##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-Q/A

Amendment No. 1


|   |  |                                                                                              
|-- |  | ---------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 
|  
|   |  | For the quarterly period ended October 1,
    2004                                           
|  
|or
|  
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|   |  | For the transition period
    from          to                                               

Commission file number 000-30993

Proxim Corporation

(Exact name of registrant as specified in its
charter)


|                         |  |                                         
|------------------------ |  | ----------------------------------------
|Delaware                 |  | 52-2198231                              
|(State of Incorporation) |  | (I.R.S. Employer
    Identification No.)

935 Stewart Drive

Sunnyvale, California 94085


(408) 731-2700


(Address, including zip code, and telephone
number,


including area code, of registrants
principal executive offices)


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 þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes þ          No o

The number of shares outstanding of the
Companys Class A common stock, par value
$.01 per share, as of November 3, 2004, was
28,753,958. No shares of the Companys Class B common
stock, par value $.01 per share, are outstanding.



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TABLE OF CONTENTS






|                                   |  |                      |    |                                                                                                                                                           |    |  |   | 
|---------------------------------- |  | -------------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | -- |  | - | 
|                                   |  |                      |    | Page                                                                                                                                                     
|                                   |  |                      |    |                                                                                                                                                          
|Explanatory Note                   |  |                      | 2  |                                                                                                                                                          
|PART I.  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements |    |                                                                                                                                                           | 3  | 
|                                   |  |                      |    | Condensed Consolidated
    Balance Sheets at October 1, 2004 and December 31,
    2003 (unaudited)                                                        |    |  | 3 | 
|                                   |  |                      |    | Condensed Consolidated
    Statements of Operations for the three months and nine months
    ended October 1, 2004 and September 26, 2003
    (unaudited) |    |  | 4 | 
|                                   |  |                      |    | Condensed Consolidated
    Statements of Cash Flows for the nine months ended
    October 1, 2004 and September 26, 2003 (unaudited)                      |    |  | 5 | 
|                                   |  |                      |    | Notes to Condensed
    Consolidated Financial Statements (unaudited)                                                                                      |    |  | 6 | 
|PART II.  OTHER
    INFORMATION   
|Item 6.                            |  | Exhibits             |    |                                                                                                                                                           | 30 | 
|Signatures                         |  |                      | 31 |                                                                                                                                                          
|Index to Exhibits                  |  |                      |    |                                                                                                                                                          
|EXHIBIT 31.1                      
|EXHIBIT 31.2                      
|EXHIBIT 32.1                      
|EXHIBIT 32.2                      



1



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##### Table of Contents






EXPLANATORY NOTE

Proxim Corporation (the Company) is
filing this Amendment No. 1 to Form 10-Q for the sole purpose of
correcting two scriveners errors on the Companys
Condensed Consolidated Balance Sheet. First, as filed, the line
item Mandatorily redeemable convertible preferred
stock incorrectly described the Companys
Series A Preferred Stock, reading that 25,000,000 shares of
Series A Preferred Stock were authorized. The line item
should have read that 3,000,000 shares of Series A
Preferred Stock were authorized. Second, as filed, the line item
Stockholders deficit incorrectly described the
Companys authorized Common Stock, reading that 39,000,000
shares of Class A Common Stock and 1,000,000 shares of Class B
Common Stock were authorized. The line item should have read
that 390,000,000 shares of Class A Common Stock were authorized
and 10,000,000 shares of Class B Common Stock were authorized.
The Company is filing amended financial statements under Item 1
in order to note these corrections. No other changes are being
made to the Companys financial statements.

2



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION






|        |                     
|------- | --------------------
|Item 1. | Financial Statements

PROXIM CORPORATION



CONDENSED CONSOLIDATED BALANCE
SHEETS


|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |          |         |  
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------- | ------ | ------------ | -------- | - | ------ | -------- | ------- | -
|                                                                                                  |                                                                                                                                                                                                  | October 1,                                                                                          |        | December 31,
|                                                                                                  |                                                                                                                                                                                                  | 2004                                                                                                |        | 2003        
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |             
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                    
|                                                                                                  |                                                                                                                                                                                                  | (In thousands, except share                                                                        
|                                                                                                  |                                                                                                                                                                                                  | and per share data)                                                                                
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                    
|                                                                                                  |                                                                                                                                                                                                  | (Unaudited)                                                                                        
|ASSETS                                                                                           
|Current assets:                                                                                   |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  | Cash and cash equivalents                                                                                                                                                                        |                                                                                                     | $      | 18,313       |          |   | $      | 19,756   |        
|                                                                                                  | Accounts receivable, net                                                                                                                                                                         |                                                                                                     |        | 8,859        |          |   |        | 13,961   |        
|                                                                                                  | Inventory                                                                                                                                                                                        |                                                                                                     |        | 15,804       |          |   |        | 19,939   |        
|                                                                                                  | Other current assets                                                                                                                                                                             |                                                                                                     |        | 4,803        |          |   |        | 5,301    |        
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total current assets                                                                                |        |              | 47,779   |   |        |          | 58,957  |  
|Property and equipment, net                                                                       |                                                                                                                                                                                                  |                                                                                                     | 6,078  |              |          |   | 7,522  |         
|Goodwill                                                                                          |                                                                                                                                                                                                  |                                                                                                     | 9,726  |              |          |   | 9,726  |         
|Intangible assets, net                                                                            |                                                                                                                                                                                                  |                                                                                                     | 25,657 |              |          |   | 40,333 |         
|Restricted cash                                                                                   |                                                                                                                                                                                                  |                                                                                                     | 770    |              |          |   | 1,254  |         
|Other assets                                                                                      |                                                                                                                                                                                                  |                                                                                                     | 430    |              |          |   | 2,316  |         
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total assets                                                                                        |        | $            | 90,440   |   |        | $        | 120,108 |  
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|LIABILITIES, MANDATORILY REDEEMABLE
    CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS
    DEFICIT
|Current liabilities:                                                                              |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  | Accounts payable                                                                                                                                                                                 |                                                                                                     | $      | 7,932        |          |   | $      | 10,500   |        
|                                                                                                  | Capital lease obligations, current                                                                                                                                                               |                                                                                                     |        | 1,144        |          |   |        | 1,176    |        
|                                                                                                  | Accrued royalties and interest                                                                                                                                                                   |                                                                                                     |        | 9,523        |          |   |        | 26,906   |        
|                                                                                                  | Other accrued liabilities                                                                                                                                                                        |                                                                                                     |        | 20,328       |          |   |        | 20,804   |        
|                                                                                                  | Convertible bridge loan                                                                                                                                                                          |                                                                                                     |        | 10,000       |          |   |        |         |        
|                                                                                                  | Convertible promissory notes                                                                                                                                                                     |                                                                                                     |        |             |          |   |        | 34,735   |        
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total current liabilities                                                                           |        |              | 48,927   |   |        |          | 94,121  |  
|Capital lease obligations, long-term                                                              |                                                                                                                                                                                                  |                                                                                                     | 116    |              |          |   | 934    |         
|Accrued royalties, long-term                                                                      |                                                                                                                                                                                                  |                                                                                                     | 8,805  |              |          |   |       |         
|Long-term debt                                                                                    |                                                                                                                                                                                                  |                                                                                                     | 101    |              |          |   | 101    |         
|Restructuring accruals, long-term                                                                 |                                                                                                                                                                                                  |                                                                                                     | 7,823  |              |          |   | 8,660  |         
|Common stock warrants                                                                             |                                                                                                                                                                                                  |                                                                                                     | 5,500  |              |          |   | 21,800 |         
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total liabilities                                                                                   |        |              | 71,272   |   |        |          | 125,616 |  
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|Commitments and contingencies (Notes 15 and
    17)                                               |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|Mandatorily redeemable convertible preferred
    stock:                                           |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  | Series A: 3,000,000 shares authorized;
    par value $.01; 3,000,000 shares issued and outstanding at
    October 1, 2004 and December 31, 2003, respectively                                    |                                                                                                     |        | 80,749       |          |   |        | 73,580   |        
|                                                                                                  | Series B: 540,000 shares authorized;
    par value $.01; 490,599 shares issued and outstanding at
    October 1, 2004, no shares issued and outstanding at
    December 31, 2003                 |                                                                                                     |        | 49,703       |          |   |        |         |        
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total mandatorily redeemable convertible
    preferred stock                                        |        |              | 130,452  |   |        |          | 73,580  |  
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|Stockholders deficit:                                                                            |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  | Common stock, Class A, par value $.01;
    authorized 390,000,000 shares: 16,572,511 and
    16,503,719 shares issued and outstanding at October 1,
    2004 and December 31, 2003, respectively |                                                                                                     |        | 166          |          |   |        | 165      |        
|                                                                                                  | Common stock, Class B, par value $.01;
    authorized 10,000,000 shares: no shares issued and
    outstanding at October 1, 2004 and December 31, 2003,
    respectively                         |                                                                                                     |        |             |          |   |        |         |        
|                                                                                                  | Additional paid-in capital                                                                                                                                                                       |                                                                                                     |        | 340,589      |          |   |        | 340,796  |        
|                                                                                                  | Treasury stock, at cost; 4,218,553 shares at
    October 1, 2004 and December 31, 2003                                                                                                           |                                                                                                     |        | (21,585      | )        |   |        | (21,585  | )      
|                                                                                                  | Notes receivable from stockholders                                                                                                                                                               |                                                                                                     |        | (711         | )        |   |        | (711     | )      
|                                                                                                  | Accumulated deficit                                                                                                                                                                              |                                                                                                     |        | (429,743     | )        |   |        | (397,753 | )      
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total stockholders deficit                                                                         |        |              | (111,284 | ) |        |          | (79,088 | )
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         
|                                                                                                  |                                                                                                                                                                                                  | Total liabilities, mandatorily redeemable
    convertible preferred stock and stockholders deficit |        | $            | 90,440   |   |        | $        | 120,108 |  
|                                                                                                  |                                                                                                                                                                                                  |                                                                                                     |        |              |          |   |        |         

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

3



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##### Table of Contents



PROXIM CORPORATION



CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |        |         |  
|------------------------------------------------------------------------------ | ------------------------------------ | ------------------------------------- | ------ | ----------------- | ------ | ---------- | ------- | ------------- | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------- | -
|                                                                               |                                      |                                       |        |                  
|                                                                               |                                      | Three Months Ended                    |        | Nine Months Ended
|                                                                               |                                      |                                       |        |                  
|                                                                               |                                      | October 1,                            |        | September 26,     |        | October 1, |         | September 26,
|                                                                               |                                      | 2004                                  |        | 2003              |        | 2004       |         | 2003         
|                                                                               |                                      |                                       |        |                   |        |            |         |              
|                                                                               |                                      |                                      
|                                                                               |                                      | (In thousands, except per share data)
|                                                                               |                                      | (Unaudited)                          
|Product revenue, net                                                           |                                      | $                                     | 31,526 |                   |        | $          | 35,058  |               |        | $ | 89,640  |        |        | $ | 103,892 |       
|License revenue                                                                |                                      |                                       |       |                   |        |            |        |               |        |   |        |        |        |   | 6,000   |       
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|                                                                               |                                      | Total revenue, net                    |        |                   | 31,526 |            |         |               | 35,058 |   |         |        | 89,640 |   |         |        | 109,892 |  
|Cost of revenue                                                                |                                      |                                       | 19,275 |                   |        |            | 22,041  |               |        |   | 56,792  |        |        |   | 64,670  |       
|Royalty charges (benefit)                                                      |                                      |                                       | (4,796 | )                 |        |            | 22,869  |               |        |   | (3,179  | )      |        |   | 22,869  |       
|Restructuring provision for excess and obsolete
    inventory                  |                                      |                                       |       |                   |        |            |        |               |        |   |        |        |        |   | 22,549  |       
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|                                                                               |                                      | Gross profit (loss)                   |        |                   | 17,047 |            |         |               | (9,852 | ) |         |        | 36,027 |   |         |        | (196    | )
|Operating expenses:                                                            |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|                                                                               | Research and development             |                                       |        | 4,748             |        |            |         | 4,915         |        |   |         | 14,160 |        |   |         | 19,032 |        
|                                                                               | Selling, general and administrative  |                                       |        | 11,497            |        |            |         | 13,179        |        |   |         | 34,095 |        |   |         | 37,720 |        
|                                                                               | Legal expense for certain litigation |                                       |        | 105               |        |            |         | 1,700         |        |   |         | 1,050  |        |   |         | 5,700  |        
|                                                                               | Amortization of intangible assets    |                                       |        | 3,948             |        |            |         | 5,364         |        |   |         | 14,676 |        |   |         | 16,229 |        
|                                                                               | Bad debt expense                     |                                       |        |                  |        |            |         | 2,305         |        |   |         |       |        |   |         | 2,305  |        
|                                                                               | Restructuring charges (benefit)      |                                       |        |                  |        |            |         | (5,194        | )      |   |         | 2,029  |        |   |         | 7,298  |        
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|                                                                               |                                      | Total operating expenses              |        |                   | 20,298 |            |         |               | 22,269 |   |         |        | 66,010 |   |         |        | 88,284  |  
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Loss from operations                                                           |                                      |                                       | (3,251 | )                 |        |            | (32,121 | )             |        |   | (29,983 | )      |        |   | (88,480 | )     
|Interest income (expense), net                                                 |                                      |                                       | 2,191  |                   |        |            | (4,192  | )             |        |   | (3,244  | )      |        |   | (4,285  | )     
|Other income (expense), net                                                    |                                      |                                       | (242   | )                 |        |            | (242    | )             |        |   | 7,471   |        |        |   | (242    | )     
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Loss before income taxes                                                       |                                      |                                       | (1,302 | )                 |        |            | (36,555 | )             |        |   | (25,756 | )      |        |   | (93,007 | )     
|Income tax provision                                                           |                                      |                                       | 203    |                   |        |            |        |               |        |   |        |        |        |   |        |       
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Net loss                                                                       |                                      |                                       | (1,505 | )                 |        |            | (36,555 | )             |        |   | (25,756 | )      |        |   | (93,007 | )     
|Accretion of Series A Preferred Stock
    obligations                          |                                      |                                       | (1,725 | )                 |        |            | (1,596  | )             |        |   | (5,070  | )      |        |   | (4,681  | )     
|Accretion of Series B Preferred Stock
    obligations                          |                                      |                                       | (1,164 | )                 |        |            |        |               |        |   | (1,164  | )      |        |   |        |       
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Net loss attributable to common
    stockholders  basic and diluted           |                                      | $                                     | (4,394 | )                 |        | $          | (38,151 | )             |        | $ | (31,990 | )      |        | $ | (97,688 | )     
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Net loss per share attributable to common
    stockholders  basic and diluted |                                      | $                                     | (0.36  | )                 |        | $          | (3.13   | )             |        | $ | (2.59   | )      |        | $ | (8.05   | )     
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       
|Shares used to compute net loss per
    share  basic and diluted              |                                      |                                       | 12,349 |                   |        |            | 12,199  |               |        |   | 12,336  |        |        |   | 12,132  |       
|                                                                               |                                      |                                       |        |                   |        |            |         |               |        |   |         |        |        |   |         |       

