December 31, 2004 (c) (d)              108     $  1,569
                                                            ======     ========

(a) The Company, after consideration of several valuation models, determined
the fair value of the Preferred Stock as an amount equals to the fair value of
the number of common shares into which the Series C Preferred Stock is
convertible into using the trading market price on the date the Series C
Preferred Stock was issued.

(b) The Company accretes its Series B Preferred Stock to redemption value
through periodic charges to retained earnings.

(c) The Series B Preferred Stock is classified as a mezzanine security, outside
of stockholders equity in the accompanying consolidated balance sheets due to
the cash redemption provisions noted above. Under Statements of Financial
Accounting Standards No. 150, this security would have been classified as equity
in a non-public filing context.

(d) As of December 31, 2004, outstanding Series B Preferred Stock is convertible
into 381,916 shares of common stock.


          SERIES C CONVERTIBLE PREFERRED STOCK AND WARRANTS

In October and December 2003, P-Com issued approximately 10,000 shares of Series
C Convertible Preferred Stock with a stated value of $1,750 per share, together
with warrants to purchase approximately 4.64 million shares of Common Stock.
Each share of Series C Convertible Preferred Stock converts into a number of
shares of the Company's Common Stock equal to the stated value divided by $3.00.
These shares of Series C Convertible Preferred Stock outstanding on December 31,
2004 are convertible into approximately 3.5 million shares of Common Stock.
Holders of Series C Convertible Preferred Stock are entitled to receive, out of
legally available funds, dividends at the rate of 6% per annum beginning on the
first anniversary of their date of issuance and 8% per annum beginning on the
second anniversary of their date of issuance. Dividends are payable
semi-annually, either in cash or shares of P-Com Common Stock.


                                       61
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.   STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES C CONVERTIBLE PREFERRED STOCK (CONTINUED)

Each share of Series C Convertible Preferred Stock is convertible into a number
of shares of Common Stock equal to the stated value, plus any accrued and unpaid
dividends, divided by an initial conversion price of $3.00. This conversion
price is subject to adjustment for any stock splits, stock dividends or similar
transactions. The conversion price is also subject to adjustment in the event
that P-Com makes a dilutive issuance of Common Stock or other securities that
are convertible into or exercisable for Common Stock at an effective per share
purchase price that is less than the conversion price of the Series C Preferred
Stock in effect at the time of the dilutive issuance. The holders of Series C
Preferred Stock may convert their shares into shares of Common Stock at any
time. However, no holder of Series C Preferred Stock may convert its shares into
shares of Common Stock if the conversion would result in the holder or any of
its affiliates, individually or in the aggregate, beneficially owning more than
9.999% of P-Com's outstanding Common Stock. In the event a holder is prohibited
from converting into Common Stock under this provision due to the 9.999%
ownership limitation discussed above, the excess portion of the Series C shall
remain outstanding, but shall cease to accrue a dividend.

Subject to limitations above, the Series C Convertible Preferred Stock is also
mandatorily convertible at the option of P-Com 180 days after the effective date
of a registration statement covering the shares of Common Stock issuable upon
the conversion of the Series C Convertible Preferred Stock, and upon the
satisfaction of the following conditions: (i) for ten consecutive days, the
Common Stock closes at a bid price equal to or greater than $6.00; (ii) the
continued effectiveness of the registration statement; (iii) all shares of
Common Stock issuable upon conversion of the Series C Convertible Preferred
Stock and Series C-1 and Series C-2 Warrants are authorized and reserved for
issuance, are registered under the Securities Act for resale by the holders, and
are listed or traded on the OTC Bulletin Board or other national exchange; (iv)
there are no uncured redemption events; and (v) all amounts accrued or payable
under the Series C Convertible Preferred Stock Certificate of Designation or
registration rights agreement have been paid. As of February 21, 2005,
approximately 3933 shares of Series C Convertible Preferred Stock had been
converted into approximately 2.29 million shares of Common Stock and
approximately 6,009 shares of Series C Convertible Preferred Stock remained
outstanding. As of February 21, 2005, 3,933 shares of the Series C Warrants have
been exercised.

The shares of Series C Convertible Preferred Stock that remain outstanding are
convertible into approximately 3.5 million shares of Common Stock, subject to
the limitation on conversion described above. The number of shares of Common
Stock issuable upon conversion of the Series C Convertible Preferred Stock and
exercise of the Series C-1 and Series C-2 Warrants are subject to adjustment for
stock splits, stock dividends and similar transactions and for certain dilutive
issuances.

The investors of Series C were issued 233 Series C-1 Warrants and 233 Series C-2
Warrants for every share of Series C purchased. The C-1 Warrant has a term of
five years and an initial exercise price of $4.50 per warrant, increasing to
$5.40 per warrant beginning February 6, 2005. The Series C-2 Warrant has a term
of five years and an initial exercise price of $5.40 per warrant, increasing to
$6.60 per warrant beginning August 6, 2005. Subject to an effective registration
statement, beginning twenty-four (24) months after the Effective Date, the
Company may redeem the Series C-1 Warrants for $0.03 per Warrant if the Closing
Bid Price of the Company's Common Stock is equal to or greater than $10.80 for
ten (10) consecutive trading days. Beginning February 6, 2007, the Company may
redeem the Series C-2 Warrants for $0.03 per Warrant if the Closing Bid Price of
the Company's Common Stock is equal to or greater than $13.20 for ten (10)
consecutive trading days. The Conversion Price of the Series C and the Exercise
Price of the C-1 and C-2 Warrants shall be subject to adjustment for issuances
of Common Stock at a purchase price less than the then-effective Conversion
Price or Exercise Price, based on weighted average anti-dilution protection,
subject to customary carve-outs (See Common Stock Warrants, below).


                                       62
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.   STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES C CONVERTIBLE PREFERRED STOCK (CONTINUED)

If P-Com completes a private equity or equity-linked financing (the "New
Financing"), the Series C holders may exchange any outstanding Series C at 100%
of face value for the securities issued in the New Financing. Such right shall
be voided in the event the Company raises $5.0 million of additional equity
capital at a price of not less than $3.60 per share.

For any equity or equity-linked private financing consummated within 12 months
after the closing of the Series C Financing, the investors in the Series C shall
have a right to co-invest in any private financing up to fifty percent (50%) of
the dollar amount invested in the Series C Financing. The investors shall have
five (5) trading days to respond. This co-investment provision shall not apply
to the issuance of stock in situations involving bona-fide strategic
partnerships, acquisition candidates and public offerings.

Upon the occurrence of the following events, (each a "Redemptive Event"), the
holders of Series C Preferred Stock may require the Company to purchase their
shares of Series C Preferred Stock for cash:

      o     the Company fails to remove any restrictive legend on any Common
            Stock certificate issued to Series C Preferred Stock holders upon
            conversion as required by the Certificate of Designation and such
            failure continues uncured for five business days after receipt of
            written notice;

      o     the Company makes an assignment for the benefit of creditors or
            applies for appointment of a receiver for a substantial part of its
            business/property or such receiver is appointed;

      o     bankruptcy, insolvency, reorganization or liquidation proceedings
            shall be instituted by or against the Company and shall not be
            dismissed within 60 days of their initiation;

      o     the Company sells substantially all of its assets;

      o     the Company merges, consolidates or engages in a business
            combination with another entity that is required to be reported
            pursuant to Item 1 of Form 8-K (unless the Company is the surviving
            entity and its capital stock is unchanged);

      o     the Company engages in transaction(s) resulting in the sale of
            securities to a person or entity whereby such person or entity would
            own greater than fifty percent (50%) of the outstanding shares of
            Common Stock of the Company (calculated on a fully-diluted basis);

      o     the Company fails to pay any indebtedness of more than $250,000 to a
            third party, or cause any other default which would have a material
            adverse effect on the business or its operations.

The Series C Preferred Stock ranks senior to the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock and ranks pari passu with the
Series D Preferred Stock. The consent of the majority holders of the Series C
Preferred Stock is required to create any securities that rank senior or pari
passu to the Series C Preferred Stock. If P-Com liquidates, dissolves or winds
up, the holders of Series C Preferred Stock and Series D Preferred Stock are
entitled to receive the stated value of their shares plus all accrued and unpaid
dividends prior to any amounts being paid to the holders of Series B Preferred
Stock and P-Com Common Stock. In addition, the holders of Series C Preferred
Stock are entitled to share ratably together with the holders of the Series D
Preferred Stock, the Series B Convertible Preferred Stock and P-Com Common Stock
in all remaining assets after the satisfaction of all other liquidation
preferences. If the assets and funds for distribution are insufficient to permit
the holders of Series C


                                       63
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.   STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES C CONVERTIBLE PREFERRED STOCK (CONTINUED)

Preferred Stock and any pari passu securities to receive their preferential
amounts, then the assets shall be distributed ratably among such holders in
proportion to the ratio that the liquidation preference payable on each share
bears to the aggregate liquidation preference payable on all such shares. If the
outstanding shares of Common Stock are increased/decreased by any stock splits,
stock dividends, combination, reclassification, reverse stock split, etc., the
conversion price shall be adjusted accordingly.

Upon certain reclassifications, the holders of Series C Preferred Stock shall be
entitled to receive such shares that they would have received with respect to
the number of shares of Common Stock into which the Series C Preferred Stock
would have converted. If the Company issues any securities convertible for
Common Stock or options, warrants or other rights to purchase Common Stock or
convertible securities pro rata to the holders of any class of Common Stock, the
holders of Series C Preferred Stock shall have the right to acquire those shares
to which they would have been entitled upon the conversion of their shares of
Series C Preferred Stock into Common Stock.

The holders of Series C Preferred Stock are entitled to vote together with the
holders of the Series D Preferred Stock and Common Stock, as a single class, on
all matters submitted to a vote of P-Com's stockholders. The holders of the
Series C Preferred Stock are entitled to a number of votes equal to the number
of shares of P-Com Common Stock that would be issued upon conversion of their
shares of Series C Preferred Stock.

 A summary of Series C Preferred Stock activities is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     Shares      Amount
                                                                    -------     --------
<S>                                                                     <C>     <C>
         Activity during the year ended December 31, 2003:
           Sale of Series C preferred stock for cash, net of
           issuance expenses                                            9.4     $ 15,108

           Issuance of Series C preferred stock for services and
           settlements                                                   .6          905

           Allocation of cash proceeds to warrants                                (8,136)

           Beneficial conversion feature                                          (7,877)

           Preferred stock accretions to accrete the fair value
           to the stated value                                                       870
                                                                    -------     --------

           Balance as of December 31, 2003                             10.0          870

         Activity during the year ended December 31, 2004
           Preferred stock accretions to accrete the fair value
           to the stated value                                                     2,184

           Conversion of Series C preferred stock for 2,275
           shares of common stock                                      (4.0)        (517)
                                                                    -------     --------

         Balances as of December 31, 2004 (e) (f)                       6.0     $  2,537
                                                                    =======     ========
</TABLE>


                                       64
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.  STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES C CONVERTIBLE PREFERRED STOCK (CONTINUED)

(a) The Company, after consideration of several valuation models, determined the
fair value of the Preferred Stock as an amount equal to the fair value of the
number of common shares into which the Series C Preferred Stock is convertible
into using the trading market price on the date the Series C Preferred Stock was
issued.

(b) The Company allocated proceeds between the Series C Preferred Stock and the
Warrants based upon their relative fair values.

(c) The beneficial conversion feature was calculated using the adjusted
conversion rate, following the allocation of proceeds to warrants discussed in
item (b) above.

(d) The Company accretes its Series C Preferred Stock to redemption value
through periodic charges to retained earnings.

(e) The Series C Preferred Stock is classified as a mezzanine security, outside
of stockholders equity in the accompanying balance sheet due to the cash
redemption provisions noted above. Under Statements of Financial Accounting
Standards No. 150, this security would have been classified as equity in a
non-public filing context.

(f) As of December 31, 2004, outstanding Series C Preferred Stock are
convertible into approximately 3.5 million shares of Common Stock.

Beneficial conversion feature represents the excess of the aggregate fair value
of the of the Common Stock, using the market price at around the Series C
commitment date, that the Preferred Stockholders would receive at conversion
over the proceeds received, and it is accreted over a five-year period.

      SERIES D CONVERTIBLE PREFERRED STOCK

P-Com has designated 2,000 shares of its Preferred Stock as Series D Convertible
Preferred Stock. In December 2003, P-Com issued the 2,000 shares of Series D
Convertible Preferred Stock to redeem $2 million of notes payable assumed from
the SPEEDCOM asset acquisition. The Series D Preferred Stock has a stated value
of $1,000 per share. Each share of Series D Preferred Stock is convertible into
a number of shares of Common Stock equal to the stated value divided by an
initial conversion price of $4.50. This conversion price is subject to
adjustment for any stock splits, stock dividends or similar transactions. The
holders of Series D Preferred Stock may convert their shares into shares of
Common Stock at any time. However, no holder of Series D Preferred Stock may
convert its shares into shares of Common Stock if the conversion would result in
the holder or any of its affiliates, individually or in the aggregate,
beneficially owning more than 9.999% of P-Com's outstanding Common Stock. The
Series D Preferred Stock are convertible into approximately 444,444 shares of
Common Stock.

