--------------------------------------------------------------------------------
                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549



                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                       OR

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO  _____

                        Commission File Number 000-29053

                       TELAXIS COMMUNICATIONS CORPORATION

             (Exact name of registrant as specified in its charter)

        MASSACHUSETTS                                      04-2751645
 (State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                        Identification No.)

                            20 INDUSTRIAL DRIVE EAST
                            SOUTH DEERFIELD, MA 01373
                    (Address of principal executive offices)

                                 (413) 665-8551
              (Registrant's telephone number, including area code)

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

         As of May 1, 2000,  there were  16,244,994  shares of the  registrant's
common stock outstanding.
<PAGE>

                                      INDEX

                                                                        PAGE NO.
                                                                        --------
PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements............................................    2

          Balance Sheets as of March 31, 2000 and
          December 31, 1999...............................................    3

          Statements of Operations and
          Comprehensive Loss for the three months ended March 31, 2000
          and March 31, 1999..............................................    4

          Statement of Changes in Stockholders' (Deficit) Equity..........    5

          Statements of Cash Flows for the three
          months ended March 31, 2000 and March 31, 1999..................    6

          Notes to Financial Statements...................................    7

Item 2.   Management's Discussion and Analysis of Financial Condition and     10
          Results of Operations...........................................

Item 3.   Qualitative and Quantitative Disclosures About Market Risk......    14

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings...............................................    14

Item 2.   Changes in Securities and Use of Proceeds.......................    14

Item 6.   Exhibits and Reports on Form 8-K................................    15

SIGNATURES                                                                    16

<PAGE>
                         PART I - FINANCIAL INFORMATION

         This Quarterly Report on Form 10-Q contains forward-looking  statements
as defined by federal securities laws which are made pursuant to the safe harbor
provisions   of  the  Private   Securities   Litigation   Reform  Act  of  1995.
Forward-looking  statements  include  statements  concerning plans,  objectives,
goals,  strategies,  expectations,  intentions,  projections,  future  events or
performance,  underlying  assumptions and other  statements which are other than
statements of historical facts. In some cases, you can identify  forward-looking
statements by terminology such as "may," "will," "should," "expects," "intends,"
"plans,"  "anticipates,"   "believes,"   "estimates,"   "predicts,"  "projects,"
"potential,"  "continue," and other similar terminology or the negative of these
terms.  Forward-looking statements are only predictions and are subject to known
and unknown risks, uncertainties,  assumptions, and other factors that may cause
actual results, levels of activity, performance or achievements to be materially
different  from  any  future  results,   levels  of  activity,   performance  or
achievements expressed or implied by these forward-looking  statements.  Factors
that could cause or contribute to such differences include,  without limitation,
dependence on a limited number of customers, manufacturing capacity constraints,
probable  variability in our quarterly  operating  results,  dependence on third
parties,  changes in the  market,  new  products  and  announcements  from other
companies,  changes in technology,  and the impact of  competitive  products and
pricing. These and other risks and uncertainties are described in more detail in
our annual  report on Form 10-K for the year ended December 31, 1999, filed with
the Securities and Exchange Commission.  As a result, we cannot guarantee future
results,  levels of activity,  performance or  achievements  and there can be no
assurance  that our  expectations,  beliefs  or  projections  will  result or be
achieved or  accomplished.  We undertake no  obligation  to update or revise any
forward-looking  statement to reflect events,  circumstances  or new information
after the date of this Form 10-Q or to reflect the  occurrence of  unanticipated
events, and we disclaim any such obligation.

Item 1.  Financial Statements and Supplementary Data.

                          INDEX TO FINANCIAL STATEMENTS

                                                                 Page
                                                                 ----
Balance Sheets...............................................      3
Statements of Operations and Comprehensive Loss..............      4
Statements of Changes in Stockholders' (Deficit) Equity......      5
Statements of Cash Flows.....................................      6
Notes to Financial Statements ...............................      7


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                TELAXIS COMMUNICATIONS CORPORATION
                                                          BALANCE SHEETS
                                                 (in thousands, except share data)

                                                                                                        Pro Forma
                                                                                         December 31,  December 31,     March 31,
                                                                                            1999           1999           2000
                                                                                          ----------     --------     ---------
                                                                                                        (unaudited)   (unaudited)
<S>                                                                                        <C>            <C>          <C>
Assets
Current assets
     Cash and cash equivalents .......................................................     $  6,603       $ 6,603      $ 54,479
     Marketable securities ...........................................................         --            --          13,246
     Accounts receivable, less allowance for doubtful accounts ($57 in 1999 and $100 .        2,900         2,900         6,754
       in 2000)
     Inventories .....................................................................        7,101         7,101        13,524
     Net assets to be disposed of ....................................................        1,954         1,954          --
     Other current assets ............................................................          170           170           449
                                                                                           --------       -------      --------
         Total current assets ........................................................       18,728        18,728        88,452
     Property, plant and equipment, net ..............................................        6,444         6,444         9,312
     Other assets ....................................................................          125           125           101
                                                                                           --------       -------      --------