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

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##### Table of Contents



PROXIM CORPORATION



CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |         |         |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------------------------- | ----------------------------------------- | ------------- | ------ | ------- | ------ | ------- | ------- | ------- | -
|                                                 |                                                                                 |                                                              
|                                                 |                                                                                 | Nine Months Ended                                            
|                                                 |                                                                                 |                                                              
|                                                 |                                                                                 | October 1,                                                    |                                           | September 26,
|                                                 |                                                                                 | 2004                                                          |                                           | 2003         
|                                                 |                                                                                 |                                                               |                                           |              
|                                                 |                                                                                 |                                                              
|                                                 |                                                                                 | (In thousands)                                               
|                                                 |                                                                                 | (Unaudited)                                                  
|Cash flows from operating activities:            |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Net loss                                                                        |                                                               | $                                         | (25,756       | )      |         | $      | (93,007 | )      
|                                                 | Adjustments to reconcile net loss to net cash
    used in operating activities: |                                                               |                                           |               |        |         |        |         |        
|                                                 | Depreciation and amortization                                                   |                                                               |                                           | 16,375        |        |         |        | 18,669  |        
|                                                 | Amortization of warrants issued to customer                                     |                                                               |                                           | 522           |        |         |        |        |        
|                                                 | Provision for excess and obsolete inventory and
    lower of cost or market     |                                                               |                                           | 1,723         |        |         |        |        |        
|                                                 | Restructuring provision for excess and obsolete
    inventory                   |                                                               |                                           |              |        |         |        | 22,549  |        
|                                                 | Bad debt expense                                                                |                                                               |                                           |              |        |         |        | 2,305   |        
|                                                 | Restructuring charges (benefit)                                                 |                                                               |                                           | 2,029         |        |         |        | (2,668  | )      
|                                                 | Loss on disposal of property and equipment                                      |                                                               |                                           | 350           |        |         |        |        |        
|                                                 | Amortization of debt discount on convertible
    notes and issuance costs       |                                                               |                                           | 8,171         |        |         |        |        |        
|                                                 | Revaluation of common stock warrants                                            |                                                               |                                           | (16,300       | )      |         |        |        |        
|                                                 | Changes in assets and liabilities:                                              |                                                               |                                           |               |        |         |        |         |        
|                                                 |                                                                                 | Accounts receivable, net                                      |                                           |               | 5,102  |         |        |         | 10,821  |        
|                                                 |                                                                                 | Inventory                                                     |                                           |               | 2,412  |         |        |         | (10,687 | )      
|                                                 |                                                                                 | Restricted cash and other assets, current and
    non-current |                                           |               | 190    |         |        |         | 1,946   |        
|                                                 |                                                                                 | Accounts payable and other accrued liabilities                |                                           |               | 3,360  |         |        |         | 535     |        
|                                                 |                                                                                 | Accrued royalties and interest                                |                                           |               | (8,578 | )       |        |         | 25,819  |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 |                                                                                 |                                                               | Net cash used in operating activities     |               |        | (10,400 | )      |         |         | (23,718 | )
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Cash flows from investing activities:            |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Purchase of property and equipment                                              |                                                               |                                           | (679          | )      |         |        | (2,873  | )      
|                                                 | Purchase of an asset held for sale                                              |                                                               |                                           |              |        |         |        | (9,966  | )      
|                                                 | Proceeds from repayment of loan to officer                                      |                                                               |                                           |              |        |         |        | 500     |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 |                                                                                 |                                                               | Net cash used in investing activities     |               |        | (679    | )      |         |         | (12,339 | )
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Cash flows from financing activities:            |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Borrowings on capital lease obligations                                         |                                                               |                                           |              |        |         |        | 1,605   |        
|                                                 | Principal payments on capital lease obligations                                 |                                                               |                                           | (895          | )      |         |        | (539    | )      
|                                                 | Proceeds from repayments of notes receivable from
    stockholders              |                                                               |                                           |              |        |         |        | 187     |        
|                                                 | Proceeds from issuance of convertible promissory
    loan                       |                                                               |                                           |              |        |         |        | 30,000  |        
|                                                 | Proceeds from issuance of bridge note                                           |                                                               |                                           | 10,000        |        |         |        |        |        
|                                                 | Issuance of common stock, net                                                   |                                                               |                                           | 531           |        |         |        | 781     |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 |                                                                                 |                                                               | Net cash provided by financing activities |               |        | 9,636   |        |         |         | 32,034  |  
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Net decrease in cash and cash equivalents        |                                                                                 |                                                               | (1,443                                    | )             |        |         | (4,023 | )      
|Cash and cash equivalents at beginning of period |                                                                                 |                                                               | 19,756                                    |               |        |         | 16,535 |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Cash and cash equivalents at end of period       |                                                                                 | $                                                             | 18,313                                    |               |        | $       | 12,512 |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Supplemental disclosures:                        |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Cash received (paid) during the period for:                                     |                                                               |                                           |               |        |         |        |         |        
|                                                 |                                                                                 |                                                               | Income taxes                              |               | $      |        |        |         | $       | 1,655   |  
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 |                                                                                 |                                                               | Interest on capital lease obligations     |               | $      | (54     | )      |         | $       | (51     | )
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|Non-cash transactions:                           |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Inception of capital leases                                                     |                                                               | $                                         | 45            |        |         | $      | 1,069   |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Accretion of Series A Preferred Stock
    redemption obligations                |                                                               | $                                         | 7,169         |        |         | $      | 6,846   |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Accretion of Series B Preferred Stock
    redemption obligations                |                                                               | $                                         | 1,164         |        |         | $      |        |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        
|                                                 | Conversion of convertible promissory notes into
    Series B Preferred Stock    |                                                               | $                                         | 49,060        |        |         | $      |        |        
|                                                 |                                                                                 |                                                               |                                           |               |        |         |        |        

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

5



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##### Table of Contents



PROXIM CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)


Note 1  The Company

Proxim Corporation (the Company) is
the company created by the merger of Proxim, Inc. and Western
Multiplex Corporation, or Western Multiplex. On March 26,
2002, Western Multiplex merged with Proxim, Inc. located in
Sunnyvale, California which designs, manufactures and markets
high performance wireless local area networking, or WLAN, and
building-to-building network products based on radio frequency,
or RF, technology and changed its name to Proxim Corporation. On
August 5, 2002, the Company completed the acquisition of
the 802.11 WLAN systems business of Agere Systems, Inc., or
Agere, including its ORiNOCO product line. In accordance with
accounting principles generally accepted in the United States of
America, the results of operations for the periods presented
include the results of the merged or acquired businesses
beginning from the respective dates of completion of the
business combinations.



| |                   
| | ------------------
| | Significant Events



| |                                          
| | -----------------------------------------
| | Capital Restructuring and Bridge
    Loan

On July 27, 2004, the Company entered into
an agreement (the Purchase Agreement) with its
strategic investors, Warburg Pincus Private Equity VIII, L.P.,
BCP Capital, L.P. (formerly known as Broadview Capital Partners,
L.P.) and affiliates (collectively, the Investors)
to restructure their equity instruments and debt holdings in the
Company. Pursuant to the terms of the Purchase Agreement, on
July 30, 2004, the Investors exchanged the
$49.0 million in aggregate amount of secured convertible
promissory notes, including accrued but unpaid interest of
$9.0 million, into shares of Series B Preferred Stock,
in accordance with the existing terms and conditions of the
secured convertible promissory notes, as described in
Note 12. The exchange relieved the Company of the
requirement to repay the notes on their maturity date of
September 30, 2004.

On July 30, 2004, the Company received
$10.0 million in cash proceeds from the Investors in
exchange for a new convertible bridge note (the Bridge
Loan) pursuant to the Purchase Agreement. The secured
convertible Bridge Loan bears interest at 15 percent per
annum and is due on June 30, 2005. In accordance with the
terms of the Bridge Loan, all principal and accrued interest
will convert into Class A common stock and/or warrants to
purchase Class A common stock, at the same price and upon the
same terms and conditions offered to other investors, if prior
to June 30, 2005 the Company closes a financing transaction
with gross proceeds of $20.0 million or more through a sale
of its Class A common stock and/or warrants to purchase Class A
common stock. If such a financing transaction does not occur,
the Bridge Loan becomes due and payable by its terms on
June 30, 2005.

Pursuant to the Purchase Agreement, subject to
the approval of the Companys stockholders, the Investors
also agreed to surrender all of their Series A Preferred
Stock, all of their Series B Preferred Stock and all of
their warrants to purchase the Companys Class A common
stock in exchange for an aggregate of 16.4 million shares
of Class A common stock and 400,000 shares of the
Companys newly issued Series C Preferred Stock (the
Exchange).

At a special meeting of stockholders held on
October 21, 2004, the Companys stockholders approved
the above Exchange. On October 22, 2004, the Exchange
closed and the Investors surrendered all of their Series A
Preferred Stock, all of their Series B Preferred Stock and
all of their warrants to purchase the Companys Class A
common stock for Class A common stock and Series C
Preferred Stock as described above.

Subsequent to the issuance of the
16.4 million shares of Class A common stock to the
Investors in the Exchange, Warburg Pincus Private Equity VIII,
L.P. owned 14,213,333 shares of the Companys common
stock representing approximately 49.4 percent of the
Companys outstanding common stock based on
12,353,958 shares outstanding as of October 21, 2004.
BCP Capital, LP. and affiliates owned 2,186,666 shares

6



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of Class A common stock representing
approximately 7.6 percent of the Companys outstanding
common stock based on 12,353,958 shares outstanding as of
October 21, 2004. On a fully accreted basis, the
Investors holdings before the Exchange would have been
convertible and exercisable for 19,977,193 shares of the
Companys Class A common stock, representing approximately
61.8% of the Companys common stock based on
12,353,958 shares outstanding as of October 21, 2004.
Accordingly, by virtue of the Exchange, the Investors
holdings were reduced by 3,577,193 shares or 17.9% on a
fully accreted, as-converted and as-exercised basis.

The Series C Preferred Stock issued to the
Investors is a mandatorily redeemable and nonvoting security and
is not convertible into common stock or any other equity
security at any time. This new long-term equity instrument is
not required to be repaid in cash until it is due on
October 22, 2012, except in the event of a change in
control or liquidation or other specified event. Further, the
Series C Preferred Stock has an initial liquidation
preference of $100 per share, or $40 million in
aggregate. The liquidation preference on the Series C
Preferred Stock accretes at 8.75 percent per annum,
compounded quarterly, and is required to be repaid by the
Company at the fully accreted value of approximately
$80 million on October 22, 2012. In addition, the
Series C Preferred Stock shall be automatically redeemed at
its fully accreted value in the event of an earlier change in
control of the Company.

The terms of the agreement also provide that the
Company may redeem the Series C Preferred Stock at any time
within the first three years after the date of issuance at its
then accreted liquidation preference if the market price of the
Companys Class A common stock on the Nasdaq National
Market remains above $22.50 for a period of 45 consecutive
trading days, such prices being subject to certain adjustments.
After the third anniversary of the date of issuance, the Company
may redeem the Series C Preferred Stock at any time at its
then accreted liquidation preference, if the market price of the
Companys Class A common stock on the Nasdaq National
Market has remained above $20.00 for a period of 45 consecutive
trading days, such prices being subject to certain.

The Exchange transaction is being evaluated in
accordance with EITF D-42, The Effect on the
Calculation of Earnings Per Share for Redemption or Induced
Conversion of Preferred Stock. Accordingly, the excess of
the fair value of the Class A common stock issued in the
transaction to the holders of the preferred stock over the fair
value of the securities issuable pursuant to the original
conversion terms will be treated as a charge to increase net
loss to arrive at net loss attributable to common stockholders
in the calculation of net loss per share attributable to common
stockholders. The Company is currently in the process of
completing its computation of the actual charge and expects the
charge to be recorded in the quarter ending December 31,
2004.



| |                             
| | ----------------------------
| | Symbol Litigation Settlement

On September 13, 2004 the Company entered
into a Settlement Agreement and a Patent Cross License Agreement
with Symbol Technologies, Inc. (Symbol) and assigned
certain intellectual property to Symbol resolving all
outstanding litigation.

Under the terms of the Settlement Agreement, the
Company agreed to pay Symbol $22.75 million dollars over
Proxims ensuing ten quarters, commencing with the quarter
ending October 1, 2004. The Settlement Agreement provides
for lump sum payments of $2.5 million per quarter in each
of the first eight quarters, a payment of $1.5 million in
the ninth quarter, and a payment of $1.25 million in the
tenth quarter. If at any point during the term of the Settlement
Agreement, the Company fails to make any of these payments
within 30 days after Symbol has notified the Company of its
failure to pay, Symbol shall have the right to demand immediate
payment in the amount of $25,917,669, minus payments made under
the agreement and plus applicable interest.

7



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Under the terms of the Patent Cross License
Agreement, Symbol and the Company have agreed to cross license
certain patents, and the Company has agreed to pay to Symbol a
two percent royalty on sales of certain of the Companys
wireless LAN products. If the Company fails to make any of the
lump sum payments due under the Settlement Agreement over the
next ten quarters and fails to cure any such missed payment
within 30 days thereafter, the Patent Cross License
Agreement provides that the royalty rate payable to Symbol on
sales of certain of the Companys wireless LAN products
covered by the agreement shall increase to five percent until
the required payments as set forth in the Settlement Agreement
have been made. Also pursuant to the terms of the Patent Cross
License Agreement, the Company and Symbol have entered into a
covenant not to sue one another for patent infringement with
respect to one anothers products through
September 13, 2009.