Holders of Series D Preferred Stock are entitled to share pro-rata, on an
as-converted basis, in any dividends or other distributions that may be declared
by the board of directors of P-Com with respect to the Common Stock. If P-Com
liquidates, dissolves or winds up, the holders of Series D Preferred Stock and
the holders of Series C Preferred Stock are entitled to receive the stated value
of their respective shares plus all accrued and unpaid dividends, pari passu,
and prior to any amounts being paid to the holders of Series B Preferred Stock
and P-Com Common Stock. In addition, the holders of Series D Preferred Stock are
entitled to share ratably together with the holders of Series C Preferred Stock,
Series B Preferred Stock and P-Com Common Stock in all remaining assets after
the satisfaction of all other liquidation preferences.


                                       65
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.  STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES D CONVERTIBLE PREFERRED STOCK (CONTINUED)

The holders of Series D Preferred Stock are entitled to certain rights and
preferences with respect to the holders of P-Com Common Stock. The holders of
Series D Preferred Stock are entitled to vote together with the holders of P-Com
Common Stock and holders of Series C Preferred Stock, as a single class, on all
matters submitted to a vote of P-Com's stockholders. The holders of Series D
Preferred Stock are entitled to a number of votes equal to the number of shares
of P-Com Common Stock that would be issued upon conversion of their shares of
Series D Preferred Stock.

Upon the occurrence of the following events, (each a "Redemptive Event"), the
holders of Series D Preferred Stock may require the Company to purchase their
shares of Series D Preferred Stock for cash:

      o     the Company fails to remove any restrictive legend from certificates
            representing shares of P-Com Common Stock that are issued to holders
            who convert their shares of Series D Preferred Stock;

      o     the Company makes an assignment for the benefit of creditors, or
            applies for or consents to the appointment of a receiver or trustee;

      o     Any bankruptcy, insolvency, reorganization or other proceeding for
            the relief of debtors is instituted by or against P-Com and is not
            dismissed within 60 days;

      o     the Company sells substantially all of its assets, merges or
            consolidates with any other entity or engages in a transaction that
            results in any person or entity acquiring more than 50% of P-Com's
            outstanding Common Stock on a fully diluted basis;

      o     the Company fails to pay when due any payment with respect to any of
            its indebtedness in excess of $250,000;

      o     the Company breaches any agreement for monies owed or owing in an
            amount in excess of $250,000 and the breach permits the other party
            to declare a default or otherwise accelerate the amounts due under
            that agreement; and

      o     the Company permits a default under any agreement to remain uncured
            and the default would or is likely to have a material adverse effect
            on the business, operations, properties or financial condition of
            P-Com.

A summary of Series D Preferred Stock activities is as follows (in thousands):

            Activity during the year ended December 31, 2004:

                                                            Shares     Amount
                                                           -------    --------
              Issuance of Series D Preferred Stock, at
                fair value, to redeem $2 million face
                value of notes (a)                           2,000    $  2,000
                                                           -------    --------
              Balances as of December 31, 2004 (b) (c)       2,000    $  2,000
                                                           =======    ========

(a) The Company, after consideration of several valuation models, determined the
fair value of the Preferred Stock as an amount equal to the fair value of the
number of common shares into which the Series D Preferred Stock is convertible
into using the trading market price on the date the Series D Preferred Stock was
issued.


                                       66
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.  STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

SERIES D CONVERTIBLE PREFERRED STOCK  (CONTINUED)

 (b) The Series D Preferred Stock is classified as a mezzanine security, outside
of stockholders equity in the accompanying balance sheet due to the cash
redemption provisions noted above. Under Statements of Financial Accounting
Standards No. 150, this security would have been classified as equity in a
non-public filing context.

(c) As of December 31, 2004, outstanding Series D Preferred Stock is
convertible into 444,444 shares of Common Stock.

     COMMON STOCK

In January 2003, the Company sold 70,000 shares of Common Stock to an existing
stockholder for aggregate net proceeds of $307,000. In December 2003, P-Com
issued 2.1 million shares of its Common Stock in connection with the SPEEDCOM
asset acquisition. In accordance with Statements of Financial Accounting
Standards No. 141, Business Combinations, these common shares were valued based
upon trading market prices around the commitment date of the purchase
transaction, or $7.2 million. In December 2003, holders of Series B Preferred
Stock converted the Preferred Stock into 3.14 million shares of Common Stock.
During the year ended December 31, 2003, the Company also issued 3.43 million
shares of Common Stock in exchange for services and to settle indebtedness. In
all instances where Common Stock was issued in exchange for services, the Common
Stock was valued using the trading market prices on the commitment date or issue
date, whichever is appropriate for the respective transaction.

In June 2002, P-Com sold approximately 3.82 million shares of unregistered
Common Stock at a per share price of $21.00, for an aggregate net proceeds of
approximately $7.3 million. In December 2002, P-Com sold approximately 111,111
shares of unregistered Common Stock at a per share price of $4.50, for an
aggregate net proceeds of approximately $0.4 million. The shares have
subsequently been registered for resale.

At December 31, 2004, P-Com had 3,870,393 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants and options.



                                       67
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.  STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

COMMON STOCK WARRANTS

         Three Year Warrant Summary. The following table summarizes our Common
Stock warrant activity for each of each year ended December 31, (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                         2004                        2003                       2002
                                       ----------------------------------------------------------------
                                        Shares      Price Range     Shares     Price Range     Shares      Price Range
<S>                                      <C>      <C>                <C>       <C>             <C>      <C>
Outstanding at beginning of year         5,900    $9.00-$1,275.00      102     $15.00-$42.50     22     $450.00-$1,275.00
    Issued                                 707    $0.56-$1.50        5,748     $0.30-$1.02       55     $9.00-$30.60
    Adjustments (a)                       (525)                         71     $4.38-$12.44      25     $131.40-$373.20
    Exercised                           (3,255)   $0.00-$0.05          (36)    $0.03-$0.03
    Cancelled                             (124)   $0.24-$0.24         (625)    $6.12-$255.00
                                                   --------------   ------                    ------
Outstanding at end of year               2,703                       5,900                      102
                                       =======                      ======                    ======

Warrants exercisable at end of year      2,703                       5,801                      102
                                       -------                      ------                    ------
Weighted-average exercise price of
  warrants issued during the year      $  1.26                       $4.80                    $19.20
</TABLE>

      (a) Adjustments to Common Stock warrants arise from anti-dilution terms.
The issuance of the Agilent Warrant and the SDS Warrant triggered the
antidilution provisions of the Series C-1 Warrants, the Series C-2 Warrants and
the Series C Convertible Preferred Stock.

         2004 WARRANT ACTIVITIES

In November 2004, P-Com issued a warrant to purchase 528,000 shares of the
Company's common stock, in connection with the issuance of the $3.3 million
promissory note to SDS Capital SPC Ltd. (the "SDS Warrant"). The SDS Warrant has
an initial exercise price of $1.50 and a term of five years. The Company
allocated the proceeds between the carrying value of the promissory note and the
warrants based on the fair value of the transaction, resulting in an effective
interest rate for the promissory note of 13.4%.

In November 2004, P-Com issued a warrant to purchase 178,571 shares of the
Company's common stock to Agilent Financial Services, in connection with the
restructuring of the $1.725 million obligation owed to Agilent Financial
Services (the "Agilent Warrant"). The Agilent Warrant has an initial exercise
price of $0.56 and a term of five years. The Company allocated the proceeds
between the carrying value of the note and the warrants based on the fair value
of the transaction, resulting in an effective interest rate for the note of
17.8%.

         STOCKHOLDER RIGHTS AGREEMENT

On September 26, 1997, the Board of Directors of P-Com adopted a Stockholder
Rights Agreement (the "Rights Agreement"). Pursuant to the Rights Agreement,
Rights (the "Rights") were distributed as a dividend on each outstanding share
of its Common Stock held by stockholders of record as of the close of business
on November 3, 1997. Each Right will entitle stockholders to buy Series A
Preferred at an exercise price of $125.00 upon certain events. The Rights will
expire ten years from the date of the Rights Agreement.


                                       68
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5.     STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)

STOCKHOLDER RIGHTS AGREEMENT (CONTINUED)

In general, the Rights will be exercisable only if a person or group acquires
15% or more of P-Com's Common Stock or announces a tender offer, the
consummation of which would result in ownership by a person or group of 15% or
more of P-Com's Common Stock. In the case of the State of Wisconsin Investment
Board, Firsthand Capital Management, Alpha Capital and StoneStreet Limited
Partnership the threshold figure is 20% rather than 15%. If, after the Rights
become exercisable, P-Com is acquired in a merger or other business combination
transaction, or sells 50% or more of its assets or earning power, each
unexercised Right will entitle its holder to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at the time of twice the Right's exercise price. At any
time within ten days after the public announcement that a person or group has
acquired beneficial ownership of 15% or more of P-Com's Common Stock, the Board
of Directors, in its sole discretion, may redeem the Rights for $0.003 per
Right.

6.     EMPLOYEE BENEFIT PLANS

         STOCK OPTION PLANS

On October 8, 2004, P-Com's stockholders approved the adoption of the 2004
Equity Incentive Plan (the "2004 Plan") as a successor to P-Com's 1995 Stock
Option/Stock Issuance Plan (the "1995 Plan").

The 2004 Plan authorizes the issuance of up to 3,000,000 shares of Common Stock
as of December 31, 2004.

The 2004 Plan provides four different types of equity incentive awards: (i)
stock options, (ii) stock appreciation rights, (iii) restricted stock, and (iv)
stock units.

The exercise price per share for incentive stock options granted under the 2004
Plan may not be less than 100% of the fair market value per share of common
stock on the option grant date. The exercise price for non-statutory stock
options granted under the 2004 Plan may not be less that 85% of the fair market
value per share of common stock on the option grant date. No option will have a
term in excess of 10 years.

STOCK APPRECIATION RIGHTS

The Plan Administrator has complete discretion under the 2004 Plan to determine
which eligible individuals are to receive stock appreciation rights, the time or
times when such grants are to be made, the number of shares subject to each
stock appreciation right, the vesting schedule (if any) to be in effect for the
stock appreciation right and the maximum term for which any stock appreciation
right is to remain outstanding. Under the 2004 Plan, an individual may not
receive stock appreciation rights that pertain to more than 833,333 shares of
common stock in any given year.

RESTRICTED STOCK

The Plan Administrator has complete discretion under the 2004 Plan to determine
which eligible individuals are to receive shares of restricted stock, the time
or times when such grants are to be made, the number of shares granted and the
vesting schedule (if any) to be in effect for the restricted stock. In any given
year, the number of shares of restricted stock that are subject to
performance-based vesting conditions granted to a participant in the 2004 Plan
may not exceed 833,333 shares.


                                       69
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

6.                 EMPLOYEE BENEFIT PLANS (CONTINUED)

STOCK OPTION PLANS (CONTINUED)

STOCK UNITS

The Plan Administrator has complete discretion under the 2004 Plan to determine
which eligible individuals are to receive stock units, the time or times when
such grants are to be made, the number of stock units granted and the vesting
schedule (if any) to be in effect for the stock units. In any given year, the
number of stock units that are subject to performance-based vesting conditions
granted to a participant in the 2004 Plan may not exceed 833,333 shares.

The following table summarizes stock option activity under P-Com's 2004 Plan (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                           2004               2003               2002
                                    ------------------------------------------------------
                                    Shares    Price   Shares     Price   Shares     Price
                                    ------   -------   -----   --------  ------    -------
<S>                                  <C>     <C>         <C>   <C>           <C>   <C>
Outstanding at beginning of year     1,104   $ 26.40     102   $ 361.50      48    $876.30
   Granted                             335      2.41   1,034   $   3.90      68      30.30
   Exercised                             1      4.17      --         --      --
   Canceled                           (272)    10.42     (32)    355.80     (14)    504.60
                                    ------             -----             ------
Outstanding at end of year           1,168     23.30   1,104      26.40     102     361.50
                                    ======             =====             ======
Options exercisable at year-end        451     54.83     151     162.00      40     735.90
                                    ======             =====             ======
Weighted-average fair value of
   options granted during the year  $23.30             $3.60             $23.10
</TABLE>


The following table summarizes information about stock options outstanding and
exercisable at December 31, 2004 (in thousands, except per share amounts):

EMPLOYEE STOCK PURCHASE PLAN

On January 11, 1995, P-Com's Board of Directors adopted the Employee Stock
Purchase Plan (the "Purchase Plan"), which was approved by stockholders in
February 1995. The Purchase Plan permits eligible employees to purchase Common
Stock at a discount through payroll deductions during successive offering
periods with a maximum duration of 24 months. Each offering period shall be
divided into consecutive semi-annual purchase periods. The price at which the
Common Stock is purchased under the Purchase Plan is equal to 85% of the fair
market value of the Common Stock on the first day of the offering period or the
last day of the purchase period, whichever is lower. A total of 300,000 shares
of Common Stock have been reserved for issuance under the Purchase Plan. Awards
and terms are established by P-Com's Board of Directors. The Purchase Plan may
be canceled at any time at the discretion of its Board of Directors prior to its
expiration in January 2005. Under the Plan, P-Com sold approximately 900, 2,633,
and 2,600, shares in 2002, 2001, and 2000, respectively. The Board of Directors
suspended the plan in January 2002.