         Total assets ................................................................     $ 25,297       $25,297      $ 97,865
                                                                                           ========       =======      ========

Liabilities, Redeemable Preferred Stock and Stockholders' (Deficit) Equity
Current liabilities
     Line of credit ..................................................................     $    500       $   500      $     --
     Accounts payable ................................................................        4,305         4,305         8,554
     Customer prepayments ............................................................          285           285           310
     Accrued expenses ................................................................        2,280         2,280         2,841
     Income taxes payable ............................................................           39            39            39
     Current maturities of long-term debt ............................................        1,149         1,149           930
     Current maturities of capital lease obligations .................................          982           982           795
                                                                                           --------       -------       --------

         Total current liabilities ...................................................        9,540         9,540        13,469
Long-term debt .......................................................................        1,578         1,578         1,566
Capital lease obligations ............................................................          807           807           631
                                                                                           --------       -------       --------
         Total liabilities ...........................................................       11,925        11,925        15,666
                                                                                           --------       -------       --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                        <C>            <C>          <C>
Redeemable Preferred Stock
     Redeemable preferred stock, Class A, $.01 par value; $3.25 redemption value;
       authorized 0 shares (3,090,323 in 1999); issued and outstanding 0 shares ......        9,899          --            --
       (3,045,696 in 1999)
     Redeemable preferred stock, Class B, $.01 par value; $3.25 redemption value;
       authorized 0 shares (789,677 in 1999); issued and outstanding 0 shares (789,677        2,566          --            --
       in 1999)
     Redeemable preferred stock, Class D, $.01 par value; $1.80 redemption value;
       authorized 0 shares (7,200,000 in 1999); issued and outstanding 0 shares ......       12,960          --            --
       (7,200,000 in 1999)
     Redeemable preferred stock, Class E, $.01 par value; $2.25 redemption value;
       authorized 0 shares (11,000,000 in 1999): issued and outstanding 0 shares
       (9,941,508 in 1999) ...........................................................       22,368          --            --
                                                                                           --------       -------       --------
                                                                                             47,793          --            --
Stockholders' (Deficit) Equity
     Preferred stock, $.01 par value; authorized 0 shares (4,500,000  in 1999); none .         --            --            --
       issued
     Common stock, $.01 par value; authorized 100,000,000 shares in 2000 and 1999;
       issued and outstanding 16,171,636 shares (843,872 shares in 1999) .............            8           113           161
     Additional paid-in capital ......................................................        1,224        48,912       124,122
     Notes receivable ................................................................         (281)         (281)         (292)
     Accumulated deficit .............................................................      (35,205)      (35,205)      (41,636)
     Deferred stock compensation .....................................................         (167)         (167)         (156)
                                                                                           --------       -------       -------
         Total stockholders' (deficit) equity ........................................      (34,421)       13,372        82,199
                                                                                           --------       -------       -------
         Total liabilities, redeemable preferred stock and stockholders' (deficit)
         equity .......................................................................    $ 25,297       $25,297       $ 97,865
                                                                                           ========       =======       ========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
                                 TELAXIS COMMUNICATIONS CORPORATION
                           STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                (in thousands, except per share data)

                                                                      Three months ended March 31,
                                                                      ----------------------------
                                                                              1999         2000
                                                                            -------      -------
                                                                          (unaudited)  (unaudited)
<S>                                                                         <C>          <C>
Sales .................................................................     $ 1,177      $ 6,316
Cost of sales .........................................................       1,650        6,514
                                                                            -------      -------

Gross margin (loss) ...................................................        (473)        (198)
Operating expenses
     Research and development, net ....................................         934        1,683
     Selling and marketing ............................................         318          588
     General and administrative .......................................         372        1,538
                                                                            -------      -------

       Total operating expenses .......................................       1,624        3,809
                                                                            -------      -------

Operating loss ........................................................      (2,097)      (4,007)
                                                                            -------      -------
Other income (expense)
     Interest and other expense .......................................         (68)        (187)
     Interest and other income ........................................          17          611
                                                                            -------      -------

       Total other income (expense) ...................................         (51)         424
                                                                            -------      -------

Loss from continuing operations before income taxes ...................      (2,148)      (3,583)
Income tax benefit ....................................................        --           --
                                                                            -------      -------