Since the date of the initial jury award of the
patent infringement suit in September 2003, the Company had
recorded an accrual for estimated past royalties of
$22.9 million and interest of $3.0 million covering
the period from 1995 through September 2003 plus total potential
royalties and interest of $2.8 million covering the period
from October 2003 to July 2, 2004. As a result of the
Settlement Agreement, the Company recorded a non-cash reversal
of royalty charges of $4.8 million and interest expense of
$3.2 million, totaling $8.0 million during the quarter
ended October 1, 2004. This reversal is the difference
between the net present value of the $22.75 million
settlement and the accrued liability related to the litigation
of $28.7 million, which was recorded in the Companys
balance sheet prior to the litigation settlement. The initial
net present value of the settlement payment was
$20.69 million. At October 1, 2004 the net present
value was $18.3 million which is included in the balance
sheet captions Accrued royalties and interest and
Accrued royalties, long-term. The difference between
the balance at October 1, 2004 and the sum of the periodic
payments will be accreted, using the effective interest rate
method, over the payment period as periodic charges to interest
expense.



| |                                                    
| | ---------------------------------------------------
| | Deficiency Notice from Nasdaq Stock Market
    Inc.

On August 30, 2004, the Company received a
letter from The Nasdaq Stock Market, Inc. (Nasdaq)
notifying it that for the 30 consecutive trading days preceding
the date of the letter, the bid price of the Companys
Class A common stock had closed below the $1.00 per share
minimum required for continued inclusion on the Nasdaq National
Market pursuant to Nasdaq Marketplace Rule 4450(b)(4). The
letter further notified the Company that, in accordance with
Nasdaq marketplace Rule 4450(e)(2), the Company would be
provided 180 calendar days, or until February 28, 2005, to
regain compliance with the minimum bid price requirement.
Compliance will be achieved if the bid price per share of the
Companys Class A common stock closes at $1.00 per
share or greater for a minimum of ten (10) consecutive days
prior to February 28, 2005.

In an attempt to increase the market price of the
Companys Class A common stock to over $1.00 per
share, the Companys stockholders approved the one-for-ten
reverse stock split, which became effective on October 25,
2004. On November 8, 2004, the Company received a letter
from Nasdaq indicating that the Company had regained compliance
with Nasdaq Marketplace Rule 4450(b)(4) because the
Companys Class A common stock had closed at a bid
price greater than $1.00 for at least 10 consecutive business
days. In the letter of November 8, 2004, Nasdaq declared
the matter closed.



| |                             
| | ----------------------------
| | Shelf Registration Statement

On October 26, 2004 the Company filed a
Registration Statement on Form S-3 with the Securities and
Exchange Commission (the SEC) using a shelf
registration process. Under this shelf registration, which
became effective on November 8, 2004, the Company may sell
any combination of securities described in the prospectus
accompanying the filing in one or more offerings with a total
value of up to $50 million.

8



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                
| | ---------------
| | Credit Facility

The Company amended and restated its secured
financing agreements with Silicon Valley Bank (the
Lender) in June and July 2003 and then further
amended these agreements in October 2003, July 2004 and October
2004. The requirement pursuant to the terms of the credit
facility that the Company maintain cash and cash equivalents of
an amount not less than $8 million was reduced to
$4 million pursuant to the terms of the foregoing
amendments. See Note 16 for further description of the
amended credit facility.



| |          
| | ---------
| | Liquidity

The Companys revenue declined from
$109.9 million for the nine months ended September 26,
2003 to $89.6 million for the nine months ended
October 1, 2004, and the Company has incurred substantial
losses and negative cash flows from operations during the nine
months ended October 1, 2004 and the years ended
December 31, 2003, 2002 and 2001. If the Company were not
able to close a financing transaction by June 30, 2005 with
gross proceeds of $20.0 million or more through a sale of
its Class A common stock and/or warrants to purchase
Class A common stock in accordance with the securities
purchase agreement dated July 27, 2004, the Company would
be required to repay the convertible Bridge Loan.

If the Company were required to repay the
convertible Bridge Loan and if it sustains continued significant
negative cash flows from its operations, it could be required to
obtain alternative sources of financing. If the Company were not
able to obtain such alternative sources of financing, it might
have insufficient cash to pay these obligations, be unable to
meet its ongoing operating obligations as they come due in the
ordinary course of business, and would have to seek protection
under applicable bankruptcy laws. These matters raise
substantial doubt about the Companys ability to continue
as a going concern. These consolidated financial statements do
not include any adjustments that might result from this
uncertainty.



| |                        
| | -----------------------
| | Risks and Uncertainties

The Company depends on single or limited source
suppliers for several key components used in the Companys
products. The Company depends on single sources for proprietary
application specific integrated circuits, or ASICs, and
assembled circuit boards for these products. Any disruptions in
the supply of these components or assemblies could delay or
decrease the Companys revenues. In addition, even for
components with multiple sources, there have been, and may
continue to be, shortages due to capacity constraints caused by
high demand. The Company does not have any long-term
arrangements with any suppliers.

The Company relies on contract and subcontract
manufacturers for turnkey manufacturing and circuit board
assemblies which subjects the Company to additional risks,
including a potential inability to obtain an adequate supply of
finished assemblies and assembled circuit boards and reduced
control over the price, timely delivery and quality of such
finished assemblies and assembled circuit boards. If the
Companys Sunnyvale facility were to become incapable of
operating, even temporarily, or were unable to operate at or
near the Companys current or full capacity for an extended
period, the Companys business and operating results could
be materially adversely affected.



| |                      
| | ---------------------
| | Basis of Presentation

The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America for interim financial information and with the
instructions to Form 10-Q and Article 10 of
Regulation S-X. The condensed consolidated balance sheet as
of October 1, 2004, the condensed consolidated statements
of operations for the three months and nine months ended
October 1, 2004 and September 26, 2003 and the
condensed consolidated statements of cash flows for the nine
months ended October 1, 2004 and September 26, 2003,
are unaudited, but include all adjustments (consisting of normal
recurring adjustments), which the Company

9



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

considers necessary for a fair statement of the
financial position, operating results and cash flows for the
periods presented.

The condensed consolidated balance sheet at
December 31, 2003 has been derived from Proxim
Corporations audited consolidated financial statements as
of that date. Certain information and footnote information
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.
Results for any interim period are not necessarily indicative of
results for any future interim period or for the entire year.
The accompanying condensed consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year
ended December 31, 2003.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity 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 the disclosure of contingent assets and
liabilities at the date of the financial statements as well as
the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates and such differences may be material to the financial
statements.



| |                            
| | ---------------------------
| | Principles of Consolidation

The condensed consolidated financial statements
include the financial statements of Proxim Corporation and all
of its subsidiaries. The financial condition and results of
operations for the three months and nine months ended
October 1, 2004 and September 26, 2003 include the
results of acquired subsidiaries from their effective dates. All
significant intercompany transactions and balances are
eliminated in consolidation.



| |                    
| | -------------------
| | Reverse Stock Split

In accordance with the Securities and Exchange
Commissions Staff Accounting Bulletin Topic 4C, Equity
Accounts and Change in Capital Structure, and the Financial
Accounting Standards Boards Statement of Financial
Accounting Standards 128, Earnings Per Share, the Company
restated all the share and per share data in these condensed
consolidated financial statements to reflect the capital
structure subsequent to the one-for-ten reverse stock split,
which became effective on October 25, 2004.



|         |                                 
|-------- | --------------------------------
|Note 2  | Recent Accounting Pronouncements

In April 2004, the Emerging Issues Task Force
issued Statement No. 03-06, Participating Securities and
the Two  Class Method Under FASB Statement
No. 128, Earnings Per Share,
(EITF 03-06). EITF 03-06 addresses a
number of questions regarding the computation of earnings per
share by companies that have issued securities other than common
stock that contractually entitle the holder to participate in
dividends and earnings of the company when, and if, it declares
dividends on its common stock. EITF 03-06 also provides
further guidance in applying the two-class method of calculating
earnings per share, clarifying what constitutes a participating
security and how to apply the two-class method of computing
earnings per share once it is determined that a security is
participating, including how to allocate undistributed earnings
to such a security. EITF 03-06 is effective for fiscal
periods beginning after March 31, 2004. The Company adopted
this EITF during the quarter ended July 2, 2004 and the
adoption had no material impact on its results of operations.

At its November 2003 meeting, the EITF reached a
consensus on disclosure guidance previously discussed under
EITF 03-01, The Meaning of Other-Than-Temporary
Impairment and Its Application to

10



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Certain Investments.The consensus provided for certain disclosure requirements that
were effective for fiscal years ending after December 15,
2003.

At its March 2004 meeting, the EITF reached a
consensus on recognition and measurement guidance previously
discussed under EITF 03-01. The consensus clarifies the
meaning of other-than-temporary impairment and its application
to investments classified as either available-for-sale or
held-to-maturity under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and
investments accounted for under the cost method or the equity
method. The implementation of the recognition and measurement
guidance provisions has been delayed. The disclosure
requirements are effective for annual financial statements for
fiscal years ending after June 30, 2004. The company will
evaluate the effect of adopting EITF 03-01 on its results
of operations once the final guidance is issued.



|         |                  
|-------- | -----------------
|Note 3  | Intangible Assets

Acquired intangible assets, net of accumulated
amortization, consist of the following (in thousands):

|                                 |                              |            |   |              |  |  |   |        | 
|-------------------------------- | ---------------------------- | ---------- | - | ------------ |  |  | - | ------ | 
|                                 |                              | October 1, |   | December 31,
|                                 |                              | 2004       |   | 2003        
|                                 |                              |            |   |             
|Acquired intangible assets, net: |                              |            |   |              |  |  |   |       
|                                 | Proxim, Inc.                 |            | $ | 12,616       |  |  | $ | 18,810 | 
|                                 | 802.11 WLAN systems business |            |   | 13,041       |  |  |   | 21,523 | 
|                                 |                              |            |   |              |  |  |   |       
|                                 | Total intangible assets, net |            | $ | 25,657       |  |  | $ | 40,333 | 
|                                 |                              |            |   |              |  |  |   |       

Acquired intangible assets by categories as of
October 1, 2004 and December 31, 2003 consist of the
following (in thousands):

|                               |                        |          |   |                          |  |              |   |        |  |  |   |        | 
|------------------------------ | ---------------------- | -------- | - | ------------------------ |  | ------------ | - | ------ |  |  | - | ------ | 
|                               |                        |          |   |                         
|                               |                        |          |   | Accumulated Amortization
|                               |                        | Gross    |   |                         
|                               |                        | Carrying |   | October 1,               |  | December 31,
|                               |                        | Amounts  |   | 2004                     |  | 2003        
|                               |                        |          |   |                          |  |             
|Amortized intangible assets:   |                        |          |   |                          |  |              |   |        |  |  |   |       
|                               | Core Technology        |          | $ | 26,531                   |  |              | $ | 12,697 |  |  | $ | 8,718  | 
|                               | Developed Technology   |          |   | 29,036                   |  |              |   | 27,029 |  |  |   | 19,063 | 
|                               | Customer Relationships |          |   | 8,995                    |  |              |   | 6,496  |  |  |   | 4,247  | 
|                               | Patents                |          |   | 3,439                    |  |              |   | 2,031  |  |  |   | 1,549  | 
|                               |                        |          |   |                          |  |              |   |        |  |  |   |       
|                               | Total                  |          | $ | 68,001                   |  |              | $ | 48,253 |  |  | $ | 33,577 | 
|                               |                        |          |   |                          |  |              |   |        |  |  |   |       
|Unamortized intangible assets: |                        |          |   |                          |  |              |   |        |  |  |   |       
|                               | Tradename              |          | $ | 5,909                    |  |              |   |        |  |  |   |        | 
|                               |                        |          |   |                          |  |              |   |        |  |  |   |       

Core technology, developed technology, customer
relationships and patents are being amortized on a straight-line
basis over the following estimated periods of benefit:

|                       |  |          
|---------------------- |  | ---------
|Core technology        |  | 5 years  
|Developed technology   |  | 2-3 years
|Customer relationships |  | 3 years  
|Patents                |  | 5 years  

The Company expects amortization expense of
existing intangible assets to be $3.2 million in the
remaining fiscal 2004, $8.7 million in fiscal 2005,
$5.9 million in fiscal 2006, and $1.9 million in
fiscal 2007, at which time existing intangible assets, other
than tradename, will be fully amortized assuming no future
impairments of those intangible assets or additions as a result
of business combinations.

11



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                         
|-------- | ------------------------
|Note 4  | Balance Sheet Components

The following is a summary of certain of the
Companys condensed consolidated balance sheets (in
thousands):

|                             |                                                                  |            |        |              |   |   |        |         |  
|---------------------------- | ---------------------------------------------------------------- | ---------- | ------ | ------------ | - | - | ------ | ------- | -
|                             |                                                                  | October 1, |        | December 31,
|                             |                                                                  | 2004       |        | 2003        
|                             |                                                                  |            |        |             
|Accounts receivable, net:    |                                                                  |            |        |              |   |   |        |        
|                             | Accounts receivable                                              |            | $      | 24,164       |   |   | $      | 34,345  |  
|                             | Less: Deferred revenue                                           |            |        | (6,896       | ) |   |        | (10,599 | )
|                             | Allowances for bad debts, sales returns and price
    protection |            |        | (8,409       | ) |   |        | (9,785  | )
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  | $          | 8,859  |              |   | $ | 13,961 |        
|                             |                                                                  |            |        |              |   |   |        |        
|Inventory:                   |                                                                  |            |        |              |   |   |        |        
|                             | Raw materials                                                    |            | $      | 3,803        |   |   | $      | 4,238   |  
|                             | Work-in-process                                                  |            |        | 1,299        |   |   |        | 1,282   |  
|                             | Finished goods                                                   |            |        | 6,401        |   |   |        | 8,223   |  
|                             | Consignment inventories                                          |            |        | 4,301        |   |   |        | 6,196   |  
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  | $          | 15,804 |              |   | $ | 19,939 |        
|                             |                                                                  |            |        |              |   |   |        |        
|Property and equipment, net: |                                                                  |            |        |              |   |   |        |        
|                             | Computer and test equipment                                      |            | $      | 11,380       |   |   | $      | 11,427  |  
|                             | Furniture and fixtures                                           |            |        | 194          |   |   |        | 194     |  
|                             | Leased assets                                                    |            |        | 2,987        |   |   |        | 2,942   |  
|                             | Leasehold improvements                                           |            |        | 438          |   |   |        | 438     |  
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  |            | 14,999 |              |   |   | 15,001 |        
|                             | Less: accumulated depreciation and amortization                  |            |        | (8,921       | ) |   |        | (7,479  | )
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  | $          | 6,078  |              |   | $ | 7,522  |        
|                             |                                                                  |            |        |              |   |   |        |        
|Intangible assets, net:      |                                                                  |            |        |              |   |   |        |        
|                             | Core technology                                                  |            | $      | 26,531       |   |   | $      | 26,531  |  
|                             | Developed technology                                             |            |        | 29,036       |   |   |        | 29,036  |  
|                             | Customer relationships                                           |            |        | 8,995        |   |   |        | 8,995   |  
|                             | Tradename                                                        |            |        | 5,909        |   |   |        | 5,909   |  
|                             | Patents                                                          |            |        | 3,439        |   |   |        | 3,439   |  
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  |            | 73,910 |              |   |   | 73,910 |        
|                             | Less: Accumulated amortization                                   |            |        | (48,253      | ) |   |        | (33,577 | )
|                             |                                                                  |            |        |              |   |   |        |        
|                             |                                                                  | $          | 25,657 |              |   | $ | 40,333 |        
|                             |                                                                  |            |        |              |   |   |        |        