                                       70
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


6.  EMPLOYEE BENEFIT PLANS (CONTINUED)

EMPLOYEE STOCK PURCHASE PLAN (CONTINUED)

Because P-Com has adopted the disclosure-only provision of SFAS No. 123, no
compensation expense has been recognized for its stock option plan or for its
stock purchase plan. Had compensation costs for its two stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans, consistent with the method of SFAS 123, P-Com's net loss and
net loss per share would have been reduced to the pro forma amounts indicated as
follows:

                                                  2004       2003        2002
                                                -------    --------    --------
Net loss attributable to common stockholders
  As reported ..............................    $(5,868)   $(14,407)   $(54,306)
  Pro forma ................................    $(7,808)   $(16,374)   $(57,054)
Net loss per share
  As reported --Basic and Diluted ..........    $ (0.56)   $  (7.98)   $ (63.77)
  Pro forma --Basic and Diluted ............    $ (0.75)   $  (9.07)   $ (67.00)

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 2004, 2003, and 2002, respectively: expected volatility of 128%, 158%,
and 158%; weighted-average risk-free interest rates of 2.8%, 2.1%, and 3.1% ;
weighted-average expected lives of 4.0, 4.0, and 4.0; respectively, and a zero
dividend yield.

The fair value of the employees' stock purchase rights was estimated using the
Black-Scholes model with the following assumptions for 2002: expected volatility
of 197% weighted-average risk-free interest rates of 1.7% weighted-average
expected lives of 0.5 years and a dividend yield of zero. The weighted-average
fair value of those purchase rights granted in 2002 was $24.90. The employee
stock purchase plan was suspended in 2002.

401(K) PLAN

P-Com sponsors a 401(k) Plan (the "401(k) Plan") which provides tax-deferred
salary deductions for eligible employees. Employees may contribute up to 60% of
their annual compensation to the 401(k) Plan, limited to a maximum annual amount
as set periodically by the Internal Revenue Service. The 401(k) Plan permits,
but does not require, P-Com to make matching contributions. To date, no matching
contributions have been made.

7.    RESTRUCTURING AND OTHER CHARGES

The Company continually monitors its inventory carrying value in the light of
the slowdown in the global telecommunications market, especially with regard to
an assessment of future demand for its point - to - multipoint, and its other
legacy product line. This has resulted in a $2.0 million charge to cost of sales
for its point - to - multipoint, Tel-Link point - to - point and Air-link spread
spectrum inventories during the second quarter of 2003. In the first quarter of
2003, the Company recorded a $3.4 million inventory related charge to cost of
sales, of which $2.0 million was related to its point - to - multipoint
inventories. These charges were offset by credits of $1.8 million in the second
quarter associated with a write-back of accounts payable and purchase commitment
liabilities arising from vendor settlements.


                                       71
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

7.    RESTRUCTURING AND OTHER CHARGES  (CONTINUED)

In the event that certain facts and circumstances indicate that the long-lived
assets may be impaired, an evaluation of recoverability would be performed. When
an evaluation occurs, management conducts a probability analysis based on the
weighted future undiscounted cash flows associated with the asset. The results
are then compared to the asset's carrying amount to determine if impairment is
necessary. The cash flow analysis for the property and equipment is performed
over the shorter of the expected useful lives of the assets, or the expected
life cycles of our product line. An impairment charge is recorded if the net
cash flows derived from the analysis are less than the asset's carrying value.
We deem that the property and equipment is fairly stated if the future
undiscounted cash flows exceed its carrying amount. In the first and second
quarter of 2003, the Company continued to reevaluate the carrying value of
property and equipment relating to its point - to - multipoint product line,
that are held for sale. The evaluation resulted in a $2.5 million provision for
asset impairment in the second quarter of 2003, and $0.6 million provision in
the first quarter of 2003. As a result of these adjustments, there is no
remaining net book value of property and equipment related to the point - to -
multipoint product line.

A summary of inventory reserve and provision for impairment of property and
equipment activities is as follows (in thousands):

       Inventory Reserve

<TABLE>
<CAPTION>
                                                   Additions
                                    Balance at     Charged to      Deductions
                                    Beginning      Statement          From      Balance at
                                     of Year     of Operations      Reserves    End of Year
                                    ----------   -------------     ----------   -----------
<S>                                  <C>            <C>             <C>          <C>
  Year ended December 31, 2002       $ 38,597       $ 5,770         $( 4,800)    $ 39,567
  Year ended December 31, 2003       $ 39,567       $ 5,460         $(17,908)    $ 27,119
  Year ended December 31, 2004       $ 27,119       $   916         $ (3,746)    $ 24,289
</TABLE>

In connection with a workforce reduction in May 2003, the Company accrued a $0.2
million charge relating to severance packages given to certain of its executive
officers. All pertinent criteria for recognition of this liability were met
during the period of recognition.

In the fourth quarter of 2002, P-Com determined that there was a need to
reevaluate its inventory carrying value in light of the continuing worldwide
slowdown in the global telecommunications market, especially with regard to an
assessment of future demand for P-Com's point - to - multipoint product range.
This resulted in a $5.8 million inventory charge to product cost of sales, of
which $5.0 million was for point - to - multipoint inventories, and $0.8 million
was for spread spectrum inventories.



                                       72
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8.    GAIN (LOSS) ON DISCONTINUED OPERATIONS

        In the first quarter of 2003, the Company committed to a plan to sell
its services business, P-Com Network Services, Inc. ("PCNS"). Accordingly,
beginning in the first quarter of 2003, this business is reported as a
discontinued operation and the financial statement information related to this
business has been presented on one line, entitled, "Discontinued Operations," in
the Consolidated Statements of Operations. On April 30, 2003, the Company
entered into an Asset Purchase Agreement with JKB Global, LLC ("JKB") to sell
certain assets of PCNS. The total cash consideration was approximately $105,000,
plus the assumption of certain liabilities. The Company guaranteed PCNS'
obligations under its premises lease, through July 2007. As part of the sale to
JKB, JKB agreed to sublet the premises from PCNS for one year beginning May 1,
2003. The terms of the sublease required JKB to pay less than the total amount
of rent due under the terms of the master lease. As a result, the Company
remained liable under the terms of the guaranty for the deficiency, under the
terms of the master lease of approximately $1.5 million, and the amount is
accrued as loss on disposition of discontinued operations in the second quarter
of 2003, which was the period that such loss was incurred. In the third quarter
of 2003, the Company reached an agreement with the landlord to settle the lease
guarantee for $0.3 million, and therefore wrote-back the excess $1.2 million
accrual as a gain in discontinued operations in the third quarter of 2003.

       Summarized results of PCNS are as follows (in thousands):

                                   Year Ended December 31,
                                2004        2003        2002
                              -------     -------     -------
Sales                         $    --     $ 1,065     $ 3,337
                              -------     -------     -------
Loss from operations          $   (40)    $  (581)    $(4,284)
Provision for income taxes         --          --          --
                              -------     -------     -------
Net loss                      $   (40)    $  (581)    $(4,284)
                              -------     -------     -------

The loss from the sale of the discontinued services unit was $1.6 million for
the year ended December 31, 2003, and this was principally due to the write-off
of assets upon the discontinuation of the services business unit.

The assets and liabilities of the discontinued operations consisted of the
following (in thousands):

                                                         December  31,
                                                         -------------
                                                         2004     2003
                                                         ----     ----
Total assets related to discontinued operations
Cash                                                     $ --     $ --
Accounts receivable                                        --       --
Inventory                                                  --       --
Prepaid expenses and other assets                          --       --
Property plant and equipment                               --       --
Other assets                                               --       40
                                                         ----     ----
                                                         $ --     $ 40
                                                         ----     ----
Total liabilities related to discontinued operations
Accounts payable                                         $183     $183
Other accrued liabilities                                  66      130
                                                         ----     ----
                                                         $249     $313


                                       73
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

9.    SALES AND PROPERTY AND EQUIPMENT BY GEOGRAPHIC REGION

The allocation of sales by geographic customer destination and property, plant
and equipment, net are as follows (in thousands):

                                % of total
Sales                            for 2004      2004       2003       2002
                                ----------   -------    -------    -------
North America ...............       11%      $ 2,579    $ 3,042    $ 2,949
United Kingdom ..............       23%        5,583      6,349      5,894
Continental Europe ..........       21%        5,178      3,693      4,487
Asia ........................       14%        3,386      5,831     15,018
Other Geographic Regions ....       31%        7,449      1,926      1,338
                                 -------     -------    -------    -------
                                   100%      $24,175    $20,841    $29,686
                                 =======     =======    =======    =======

                                                   2004      2003
                                                  ------    ------
Property, plant and equipment, net
  United States ..............................    $1,467    $2,324
  United Kingdom .............................        26        36
  Italy ......................................       253     1,439
  Other geographic regions ...................         9         8
                                                  ------    ------
  Total ......................................    $1,755    $3,807
                                                  ======    ======


10.     NET LOSS PER SHARE

The numerator for calculation of net loss per common share is the Company's net
loss for the period, less preferred stock dividends and accretions. The
denominator, weighted average common shares outstanding, does not include stock
options with an exercise price that exceeds the average fair market value of the
underlying Common Stock or other dilutive securities because the effect would be
anti-dilutive.

11.     INCOME TAXES

Loss before discontinued operations, income taxes, cumulative effect of change
in accounting principle and Preferred Stock accretions consists of the following
(in thousands):

                              Year Ended December 31,
                        ----------------------------------
                          2004         2003         2002
                        --------     --------     --------
Domestic ...........    $ (2,574)    $(10,669)    $(44,694)
Foreign ............        (706)         (80)        (298)
                        --------     --------     --------
                        $ (3,280)    $(10,749)    $(44,992)
                        ========     ========     ========


<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11.    INCOME TAXES (CONTINUED)

The provision (benefit) for income taxes consists of the following (in
thousands):

                                         2004       2003       2002
                                        ------     -----      -----
Current:
  Federal .........................     $   --     $  --      $(503)
  State ...........................         --        --         --
  Foreign .........................         --        --         33
                                        ------     -----      -----
                                            --        --       (470)
                                        ------     -----      -----
Deferred:
  Federal .........................         --        --         --
  State ...........................         --        --         --
                                        ------     -----      -----
                                                      --         --
                                        ------     -----      -----
  Total ...........................     $   --     $  --      $(470)
                                        ======     =====      =====

Deferred tax assets consist of the following (in thousands):

                                                  December 31,
                                           ------------------------
                                              2004           2003
                                           ---------      ---------
Net operating loss carryforwards .....     $  98,594      $  92,133
Credit carryforwards .................         4,143          4,352
Intangible assets ....................        16,126         18,868
Reserves and other ...................        11,417         15,549
                                           ---------      ---------
Total deferred tax assets ............     $ 130,280      $ 130,902
Valuation allowance ..................      (130,280)      (130,902)
                                           ---------      ---------

Net deferred tax asset ...............     $      --      $      --
                                           =========      =========

For federal and state tax purposes, a portion of P-Com's net operating loss
carryforwards may be subject to certain limitations on utilization in case of
change in ownership as defined by federal and state tax law.

Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their bases for
financial reporting purposes. In addition, future tax benefits, such as net
operating loss carryforwards, are recognized to the extent that realization of
such benefits is more likely than not. P-Com has assessed its ability to realize
future tax benefits, and concluded that as a result of the history of losses, it
was more likely than not, that such benefits would not be realized. Accordingly,
P-Com has recorded a full valuation allowance against future tax benefits.

As of December 31, 2004, P-Com had a federal net operating loss carry forward of
approximately $271,970,000. If not utilized, the losses will begin to expire in
2017.


                                       74
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11.    INCOME TAXES (CONTINUED)

Reconciliation of the statutory federal income tax rate to its effective tax
rate is as follows:

                                                   2004      2003      2002
                                                  ------    ------    ------

Income tax benefit at federal statutory rate      -35.0%    -35.0%    -35.0%
State income taxes net of federal benefit          -5.8%     -5.8%     -5.8%
Foreign income taxes at different rate              0.0%      0.0%      0.5%
Change in valuation allowance                      40.8%     40.8%     40.8%
Other Net                                           0.0%      0.0%     -1.4%
                                                  --------------------------
Total                                               0.0%      0.0%     -0.9%
                                                  ==========================

12.     ACQUISITION

WAVE WIRELESS DIVISION OF SPEEDCOM WIRELESS CORPORATION

On December 10, 2003, P-Com acquired substantially all of the operating assets
and liabilities of Wave Wireless ("Wave Wireless"), a division of SPEEDCOM
Wireless Corporation, a Sarasota, Florida-based company, through the issuance of
2,116,667 shares of P-Com Common Stock valued at $7,238,000, using market values
for such shares around the commitment date ($3.42). Wave Wireless designs,
manufactures and markets spread spectrum radio products for voice and data
applications in both domestic and international markets. P-Com accounted for
this acquisition as a purchase business combination. The results of the Wave
Wireless division were included from the date of acquisition.