Loss from continuing operations .......................................      (2,148)      (3,583)
                                                                            -------      -------
Discontinued operations:
     Income from operations of MMWP segment, net of taxes .............         358         --
     Stock compensation cost on disposition of MMWP segment ...........        --         (2,848)
                                                                            -------      -------

Income (loss) from discontinued operations ............................         358       (2,848)
                                                                            -------      -------

Net loss and comprehensive loss .......................................     $(1,790)     $(6,431)
                                                                            =======      =======
Basic and diluted earnings (loss) per share from:
     Continuing operations ............................................     $ (4.34)     $ (0.37)
                                                                            =======      =======
     Discontinued operations ..........................................     $  0.72      $ (0.29)
                                                                            =======      =======
     Net loss .........................................................     $ (3.62)     $ (0.66)
                                                                            =======      =======

Shares used in computing basic and diluted earnings (loss) per share ..         495        9,739
                                                                            =======      =======
</TABLE>

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

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                 TELAXIS COMMUNICATIONS CORPORATION
                                       STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
                                                  (in thousands, except share data)

                                            Common Stock           Additional
                                          ------------------         Paid-in       Note     Deferred Stock    Accumulated
                                          Shares      Amount         Capital    Receivable   Compensation       Deficit       Total
                                          ------      ------         -------    ----------   ------------       -------       -----
<S>                                       <C>            <C>       <C>         <C>             <C>           <C>           <C>
Balances, January 1, 2000.............       843,872     $   8     $    1,224  $     (281)     $   (167)     $  (35,205) $  (34,421)
Sale of common stock..................     4,600,000        46         78,154          --            --              --      78,200
Exercise of common stock options......       199,359         2            243         (11)           --              --         234
Exercise of common stock warrants.....        40,000        --             40          --            --              --          40
Amortization of deferred stock
   compensation.......................            --        --             --          --            11              --          11
Offering costs........................            --        --         (6,075)         --            --              --      (6,075)
Stock compensation cost on
   discontinued operation.............            --        --          2,848          --            --              --       2,848
Conversion of preferred stock.........    10,488,405       105         47,688          --            --              --      47,793
Net loss..............................            --        --             --          --            --          (6,431)     (6,431)
                                          ----------     ------     ----------  ----------      --------      ----------  ----------

Balances, March 31, 2000 (unaudited)..    16,171,636     $  161     $  124,122  $     (292)     $   (156)     $  (41,636) $   82,199
                                          ==========     ======     ==========  ==========      ========      ==========  ==========

</TABLE>

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

                                       5
<PAGE>
<TABLE>
<CAPTION>

                                 TELAXIS COMMUNICATIONS CORPORATION
                                      STATEMENTS OF CASH FLOWS
                                           (in thousands)

                                                                              Three months ended
                                                                                   March 31,
                                                                            ----------------------
                                                                              1999          2000
                                                                            --------      --------
                                                                           (unaudited)  (unaudited)
<S>                                                                        <C>           <C>
Cash flows from operating activities
   Net loss ..........................................................     $ (1,790)     $ (6,431)
   Adjustments to reconcile net loss to net cash utilized by operating
   activities:
     Depreciation and amortization ...................................          575           647
     Non-cash compensation expense ...................................         --           2,859
     Changes in assets and liabilities
       Accounts receivable ...........................................          365        (3,854)
       Contracts in process ..........................................           (5)         --
       Inventories ...................................................           72        (6,423)
       Other current assets ..........................................           (2)         (297)
       Accounts payable and accrued expenses .........................         (521)        4,774
       Customer prepayments ..........................................          (79)           25
                                                                           --------      --------

       Net cash utilized by operating activities .....................       (1,385)       (8,700)
                                                                           --------      --------
Cash flows from investing activities
   Purchase of marketable securities .................................         --         (13,246)
   Proceeds from sale of discontinued operations .....................         --           1,990
   Additions to property and equipment ...............................         (350)       (3,476)
   Reduction (addition) to other assets ..............................           (9)            8
                                                                           --------      --------

       Net cash utilized by investing activities .....................         (359)      (14,724)
                                                                           --------      --------
Cash flows from financing activities
   Repayment of line of credit .......................................         --            (500)
   Repayments of long-term debt and capital lease obligations ........         (305)         (599)
   Issuance of common stock upon exercise of options and warrants ....            2           274
   Issuance of common stock ..........................................         --          78,200
   Stock issuance costs ..............................................         --          (6,075)
                                                                           --------      --------

       Net cash provided (utilized) by financing activities ..........         (303)       71,300
                                                                           --------      --------

Net increase (decrease) in cash and cash equivalents .................       (2,047)       47,876
Cash and cash equivalents at beginning of period .....................        2,635         6,603
                                                                           --------      --------