12



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                |                                                  |            |        |              |  |   |        |        | 
|------------------------------- | ------------------------------------------------ | ---------- | ------ | ------------ |  | - | ------ | ------ | 
|                                |                                                  | October 1, |        | December 31,
|                                |                                                  | 2004       |        | 2003        
|                                |                                                  |            |        |             
|Other accrued liabilities:      |                                                  |            |        |              |  |   |        |       
|                                | Restructuring accruals, current portion          |            | $      | 3,592        |  |   | $      | 7,144  | 
|                                | Accrued interest on convertible promissory notes |            |        |             |  |   |        | 3,247  | 
|                                | Accrued interest on convertible bridge loan      |            |        | 271          |  |   |        |       | 
|                                | Accrued unconditional project commitments        |            |        | 799          |  |   |        | 1,284  | 
|                                | Accrued compensation                             |            |        | 4,186        |  |   |        | 3,402  | 
|                                | Accrued warranty costs                           |            |        | 1,264        |  |   |        | 1,395  | 
|                                | Deferred revenue                                 |            |        | 4,878        |  |   |        |       | 
|                                | Other accrued liabilities                        |            |        | 5,338        |  |   |        | 4,332  | 
|                                |                                                  |            |        |              |  |   |        |       
|                                |                                                  | $          | 20,328 |              |  | $ | 20,804 |       
|                                |                                                  |            |        |              |  |   |        |       
|Accrued royalties and interest: |                                                  |            |        |              |  |   |        |       
|                                | Accrued royalties, current                       |            | $      | 9,523        |  |   | $      | 26,906 | 
|                                | Accrued royalties, long-term                     |            |        | 8,805        |  |   |        |       | 
|                                |                                                  |            |        |              |  |   |        |       
|                                |                                                  | $          | 18,328 |              |  | $ | 26,906 |       
|                                |                                                  |            |        |              |  |   |        |       

The following is a summary of the movements in
allowance for bad debt, sales returns and price protection and
product warranty costs during the nine months ended
October 1, 2004 and September 26, 2003 (in thousands):

|                                   |  |                     |        |                  |  |      |         |      |  |   |       |   |  |   |       |  
|---------------------------------- |  | ------------------- | ------ | ---------------- |  | ---- | ------- | ---- |  | - | ----- | - |  | - | ----- | -
|                                   |  |                     |        |                  |  |     
|                                   |  | Allowance for Bad   |        |                 
|                                   |  | Debt, Sales Returns |        | Product Warranty
|                                   |  | and Discounts       |        | Costs           
|                                   |  |                     |        |                 
|                                   |  | 2003                |        | 2004             |  | 2003 |         | 2004
|                                   |  |                     |        |                  |  |      |         |     
|Balance at beginning of period     |  | $                   | 7,500  |                  |  | $    | 9,785   |      |  | $ | 2,041 |   |  | $ | 1,395 |  
|Additional provision               |  |                     | 6,031  |                  |  |      | 12,075  |      |  |   | 132   |   |  |   | 639   |  
|Settlements made during the period |  |                     | (2,622 | )                |  |      | (13,451 | )    |  |   | (513  | ) |  |   | (770  | )
|                                   |  |                     |        |                  |  |      |         |      |  |   |       |   |  |   |       |  
|Balance at end of period           |  | $                   | 10,909 |                  |  | $    | 8,409   |      |  | $ | 1,660 |   |  | $ | 1,264 |  
|                                   |  |                     |        |                  |  |      |         |      |  |   |       |   |  |   |       |  

The following is a summary of the changes in the
reserve for excess and obsolete inventory and lower of cost or
market during the nine months ended October 1, 2004 (in
thousands):

|                                                                            |  |   |        |  
|--------------------------------------------------------------------------- |  | - | ------ | -
|Balance as of December 31, 2003                                             |  | $ | 5,072  |  
|Provision for excess and obsolete inventory and
    lower of cost or market |  |   | 1,723  |  
|Inventory scrapped                                                          |  |   | (2,049 | )
|                                                                            |  |   |        |  
|Balance as of October 1, 2004                                               |  | $ | 4,746  |  
|                                                                            |  |   |        |  

During the nine months ended October 1,
2004, the Company recorded a $1.7 million provision for
excess and obsolete inventory and lower of cost or market as
part of its ongoing review of its inventory reserve
requirements. To mitigate the component supply constraints that
have existed in the past, the Company had built inventory levels
for certain components with long lead times and had entered into
longer term commitments for certain components. The inventory
charges were due to a decrease in anticipated demand for certain
of the Companys products, notification from customers that
they would not be ordering as many products as they had
previously indicated they would, and continued increase in
competition for wireless networking products.

13



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Due to these factors, inventory levels exceeded
the Companys requirements based on its current 12-month
sales forecasts. The additional excess and obsolete and lower of
cost or market inventory charges were calculated based on the
inventory levels in excess of the estimated 12-month sales
forecasts and anticipated reduced selling prices for certain
products. The Company does not anticipate that the excess and
obsolete inventory subject to this reserve will be saleable at a
later date based on its current 12-month sales forecast. The
Company uses a 12-month sales forecast, because the wireless
communications industry is characterized by rapid technological
changes such that if the Company has not sold a product after a
12-month period, it is unlikely that the product will be sold.

Property and equipment includes $3.0 million
of computer equipment under capital leases at October 1,
2004. Accumulated amortization of assets under capital leases
totaled $681,000.



|         |                              
|-------- | -----------------------------
|Note 5  | Impairment of Loan to Officer

The Company had guaranteed up to $5 million
of obligations of an officer of the Company, with respect to a
margin loan with an investment bank that he established prior to
2001. On October 15, 2002, the investment bank called the
Companys guaranty of $5 million. The Company
continues to seek repayment from the former officer under a
Reimbursement and Security Agreement. In this regard, in January
2003, the former officer made a cash payment of
$0.5 million to the Company. The Company assessed the
recoverability of the remaining balance of the loan with respect
to the former officers financial position and recorded an
impairment charge of $4.5 million in the fourth quarter of
2002. This impairment charge does not constitute forgiveness of
the former officers indebtedness to the Company. Future
payments by the former officer under the Reimbursement and
Security Agreement will be recorded as income in the period cash
is received.



|         |                                                          
|-------- | ---------------------------------------------------------
|Note 6  | Revenue Information and Concentration of
    Credit Risks

The Companys products are grouped into two
product lines: WWAN and WLAN product lines. The WWAN product
line includes point-to-point Lynx and Tsunami products and
point-to-multipoint Tsunami products. The WLAN product line
includes ORiNOCO 802.11 access point and client card products.
Total revenue during the nine months ended September 26,
2003 also includes one-time license revenue of $6.0 million
related to the patent infringement legal settlement agreement
with Intersil (see Note 17). Revenue information by product
line is as follows (in thousands):

|                     |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |         | 
|-------------------- | ------------- | ------------------ | ------ | ----------------- |  | ---------- | ------ | ------------- |  | - | ------ | ------ |  | - | ------ | ------- | 
|                     |               |                    |        |                  
|                     |               | Three Months Ended |        | Nine Months Ended
|                     |               |                    |        |                  
|                     |               | October 1,         |        | September 26,     |  | October 1, |        | September 26,
|Product Line         |               | 2004               |        | 2003              |  | 2004       |        | 2003         
|                     |               |                    |        |                   |  |            |        |              
|WWAN                 |               | $                  | 16,772 |                   |  | $          | 17,324 |               |  | $ | 47,031 |        |  | $ | 52,736 |        
|WLAN                 |               |                    | 14,754 |                   |  |            | 17,734 |               |  |   | 42,609 |        |  |   | 51,156 |        
|WLAN license revenue |               |                    |       |                   |  |            |       |               |  |   |       |        |  |   | 6,000  |        
|                     |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |        
|                     | Total revenue |                    | $      | 31,526            |  |            | $      | 35,058        |  |   | $      | 89,640 |  |   | $      | 109,892 | 
|                     |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |        

14



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company sells its products worldwide
primarily through independent distributors and value-added
resellers and, to a lesser extent, through its direct sales
force. It currently operates in two geographic regions: North
America and International. Revenue outside of North America is
primarily export sales denominated in United States dollars.
Disaggregated financial information regarding the Companys
revenue by geographic region is as follows (in thousands):

|                              |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |         | 
|----------------------------- | ------------- | ------------------ | ------ | ----------------- |  | ---------- | ------ | ------------- |  | - | ------ | ------ |  | - | ------ | ------- | 
|                              |               |                    |        |                  
|                              |               | Three Months Ended |        | Nine Months Ended
|                              |               |                    |        |                  
|                              |               | October 1,         |        | September 26,     |  | October 1, |        | September 26,
|Geographic Region             |               | 2004               |        | 2003              |  | 2004       |        | 2003         
|                              |               |                    |        |                   |  |            |        |              
|North America product revenue |               | $                  | 18,516 |                   |  | $          | 21,464 |               |  | $ | 52,616 |        |  | $ | 58,939 |        
|North America license revenue |               |                    |       |                   |  |            |       |               |  |   |       |        |  |   | 6,000  |        
|International product revenue |               |                    | 13,010 |                   |  |            | 13,594 |               |  |   | 37,024 |        |  |   | 44,953 |        
|                              |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |        
|                              | Total revenue |                    | $      | 31,526            |  |            | $      | 35,058        |  |   | $      | 89,640 |  |   | $      | 109,892 | 
|                              |               |                    |        |                   |  |            |        |               |  |   |        |        |  |   |        |        

Two customers accounted for 17.3% and 13.0% of
total revenue for the three months ended October 1, 2004,
and two customers accounted for 16.6% and 13.2% of total revenue
for the three months ended September 26, 2003. Two
customers accounted for 15.9% and 12.7% of total revenue for the
nine months ended October 1, 2004, and one customer
accounted for 13.9% of total revenue for the nine months ended
September 26, 2003.



|         |                                                              
|-------- | -------------------------------------------------------------
|Note 7  | Restructuring Charges for Severance and Excess
    Facilities

During the nine months ended October 1,
2004, the Company recorded restructuring charges of
$2.0 million, consisting of $1.9 million of cash
provisions and $0.1 million of non-cash provisions for
abandoned property and equipment. The $1.9 million of cash
provisions consisted of $1.4 million of operating lease
commitments, less estimated future sublease receipts and exit
costs related to a portion of the Sunnyvale facility, which was
closed in the first quarter of 2004, and $0.5 million of
severance payments for five employees. The estimated future
sublease receipts are based on current comparable rates for
leases in the respective markets. If facility rental rates
continue to decrease in these markets, or if it takes longer
than expected, or if the Company is unable to sublease these
facilities, the actual costs to close these facilities could
exceed the original estimates, and additional restructuring
charges totaling $2.6 million could result.

The following table summarizes the restructuring
activities for the year ended December 31, 2003 and the
nine months ended October 1, 2004 (in thousands):

|                                               |  |           |        |            |  |            |         |       |  |       |        |   |  |   |        |   |  |   |         |  
|---------------------------------------------- |  | --------- | ------ | ---------- |  | ---------- | ------- | ----- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                               |  |           |        |            |  | Asset Held |         |       |  |      
|                                               |  | Severance |        | Facilities |  | for Sale   |         | Other |  | Total
|                                               |  |           |        |            |  |            |         |       |  |      
|Balance as of December 31, 2002                |  | $         |       |            |  | $          | 30,450  |       |  | $     |       |   |  | $ |       |   |  | $ | 30,450  |  
|Provision charged to operations                |  |           | 9,071  |            |  |            | 12,743  |       |  |       | 6,925  |   |  |   | 3,904  |   |  |   | 32,643  |  
|Reversal of previously recorded provision      |  |           |       |            |  |            | (27,764 | )     |  |       |       |   |  |   |       |   |  |   | (27,764 | )
|Non-cash charges utilized                      |  |           |       |            |  |            |        |       |  |       |       |   |  |   | (3,304 | ) |  |   | (3,304  | )
|Cash payments                                  |  |           | (5,451 | )          |  |            | (3,845  | )     |  |       | (9,966 | ) |  |   |       |   |  |   | (19,262 | )
|Proceeds from sale of asset held for sale, net |  |           |       |            |  |            |        |       |  |       | 3,041  |   |  |   |       |   |  |   | 3,041   |  
|                                               |  |           |        |            |  |            |         |       |  |       |        |   |  |   |        |   |  |   |         |  
|Balance as of December 31, 2003                |  |           | 3,620  |            |  |            | 11,584  |       |  |       |       |   |  |   | 600    |   |  |   | 15,804  |  
|Provision charged to operations                |  |           | 463    |            |  |            | 1,447   |       |  |       |       |   |  |   | 119    |   |  |   | 2,029   |  
|Non-cash charges utilized                      |  |           |       |            |  |            |        |       |  |       |       |   |  |   | (119   | ) |  |   | (119    | )
|Cash payments                                  |  |           | (3,731 | )          |  |            | (2,568  | )     |  |       |       |   |  |   |       |   |  |   | (6,299  | )
|                                               |  |           |        |            |  |            |         |       |  |       |        |   |  |   |        |   |  |   |         |  
|Balance as of October 1, 2004                  |  | $         | 352    |            |  | $          | 10,463  |       |  | $     |       |   |  | $ | 600    |   |  | $ | 11,415  |  
|                                               |  |           |        |            |  |            |         |       |  |       |        |   |  |   |        |   |  |   |         |  