The Company accounted for the Wave Wireless acquisition as a purchase under
Statements of Financial Accounting Standards No. 141, Business Combinations
("SFAS 141"). As a result, the purchase price was allocated to the fair values
of assets acquired and liabilities assumed based upon their fair values. The
excess of the purchase price over the fair values of assets and liabilities
resulted in the recognition of $11.9 million of goodwill. The following tabular
presentation reflects the purchase allocation:


Fair value of 63.5 million shares of Common Stock     $ 7,238
Cash advances to Speedcom                               1,580
Liabilities assumed:
     Operating liabilities                              1,483
     Notes payable                                      3,000
                                                      -------
                                                       13,301
Assets acquired:
     Current assets, at fair values                     1,094
     Property and equipment and other assets              226
                                                      -------
                                                      $11,981
                                                      =======


                                       75
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

12.     ACQUISITION (CONTINUED)

WAVE WIRELESS DIVISION OF SPEEDCOM WIRELESS CORPORATION (CONTINUED)

The following unaudited pro forma financial information gives effect to the Wave
Wireless acquisition, as if it had occurred at the beginning of the respective
period. Unaudited pro forma financial information is not necessarily indicative
of the results of operations that would have occurred had the acquisition taken
place at the beginning of those periods:

                                                            December 31,
                                                         2003          2002
                                                     -----------     --------

Sales                                                $    25,222     $ 37,362
                                                     ========================
Loss from continuing operations applicable to
  common shareholders                                $    15,559     $(48,971)
                                                     ========================

Loss from continuing operations per common share     $     (3.90)    $ (15.90)
                                                     ========================
Shares used to compute loss from continuing
  operations per common share                              3,905        3,102
                                                     ========================

13     COMMITMENTS

OBLIGATIONS UNDER CAPITAL AND OPERATING LEASES

In 2000, P-Com entered into several capital leases for equipment in the amount
of $1,869 thousand with interest accruing at 11%. These leases expired in 2002.
In 2001, P-Com entered into several capital leases for equipment in the amount
of $3,212 thousand with interest accruing at 11%. These leases expired in 2004.
In 2002, P-Com entered into several capital leases for equipment in the amount
of $459 thousand with interest accruing at 7.25%. These leases expired in 2003.
P-Com did not enter into any new capital lease arrangement in 2003. The capital
lease obligations are secured on all the leased equipment. Future minimum lease
payments required under these leases are as follows (in thousands):

The present value of net minimum lease payments are reflected in the December
31, 2004 and 2003 balance sheets as a component of other accrued liabilities and
other long-term liabilities of $0.0 and $2,317 thousand, respectively.


                                       76
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13.     COMMITMENTS (CONTINUED)

OBLIGATIONS UNDER CAPITAL AND OPERATING LEASES (CONTINUED)

P-Com leases its facilities under non-cancelable operating leases, which expire
at various times through 2015. The leases require P-Com to pay taxes,
maintenance and repair costs. Future minimum lease payments under its
non-cancelable operating leases at December 31, 2004 are as follows (in
thousands):

Year Ending December 31,
------------------------
2005 ................................    $1,671
2006 ................................       319
2007 ................................       319
2008 ................................       319
2009 ................................       319
Thereafter...........................     1,678
                                         ------
                                         $4,625
                                         ======

During 2004, 2003, and 2002, the amount of rent expense incurred by P-Com under
non-cancelable operating leases was $1,718 thousand, $1,446 thousand, and $3,230
thousand respectively.

14.     CONTINGENCIES

In June 2000, two former consultants to P-Com Italia S.p.A. filed a complaint
against P-Com Italia in the Civil Court of Rome, Italy seeking payment of
certain consulting fees allegedly due the consultants totaling approximately
$615,000. The Civil Court of Rome has appointed a technical consultant in order
to determine the merit of certain claims made by the consultants. P-Com believes
that the claims are wholly without merit and, while no assurances can be given,
that the claims will be rejected.

15.     SUPPLEMENTAL CASH FLOW INFORMATION

The following provides additional information concerning supplemental disclosure
of cash flow activities.

                                           YEAR ENDED DECEMBER 31,
                                      ------------------------------
                                        2004        2003       2002
                                      -------     -------     ------

Cash paid for income taxes ......     $    --     $    --     $   --
                                      =======     =======     ======
Cash paid for interest ..........     $   682     $   204     $1,829
                                      =======     =======     ======



                                       77
<PAGE>

                                   P-COM, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         (AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

15.     SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)

NON-CASH TRANSACTIONS

During 2003, P-Com redeemed $20,090,000 of 7% Convertible Notes through an
issuance of approximately 1,000,000 shares of Series B Preferred Stock. P-Com
also redeemed $2.37 million of the Convertible Notes and repurchased 30,667
shares of Common Stock through an exchange for property and equipment.

During 2003, P-Com issued shares of Common Stock, valued at approximately $0.5
million (2002: $1.27 million), to pay vendors for outstanding liabilities, and
issued shares of Common Stock, valued at approximately $0.4 million, to pay a
consultant in lieu of services rendered.

During 2003, P-Com issued 2.1 million shares of Common Stock as consideration
for the asset acquisition from SPEEDCOM.

During 2003, P-Com issued shares of Series D Convertible Preferred Stock valued
at approximately $2 million, to redeem $2 million of promissory notes assumed
from SPEEDCOM.

During 2002, $459,000 of property and equipment were acquired through the
assumption of capital lease liabilities, respectively. In 2004 and 2003, no such
transactions transpired.

During 2002, P-Com issued shares of Common Stock in exchange for Convertible
Subordinated Notes. In conjunction with these transactions, the Company recorded
Convertible Subordinated Notes conversion expense of $711 thousand for the year
ended December 31, 2002, in accordance with FAS 84, a non-operating gain of $1.4
million for the year ended December 31, 2002. See Note 4 for additional
information.

P-Com also issued warrants to purchase Common Stock to a consultant in lieu of
services rendered, to Silicon Valley Bank for the bank line of credit, to
investors, brokers, investment bankers and other service providers in
conjunction with the Common Stock and Preferred Stock issuances, and certain
warrant holders for anti-dilution adjustments.

16.      SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth the Company's condensed consolidated financial
information for the quarterly periods during the years ended December 31, 2004
and 2003. The amounts are in thousands, except income (loss) per common share.
Income (loss) per common share for periods prior to July 19, 2004 has been
restated to give effect to a one-for-thirty reverse stock split.

                                     First      Second       Third      Fourth
                                    Quarter     Quarter     Quarter     Quarter
                                    -------     -------     -------     -------
YEAR  ENDED DECEMBER 31, 2004
  Net sales                         $ 6,837     $ 6,917     $ 6,143     $ 4,278
  Gross Profit                        1,738       1,992       1,157         568
Income (loss) from continuing
  operations                         (2,341)      6,253      (3,438)     (3,754)
Discontinued operations                 (40)         --          --          --
Preferred stock accretions             (776)       (673)       (683)       (260)
Net income (loss) applicable to
  common shareholders                (3,157)      5,580      (4,121)     (4,170)
Income (loss) per common share        (0.39)      10.83       (0.27)      (0.35)


                                       78
<PAGE>

                                     First      Second       Third      Fourth
                                    Quarter     Quarter     Quarter     Quarter
                                    -------     -------     -------     -------
YEAR ENDED DECEMBER 31, 2003
  Net sales                        $  4,617    $  4,965    $  5,569    $  5,690
  Gross profit                       (3,608)        841       1,138       1,866
Income (loss) from continuing
  operations                         (8,516)     (4,258)      8,033      (6,008)
Discontinued operations              (1,858)     (1,767)      1,367         121
Preferred stock accretions               --          --          --      (1,522)
Net income (loss) applicable to
  common shareholders               (10,374)     (6,025)      9,400      (7,409)
Income (loss) per share               (8.52)    (133.10)       1.88       (2.29)


17.     SUBSEQUENT EVENT

On March 10, 2005, the Company's Chief Executive Officer, Samuel Smookler,
resigned as Chief Executive Officer and a director of the Company. The Board of
Directors is currently negotiating the terms of his severance arrangements.
Under the terms of his existing Agreement, Mr. Smookler may be entitled to
receive severance payments totaling $250,000. In addition, his incentive stock
option to acquire 80,000 shares of common stock vests immediately. The Company
will record the negotiated severance expense effective with the date of
termination during the first fiscal quarter in the year ended December 31, 2005.
The acceleration in vesting of Mr. Smookler's incentive stock options is not
considered a modification and, therefore, no expense will be recorded, because
acceleration upon termination was provided for in his original employment
agreement.

                                   SCHEDULE II
 VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2002, 2003, AND 2004
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                 Additions
                                    Balance a    Charged to   Deductions
                                    Beginning    Statement       From        Balance at
                                     of Year   of Operations   Reserves     End of Year
                                    ---------  -------------  ----------    -----------
<S>                                  <C>          <C>          <C>           <C>
Allowance for doubtful accounts:
  Year ended December 31, 2002       $  1,080     $    258     $   (959)     $    379
  Year ended December 31, 2003            379           --          (69)          310
  Year ended December 31, 2004            310          202          (82)          430

Inventory related reserves:
  Year ended December 31, 2002       $ 38,597     $  5,770     $ (4,800)     $ 39,567
  Year ended December 31, 2003         39,567        5,459      (17,907)       27,119
  Year ended December 31, 2004         27,119          916       (3,746)       24,289
</TABLE>


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURES

On August 7, 2003, PricewaterhouseCoopers LLP, ("PricewaterhouseCoopers"), was
dismissed as our independent registered public accounting firm. On August 7,
2003, our Audit Committee approved Aidman Piser & Company ("Aidman Piser") as
our new independent auditors.

The reports of PricewaterhouseCoopers on our financial statements for the
preceding two fiscal years contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principle. However, the reports of PricewaterhouseCoopers contained an
explanatory paragraph indicating that there was substantial doubt about our
ability to continue as a going concern.

In connection with the audits for the two most recent fiscal years in the period
ended December 31, 2002 and through August 7, 2003, there were no disagreements
with PricewaterhouseCoopers, on any matter of accounting principles or


                                       79
<PAGE>

practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
would have caused them to make reference in their audit report.

ITEM 9A.   CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer, the Company
conducted an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
of the end of the period covered by this report (the "Evaluation Date"). Based
upon the evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures were effective to ensure that information required to be
disclosed by the Company in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

There were no changes in our internal control over financial reporting during
2004.

ITEM 9B.  OTHER INFORMATION

None.

                                    PART III

ITEM 10.   DIRECTORS AND OFFICERS OF THE REGISTRANT

           P-Com's board of directors is authorized to have seven directors. The
executive officers and directors of P-Com, their ages as of March 20, 2005,
their positions and their backgrounds are as follows:

Name                      Age         Position
-----------------         ---         ------------------------------------------

George P. Roberts         72          Chairman of the Board
Daniel W. Rumsey          43          Chief Restructuring Officer
Don Meiners               43          President
Carlos Belfiore           60          Vice President and Chief Technical Officer
Elsbeth B. Kahn           48          Vice President of Sales and Marketing
Richard Reiss             48          Director
Frederick Fromm           55          Director
R. Craig Roos             59          Director


BACKGROUND

           The principal occupations of each executive officer and director of
P-Com for at least the last five years are as follows:

George P. Roberts

           Mr. Roberts is a founder of P-Com and has served as Chief Executive
Officer and a Director from October 1991 to May 2001, and as interim Chief
Executive Officer since January 2002. Mr. Roberts resigned from his position as
interim Chief Executive Officer on September 1, 2003. Since September 1993, he
has also served as Chairman of the Board of Directors. Mr. Roberts' term as a
director of P-Com ends upon the 2007 Annual Meeting of Stockholders.


                                       80
<PAGE>

Daniel W. Rumsey

           Mr. Rumsey was appointed Chief Restructuring Officer on March 10,
2005. Prior to his appointment, since March 2003, Mr. Rumsey served as P-Com's
Vice President, Acting Chief Financial Officer and General Counsel. Prior to
joining P-Com, Mr. Rumsey was Vice President and General Counsel of Knowledge
Kids Network, Inc., a multi-media education company. Knowledge Kids Network is
part of the Knowledge Universe family of companies. Prior to joining Knowledge
Kids Network, Mr. Rumsey was the President and General Counsel of Aspen Learning
Systems and NextSchool, Inc., which he joined in February 1997. Mr. Rumsey sold
Aspen Learning Systems and NextSchool to Knowledge Kids Network in 1999. Mr.
Rumsey has an extensive restructuring, legal and finance background, dating back
to 1987 when he served as a staff attorney in the U.S. Securities and Exchange
Commission's Division of Corporation Finance. He has also served as Assistant
General Counsel for Terra Industries, Inc. and Associate General Counsel and
Corporate Secretary of EchoStar Communications Corporation. Mr. Rumsey also
serves as the Chairman of the Board of Directors of Prescient Applied
Intelligence. Mr. Rumsey received his J.D. from the University of Denver College
of Law in 1985, and his B.S. from the University of Denver in 1983.

Don Meiners

           Mr. Meiners was appointed President on March 10, 2005. Prior to his
appointment, he was Vice President - Operations of P-Com, and has held a variety
of management roles since he joined P-Com in 1992. These include Vice President
of Operations, Vice President Engineering, Vice President Manufacturing and Vice
President of Engineering Program Management. Prior to P-Com, Mr. Meiners served
in design engineering roles and project management for Digital Microwave
Corporation and Equitorial Inc. Mr. Meiners graduated from the Missouri
Institute Of Technology in 1983.

Carlos Belfiore

           Dr. Belfiore is currently Vice President - Engineering, and Chief
Technical Officer of P-Com. Prior to joining P-Com in November 2003, he was an
independent engineering consultant. Prior to that, Dr. Belfiore held various
management and technical leadership positions at Stratex Networks, which he
joined in 1988, including Senior Director IDU Development, Director of New
Technology Development, Director of Modem Development, and Senior Scientist.
Prior to joining Stratex, Dr. Belfiore was with the Microwave Communication
Division of Harris Corporation, serving as Manager of Advanced Development and
Principal Development Engineer. Dr. Belfiore received a Ph.D. in electrical
engineering from University of Minnesota in 1976.

Elsbeth B. Kahn

         Elsbeth B. Kahn. Beth Kahn is currently Vice President - Sales and
Marketing, a position she has held since she joined P-Com in April 2004. Prior
to joining P-Com, Ms. Kahn was Chief Operating Officer at Advanced Network
Information, a data networking technical and sales skills training company.
Prior to joining Advanced Network Information in 2003, Ms. Kahn was Vice
President and General Manager at DMC Stratex Networks, where she managed the
profitability of three different product lines. Prior to joining DMC Stratex
Networks in 2000, she held several director positions in manufacturing,
marketing, development and business operations at Lucent Technologies/AT&T.
Earlier in her career, Ms. Kahn spent six years at Bell Laboratories in the
Microelectronics Business supporting digital radio, secure telephony and
multi-chip module products. Ms. Kahn received a Master's of Science degree in
Mechanical Engineering from the Massachusetts Institute of Technology in 1983,
and a Bachelor's of Science degree in Mechanical Engineering from the University
of Idaho in 1981, where she graduated Summa cum Laude.

Richard Reiss

         Mr. Reiss has served as director of P-Com since March 2005. Mr. Reiss
is currently the Chairman of the Board of Directors of Glowpoint, Inc., where he
has served since May 2000. He served as the Chief Executive Officer of Glowpoint
from May 2000 to April 2002, and as President from May 2000 to April 2002. Mr.
Reiss served as Chairman of the Board of Directors, President and Chief
Executive Officer of All Communications Corporation from its formation in 1991
until the formation of Glowpoint's predecessor pursuant to a merger of All
Communications Corporation and View Tech, Inc. in May 2000.


                                       81
<PAGE>

Frederick Fromm

         Mr. Fromm has served as a director of P-Com since June 2001. Since
February 2004, Mr. Fromm has served as a consultant to several
telecommunications companies. From May 2003 to February 2004, Mr. Fromm was
President and Chief Executive Officer of Gluon Networks, Inc. a
telecommunications equipment company. From July 2000 to October 2001, he was
President, and from Nov. 2001 to October 2002 he was also Chief Executive
Officer of Oplink Communications, Inc., an optical components company. From
October 1998 to July 2000, he was President and Chief Executive Officer of
Siemens Information and Communications, Inc, a telecommunications equipment
company. From October 1996 to October 1998, he was President and Chief Executive
Officer of Siemens Telecom Networks, Inc. a telecommunications equipment
company.

R. Craig Roos

         Mr. Roos joined P-Com's Board of Directors in December 2003. Mr. Roos
is founder and sole owner of Roos Capital Planners, Inc., which he formed in
1979 and which specializes in advisory services to the communications industry,
primarily in the fixed and mobile wireless area. Mr. Roos has served on the
boards of several companies in the wireless, communications, software, media,
and telecommunications industries. He served as chairman of MobileMedia
Corporation from 1993 until 1995. Mr. Roos also was a co-founder of Locate, a
digital local access carrier specializing in high-speed T-1 level radio carrier
technologies. Mr. Roos has testified before the United States Congress on
telecommunications issues and is a former chairman of the Alternative Local
Telecommunications Trade Association. Mr. Roos currently serves on the Board of
Directors of SPEEDCOM Wireless Corporation.

BOARD COMMITTEES AND MEETINGS

         The board of directors has an Audit Committee and a Compensation
Committee.

         Audit Committee. The Audit Committee currently consists of two
directors, Mr. Fromm, and Mr. Roos. The committee is primarily responsible for
approving the services performed by P-Com's independent registerd public
accounting firm and reviewing their reports regarding P-Com's accounting
practices and systems of internal accounting controls. The Board of Directors
has determined that Mr. Roos is a financial expert in that Mr. Roos has (i) an
understanding of generally accepted accounting principles and financial
statements; (ii) has the ability to assess the general application of such
principles in connection with the accounting for estimates, accruals and
reserves; (iii) has experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by P-Com's financial
statements, or experience actively supervising one or more persons engaged in
such activities; and (iv) an understanding of internal control over financial
reporting; and an understanding of audit committee functions.

         Compensation Committee. The Compensation Committee currently consists
of one director, Mr. Fromm. The Compensation Committee is primarily responsible
for reviewing and approving P-Com's general compensation policies and setting
compensation levels for its executive officers. The Compensation Committee also
has the authority to administer P-Com's Employee Stock Purchase Plan and its
2004 Equity Incentive Plan and to make option grants thereunder.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         None of the members of P-Com's Compensation Committee has at any time
been an officer or employee of P-Com. None of P-Com's executive officers
currently serves, or in the past year has served, as a member of the board of
directors or Compensation Committee of any entity that has one or more executive
officers serving on P-Com's board of directors or Compensation Committee.

DIRECTOR COMPENSATION

         Non-employee directors do not receive cash compensation for their
services as directors.


                                       82
<PAGE>

CODE OF ETHICS

         The Company has adopted a Code of Ethics that applies to the Company's
Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, and
Financial Reporting Officer, or persons performing similar functions. A copy of
the Company's Code of Ethics is filed as Exhibit 14.1 hereto. P-Com will provide
to the public, free of charge, a copy of the code of ethics upon request in
writing to P-Com's Chief Restructuring Officer at P-Com at 3175 S. Winchester
Blvd., Campbell, CA 95008.

ITEM 11.   EXECUTIVE COMPENSATION AND RELATED INFORMATION

         The following table provides certain information summarizing the
compensation earned for services rendered in all capacities to P-Com and its
subsidiaries for each of the last three fiscal years by its "named executive
officers," who consist of P-Com's Chief Executive Officer and each of P-Com's
four other most highly compensated executive officers, who were executive
officers on December 31, 2004 and whose salary and bonus for the fiscal year
ended December 31, 2004 was in excess of $100,000.


SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                   LONG TERM
                                                                                                 COMPENSATION
                                                                                                 -------------
                                                                                                    AWARDS
                                                           ANNUAL COMPENSATION                   -------------
                                         ------------------------------------------------------   SECURITIES
                                                     SALARY        BONUS         OTHER ANNUAL     UNDERLYING      ALL OTHER
     NAME AND PRINCIPAL POSITION          YEAR       ($)(1)         ($)        COMPENSATION ($)   OPTIONS (#)  COMPENSATION ($)
------------------------------------     ------      -------      --------     ----------------  ------------  ----------------
<S>                                       <C>        <C>           <C>            <C>               <C>            <C>
Samuel Smookler                           2004       252,100       125,000                              --            --
Former CEO and Director                   2003       139,569            --        53,083(2)         80,000(3)         --
                                          2002            --            --            --                --            --

Daniel W. Rumsey                          2004       158,269            --            --                --            --
Chief Restructuring Officer               2003       104,369            --            --            73,333         8,000(4)
                                          2002            --            --            --                --            --

Don Meiners                               2004       130,046            --            --                --            --
President                                 2003       103,699            --            --            73,333            --
                                          2002       115,617            --            --               983            --

Randall L. Carl(5)                        2004       144,054        15,048            --                --            --
Former Senior Vice President,             2003       136,800        36,252            --            73,600            --
Sales and Marketing                       2002       158,650        11,400            --             1,500            --

Carlos A. Belfiore                        2004       138,000            --            --                --            --
Vice President of Engineering and         2003        18,577            --            --            80,000            --
Chief Technical Officer                   2002            --            --            --                --            --
</TABLE>

(1) Includes amounts deferred under P-Com's 401(k) Plan.

(2) On October 8, 2003, Messrs. Roberts and Smookler each acquired 23.33 shares
of Series C Preferred Stock of P-Com convertible into 13,611 shares of Common
Stock, resulting in an effective purchase price of $3.00 per share of Common
Stock. The closing price per share of Common Stock as reported on the OTC
Bulletin Board on October 8, 2003 was $6.90 per share.

(3) Mr. Smookler was also granted a warrant to purchase 120,000 shares of P-Com
Common Stock on the same terms and conditions as this option. Mr. Smookler
resigned as Chief Executive Officer and a director of P-Com on March 10, 2005.
The Board of Directors is currently negotiating the terms of Mr. Smookler's
severance arrangements. Under the terms of his existing Agreement, Mr. Smookler
may be entitled to receive severance payments totaling $250,000.

(4) Prior to joining P-Com full time in April 2003, Mr. Rumsey was paid $8,000
as a consultant to P-Com.

(5) Mr. Carl's employment with P-Com was terminated effective March 18, 2005.
Mr. Carl's employment agreement requires the payment to him of six months
severance, totaling approximately $72,000.


                                       83
<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR

           No stock options were granted to the named executive officers during
the 2004 fiscal year. No stock appreciation rights were granted to these
individuals during such fiscal year.



                                       84
<PAGE>

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
                                     VALUES

           The table below sets forth certain information with respect to
P-Com's named executive officers concerning the exercise of options during 2004
and unexercised options held by such individuals as of the end of such fiscal
year. No SARs were exercised during 2004 nor were any SARs outstanding at the
end of such fiscal year.

<TABLE>
<CAPTION>
                                                        NUMBER OF SECURITIES UNDERLYING        VALUE OF  UNEXERCISED
                                                         UNEXERCISED OPTIONS AT FISCAL    IN-THE-MONEY OPTIONS AT FISCAL
                            SHARES          VALUE                 YEAR END(3)                     YEAR END ($) (1)
                          ACQUIRED ON      REALIZED     ------------------------------      --------------------------
       NAME              EXERCISE (#)       ($)(2)      EXERCISABLE      UNEXERCISABLE      EXERCISABLE  UNEXERCISABLE
-------------------      ------------      --------     -----------      -------------      -----------  -------------
<S>                            <C>            <C>          <C>                 <C>                <C>         <C>
Sam Smookler                   --             --           43,333              36,667             --          --
Don Meiners                    --             --           26,881              48,891             --          --
Daniel W. Rumsey               --             --           24,444              48,889             --          --
Randall L. Carl                --             --           26,669              49,264             --          --
Carlos A. Belfiore             --             --           25,867              54,133             --          --
</TABLE>

(1) Based on the fair market value of the option shares at the 2004 fiscal
year-end ($0.44 per share based on the closing selling price on the OTC Bulletin
Board as of December 31, 2004) less the exercise price.

(2) Based on the fair market value of the shares on the exercise date less the
exercise price paid for those shares.

(3) The options are immediately exercisable for all the options shares. However,
any shares purchased under the options are subject to repurchase by P-Com, at
the original exercise price paid per share, upon the optionee's cessation of
service prior to vesting in such shares.



                                       85
<PAGE>

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS

           The Compensation Committee of the Board of Directors, as Plan
Administrator of the 2004 Equity Incentive Plan, has the authority to provide
for accelerated vesting of the shares of Common Stock subject to any outstanding
options held by the Chief Executive Officer and any other executive officer or
any unvested share issuances actually held by such individual, in connection
with certain changes in control of P-Com or the subsequent termination of the
officer's employment following the change in control event.