15



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The restructuring reserves were presented on the
balance sheet as follows (in thousands):

|          |                              |            |       |              |  |   |       |        | 
|--------- | ---------------------------- | ---------- | ----- | ------------ |  | - | ----- | ------ | 
|          |                              | October 1, |       | December 31,
|          |                              | 2004       |       | 2003        
|          |                              |            |       |             
|Current   |                              | $          | 3,592 |              |  | $ | 7,144 |       
|Long-term |                              |            | 7,823 |              |  |   | 8,660 |       
|          |                              |            |       |              |  |   |       |       
|          | Total restructuring accruals |            | $     | 11,415       |  |   | $     | 15,804 | 
|          |                              |            |       |              |  |   |       |       



|         |                                                                   
|-------- | ------------------------------------------------------------------
|Note 8  | Interest Income (Expense), Net and Other
    Income (Expense), Net

The following table summarizes the components of
interest income (expense), net (in thousands):

|                                                   |  |                    |       |                   |  |            |        |               |  |   |        |   |  |   |        |  
|-------------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---------- | ------ | ------------- |  | - | ------ | - |  | - | ------ | -
|                                                   |  |                    |       |                  
|                                                   |  | Three Months Ended |       | Nine Months Ended
|                                                   |  |                    |       |                  
|                                                   |  | October 1,         |       | September 26,     |  | October 1, |        | September 26,
|                                                   |  | 2004               |       | 2003              |  | 2004       |        | 2003         
|                                                   |  |                    |       |                   |  |            |        |              
|Interest (expense) reversal on royalty
    charges |  | $                  | 3,233 |                   |  | $          | (2,950 | )             |  | $ | 3,018  |   |  | $ | (2,950 | )
|Interest expense on convertible notes              |  |                    | (767  | )                 |  |            | (1,197 | )             |  |   | (5,808 | ) |  |   | (1,197 | )
|Interest expense on convertible bridge loan        |  |                    | (271  | )                 |  |            |       |               |  |   | (271   | ) |  |   |       |  
|Other expense                                      |  |                    | (4    | )                 |  |            | (45    | )             |  |   | (183   | ) |  |   | (138   | )
|                                                   |  |                    |       |                   |  |            |        |               |  |   |        |   |  |   |        |  
|                                                   |  | $                  | 2,191 |                   |  | $          | (4,192 | )             |  | $ | (3,244 | ) |  | $ | (4,285 | )
|                                                   |  |                    |       |                   |  |            |        |               |  |   |        |   |  |   |        |  

The following table summarizes the components of
other income (expense), net (in thousands):

|                                                 |  |                    |        |                   |  |            |      |               |  |   |        |   |  |   |      |  
|------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---------- | ---- | ------------- |  | - | ------ | - |  | - | ---- | -
|                                                 |  |                    |        |                  
|                                                 |  | Three Months Ended |        | Nine Months Ended
|                                                 |  |                    |        |                  
|                                                 |  | October 1,         |        | September 26,     |  | October 1, |      | September 26,
|                                                 |  | 2004               |        | 2003              |  | 2004       |      | 2003         
|                                                 |  |                    |        |                   |  |            |      |              
|Amortization of debt discount and issuance costs |  | $                  | (2,434 | )                 |  | $          | (242 | )             |  | $ | (8,171 | ) |  | $ | (242 | )
|Revaluation of common stock warrants             |  |                    | 2,500  |                   |  |            |     |               |  |   | 16,300 |   |  |   |     |  
|Loss on sale of short-term investment            |  |                    | (308   | )                 |  |            |     |               |  |   | (308   | ) |  |   |     |  
|Loss on disposal of property and equipment       |  |                    |       |                   |  |            |     |               |  |   | (350   | ) |  |   |     |  
|                                                 |  |                    |        |                   |  |            |      |               |  |   |        |   |  |   |      |  
|                                                 |  | $                  | (242   | )                 |  | $          | (242 | )             |  | $ | 7,471  |   |  | $ | (242 | )
|                                                 |  |                    |        |                   |  |            |      |               |  |   |        |   |  |   |      |  



|         |             
|-------- | ------------
|Note 9  | Income Taxes

The income tax provision recorded during the
three months ended October 1, 2004 represents net provision
for the valuation allowance of deferred tax assets as a result
of the reversal of the deferred tax liability arising from the
disposal of the short-term investments.

16



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|          |                                                       
|--------- | ------------------------------------------------------
|Note 10  | Loss Per Share Attributable to Common
    Stockholders

Basic and diluted net loss per share attributable
to common stockholders is presented in conformity with
SFAS No. 128, Earnings Per Share and
EITF 03-06, Participating Securities and the
Two  Class Method Under FASB Statement
No. 128, Earnings Per Share. The following is a
reconciliation of the numerators and denominators of the basic
and diluted net loss per share computations for the three and
nine months ended October 1, 2004 and September 26,
2003:

|                                                                                              |                                                                                          |                    |        |                   |   |            |         |               |   |   |         |       |   |   |         |       |  
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------ | ------ | ----------------- | - | ---------- | ------- | ------------- | - | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                                              |                                                                                          |                    |        |                  
|                                                                                              |                                                                                          | Three Months Ended |        | Nine Months Ended
|                                                                                              |                                                                                          |                    |        |                  
|                                                                                              |                                                                                          | October 1,         |        | September 26,     |   | October 1, |         | September 26,
|                                                                                              |                                                                                          | 2004               |        | 2003              |   | 2004       |         | 2003         
|                                                                                              |                                                                                          |                    |        |                   |   |            |         |              
|Net loss attributable to common stockholders                                                  |                                                                                          | $                  | (4,394 | )                 |   | $          | (38,151 | )             |   | $ | (31,990 | )     |   | $ | (97,688 | )    
|Weighted average common shares outstanding,
    adjusted for one-for-ten reverse stock split  |                                                                                          |                    | 12,349 |                   |   |            | 12,199  |               |   |   | 12,336  |       |   |   | 12,132  |      
|                                                                                              |                                                                                          |                    |        |                   |   |            |         |               |   |   |         |       |   |   |         |      
|                                                                                              | Net loss per share, adjusted for one-for-ten
    reverse stock split  basic and diluted |                    | $      | (0.36             | ) |            | $       | (3.13         | ) |   | $       | (2.59 | ) |   | $       | (8.05 | )
|                                                                                              |                                                                                          |                    |        |                   |   |            |         |               |   |   |         |       |   |   |         |      
|Potentially dilutive shares not included in the
    calculation because they are antidilutive |                                                                                          |                    | 15,758 |                   |   |            | 8,577   |               |   |   | 15,612  |       |   |   | 7,354   |      
|                                                                                              |                                                                                          |                    |        |                   |   |            |         |               |   |   |         |       |   |   |         |      

For the three and nine months ended
October 1, 2004 and September 26, 2003, basic net loss
per share was computed using the weighted average number of
shares outstanding during the period. Diluted net loss per share
was determined in the same manner as basic earnings per share
except that the number of shares was increased assuming dilutive
stock options and warrants using the treasury stock method. For
the three and nine months ended October 1, 2004 and
September 26, 2003, the incremental shares from the assumed
exercise of stock options and warrants, and the assumed
conversion of Series A and Series B Preferred Stock,
were not included in computing diluted per share amounts as the
effect would be antidilutive.



|          |                   
|--------- | ------------------
|Note 11  | Comprehensive Loss

The total comprehensive loss for the three and
nine months ended October 1, 2004 and September 26,
2003 is as follows (in thousands):

|                                             |                          |                    |        |                   |   |            |         |               |   |   |         |         |   |   |         |         |  
|-------------------------------------------- | ------------------------ | ------------------ | ------ | ----------------- | - | ---------- | ------- | ------------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                             |                          |                    |        |                  
|                                             |                          | Three Months Ended |        | Nine Months Ended
|                                             |                          |                    |        |                  
|                                             |                          | October 1,         |        | September 26,     |   | October 1, |         | September 26,
|                                             |                          | 2004               |        | 2003              |   | 2004       |         | 2003         
|                                             |                          |                    |        |                   |   |            |         |              
|Net loss attributable to common stockholders |                          | $                  | (4,394 | )                 |   | $          | (38,151 | )             |   | $ | (31,990 | )       |   | $ | (97,688 | )      
|Unrealized gain (loss) on investments        |                          |                    | (306   | )                 |   |            | 168     |               |   |   |        |         |   |   | 572     |        
|                                             |                          |                    |        |                   |   |            |         |               |   |   |         |         |   |   |         |        
|                                             | Total comprehensive loss |                    | $      | (4,700            | ) |            | $       | (37,983       | ) |   | $       | (31,990 | ) |   | $       | (97,116 | )
|                                             |                          |                    |        |                   |   |            |         |               |   |   |         |         |   |   |         |        



|          |                             
|--------- | ----------------------------
|Note 12  | Convertible Promissory Notes

On July 22, 2003, the Investors agreed to
collectively invest an aggregate of $30.0 million and
potentially up to an aggregate of $40.0 million in the
Company. On July 30, 2003, the Company issued short-term
secured exchangeable promissory notes bearing interest at
25% per annum pursuant to the securities purchase agreement
dated July 22, 2003. On October 21, 2003, the Company
amended and restated its securities purchase agreement (the
Amended Agreement) with the Investors and its
$30.0 million short-term secured promissory notes issued to
these Investors on July 30, 2003. The amended and restated
secured exchangeable promissory notes (the Amended
Notes) continued to bear interest at 25% per annum,
subject to increase on an event of default or other events.

17



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

At the option of the Investors and subject to the
approval of the Companys stockholders, the Amended Notes
were exchangeable for shares of the Companys Series B
Preferred Stock with an aggregate initial liquidation preference
equal to the principal amount of the exchanged indebtedness,
plus accrued but unpaid interest, at the conversion price of
$100.00 per share. The liquidation preference on the
Amended Notes accreted at 14% per annum, compounded
quarterly, through the seventh anniversary of the date on which
the Company first issued shares of the Series B Preferred
Stock, or the Series B Preferred Stock original issue date.
Upon issuance, the Series B Preferred Stock also was
entitled to per share weighted average conversion price
adjustments for dilutive issuances and subscription rights in
certain equity financings.

Subject to the approval of its stockholders, the
Company agreed to issue to the Investors warrants to
purchase 1.8 million and 0.6 million shares of
Class A common stock at an exercise price of $14.60 and
$15.30 per share, respectively (collectively, the
Series B Warrants). The Investors also agreed
to make available to the Company an additional
$10.0 million, issuable in exchange for senior secured
exchangeable promissory notes (the New Notes, and
together with the Amended Notes, the Notes), at the
Companys election (the Call Right).

At a special meeting of stockholders held on
December 12, 2003, the Companys stockholders approved
the Companys ability to issue to the Investors:
(i) shares of the Companys Series B Preferred
Stock upon exercise of each Investors right to exchange
the Notes, plus accrued but unpaid interest thereon, as well as
upon each Investors exercise of the right to exchange any
New Notes that the Company might issue to the Investors, plus
accrued but unpaid interest thereon; and (ii) the
Series B Warrants. Following the receipt of stockholder
approval, the Company issued the Series B Warrants to the
Investors on December 12, 2003. In accordance with the
terms of the Amended Agreement, the Company exercised its Call
Right and on December 19, 2003, the Company issued the New
Notes to the Investors in exchange for an additional investment
of $10 million.

As described in Note 1, on July 30,
2004, the Investors exchanged the aggregate principal amount of
the Notes plus accrued but unpaid interest thereon of
$49,059,990, for 490,599 shares of Series B Preferred
Stock, in accordance with the existing terms and conditions of
the Notes. The exchange relieved the Company from the
requirement to repay the Notes on their maturity date of
September 30, 2004.



|          |                                                       
|--------- | ------------------------------------------------------
|Note 13  | Mandatorily Redeemable Convertible Preferred
    Stock

As described in Note 1 under Significant
Events, on July 27, 2004, subject to the approval of the
Companys stockholders, the Investors agreed to surrender
all of their Series A Preferred Stock, all of their
Series B Preferred Stock, and all of their warrants to
purchase the Companys Class A common stock in
exchange for an aggregate of 16.4 million shares of
Class A common stock and 400,000 shares of the
Companys newly issued Series C Preferred Stock (the
Exchange). At a special meeting of stockholders held
on October 21, 2004, the Companys stockholders
approved the Exchange and the Investors surrendered all of their
Series A Preferred Stock, all of the Series B
Preferred Stock and all of their Class A common stock
warrants.

18



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of October 1, 2004, Madatorily Redeemable
Convertible Preferred Stock consisted of the following:

|         |  |            |           |             |  |             |           |                 |  |   |             |  |  |  |           | 
|-------- |  | ---------- | --------- | ----------- |  | ----------- | --------- | --------------- |  | - | ----------- |  |  |  | --------- | 
|         |  |            |           |             |  |             |           | Total Number of
|         |  |            |           |             |  |             |           | Shares of      
|         |  |            |           |             |  |             |           | Class A        
|         |  |            |           |             |  |             |           | Common Stock   
|         |  |            |           | Issued and  |  | Liquidation |           | Issuable Upon  
|         |  | Authorized |           | Outstanding |  | Preference  |           | Conversion     
|         |  |            |           |             |  |             |           |                
|Series A |  |            | 3,000,000 |             |  |             | 3,000,000 |                 |  | $ | 87,739,392  |  |  |  | 4,242,717 | 
|         |  |            |           |             |  |             |           |                 |  |   |             |  |  |  |           | 
|Series B |  |            | 540,000   |             |  |             | 490,599   |                 |  |   | 50,223,699  |  |  |  | 4,367,282 | 
|         |  |            |           |             |  |             |           |                 |  |   |             |  |  |  |           | 
|         |  |            |           |             |  |             |           |                 |  | $ | 137,963,091 |  |  |  | 8,609,999 | 
|         |  |            |           |             |  |             |           |                 |  |   |             |  |  |  |           | 

As described in Note 1, on July 30,
2004, the Investors exchanged the Notes for shares of the
Companys Series B Preferred Stock. Because this
exchange took place before the maturity date of the Notes, the
conversion price for the Series A Preferred Stock was
adjusted according to the terms of the Series A Preferred
Stock to approximately $20.70 to reflect the decrease in the
dilutive effect of the issuance of the Series B Preferred
Stock to the holders of the Series A Preferred Stock.
Subsequent to this adjustment, on a fully accreted basis as of
August 5, 2005, the Series A Preferred Stock would
have consisted of the following:

|         |  |             |            |                 |  |  |           | 
|-------- |  | ----------- | ---------- | --------------- |  |  | --------- | 
|         |  |             |            | Total Number of
|         |  |             |            | Shares of      
|         |  |             |            | Class A        
|         |  |             |            | Common Stock   
|         |  | Liquidation |            | Issuable Upon  
|         |  | Preference  |            | Conversion     
|         |  |             |            |                
|Series A |  | $           | 94,899,000 |                 |  |  | 4,588,923 | 
|         |  |             |            |                 |  |  |           | 

In August 2002, in connection with the
acquisition of the 802.11 WLAN systems business of Agere
Systems, Inc., Warburg Pincus Private Equity VIII, L.P., BCP
Capital, L.P. and affiliated entities agreed to collectively
invest $75.0 million in the Company. These investors
received 1,640,000 shares of Series A Preferred Stock
in the amount of approximately $41.0 million, with a
conversion price of approximately $30.60 per share, and
warrants to purchase approximately 0.67 million shares of
our Class A common stock valued at $12.3 million. The
value of the warrants was recorded as a reduction of the
Series A Preferred Stock carrying value and recorded as
additional paid-in capital. A deemed preferred stock dividend
representing the beneficial conversion feature of the
Series A Preferred Stock of $2.7 million was also
recorded to increase the loss attributable to holders of the
Companys Class A common stock.

Upon receipt of approval of the Companys
stockholders at a special meeting held on October 8, 2002,
the notes issued to these investors were converted into
1,360,000 shares of Series A Preferred Stock and the
Company granted to these investors additional warrants to
purchase approximately 0.56 million shares of the
Companys Class A common stock value at $1.7 million.
In total, the investors were granted warrants to acquire
1.2 million shares of Class A common stock for
approximately $30.60 per share value at $14.0 million.
The Series A Preferred Stock issued to the Investors
represented approximately 20.4% of the Companys
outstanding Class A common stock on an as-converted and
as-exercised basis as of October 1, 2004.

19



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The issuance of Series A Preferred Stock,
convertible notes and related warrants and the subsequent
conversion, accretion and interest accrual were recorded through
October 1, 2004 as follows (in thousands):

|                                                                     |  |             |         |           |  |            |         |             |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------- |  | ----------- | ------- | --------- |  | ---------- | ------- | ----------- |  | - | ------ | - |  | - | ------- | -
|                                                                     |  |             |         | Series A  |  | Additional |         |            
|                                                                     |  | Convertible |         | Preferred |  | Paid-In    |         | Accumulated
|                                                                     |  | Notes       |         | Stock     |  | Capital    |         | Deficit    
|                                                                     |  |             |         |           |  |            |         |            
|Issuance of Series A Preferred Stock                                 |  | $           |        |           |  | $          | 41,000  |             |  | $ |       |   |  | $ |        |  
|Issuance of convertible notes                                        |  |             | 34,000  |           |  |            |        |             |  |   |       |   |  |   |        |  
|Issuance of warrants                                                 |  |             |        |           |  |            | (13,993 | )           |  |   | 13,993 |   |  |   |        |  
|Conversion of convertible notes                                      |  |             | (34,000 | )         |  |            | 34,000  |             |  |   |       |   |  |   |        |  
|Deemed Preferred Stock dividend                                      |  |             |        |           |  |            |        |             |  |   | 2,740  |   |  |   | (2,740  | )
|Accretion of Preferred Stock redemption
    obligations              |  |             |        |           |  |            | 2,936   |             |  |   | (1,046 | ) |  |   | (1,890  | )
|Accrued interest on convertible notes payable in
    Preferred Stock |  |             |        |           |  |            | 469     |             |  |   |       |   |  |   |        |  
|                                                                     |  |             |         |           |  |            |         |             |  |   |        |   |  |   |         |  
|Balance as of December 31, 2002                                      |  |             |        |           |  |            | 64,412  |             |  |   | 15,687 |   |  |   | (4,630  | )
|Accretion of Preferred Stock redemption
    obligations              |  |             |        |           |  |            | 9,168   |             |  |   | (2,865 | ) |  |   | (6,303  | )
|                                                                     |  |             |         |           |  |            |         |             |  |   |        |   |  |   |         |  
|Balance as of December 31, 2003                                      |  | $           |        |           |  | $          | 73,580  |             |  | $ | 12,822 |   |  | $ | (10,933 | )
|Accretion of Preferred Stock redemption
    obligations              |  |             |        |           |  |            | 7,169   |             |  |   | (2,099 | ) |  |   | (5,070  | )
|                                                                     |  |             |         |           |  |            |         |             |  |   |        |   |  |   |         |  
|Balance as of October 1, 2004                                        |  | $           |        |           |  | $          | 80,749  |             |  | $ | 10,723 |   |  | $ | (16,003 | )
|                                                                     |  |             |         |           |  |            |         |             |  |   |        |   |  |   |         |  

As of October 1, 2004, the holders of
Series A Preferred Stock had various rights and preferences
as follows:



| |       
| | ------
| | Voting

For so long as Warburg Pincus owned at least 25%
of its shares of Series A Preferred Stock or the
Class A common stock issuable on conversion of its
Series A Preferred Stock and exercise of its warrants,
Warburg Pincus would have had the right to nominate for election
one member of the Companys board of directors, who would
reside on all major board committees for so long as such
committee membership did not conflict with any applicable law or
regulation or any listing requirements of the Nasdaq National
Market.

The approval of holders of a majority of the
Series A Preferred Stock would have been separately
required to approve changes to the Companys certificate of
incorporation or bylaws that would adversely affect these
holders rights, any offer, sale or issuance of the
Companys equity or equity-linked securities ranking senior
to or equally with the Series A Preferred Stock, and any
repurchase or redemption of the Companys equity securities
(other than from an employee, director or consultant following
termination), or the declaration or payment of any dividend on
the Companys Class A common stock.



| |           
| | ----------
| | Redemption

In August 2007, the Company would have been
required to redeem all outstanding shares of Series A
Preferred Stock, if any, for cash equal to their liquidation
preference, which bore interest at 8% per annum, compounded
semi-annually, for three years, plus accrued and unpaid
dividends.



| |          
| | ---------
| | Dividends

From August 2005 through August 2007, outstanding
shares of Series A Preferred Stock would have been entitled
to cumulative dividends equal to 8% of their liquidation
preference per year, payable, at the Companys election, in
cash or shares of the Companys Class A common stock
valued at the then-market price;

20



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |            
| | -----------
| | Liquidation

Each share of Series A Preferred Stock had
an initial liquidation preference of $25.00 and the liquidation
preference bore interest at 8% per annum, compounded
semi-annually, for three years. The liquidation preference was
subject to adjustments in the event the Company undertook a
business combination or other extraordinary transaction, or the
Company was liquidated or dissolved.



| |           
| | ----------
| | Conversion

In the event of a change in control of the
Company, the Company would have had the right to convert the
Series A Preferred Stock into Class A common stock if
upon such conversion the holders of Series A Preferred
Stock would have received liquid securities or cash with a fair
market value equal to or greater than 110% of the liquidation
preference then in effect. If the consideration was less than
110% of the liquidation preference, the Company would have had
the option either to repurchase or modify the conversion price
so that the consideration would equal 110% of the liquidation
preference then in effect or exchange the Series A
Preferred Stock for cash at 101% of the liquidation preference
then in effect. In addition, in the event of a change in control
that occurred prior to August 2005, the liquidation preference
would have increased as necessary to provide for three years of
accretion.

Holders of Series A Preferred Stock had
rights to acquire additional shares of the Companys
capital stock or rights to purchase property in the event of
certain grants, issuance or sales.

The conversion price of the Series A
Preferred Stock, which initially was approximately
$30.60 per share, was subject to customary weighted average
anti-dilution adjustments and other customary adjustments, and
as of July 2, 2004 had been reduced to $20.49 per
share. As of October 1, 2004, the conversion price was
adjusted upward to approximately $20.70.

In connection with the acquisition of the 802.11
WLAN systems business of Agere Systems, Inc., the Company also
issued warrants as described in Note 14.

On a fully accreted basis on July 30, 2011,
Series B Preferred Stock would have consisted of the
following:

|         |  |             |             |                 |  |  |            | 
|-------- |  | ----------- | ----------- | --------------- |  |  | ---------- | 
|         |  |             |             | Total Number of
|         |  |             |             | Shares of      
|         |  |             |             | Class A        
|         |  |             |             | Common Stock   
|         |  | Liquidation |             | Issuable Upon  
|         |  | Preference  |             | Conversion     
|         |  |             |             |                
|Series B |  | $           | 128,545,376 |                 |  |  | 11,177,866 | 
|         |  |             |             |                 |  |  |            | 

21



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The issuance of the Notes and the subsequent
conversion, accretion and interest accrual were recorded through
October 1, 2004 as follows (in thousands):

|                                                                     |  |             |         |           |  |             |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | ----------- | ------- | --------- |  | ----------- | ------ | - |  | - | ------ | -
|                                                                     |  |             |         | Series B  |  |            
|                                                                     |  | Convertible |         | Preferred |  | Accumulated
|                                                                     |  | Notes       |         | Stock     |  | Deficit    
|                                                                     |  |             |         |           |  |            
|Issuance of convertible notes                                        |  |             | 40,000  |           |  |             |       |   |  |   |       |  
|Debt discount                                                        |  |             | (5,565  | )         |  |             |       |   |  |   |       |  
|Amortization of debt discount costs                                  |  |             | 300     |           |  |             |       |   |  |   | (300   | )
|                                                                     |  |             |         |           |  |             |        |   |  |   |        |  
|Balance as of December 31, 2003                                      |  | $           | 34,735  |           |  | $           |       |   |  | $ | (300   | )
|Amortization of debt discount costs                                  |  |             | 5,265   |           |  |             |       |   |  |   | (5,265 | )
|Accrued interest on convertible notes payable in
    Preferred Stock |  |             | 9,060   |           |  |             |       |   |  |   | (9,060 | )
|Conversion of convertible notes                                      |  |             | (49,060 | )         |  |             | 49,060 |   |  |   |       |  
|Accretion of Preferred Stock redemption
    obligations              |  |             |        |           |  |             | 1,164  |   |  |   | (1,164 | )
|Issuance cost                                                        |  |             |        |           |  |             | (521   | ) |  |   |       |  
|                                                                     |  |             |         |           |  |             |        |   |  |   |        |  
|Balance as of October 1, 2004                                        |  | $           |        |           |  | $           | 49,703 |   |  | $ | 15,789 |  
|                                                                     |  |             |         |           |  |             |        |   |  |   |        |  

As of October 1, 2004, the holders of the
Notes and the Series B Preferred Stock had various rights
and preferences as follows:

Voting

In addition to its rights as a holder of
Series A Preferred Stock, for so long as Warburg Pincus
owned at least 25% of its shares of Series B Preferred
Stock or the Class A common stock issuable on conversion of
its Series B Preferred Stock and exercise of its warrants,
Warburg Pincus had the right to nominate for election one member
of the Companys board of directors, who would reside on
all major board committees for so long as such committee
membership does not conflict with any applicable law or
regulation or any listing requirements of the Nasdaq National
Market. The approval of holders of a majority of the
Series B Preferred Stock was separately required to approve
changes to the Companys certificate of incorporation or
bylaws that would have adversely affected these holders
rights, any other sale or issuance of the Companys equity
or equity-linked securities ranking senior to or equally with
the Series B Preferred Stock, and any repurchase or
redemption of the Companys equity securities (other than
from an employee, director or consultant following termination),
or the declaration or payment of any dividend on the
Companys common stock.

Although the conversion of the Series B
Preferred Stock was subject to weighted-average anti-dilution
adjustments in the event of certain issuances of the
Companys common stock, or securities exercisable for or
exchangeable or convertible into our common stock, as described
below, the Series B Certificate of Designations limited the
voting rights of the Series B Preferred Stock, such that
the Series B Preferred Stock could not vote at a higher
rate than if converted to common stock at $11.50, subject to
certain adjustments.



| |           
| | ----------
| | Redemption

In July 2011, the Company would have been
required to redeem all outstanding shares of Series B
Preferred Stock, if any, for cash equal to their liquidation
preference, which bore interest at 14% per annum,
compounded quarterly, for seven years, plus accrued and unpaid
dividends.



| |           
| | ----------
| | Conversion

As of October 1, 2004, at the option of the
note holders, the Series B Preferred Stock was exchangeable
for shares of the Companys Class A common stock at
the conversion price of $11.50 per share, subject to

22



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

antidilution adjustments. The Company had the
right to require conversion of the Series B Preferred Stock
after five years if the closing price of its Class A common
stock exceed 300% of the conversion price for ninety consecutive
trading days. The Series B Preferred Stock was convertible
at the option of the holders at any time, in whole or in part,
into that number of shares of Class A common stock equal to
the liquidation preference then in effect divided by the then
current conversion price.

In the event of a change in control of the
Company, the holders of the Series B Preferred Stock would
have had the right to convert the Series B Preferred Stock
into Class A common stock if upon such conversion the
holders of Series B Preferred Stock would have received
liquid securities or cash with a fair market value equal to or
greater than 110% of the liquidation preference then in effect.
If the consideration would have been less than 110% of the
liquidation preference, the Company would have had either to
modify the conversion price so that the consideration would
equal 110% of the liquidation preference then in effect or offer
to repurchase the Series B Preferred Stock for cash at 101%
of the liquidation preference then in effect. In addition, in
the event of a change of control that occurred prior to the
seventh anniversary of the issuance of the Series B
Preferred Stock, the liquidation preference would have increased
as necessary to provide for seven years of accretion.



| |              
| | -------------
| | Anti-Dilution

The conversion price was subject to customary
weighted average anti-dilution adjustments and other customary
adjustments upon some transactions that affect the
Companys capital stock.



| |           
| | ----------
| | Put Rights

Had a change in control occurred while the Notes
were outstanding, 150% of the accrued value of the Notes with a
cap of $10.0 million on the accrued interest portion of the
Notes, would have been immediately due and payable.



|          |                      
|--------- | ---------------------
|Note 14  | Stockholders Deficit



| |                                      
| | -------------------------------------
| | Warrants to Purchase Common
    Stock

In connection with the acquisition of the 802.11
WLAN systems business of Agere Systems, Inc., the Company issued
warrants to purchase 1.2 million shares of the
Companys Class A common stock to Warburg Pincus
Private Equity VIII, L.P. and BCP Capital, L.P. and affiliated
entities. Each new warrant was convertible into one share of
Class A common stock of the Company at an exercise price of
approximately $30.60 per share. As a result of subsequent
antidilution adjustments, these warrants represented rights to
purchase 1.8 million shares of our Class A common
stock at an exercise price of approximately $20.68 as of
October 1, 2004. At issuance, the Company estimated the
fair value of the warrants using the Black-Scholes option
valuation model totaling $14.0 million. The warrants would
have expired on August 5, 2007.