           P-Com entered into an Employment and Continuity of Benefits Agreement
with George P. Roberts, dated May 31, 2001, outlining his continued employment
with P-Com as Chairman of the Board following his resignation as Chief Executive
Officer on May 30, 2001. The agreement provided for an employment period
commencing May 31, 2001 through May 30, 2002. Throughout the employment period,
Mr. Roberts was eligible to participate in all benefit plans that are made
available to P-Com's executives and for which Mr. Roberts qualified.

           P-Com entered into a letter agreement with George P. Roberts, dated
April 28, 2003, extending the employment period under the Employment and
Continuity of Benefits Agreement with Mr. Roberts through May 30, 2005. The
letter agreement provides for the amendment of the Employment and Continuity of
Benefits Agreement upon the assignment of a new Chief Executive Officer of
P-Com. Effective September 1, 2003, due his resignation and the appointment of a
new Chief Executive Officer of P-Com, Mr. Roberts is entitled to compensation
equal to half his salary prior to recent reductions, with one half of his total
salary of $188,000 paid in cash, and the other half paid in Common Stock of
P-Com.

           P-Com entered into an agreement with Sam Smookler, P-Com's former
President and Chief Executive Officer, dated July 25, 2003, providing for the
employment of Mr. Smookler as President and Chief Executive Officer for a period
of two years. The agreement further provided for the payment to Mr. Smookler of
a salary of $36,000 per month beginning September 1 and continuing through
December 31, 2003. Beginning January 1, 2004, Mr. Smookler was paid a base
salary of $250,000 per year. On September 2, 2004, Mr. Smookler was paid a cash
bonus equal to 50% of his base salary. The agreement also provided for the grant
of an option to purchase 2% of P-Com's total number of shares of Common Stock
issued and outstanding as of September 2, 2003. By agreement with the Board of
Directors, this number was fixed at 166,666 shares, which amount was reduced to
80,000 due to limitations in P-Com's 1995 Stock Option/Stock Issuance Plan.
P-Com granted Mr. Smookler a warrant to purchase 86,666 shares of Common Stock,
thereby making up the difference between the 166,666 shares granted by the Board
of Directors, and the 80,000 actually issued under the Plan. Mr. Smookler
resigned as Chief Executive Officer and a director of P-Com on March 10, 2005.
The Board of Directors is currently negotiating the terms of Mr. Smookler's
severance arrangements. Under the terms of his existing Agreement, Mr. Smookler
may be entitled to receive severance payments of $250,000. In addition, his
incentive stock option to acquire 80,000 shares of common stock vests
immediately.

           P-Com entered into an agreement with Daniel Rumsey, its Chief
Restructuring Officer, and former Vice President, General Counsel and Acting
Chief Financial Officer, on April 4, 2003. Under the terms of the agreement, in
the event Mr. Rumsey's employment with P-Com terminates at any time by reason of
an involuntary termination, P-Com is obligated to pay him severance equal to the
higher of his base salary on the date of the agreement, or his base salary on
the date of his involuntary termination, which amount is obligated to be paid in
a series of successive biweekly installments over the twelve month period
measured from the date of his involuntary termination. At the time of his
involuntary termination, each unvested option granted to Mr. Rumsey shall
continue to vest, and such options plus options already vested but unexercised
as of the date of his involuntary termination shall continue to be exercisable
in accordance with the 1995 Stock Option/Stock Issuance Plan from the date of
involuntary termination to the first anniversary date thereof. For purposes of
the agreement, an involuntary termination shall mean the termination of his
employment with P-Com (i) involuntarily upon his discharge or dismissal; or (ii)
voluntarily following his resignation following (a) a change in level of
management to which he reports, (b) a decrease or material change in his
responsibilities, or (c) a reduction in his base salary. Effective March 10,
2005, Mr. Rumsey's annual salary was increased to $240,000.

           P-Com entered into an agreement with Dr. Carlos Belfiore, its Vice
President of Engineering and Chief Technical Officer, on October 20, 2003. Under
the terms of the agreement, Dr. Belfiore is paid a base salary of $138,000 per


                                       86
<PAGE>

year. Dr. Belfiore was also paid a cash bonus equal to 30% of his base salary on
January 15, 2005. The agreement also provided for the grant of an option to
purchase 91,666 shares of Common Stock of P-Com, which amount was reduced to
80,000 due to limitations in P-Com's 1995 Stock Option/Stock Issuance Plan.
P-Com granted Dr. Belfiore a warrant to purchase 11,666 shares of Common Stock,
thereby making up the difference between the 91,666 shares granted by the Board
of Directors, and the 80,000 actually issued under the Plan. In the event Dr.
Belfiore's employment is terminated at any time without cause, P-Com is
obligated to pay Dr. Belfiore his salary for six months following such
termination, and all options previously granted to Dr. Belfiore continue to vest
in accordance with their terms and conditions for a period of two years
following the date of such termination. Following a change in control of P-Com,
P-Com is obligated to pay Dr. Belfiore his base salary for a period of one year,
and his options shall automatically accelerate so that each option becomes fully
vested and immediately exercisable for the total number of shares subject to the
option. A change in control will be deemed to occur under the agreements upon:
(a) a merger or consolidation in which P-Com is not the surviving entity; (b)
the sale, transfer or other disposition of all or substantially all of the
assets of P-Com in complete liquidation or dissolution of P-Com; (c) a reverse
merger in which P-Com is the surviving entity but in which securities
representing fifty percent (50%) or more of the total combined voting power of
P-Com's outstanding securities are transferred to persons different from the
persons holding those securities immediately prior to such merger; and the
acquisition, directly or indirectly by any person or related group of persons of
beneficial ownership of securities possessing more than thirty percent (30%) of
P-Com's outstanding voting securities pursuant to a tender or exchange offer
made directly to P-Com's stockholders.

On November 3, 2004, P-Com, Inc. entered into retention agreements with two of
its senior executives, Don Meiners, its current President and former Vice
President of Operations, and Randall L. Carl, its former Vice President of Sales
and Marketing - Licensed Products. Under the terms of the agreements, in the
event that either Messrs. Meiners or Carl are terminated without cause, P-Com is
obligated to pay their base salary for a period of six months, and all options
previously granted shall vest in accordance with their terms for a period of two
years following the date of such termination. Mr. Carl's employment with the
Company was terminated on March 17, 2005. The Company is currently negotiating
the terms of Mr. Carl's severance payments.

In the event that Mr. Meiners is terminated within twelve months of a change in
control, P-Com is obligated to pay his salary for a period of one year following
such termination and all options granted shall automatically accelerate so that
each option will become fully vested and immediately exercisable for the total
number of shares of Common Stock subject to those options ("Severance
Benefits"). For purposes of the agreement, a Change of Control shall mean any of
the following transactions effecting a change in ownership or control of the
Company: (a) a merger or consolidation in which P-Com is not the surviving
entity; (b) the sale, transfer or other disposition of all or substantially all
of the assets of P-Com in complete liquidation or dissolution of P-Com; (c) any
reverse merger in which P-Com is the surviving entity but in which securities
representing 50% or more of the total combined voting power of P-Com's
outstanding securities are transferred to a person(s) different from the
person(s) holding those securities immediately prior to such merger; or (d) the
acquisition, directly or indirectly by a person or related group of persons of
beneficial ownership of securities possessing more than 30% of the total
combined voting power of P-Com's outstanding securities pursuant to a tender or
exchange offer made directly to P-Com's stockholders.

Mr. Meiners shall be entitled to receive his Severance Benefits if, at any time
within twelve months of a Change of Control: (a) his level of responsibility at
P-Com is materially reduced; (b) his place of employment is moved to a location
that is more than 50 miles from his place of employment immediately prior to a
Change in Control; or (c) his salary or bonus plan is reduced without his prior
written consent. Effective March 10, 2005, Mr. Meiners annual salary was
increased to $150,000.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Compensation Committee of our Board of Directors currently consists
of Mr. Fromm. Mr. Fromm was not an officer or employee of the Company at any
time during the 2003 Fiscal Year or at any other time, nor did he have a
business relationship with the Company.

      No executive officer of the Company has ever served as a member of the
board of directors or compensation committee of any other entity that has or has
had one or more executive officers serving as a member of our Board of Directors
or Compensation Committee.


                                       87
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION

         The Compensation Committee of the Board of Directors is responsible for
establishing the base salary and incentive cash bonus programs for our executive
officers. The Committee also has the exclusive responsibility for the
administration of our 2004 Equity Incentive Plan, under which grants may be made
to executive officers and other key employees of the Company.

         The Compensation Committee is comprised of one non-employee director,
who has no interlocking or other type of relationship that would call into
question his independence as a committee member. The sole member of the
Company's Compensation Committee is Mr. Frederick Fromm. On issues related to
executive compensation, the Compensation Committee consults with the Chief
Executive Officer. The following report of the Compensation Committee describes
the Company's compensation policies during the fiscal year ended December 31,
2004 as they affected the Company's Chief Executive Officer and other executive
officers.

         The Committee's objective in determining executive compensation is to
provide our executive officers and other key employees with competitive
compensation opportunities based upon their contribution to the financial
success of the Company, the market levels of compensation in effect at companies
with which the Company competes for executive talent, the personal performance
of such individuals and, most importantly in 2004, the financial resources of
the Company. The Committee may, however, in its discretion, apply different
factors in setting executive compensation for future fiscal years.

         The compensation package for each executive officer is comprised of
cash compensation and long-term equity incentive awards. Cash compensation
consists of base salary and annual performance awards.

CASH COMPENSATION

         A key objective of our current executive compensation program is to
position its key executives to earn cash compensation reflective of peer groups
in the current industry climate. During 2004, the Committee increased the base
salaries of certain of its key executive officers to more closely align their
salary with their peers, in order to ensure retention of such executives. As a
percentage, the base salaries paid to the Company's executive officers in 2004
were less than the 30% reduction in base salaries taken in 2002, when each
executive officer's salary was reduced along with all exempt employees of the
Company. These reductions were necessary in order for the Company to retain cash
and consummate the restructuring of the Company, which was completed in the
first quarter of 2004. As a result of the Company's failure to achieve its cash
and other objectives in 2004, no performance awards were paid to executive
officers in 2004 - other than to the Company's former sales executive, Randall
L. Carl, who was paid sales performance awards totaling $15,048 in 2004.

LONG-TERM INCENTIVE AWARDS

         Equity incentives are provided primarily through stock option grants
under the 2004 Plan. The grants are designed to align the interests of each
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. Each grant allows the individual to
acquire shares of our Common Stock at a fixed price per share (the market price
on the grant date) over a specified period of time (up to 10 years). The shares
subject to each option generally vest in installments over a two-to-four-year
period, contingent upon the executive officer's continued employment with the
Company. Accordingly, the option will provide a return to the executive officer
only if the executive officer remains employed by the Company during the
applicable vesting period, and then only if the market price of the underlying
shares appreciates over the option term.

         The number of shares subject to each option grant is set at a level
intended to create a meaningful opportunity for stock ownership based on the
officer's current position with the Company, the base salary associated with
that position, the individual's potential for increased responsibility and
promotion over the option term, the individual's personal performance in recent
periods, and other factors determined important by the Committee. The Committee
also takes into account the recommendations of the Chief Executive Officer of
the Company, in determining the recipients and size of each grant.


                                       88
<PAGE>

         No stock option or other grants were issued to the Company's continuing
executive officers in 2004, in light of the grant to the executive officers in
2003. Stock options were, however, granted to Elsbeth Kahn, the Company's former
Vice President, Sales and Marketing. Ms. Kahn was granted an option to purchase
60,000 shares upon joining the Company in April 2004.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

         Mr. Samuel Smookler joined the Company as President and Chief Executive
Officer on September 1, 2003. Mr. Smookler resigned from the Company on March
10, 2005. In setting Mr. Smooker's compensation, including his bonus for
2003-2004, the Compensation Committee considered Mr. Smookler's industry
experience, the scope of his responsibilities, the Board's confidence in Mr.
Smookler to lead the Company beyond the restructuring and to return the Company
to profitability, and the recommendation of the Chairman and then interim Chief
Executive Officer. Mr. Smookler's compensation in 2003 reflects amounts paid to
Mr. Smookler designed to replace the income Mr. Smookler lost from his former
employer to join the Company. This payment was required to successfully recruit
Mr. Smookler to the Company. In determining Mr. Smookler's stock option grant,
the Committee considered the percentage ownership interest typically offered
chief executive officers of similarly situated companies, the anticipated impact
of the restructuring on the issued and outstanding capital of the Company, and
the relative number of options granted to other executive officers of the
Company.

         Mr. Smookler's base compensation was not changed in 2004. In the
Committee's view, the total compensation package provided to Mr. Smookler for
the 2004 fiscal year is appropriate in the markets the industry served, in light
of P-Com's current performance.

COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)

         Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1.0 million paid to certain of the corporation's executive officers. The
limitation applies only to compensation that is not considered to be
performance-based. The non-performance based compensation to be paid to our
executive officers for the 2004 fiscal year did not exceed the $1.0 million
limit per officer, nor is it expected that the non-performance based
compensation to be paid to our executive officers for fiscal 2005 will exceed
that limit. Options granted under our 1995 and 2004 Plan are structured so that
any compensation deemed paid to an executive officer in connection with the
exercise of those options will qualify as performance-based compensation that
will not be subject to the $1.0 million limitation. Because it is very unlikely
that the cash compensation payable to any of our executive officers in the
foreseeable future will approach the $1.0 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to our executive officers.
The Compensation Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the $1.0 million level.

         It is the opinion of the Compensation Committee that the executive
compensation policies and programs in effect for our executive officers provide
an appropriate level of total remuneration which properly aligns our performance
and the interests of our stockholders with competitive and equitable executive
compensation in a balanced and reasonable manner, for both the short and
long-term.

                  Frederick Fromm
                  Member, Compensation Committee


STOCK PERFORMANCE GRAPH

         The graph depicted below shows a comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 Index and the
Standard & Poor's Communications Equipment Manufacturers Index.



                                       89
<PAGE>

        [TABLE BELOW REPRESENTS A LINE CHART IN THE ORIGINAL DOCUMENT.]

                                                S&P
                                           COMMUNICATIONS
                                             EQUIPMENT
               QUARTER ENDING   S&P 500        INDEX       P-COM
               --------------   -------    -------------- -------
                    Dec-99      100.00        100.00      100.00
                    Mar-00      102.00         97.25      209.19
                    Jun-00       99.00         88.33       64.31
                    Sep-00       97.77         70.70       74.91
                    Dec-00       89.86         43.68       34.63
                    Mar-01       78.97         24.66       14.49
                    Jun-01       83.34         20.08        6.22
                    Sep-01       70.85         14.24        3.05
                    Dec-01       78.14         16.04        3.73
                    Mar-02       78.09         12.28        2.26
                    Jun-02       67.37          8.32        0.81
                    Sep-02       55.49          6.16        0.46
                    Dec-02       59.88          7.32        0.43
                    Mar-03       57.73          7.53        0.34
                    Jun-03       66.33          8.41        0.21
                    Sep-03       67.79          9.94        0.50
                    Dec-03       75.68         12.12        0.33
                    Mar-04       76.65         12.93        0.14
                    Jun-04       77.65         13.27        0.09
                    Sep-04       75.86         11.46        0.05
                    Dec-04       82.49         12.45        0.04

(1) The graph assumes that $100 was invested on January 1, 1999, in our Common
Stock and in each index, and that all dividends were reinvested. No cash
dividends have been declared on our Common Stock. (2) Stockholder returns over
the indicated period should not be considered indicative of future stockholder
returns.

         Notwithstanding anything to the contrary set forth in any of our
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than 10% of the Common
Stock, to file with the SEC initial reports of beneficial ownership ("Form 3")
and reports of changes in beneficial ownership of Common Stock and other equity
securities of the Company ("Form 4"). Officers, directors and greater than 10%
stockholders of the Company are required by SEC rules to furnish to the Company
copies of all Section 16(a) reports that they file. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with for fiscal 2004, except that one Form 4
was not timely filed for Mr. Josling and one Form 3 was not timely filed for Ms.
Kahn.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table presents information concerning the beneficial
ownership of P-Com's Common Stock, Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock as of February 21, 2005 by each of the
following:

      o     each person known by P-Com to be the beneficial owner of 5% of more
            of its outstanding shares of Common Stock, Series C Convertible
            Preferred Stock or Series D Convertible Preferred Stock;


                                       90
<PAGE>

      o     each of P-Com's named executive officers;

      o     each of P-Com's directors; and

      o     all of P-Com's executive officers and directors as a group.

         Beneficial ownership is determined under the rules of the Securities
and Exchange Commission and generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated
in the footnotes to this table, P-Com believes that each stockholder identified
in the table possesses sole voting and investment power over all shares of
Common Stock, Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock shown as beneficially owned by that stockholder. Percentage of
beneficial ownership is based on 11,844,748 shares of Common Stock, 6,009 shares
of Series C Convertible Preferred Stock and 2,000 shares of Series D Convertible
Preferred Stock outstanding as of February 21, 2005. Shares of Common Stock
subject to warrants and options that are currently exercisable or exercisable
within 60 days of February 21, 2005, are considered outstanding and beneficially
owned by the stockholder who holds those warrants or options for the purpose of
computing the percentage ownership of that stockholder but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
stockholder. Unless otherwise indicated below, the address of each stockholder
listed below is 3175 S. Winchester Boulevard, Campbell, California 95008.




                                       91
<PAGE>

<TABLE>
<CAPTION>
                                                                           SERIES C CONVERTIBLE          SERIES D CONVERTIBLE
                                            COMMON STOCK                      PREFERRED STOCK               PREFERRED STOCK
                              -----------------------------------------  --------------------------  ---------------------------
                                SHARES
                               ISSUABLE
                               PURSUANT      NUMBER OF
                                  TO          SHARES
                               WARRANTS     BENEFICIALLY
                                  AND          OWNED
                                OPTIONS     (INCLUDING
                              EXERCISABLE   THE NUMBER
                               WITHIN 60     OF SHARES                    NUMBER OF                  NUMBER OF
                                DAYS OF      SHOWN IN      PERCENTAGE      SHARES      PERCENTAGE      SHARES      PERCENTAGE
NAME AND ADDRESS               FEBRUARY      THE FIRST     OF SHARES     BENEFICIALLY   OF SHARES  BENEFICIALLY     OF SHARES
OF BENEFICIAL OWNER            21, 2005       COLUMN)     OUTSTANDING     OWNED (1)    OUTSTANDING    OWNED(2)     OUTSTANDING
----------------------------  ------------  ------------  -------------  ------------  ------------   -------------  ------------
<S>                             <C>           <C>            <C>            <C>           <C>          <C>             <C>
North Sound Legacy Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3)        1,621,028     1,621,028      13.7%          2,332         38.8%        142.00          7.1%

North Sound Legacy
Institutional Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3)        1,621,028     1,621,028      13.7%          2,332         38.8%        877.33         43.9%

North Sound Legacy
International Fund Ltd.
Bison Court, Roadtown
Tortola, BVI
Wilmington, DE 19801 (3)        1,621,028     1,621,028      13.7%          2,332         38.8%        980.67         49.0%

SDS Capital Group SPC, Ltd.
113 Church Street
PO Box 134GT
Grand Canyon, Cayman Islands      528,000       874,044      7.4%             266          4.4%            --            --

Frederick R. Fromm                  9,351        16,275         *            9.32            *             --            --

R. Craig Roos                           0        17,333         *           23.33            *             --            --

George P. Roberts                  48,911        68,239         *           23.33            *             --            --

Daniel W. Rumsey                   30,556        30,556         *              --            --            --            --

Don Meiners                        32,498        32,570         *              --            --            --            --

Sam Smookler  (4)                  70,519        79,685         *           23.33            *             --            --

Carlos A. Belfiore                 33,333        33,333         *              --            --            --            --

Randall L. Carl (5)                32,867        32,867         *              --            --            --            --

Brian T. Josling (6)(7)            13,866        23,177         *              --            --            --            --

All current directors and
executive officers as a
group (9 persons)                 271,901       334,215     2.82%           79.31           1.3%           --            --
</TABLE>

* Less than 1%.

     (1)  There are no outstanding warrants or options to purchase shares of
          Series C Convertible Preferred Stock.

     (2)  There are no outstanding warrants or options to purchase shares of
          Series D Convertible Preferred Stock.

     (3)  Includes shares beneficially owned by North Sound Legacy Fund LLC,
          North Sound Legacy Institutional Fund LLC, and North Sound
          International Fund Ltd.

     (4)  Mr. Smookler resigned as President, Chief Executive Officer and
          Director of the Company effective March 10, 2005.

     (5)  Mr. Carl's employment with the Company was terminated effective March
          18, 2005.

     (6)  For purposes of determining beneficial ownership in accordance with
          Rule 13d-3 of the Securities Exchange Act of 1934, as amended, the
          total shares of Common Stock includes shares beneficially owned by
          Margaret Josling and TKB Ventures Ltd.

     (7)  Mr. Josling resigned as a Director of the Company effective March 1,
          2005.


                                       92
<PAGE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTONS

           Not applicable.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

           Effective August 17, 2003, P-Com retained Aidman, Piser & Company
("Aidman Piser") as the independent registered public accounting firm to audit
our financial statements for the fiscal year ending December 31, 2004. The
aggregate fees Aidman Piser billed us in 2004 for audit services, including for
review of our interim financial statements was $133,210.

AUDIT-RELATED FEES

           The aggregate fees Aidman Piser billed us in 2004 for audit related
services that are reasonably associated to the performance of the audit or
review of the Company's financial statements and are not reported above under
the caption "Audit Fees" were $36,840, and were principally related to
post-report review procedures to update their reports and issue consents in
connection with our filing of Registration Statements.

TAX FEES

           Aidman Piser does not provide tax compliance, tax advisory or any
other tax planning services to P-Com.

ALL OTHER FEES

           Aidman Piser does not provide any other services to P-Com.

AUDIT COMMITTEE PRE-APPROVAL POLICIES

           The Audit Committee has adopted an Audit Committee Charter, which
sets forth the procedures and policies pursuant to which services to be
performed by the independent auditor are to be pre-approved. Under the Charter,
proposed services either may be pre-approved by agreeing to a framework with
descriptions of allowable services with the Audit Committee ("general
pre-approval"), or require the specific pre-approval of the Audit Committee.
Unless a type of service has received general pre-approval, it requires specific
pre-approval by the Audit Committee if it is to be provided by the independent
registered public accounting firm.

           The Audit Committee will annually review and pre-approve the services
that may be provided by the independent auditor that are subject to general
pre-approval. Under the Charter, the Audit Committee may delegate pre-approval
authority one or more designated members of the Audit Committee the authority to
pre-approve audit and permissible non-audit services, provided such pre-approval
decision is presented to the full Audit Committee at its scheduled meetings. The
member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
meeting.


                                       93
<PAGE>

                                     PART IV

ITEM 15  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are included as part of this Annual Report on Form
10-K.

1.       Index to Financial Statements
         Financial Statements of the Registrant are listed in the Index to
         Consolidated Financial Statements and filed under Item 8, "Financial
         Statements" in this Annual Report on Form 10-K.

2.       Financial Statement Schedule

         Schedule II - Valuation and Qualifying Accounts

3.       Exhibits

Exhibit
Number        Description of Document
------        -----------------------
3.1(1)        Restated Certificate of Incorporation filed with the Delaware
              Secretary of State on March 9, 1995
3.1A(2)       Certificate of Amendment of Restated Certificate of Incorporation
              filed with the Delaware Secretary of State on June 16, 1997
3.1B(3)       Certificate of Designation for the Series A Junior Participating
              Preferred Stock, as filed with the Delaware Secretary of State on
              October 8, 1997
3.1C(4)       Amended and Restated Certificate of Designation of the Series A
              Junior Participating Preferred Stock, as filed with the Delaware
              Secretary of State on December 21, 1998
3.1D(5)       Certificate of Designation for the Series B Convertible
              Participating Preferred Stock, as filed with the Delaware
              Secretary of State on December 21, 1998
3.1E(6)       Certificate of Correction of Certificate of Designations for the
              Series B Convertible Participating Preferred Stock, as filed with
              the Delaware Secretary of State on December 23, 1998
3.1F(7)       Certificate of Elimination of Series B Convertible Participating
              Preferred Stock as filed with the Delaware Secretary of State on
              June 15, 1999
3.1G(8)       Certificate of Amendment of Restated Certificate of Incorporation
              filed with the Delaware Secretary of State on October 20, 2000
3.1H(9)       Certificate of Amendment of Restated Certificate of Incorporation
              filed with the Delaware Secretary of State on June 24, 2002
3.1I(10)      Certificate of Designation, Preferences and Rights of Series B
              Convertible Preferred Stock of P-Com, Inc., as filed with the
              Delaware Secretary of State on July 29, 2003.
3.1J(11)      Certificate of Designation, Preferences and Rights of Series C
              Convertible Preferred Stock of P-Com, Inc., as filed with the
              Delaware Secretary of State on September 24, 2003.
3.1I(12)      Certificate of Amendment of Restated Certificate of Incorporation
              filed with the Delaware Secretary of State on December 3, 2003.
3.1J(12)      Certificate of Designation, Preferences and Rights of Series D
              Convertible Preferred Stock of P-Com, Inc., as filed with the
              Delaware Secretary of State on December 15, 2003.
3.1K(13)      Certificate of Amendment of Restated Certificate of Incorporation
              of P-Com, Inc., as filed with the Delaware Secretary of State on
              July 15, 2004.
3.1L(14)      Restated Certificate of Incorporation of P-Com, Inc. 3.1M(15)
              Certificate of Amendment of Restated Certificate of Incorporation
              of P-Com, Inc., as filed with the Delaware Secretary of State on
              October 12, 2004.
3.2(16)       Bylaws
3.2A(12)      Amendment to Bylaws, effective as of December 3, 2003.
4.1(17)       Form of Common Stock Certificate 4.2(18) Amended and Restated
              Rights Agreement dated as of January 24, 2001 between Registrant
              and BankBoston, N.A.