In connection with a three-year licensing and
distribution agreement entered into with Motorola, Inc. on
September 8, 2003, the Company issued to Motorola a fully
vested warrant to purchase 108,000 shares of the
Companys Class A common stock at an exercise price of
$23.40 per share. This warrant will expire on
September 8, 2008. The Company has estimated the fair value
of the warrant using the Black-Scholes option valuation model at
$2.1 million. The fair value of the warrant is being
amortized on a straight-line basis over the three-year term of
the commercial arrangement with Motorola with quarterly charges
against revenue of $174,000 effective beginning in the first
quarter of 2004.

In connection with additional investments made by
Warburg Pincus Private Equity VIII, L.P., BCP Capital, L.P. and
affiliated entities during the year ended December 31,
2003, the Company issued to these investors warrants to
purchase 1.8 million and 0.6 million shares of
the Companys Class A common stock at an exercise
price of $14.60 per share and $15.30 per share,
respectively (see Note 12). These warrants were

23



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

valued by the Company with the assistance of an
independent valuation consulting firm at $22.2 million at
December 12, 2003 and $21.8 million at
December 31, 2003. The fair value of the warrants were
recorded as a long-term liability, as the warrant holders were
entitled to require the Company to purchase the warrants for
cash, as defined in the agreement, upon the occurrence of a
change in control event. The fair value of the warrants was
subject to revaluation adjustments at the end of each reporting
period, until they were surrendered by the Investors in the
Exchange on October 22, 2004. For the life of the warrants,
the resulting gain or loss was recorded as other income or
expense in the corresponding reporting period. These warrants
would have expired by their terms on December 15, 2010.

As of October 1, 2004, the Company had
issued in the aggregate, warrants to
purchase 3,735,134 shares of the Companys
Class A common stock of which warrants to
purchase 3,627,134 were issued to the Investors. As a
result of antidilution adjustments, as of October 1, 2004,
these warrants represented rights to
purchase 4,478,477 shares of Class A common stock
of which warrants to purchase 4,213,346 shares were
held by the Investors.

As described in Note 1 under Significant
Events, on October 22, 2004 pursuant to the approval of the
Companys stockholders, the Investors surrendered all of
their Series A Preferred Stock, all of their Series B
Preferred Stock, and all of their warrants to purchase the
Companys Class A common stock in exchange for an
aggregate of 16.4 million shares of Class A common
stock and 400,000 shares of the Companys newly issued
Series C Preferred Stock.



| |                                                               
| | --------------------------------------------------------------
| | Pro Forma Fair Value Disclosure Under
    SFAS No. 123 and 148

In accordance with SFAS No. 148,
Accounting for Stock-based Compensation, Transition and
Disclosure, the Company is required to disclose the
effects on reported net loss and basic and diluted net loss per
share as if the fair value based method had been applied to all
awards.

The weighted average estimated grant date fair
value, as defined by SFAS No. 123, for stock options
granted under its stock option plans during the nine months
ended October 1, 2004 and September 26, 2003 was
$14.23 and $11.20 per share, respectively. The weighted
average estimated grant date fair value of stock purchase rights
granted pursuant to its employee stock purchase plan during the
nine months ended October 1, 2004 and September 26,
2003 was $7.84 and $7.50 per share, respectively. The
estimated grant date fair value disclosed by the Company is
calculated using the Black-Scholes option pricing model. The
Black-Scholes model, as well as other currently accepted option
valuation models, was developed to estimate the fair value of
freely tradable, fully transferable options without vesting
restrictions, which significantly differ from its stock option
and purchase awards. These models also require highly subjective
assumptions, including future stock price volatility and
expected time until exercise, which greatly affect the
calculated grant date fair value.

Had the Company recorded compensation based on
the estimated grant date fair value, as defined by
SFAS No. 123, for awards granted under its stock
option plans and stock purchase plan, the net loss attributable
to common stockholders and net loss per share attributable to
common stockholders would have been (in thousands, except per
share data):

|                                                                                       |  |                    |        |                   |  |            |         |               |  |   |         |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---------- | ------- | ------------- |  | - | ------- | - |  | - | -------- | -
|                                                                                       |  |                    |        |                  
|                                                                                       |  | Three Months Ended |        | Nine Months Ended
|                                                                                       |  |                    |        |                  
|                                                                                       |  | October 1,         |        | September 26,     |  | October 1, |         | September 26,
|                                                                                       |  | 2004               |        | 2003              |  | 2004       |         | 2003         
|                                                                                       |  |                    |        |                   |  |            |         |              
|Net loss attributable to common stockholders as
    reported                           |  | $                  | (4,394 | )                 |  | $          | (38,151 | )             |  | $ | (31,990 | ) |  | $ | (97,688  | )
|Less: stock-based employee compensation expense
    determined under fair value method |  |                    | (1,477 | )                 |  |            | (1,057  | )             |  |   | (4,565  | ) |  |   | (6,770   | )
|                                                                                       |  |                    |        |                   |  |            |         |               |  |   |         |   |  |   |          |  
|Pro forma net loss attributable to common
    stockholders                             |  | $                  | (5,871 | )                 |  | $          | (39,208 | )             |  | $ | (36,555 | ) |  | $ | (104,458 | )
|                                                                                       |  |                    |        |                   |  |            |         |               |  |   |         |   |  |   |          |  

24



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|             |                                                                              |                    |   |                   |   |            |   |               |   |  |   |       |   |  |   |       |  
|------------ | ---------------------------------------------------------------------------- | ------------------ | - | ----------------- | - | ---------- | - | ------------- | - |  | - | ----- | - |  | - | ----- | -
|             |                                                                              |                    |   |                  
|             |                                                                              | Three Months Ended |   | Nine Months Ended
|             |                                                                              |                    |   |                  
|             |                                                                              | October 1,         |   | September 26,     |   | October 1, |   | September 26,
|             |                                                                              | 2004               |   | 2003              |   | 2004       |   | 2003         
|             |                                                                              |                    |   |                   |   |            |   |              
|As reported: |                                                                              |                    |   |                   |   |            |   |               |   |  |   |       |   |  |   |      
|             | Basic and diluted net loss attributable to common
    stockholders per share |                    | $ | (0.36             | ) |            | $ | (3.13         | ) |  | $ | (2.59 | ) |  | $ | (8.05 | )
|             |                                                                              |                    |   |                   |   |            |   |               |   |  |   |       |   |  |   |      
|Pro forma:   |                                                                              |                    |   |                   |   |            |   |               |   |  |   |       |   |  |   |      
|             | Basic and diluted net loss attributable to common
    stockholders per share |                    | $ | (0.48             | ) |            | $ | (3.21         | ) |  | $ | (2.96 | ) |  | $ | (8.61 | )
|             |                                                                              |                    |   |                   |   |            |   |               |   |  |   |       |   |  |   |      

The pro forma effect on net loss and net loss per
share for the three and nine months ended October 1, 2004
and September 26, 2003 is not representative of the pro
forma effect on net loss in future years because it does not
take into consideration pro forma compensation expense related
to grants made prior to 1996.



|          |                              
|--------- | -----------------------------
|Note 15  | Commitments and Contingencies

The Company occupies its facilities under several
non-cancelable operating lease agreements expiring at various
dates through September 2009, and requiring payment of property
taxes, insurance, maintenance and utilities. Future minimum
lease payments under non-cancelable operating were as follows
(in thousands):

|                                      |  |          |        | 
|------------------------------------- |  | -------- | ------ | 
|                                      |  | Minimum 
|                                      |  | Lease   
|                                      |  | Payments
|                                      |  |         
|Three months ending December 31, 2004 |  | $        | 1,981  | 
|Year ending December 31:              |  |          |        | 
|2005                                  |  |          | 7,740  | 
|2006                                  |  |          | 6,708  | 
|2007                                  |  |          | 6,371  | 
|2008                                  |  |          | 6,435  | 
|Thereafter                            |  |          | 4,434  | 
|                                      |  |          |        | 
|Total minimum lease payments          |  | $        | 33,669 | 
|                                      |  |          |        | 

For the nine months ended October 1, 2004
and the years ended December 31, 2003 and 2002, the Company
recorded restructuring charges relating to the committed future
lease payments for closed facilities, net of estimated future
sublease receipts of which $10.5 million are included in
the above disclosures.

Under the terms of the Settlement Agreement, the
Company agreed to pay Symbol $22.75 million dollars over
the Companys ensuing ten quarters, commencing with the
quarter ending October 1, 2004. The Settlement Agreement
provides for lump sum payments of $2.5 million per quarter
in each of the first eight quarters, a payment of
$1.5 million in the ninth quarter, and a payment of
$1.25 million in the tenth quarter. If at any point during
the term of the Settlement Agreement, the Company fails to make
any of these payments within 30 days after Symbol has
notified the Company of its failure to pay, Symbol shall have
the right to demand immediate payment in the amount of
$25,917,669, minus payments made under the agreement and plus
applicable interest.

Under the terms of the Patent Cross License
Agreement, Symbol and the Company have agreed to cross license
certain patents, and the Company has agreed to pay to Symbol a
two percent royalty on sales of certain of the Companys
wireless LAN products. If the Company fails to make any of the
lump sum payments due under the Settlement Agreement over the
next ten quarters and fails to cure any such missed payment
within 30 days thereafter, the Patent Cross License
Agreement provides that the royalty rate payable to Symbol on

25



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

sales of certain of the Companys wireless
LAN products covered by the agreement shall increase to five
percent until the required payments as set forth in the
Settlement Agreement have been made.



|          |                  
|--------- | -----------------
|Note 16  | Credit Facilities

In December 2002, the Company entered into a
secured credit facility with Silicon Valley Bank (the
Lender), and then subsequently amended the credit
facility in March 2003. On June 13, 2003, in order to
secure additional working capital, the Company entered into a
letter agreement (the Letter Agreement) and an
accounts receivable financing agreement, which effectively
amended and restated the existing credit facility in its
entirety. The Company subsequently amended the accounts
receivable financing agreement (amended, the Amended A/R
Financing Agreement) on July 25, 2003,
October 31, 2003 and most recently on July 31, 2004.

Under the Amended A/R Financing Agreement, the
Company may borrow up to $20.0 million in total. First, the
Company may borrow up to $10.0 million by financing a
portion of its eligible accounts receivable, primarily limited
to customers in the United States. Under this arrangement, the
Lender may agree to accept for collection through a lockbox
arrangement accounts receivable from the Company, and in return
the Company will receive advances from the Lender at a rate
equal to 80% of accounts receivable from account debtors who are
not distributors, and 50% of accounts receivable from account
debtors who are distributors, subject to borrowing restrictions
on most international accounts and at the discretion of the
Lender. After collection of a receivable, the Lender will refund
to the Company the difference between the amount collected and
the amount initially advanced to the Company, less a finance
charge applied against the average monthly balance of all
transferred but outstanding receivables at a rate per annum
equal to the Lenders prime rate plus 1.50 percentage
points, or 5.75%, whichever is greater. In addition to a
facility fee of $100,000, the Company must pay each month to the
Lender a handling fee equal to 0.25% of the average monthly
balance of transferred but outstanding receivables. The Company
must repay each advance upon the earliest to occur of
(i) the collection of the corresponding financed
receivable, (ii) the date on which the corresponding
financed receivable becomes an ineligible receivable pursuant to
the terms of the Amended A/R Financing Agreement, or
(iii) July 30, 2005. Second, the Company may borrow up
to an additional $10 million, under which the Company is
required to maintain a compensating cash balance equal to such
borrowings.

Under the A/R Financing Agreement, the Company
may receive temporary advances from the Lender in excess of the
availability otherwise applicable under the A/R Financing
Agreement (Temporary Overadvances), in an amount
equal to $4.0 million for advances relating to letters of
credit and in an amount equal to $4.0 million to be used
for working capital purposes. The Company may receive Temporary
Overadvances under this arrangement through November 30,
2004. This Temporary Overadvances arrangement may be renewed
upon agreement by both the Company and the Lender. Borrowings
outstanding under Temporary Overadvances are subject to a
finance charge of 1.5% per week. As of October 1,
2004, no borrowings were outstanding under the Amended A/R
Financing Agreement.

Obligations under the amended A/ R Financing
Agreement are collateralized by a security interest on all of
the assets of the Company, including intellectual property, and
are senior in lien priority and right of payment to the
Companys obligations to the funds affiliated with Warburg
Pincus and BCP Capital, L.P. under the secured promissory notes
issued in July 2003 and amended in October 2003 and which until
the exchange of Notes on July 30, 2004, totaled
$40 million in aggregate principal amount, plus accrued
interest. The amended A/ R Financing Agreement requires the
consent of the Lender in order to incur debt, grant liens and
sell assets. The events of default under the secured credit
facility include the failure to pay amounts when due, failure to
observe or perform covenants, bankruptcy and insolvency events,
defaults under certain of the Companys other obligations
and the occurrence of a material adverse change in the
Companys business.

Under the Amended A/ R Financing Agreement, the
financial covenants require the Company to maintain cash and
cash equivalents with the Lender and its affiliates in an amount
not less than $4.0 million. If

26



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Company fails to meet this requirement, the
Company may still remain in compliance with the financial
covenants by maintaining a ratio of the total of cash, cash
equivalents and accounts receivable approved by the Lender to
the Companys current liabilities of at least 5.0 to 1. In
addition, the Company is required to maintain restricted cash
balances to the extent that our outstanding letters of credit
exceed $4.0 million. The Company currently maintains
substantially all of its cash, cash equivalents and investments
at Silicon Valley Bank and its affiliates. In the event of
default under the Amended A/ R Financing Agreement, the Lender
has the right to offset such cash, cash equivalents and
investments against the Companys obligations owing to the
Lender. As of October 1, 2004, the Company complied with
all of the financial covenants under this agreement.