                                       94
<PAGE>

4.3*(19)      1995 Stock Option/Stock Issuance Plan (as amended and restated
              through July 17, 2002), including forms of Notices of Grant of
              Automatic Stock Option for initial grant and annual grants and
              Automatic Stock Option Agreements.
4.4*(20)      Amendment to 1995 Stock Option/Stock Issuance Plan, effective as
              of December 3, 2003.
4.5*(21)      Employee Stock Purchase Plan, as amended. 4.6*(22) 2004 Equity
              Incentive Plan.
10.18(23)     Form of Indemnification Agreement by and between the Company and
              each of its officers and directors and a list of signatories.
10.90*(24)    Employment and Continuity of Benefits Agreement by and between
              George Roberts and P-Com, Inc., dated May 31, 2001.
10.95*#(25)   Severance Letter Agreement by and between P-Com, Inc. and Alan T.
              Wright dated April 8, 2002.
10.96*#(25)   Form of Amendment to Change in Control Severance Agreement by and
              between P-Com, Inc. and the officers P-Com listed as signatories
              thereto.
10.98#(25)    Engagement Letter Agreement by and between P-Com, Inc. and Cagan
              McAfee Capital Partners dated December 10, 2001 and Addendum dated
              June 13, 2002.
10.99(25)     Warrant Issuance Agreement by and between P-Com, Inc. and Cagan
              McAfee Capital Partners dated December 1, 2001.
10.100(25)    Accounts Receivable Purchase Agreement by and between P-Com, Inc.
              and Silicon Valley Bank dated June 26, 2002.
10.101#(25)   OEM Agreement by and between P-Com, Inc. and Shanghai Datang
              Mobile Communications dated July 1, 2002.
10.107(26)    Loan and Security Agreement between P-Com, Inc. and Silicon Valley
              Bank dated September 20, 2002
10.108(26)    Loan and Security Agreement (Exim Program) between P-Com, Inc. and
              Silicon Valley Bank dated September 20, 2002.
10.109(26)    Secured Promissory Notes issued to Silicon Valley Bank dated
              September 20, 2002.
10.110(26)    Warrant to Purchase Stock Agreement between P-Com, Inc. and
              Silicon Valley Bank dated September 20, 2002.
10.111(26)    Amendment to OEM Agreement between P-Com, Inc. and Shanghai Datang
              Mobile Communication effective July 1, 2002.
10.113(27)    Addendum II to Engagement Letter, dated December 10, 2001, between
              P-Com, Inc. and Cagan McAfee Capital Partners, effective as of
              January 9, 2003.
10.117(10)    Securities Purchase Agreement, dated May 28, 2003, by and among P-
              Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
              Institutional Fund LLC and North Sound Legacy International Ltd.
10.118(10)    Registration Rights Agreement, dated May 28, 2003, by and among P-
              Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
              Institutional Fund LLC and North Sound Legacy International Ltd.
10.119(10)    Security Agreement, dated May 28, 2003, by P-Com, Inc. and North
              Sound Legacy Institutional Fund LLC, as collateral agent for North
              Sound Legacy Fund LLC, North Sound Legacy Institutional Fund LLC
              and North Sound Legacy International Ltd.
10.120(11)    Form of Securities Purchase Agreement, dated October 3, 2003, by
              and among P-Com, Inc. and certain investors signatory thereto.
10.121(11)    Form of Registration Rights Agreement, dated October 3, 2003, by
              and among P-Com, Inc. and certain investors signatory thereto.
10.122(11)    Form of Series C-1 Warrant 10.123(11) Form of Series C-2 Warrant
10.124(12)    Form of Registration Rights Agreement, dated as of October 3,
              2003, by and among P-Com, Inc., P Investors LLC, Woodmont
              Investments Ltd. and Newberg Family Trust.
10.125(12)    Form of Joinder Agreement, dated December 16, 2003, by and among
              P-Com, Inc. and certain investors signatory thereto.
10.126(12)    Closing Memorandum, dated as of December 10, 2003, by and between
              P-Com, Inc. and SPEEDCOM Wireless Corporation.
10.127(12)    Debt Conversion Agreement, dated as of December 10, 2003, by and
              among P-Com, Inc., SPEEDCOM Wireless Corporation, North Sound
              Legacy Fund LLC, North Sound Legacy Institutional Fund LLC and
              North Sound Legacy International Ltd.
10.128(28)    Form of Convertible Promissory Note, issued by P-Com to each of
              North Sound Legacy Fund LLC, North Sound Legacy Institutional Fund
              LLC and North Sound Legacy International Ltd.
10.129(12)    Note Repurchase Agreement, dated as of December 18, 2003, by and
              among P-Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
              Institutional Fund LLC and North Sound Legacy International Ltd.
10.130(12)    Form of Registration Rights Agreement, dated as of December 18,
              2003, by and among P-Com, Inc., North Sound Legacy Fund LLC, North
              Sound Legacy Institutional Fund LLC and North Sound Legacy
              International Ltd.


                                       95
<PAGE>

10.131(28)    Engagement Letter Agreement, dated as of August 25, 2003, between
              P-Com, Inc. and Burnham Hill Partners, a division of Pali Capital,
              Inc.
10.132*(28)   Severance Agreement, dated April 4, 2003, between P-Com, Inc. and
              Daniel W. Rumsey.
10.133*(28)   Employment Letter Agreement, dated July 25, 2003, between P-Com,
              Inc. and Samuel Smookler.
10.134*(28)   Employment Letter Agreement, dated October 20, 2003, between
              P-Com, Inc. and Carlos Belfiore
10.135*(29)   Employment Letter Agreement, dated April 7, 2004, between P-Com,
              Inc. and Elsbeth Kahn.
10.136*(30)   Employment Letter Agreement, dated November 3, 2004, between
              P-Com, Inc. and Don Meiners.
10.137*(31)   Employment Letter Agreement, dated November 3, 2004, between
              P-Com, Inc. and Randall L. Carl.
10.138(32)    Note and Warrant Purchase Agreement, dated November 3, 2004,
              between P-Com, Inc. and Purchasers.
10.139(33)    Registration Rights Agreement, dated November 3, 2004, between
              P-Com, Inc. and Purchasers.
10.140(34)    Form of Promissory Note.
10.141(35)    Form of Warrant.
14.1(36)      Code of Ethics
21.1          Subsidiaries of the Registrant
23.1          Consent of Aidman, Piser & Company, P.A.
23.2          Consent of PricewaterhouseCoopers LLP
31.1          Rule 13a-14(a)/ 15d-14(a) Certification
31.2          Rule 13a-14(a)/15d-14(a) Certification
32.1          Section 1350 Certification
32.2          Section 1350 Certification

* Compensatory benefit arrangement.
# Confidential treatment has been granted as to certain portions of these
exhibits.
+ Previously filed.

(1) Incorporated by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (File No. 33-95392) declared effective with the Securities
and Exchange Commission on August 17, 1995.
(2) Incorporated by reference to Exhibit 3.3 to the Registrant's Quarterly
Report on Form 10-Q (File No. 000-25356) for the quarterly period ended June 30,
1997, filed with the Securities and Exchange Commission on August 18, 1997.
(3) Incorporated by reference to Exhibit 3 to the Registrant's Current Report on
From 8-K (File No. 000-25356) filed with the Securities and Exchange Commission
on October 2, 1997.
(4) Incorporated by reference to Exhibit 3.2C of the Registrant's Form 8-A/A
filed with the Securities and Exchange Commission on December 22, 1998.
(5) Incorporated by reference to Exhibit 3.2D of the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange Commission on December 24,
1998.
(6) Incorporated by reference to Exhibit 3.2E of the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange Commission on December 24,
1998.
(7) Incorporated by reference to Exhibit 3.2F to the Registrant's Annual Report
on Form 10-K, for the fiscal year ended December 31, 2000, filed with the
Securities and Exchange Commission on April 2, 2001.
(8) Incorporated by reference to Exhibit 3.2A to the Registrant's Annual Report
on Form 10-K, for the fiscal year ended December 31, 2001, filed with the
Securities and Exchange Commission on April 1, 2002.
(9) Incorporated by reference to Exhibit 3.2G to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2002, filed with the
Securities and Exchange Commission on August 14, 2002.
(10) Incorporated by reference to the exhibits filed as part of the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003,
filed with the Securities and Exchange Commission on August 14, 2003.
(11) Incorporated by reference to the exhibits filed as part of the Registrant's
Current Report on Form 8-K, filed with the Securities and Exchange Commission on
October 7, 2003.
(12) Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-111405) declared
effective with the Securities and Exchange Commission on February 6, 2004.


                                       96
<PAGE>

(13) Incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2004, filed with the
Securities and Exchange Commission on August 16, 2004.
(14) Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2004, filed with the
Securities and Exchange Commission on August 16, 2004.
(15) Incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2004, filed
with the Securities and Exchange Commission on November 12, 2004.
(16) Incorporated by reference to Exhibit 3.3A to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended on September 30, 2002, filed
with the Securities and Exchange Commission on November 14, 2002.
(17) Incorporated by reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1 (File No. 33-88492) declared effective with the Securities
and Exchange Commission on March 2, 1995.
(18) Incorporated by reference to Exhibit 4.10 to the Registrant's Form 8-A/A
filed with the Securities and Exchange Commission on May 7, 2001.
(19) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-55604)filed with the Securities and Exchange
Commission on February 14, 2001.
(20) Incorporated by reference to Exhibit 4.4 to the Registrant's Registration
Statement on Form S-8 (File No. 111511) filed with the Securities and Exchange
Commission on December 23, 2003.
(21) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-63762)filed with the Securities and Exchange
Commission on June 25, 2001.
(22) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-120455) filed with the Securities and
Exchange Commission on November 12, 2004.
(23) Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 33-88492) declared
effective with the Securities and Exchange Commission on March 2, 1995.
(24) Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2001, filed with the Securities and Exchange on December 24, 2001.
(25) Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2002, filed with the Securities and Exchange Commission on August 14, 2002.
(26) Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2002, filed with the Securities and Exchange Commission on
November 14, 2002.
(27) Incorporated by reference to the identically numbered exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, filed with the Securities and Exchange Commission on March 31, 2003.
(28) Incorporated by reference to the identically numbered exhibit to the
Registrant's Amendment No. 1 to the Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on January 30, 2004.
(29) Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2004, filed with
the Securities and Exchange Commission on May 17, 2004.
(30) Incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
ovember 9, 2004.
(31) Incorporated by reference to Exhibit 10.2 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 9, 2004.
(32) Incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 8, 2004.
(33) Incorporated by reference to Exhibit 10.2 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 8, 2004.
(34) Incorporated by reference to Exhibit 10.3 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 8, 2004.
(35) Incorporated by reference to Exhibit 10.4 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 8, 2004.
(36) Incorporated by reference to Exhibit 99.3 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002, filed with the
Securities and Exchange Commission on March 31, 2003.

(b) During the three months ended December 31, 2004, we furnished the following
Current Reports on Form 8-K:

o   Current report furnished October 4, 2004 reporting Item 2.02, Item 2.03 and
    Item 9.01
o   Current report furnished October 14, 2004 reporting Item 5.03, Item 8.01 and
    Item 9.01
o   Current report furnished November 1, 2004 reporting Item 2.02 and Item 9.01
o   Current report furnished November 8, 2004 reporting Item 1.01, Item 2.03 and
    Item 9.01
o   Current report furnished November 9, 2004 reporting Item 1.01 and Item 9.01
o   Current report furnished December 1, 2004 reporting Item 1.01, Item 2.03,
    Item 3.02, Item 8.01 and Item 9.01


                                       97
<PAGE>

                                   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.


Date:  March 23, 2005                       By: /s/ Daniel W. Rumsey
                                                -------------------------------
                                                Daniel W. Rumsey
                                                Chief Restructuring Officer

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 and on the dates indicated.



                                       98
<PAGE>

Signature                    Title                                Date
---------                    -----                                ----

                             Chief Restructuring Officer
/s/ Daniel W. Rumsey         (Principal Executive Officer)        March 23, 2005
-------------------------
Daniel W. Rumsey

                             (Principal Financial Officer and
/s/ Daniel W. Rumsey         Principal Accounting Officer)        March 23, 2005
-------------------------
Daniel W. Rumsey


/s/ George P. Roberts        Chairman of the Board of Directors   March 23, 2005
-------------------------
George P. Roberts


/s/ Richard Reiss            Director of the Company              March 23, 2005
-------------------------
Richard Reiss


/s/ Frederick R. Fromm       Director of the Company              March 23, 2005
-------------------------
Frederick R. Fromm


/s/ R. Craig Roos            Director of the Company              March 23, 2005
-------------------------
R. Craig Roos



                                       99