In the first quarter of 2003, the Company entered
into an equipment and software lease agreement. Under the
agreement, the Company may either lease or finance certain
equipment, software and related services through a direct
leasing or sales and leaseback arrangement with the lessor for
up to $3.0 million. The lease term covers a period of
30 months, and the annual implicit interest rate on the
lease is approximately 4%. During the second quarter of 2003,
the Company installed and placed into service certain equipment,
software and related services through both a direct leasing and
sales leaseback arrangement and through a direct leasing
arrangement during the third and fourth quarters of 2003 and
during the second quarter of 2004. As the present value of total
future minimum lease payments was greater than 90% of the fair
value of the leased assets, the Company accounted for both the
direct leasing and sales and leaseback transactions as capital
lease transactions. Net book value of the leased assets
capitalized in connection with this agreement as of
October 1, 2004 was $2.3 million. Future minimum lease
payments under non-cancelable capital leases at October 1,
2004 were as follows (in thousands):

|                                               |  |   |       | 
|---------------------------------------------- |  | - | ----- | 
|Three months ending December 31, 2004          |  | $ | 323   | 
|Year ending December 31:                       |  |   |       | 
|2005                                           |  |   | 920   | 
|2006                                           |  |   | 46    | 
|                                               |  |   |       | 
|Total minimum lease payments                   |  |   | 1,289 | 
|Less: amounts representing interest            |  |   | 29    | 
|                                               |  |   |       | 
|Present value of future minimum lease payments |  |   | 1,260 | 
|Less: current portion                          |  |   | 1,144 | 
|                                               |  |   |       | 
|Capital lease obligations, long-term portion   |  | $ | 116   | 
|                                               |  |   |       | 



|          |                  
|--------- | -----------------
|Note 17  | Legal Proceedings

Proxim, Inc.s involvement in patent
litigation has resulted in, and could in the future continue to
result in, substantial costs and diversion of management
resources of the Company.



| |                          
| | -------------------------
| | Symbol Technologies, Inc.

On September 13, 2004 the Company entered
into the Settlement Agreement and a Patent Cross License
Agreement with Symbol and assigned certain intellectual property
to Symbol resolving all outstanding litigation.

Under the terms of the Settlement Agreement, the
Company agreed to pay Symbol $22.75 million dollars over
Proxims next ten quarters, commencing with the quarter
ending October 1, 2004. The Settlement Agreement provides
for lump sum payments of $2.5 million per quarter in each
of the first eight quarters, a payment of $1.5 million in
the ninth quarter, and a payment of $1.25 million in the
tenth quarter. If at any point during the term of the Settlement
Agreement, the Company fails to make any of these payments within

27



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

30 days after Symbol has notified the
Company of its failure to pay, Symbol shall have the right to
demand immediate payment in the amount of $25,917,669, minus
payments made under the agreement and plus applicable interest.

Under the terms of the Patent Cross License
Agreement, Symbol and the Company have agreed to cross license
certain patents, and the Company has agreed to pay to Symbol a
two percent royalty on sales of certain of the Companys
wireless LAN products. If the Company fails to make any of the
lump sum payments due under the Settlement Agreement over the
next ten quarters and fails to cure any such missed payment
within 30 days thereafter, the Patent Cross License
Agreement provides that the royalty rate payable to Symbol on
sales of certain of the Companys wireless LAN products
covered by the agreement shall increase to five percent until
the required payments as set forth a in the Settlement Agreement
have been made. Also pursuant to the terms of the Patent Cross
License Agreement, the Company and Symbol have entered into a
covenant not to sue one another for patent infringement with
respect to one anothers products through
September 13, 2009.

Since the date of the initial jury award of the
patent infringement suit in September 2003, the Company had
recorded an accrual for estimated past royalties of
$22.9 million and interest of $3.0 million covering
the period from 1995 through September 2003 plus total potential
royalties and interest of $2.8 million covering the period
from October 2003 to July 2, 2004. As a result of the
Settlement Agreement, Proxim recorded a non-cash reversal of
royalty charges of $4.8 million and interest expense of
$3.2 million totaling $8.0 million during the quarter
ended October 1, 2004. This reversal is the difference
between the net present value of the $22.75 million
settlement and the accrued liability related to the litigation
of $28.7 million, which was recorded in the Companys
balance sheet prior to the litigation settlement. The initial
net present value of the settlement payment was
$20.69 million. At October 1, 2004 the net present
value was $18.3 million, which is included in the balance
sheet captions Accrued royalties and interest and
Accrued royalties, long-term. The difference between
the balance at October 1, 2004 and the sum of the periodic
payments will be accreted, using the effective interest rate
method over the payment period as periodic charges to interest
expense.



| |                     
| | --------------------
| | Intersil Corporation

On March 17, 2003, the Company announced a
settlement with Intersil Corporation to resolve all pending
patent-related litigation between the two companies. Under the
terms of the agreement, Proxim, Inc. and Intersil have agreed to
dismiss all claims against each other, including lawsuits before
the International Trade Commission and Delaware and
Massachusetts Federal Courts. As part of the confidential
settlement agreement, the two companies entered into a patent
cross license agreement for their respective patent portfolios
and Intersil agreed to make a one-time payment of
$6.0 million to the Company. The two companies have also
entered into a product supply agreement defining the terms under
which the Company will be able to purchase 802.11 products
that utilize Intersils chipsets. During the first quarter
of 2003, the Company recorded $6 million as license revenue
and $3 million of legal expense as final settlement of
outstanding legal fees and expenses related to the terminated
patent litigation.



| |                              
| | -----------------------------
| | Top Global Technology Limited

On March 10, 2003, the Company was served
with a complaint filed on January 15, 2003, by Top Global
Technology Limited (Top Global), a distributor for
Agere Systems Singapore. The Companys demurrer to Top
Globals complaint was sustained in May 2003. Top Global
then filed and served an amended complaint on May 30, 2003.
Top Globals lawsuit was filed against Agere Systems, Inc.,
Agere Systems Singapore, and Agere Systems Asia Pacific
(collectively, Agere) and in the Superior Court for
the State of California, County of Santa Clara. Top Global
claims that it is entitled to return for a credit
$1.2 million of products that it purchased from Agere
Systems Singapore in June 2002 as a result of the Companys
decision to discontinue a product line that the Company
purchased from Agere in August 2002. The amended complaint asks
the

28



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

court to determine whether Agere or the Company
are responsible for accepting the product return and issuing a
$1.2 million credit and also alleges breach of contract.
The Company answered the amended complaint and asserted several
defenses to Top Globals claims. In January 2004, the
parties mediated this dispute but were unable to reach a
settlement. In March 2004, the Court dismissed the contract
claims against Agere but at the same time granted Top
Globals motion for leave to amend its complaint to allege
a fraud claim against Agere. In March 2004, the court dismissed
the contract claims against Agere but at the same time granted
Top Globals motion for leave to amend its complaint to
allege a fraud claim against Agere. Top Global subsequently
amended its complaint to allege a claim of fraud against Agere.
The parties are currently conducting discovery. Proxims
motion for summary judgment in the matter will be heard
January 7, 2005. A trial date has been set for
February 22, 2005. The Company intends to defend itself
vigorously against this lawsuit.



| |                              
| | -----------------------------
| | Active Technology Corporation

On February 10, 2004, the Company received a
copy of a complaint filed on February 2, 2004 in Tokyo
District Court by Active Technology Corporation, a
Japanese-based distributor of the Companys products. The
complaint alleges, among other things, that the Company sold to
Active certain defective products, which Active in turn
subsequently sold to its customers. Active seeks damages of
559.2 million Japanese yen, which includes the purchase
price of the allegedly defective products and replacement costs
allegedly incurred by Active. Active seeks to offset the claim
of 559.2 million Japanese yen against outstanding accounts
payable by Active of 175.3 million Japanese yen to the
Company, resulting in a net claim against Proxim Corporation of
383.9 million Japanese yen. Translated into
U.S. dollars on November 3, 2004, Actives net
claim is approximately $3.6 million. On October 5,
2004, a hearing was held in the matter, and Proxim filed a
counterclaim for $2.3 million plus interest for outstanding
amounts owed Proxim. The next hearing in the matter will be held
on November 12, 2004. The Company intends to defend itself
vigorously against this lawsuit.



| |        
| | -------
| | General

The Company is a party to disputes, including
legal actions, with several of our suppliers and vendors. These
disputes relate primarily to excess materials and order
cancellation claims that resulted from the declines in demand
for the Companys products during 2001 and 2002 and the
commensurate reductions in manufacturing volumes. The Company
intends to defend itself vigorously against these claims.

The results of any litigation matters are
inherently uncertain. In the event of any adverse decision in
the described legal actions or disputes, or any other related
litigation with third parties that could arise in the future,
the Company could be required to pay damages and other expenses,
and, in the case of litigation related to patents or other
intellectual property rights, to cease the manufacture, use and
sale of infringing products, to expend significant resources to
develop non-infringing technology, or to obtain licenses to the
infringing technology. The Company cannot make any assurance
that these matters will not materially and adversely affect the
Companys business, financial condition, operating results
or cash flows.

29



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



PART II. OTHER INFORMATION






|        |         
|------- | --------
|Item 6. | Exhibits

|        |         |             |  |                                                                                                                                                                                                                               
|------- | ------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 2.1*    |             |  | Securities Purchase Agreement, dated as of
    July 27, 2004, by and among Proxim Corporation, Warburg
    Pincus Private Equity VIII, L.P., BCP Capital, L.P., BCP Capital
    QPF, L.P. and BCP Capital Affiliates Fund LLC.
|       
|        | 10.68  |             |  | Amendment to Loan Documents, dated as of
    July 31, 2004, between the Registrant and Silicon Valley
    Bank.                                                                                                               
|       
|        | 10.69** |             |  | Settlement Agreement, dated September 13,
    2004, between Proxim Corporation and Symbol Technologies, Inc.                                                                                                                  
|       
|        | 10.70  |             |  | Amendment to Overadvance LC Rider, dated as of
    October 31, 2004, between the Registrant and Silicon Valley
    Bank.                                                                                                      
|       
|        | 10.71  |             |  | Employment Agreement, dated as of
    December 5, 2002, between Proxim Corporation and Kevin J.
    Duffy                                                                                                                     
|       
|        | 10.72  |             |  | Amendment to Employment Agreement, dated as of
    May 25, 2004, between Proxim Corporation and Kevin J. Duffy                                                                                                                
|       
|        | 10.73  |             |  | Employment Agreement, dated as of April 7,
    2003, between Proxim Corporation and David E. Olson                                                                                                                            
|       
|        | 10.74  |             |  | Amendment to Employment Agreement, dated as of
    July 1, 2004, between Proxim Corporation and David E. Olson                                                                                                                
|       
|        | 10.75  |             |  | Employment Agreement, dated as of
    October 27, 2003, between Proxim Corporation and Richard J.
    Tallman                                                                                                                 
|       
|        | 10.76  |             |  | Amendment to Employment Agreement, dated as of
    June 15, 2004, between Proxim Corporation and Richard J.
    Tallman                                                                                                       
|       
|        | 10.77  |             |  | Employment Agreement, dated as of April 12,
    2004, between Proxim Corporation and Michael D. Angel                                                                                                                         
|       
|        | 31.1    |             |  | Section 302 Certification of Principal
    Executive Officer                                                                                                                                                                  
|       
|        | 31.2    |             |  | Section 302 Certification of Principal
    Financial Officer                                                                                                                                                                  
|       
|        | 32.1    |             |  | Section 906 Certification of Principal
    Executive Officer                                                                                                                                                                  
|       
|        | 32.2    |             |  | Section 906 Certification of Principal
    Financial Officer                                                                                                                                                                  



---



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to Exhibit 2.1 to
    the Registrants Current Report on Form 8-K filed with
    the Commission on July 30, 2004.



|   |                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------
|** | Incorporated by reference to Exhibit 10.69
    to the Registrants Current Report on Form 8-K filed
    with the Commission on September 16, 2004.



| |   |                  
| | - | -----------------
| |  | Previously filed.

30



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



SIGNATURES

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



| |                   
| | ------------------
| | PROXIM CORPORATION



| |     |                     
| | --- | --------------------
| | By: | /s/ MICHAEL D. ANGEL

| |                                                 
| | ------------------------------------------------
| |                                                 
| | Michael D. Angel                                
| | Executive Vice President and                    
| | Chief Financial Officer                         
| | (Principal Financial and Accounting
    Officer)

Date: January 27, 2005

31



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##### Table of Contents



PROXIM CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



INDEX TO EXHIBITS

|        |         |             |  |                                                                                                                                                                                                                               
|------- | ------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 2.1*    |             |  | Securities Purchase Agreement, dated as of
    July 27, 2004, by and among Proxim Corporation, Warburg
    Pincus Private Equity VIII, L.P., BCP Capital, L.P., BCP Capital
    QPF, L.P. and BCP Capital Affiliates Fund LLC.
|       
|        | 10.68  |             |  | Amendment to Loan Documents, dated as of
    July 31, 2004, between the Registrant and Silicon Valley
    Bank.                                                                                                               
|       
|        | 10.69** |             |  | Settlement Agreement, dated September 13,
    2004, between Proxim Corporation and Symbol Technologies, Inc.                                                                                                                  
|       
|        | 10.70  |             |  | Amendment to Overadvance LC Rider, dated as of
    October 31, 2004, between the Registrant and Silicon Valley
    Bank.                                                                                                      
|       
|        | 10.71  |             |  | Employment Agreement, dated as of
    December 5, 2002, between Proxim Corporation and Kevin J.
    Duffy                                                                                                                     
|       
|        | 10.72  |             |  | Amendment to Employment Agreement, dated as of
    May 25, 2004, between Proxim Corporation and Kevin J. Duffy                                                                                                                
|       
|        | 10.73  |             |  | Employment Agreement, dated as of April 7,
    2003, between Proxim Corporation and David E. Olson                                                                                                                            
|       
|        | 10.74  |             |  | Amendment to Employment Agreement, dated as of
    July 1, 2004, between Proxim Corporation and David E. Olson                                                                                                                
|       
|        | 10.75  |             |  | Employment Agreement, dated as of
    October 27, 2003, between Proxim Corporation and Richard J.
    Tallman                                                                                                                 
|       
|        | 10.76  |             |  | Amendment to Employment Agreement, dated as of
    June 15, 2004, between Proxim Corporation and Richard J.
    Tallman                                                                                                       
|       
|        | 10.77  |             |  | Employment Agreement, dated as of April 12,
    2004, between Proxim Corporation and Michael D. Angel                                                                                                                         
|       
|        | 31.1    |             |  | Section 302 Certification of Principal
    Executive Officer                                                                                                                                                                  
|       
|        | 31.2    |             |  | Section 302 Certification of Principal
    Financial Officer                                                                                                                                                                  
|       
|        | 32.1    |             |  | Section 906 Certification of Principal
    Executive Officer                                                                                                                                                                  
|       
|        | 32.2    |             |  | Section 906 Certification of Principal
    Financial Officer                                                                                                                                                                  



---



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to Exhibit 2.1 to
    the Registrants Current Report on Form 8-K filed with
    the Commission on July 30, 2004.



|   |                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------
|** | Incorporated by reference to Exhibit 10.69
    to the Registrants Current Report on Form 8-K filed
    with the Commission on September 16, 2004.



| |   |                  
| | - | -----------------
| |  | Previously filed.