Cash and cash equivalents at end of period ...........................     $    588      $ 54,479
                                                                           ========      ========
Supplemental disclosure of cash flow information
  Non-cash  investing  and financing activities:
     Conversion of redeemable preferred stock ........................         --          47,793
     Notes received for issuance of common stock .....................         --              11

</TABLE>

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

                                       6
<PAGE>
                       TELAXIS COMMUNICATIONS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

1.       Summary of Significant Accounting Policies

     Basis of Presentation

         The financial information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited.  In the opinion of management,  such
interim  financial  information  includes all adjustments,  consisting of normal
recurring adjustments, necessary for a fair presentation of the results for such
interim periods. The financial statements do not include all the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  The statements  should be read in  conjunction  with the
financial  statements  and  footnotes as of and for the year ended  December 31,
1999  included  in the  Company's  Annual  Report  on Form 10-K  filed  with the
Securities and Exchange Commission. The December 31, 1999 balance sheet data was
derived from audited financial statements,  but does not include all disclosures
required by generally accepted accounting principles.  The results of operations
for the three months ended March 31, 2000 are not necessarily  indicative of the
results to be expected for any future period.

     Unaudited Pro Forma Balance Sheet

         The outstanding  shares of the Company's  preferred stock class A, B, D
and E automatically  convert to common stock upon a public offering resulting in
gross  proceeds of at least  $15,000,000  and with an offering price of at least
$4.50 per share.  These  conversions  have been  reflected in the  unaudited pro
forma balance sheet as of December 31, 1999.

     Marketable Securities

         The Company has invested the proceeds from our initial public  offering
in accordance with our corporate cash management policy.  Marketable  securities
are  carried at cost plus  accrued  interest,  which  approximates  fair  value.
Investments are placed in instruments  with  institutions  that have "Investment
Grade"  ratings or better.  The Company's  investments  consist of municipal and
government  bonds, and commercial paper. At March 31, 2000, the Company had $8.7
million invested in securities with maturities from three to twelve months,  and
$4.5 million  invested  with  maturities  greater than twelve months and through
June 2001.

     Comprehensive Income

         For the three months ended March 31, 1999 and 2000,  comprehensive loss
equaled net loss.

2.       Inventories

         Inventories  are  stated  at the  lower of cost  (standard  cost  which
approximates actual) or market and consist of the following (in thousands):
<PAGE>

                                                  December 31,    March 31,
                                                     1999           2000
                                                 -----------    ------------
                                                                (unaudited)
         Parts and subassemblies............     $     3,257    $      7,348
         Work-in process....................           3,844           6,176
                                                 -----------    ------------
                                                 $     7,101    $     13,524
                                                 ===========    ============

                                       7
<PAGE>
3.       Property, Plant and Equipment

         Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                             December 31,          March 31,
                                                                 1999                2000
                                                            --------------      --------------
                                                                                  (unaudited)
<S>                                                         <C>                 <C>
         Machinery and equipment..........................  $        9,803      $      13,204
         Furniture and fixtures...........................             679                696
         Leasehold improvements...........................           1,970              2,023
         Equipment under capital leases...................           3,469              3,474
                                                            --------------      -------------
                                                                    15,921             19,397
         Less accumulated depreciation and amortization...          (9,477)           (10,085)
                                                            --------------      -------------
                                                            $        6,444      $       9,312
                                                            ==============      =============
</TABLE>

         The net book value of equipment under capital leases was  approximately
$1,296,000 and $2,757,000 at December 31, 1999 and March 31, 2000, respectively.

         Depreciation expense for the three months ended March 31, 1999 and 2000
was $575,000 and $608,000 respectively.

4.       Earnings Per Share

         Earnings  per  share have been  computed  by  dividing  the  loss  from
continuing operations,  income (loss) from discontinued  operations and net loss
by the weighted average common shares  outstanding.  No effect has been given to
the exercise of common stock options, stock warrants, and outstanding redeemable
preferred stock, since the effect would be antidilutive on continuing operations
for all reporting periods.
<PAGE>
<TABLE>
<CAPTION>
                                                                             Three Months ended
                                                                                  March 31,
                                                                                 (unaudited)
                                                                           ---------------------
                                                                             1999         2000
                                                                           -------      --------
<S>                                                                        <C>          <C>
Historical:
     Loss from continuing operations ...........................           $(2,148)     $  (3,583)
                                                                           =======      =========
     Weighted average shares of common stock outstanding .......               495          9,739
                                                                           =======      =========
     Basic and diluted loss per share from continuing operations           $ (4.34)     $   (0.37)
     Income (loss) from discontinued operations ................           $   358      $  (2,848)
                                                                           =======      =========
     Weighted average shares of common stock outstanding .......               495          9,739
                                                                           =======      =========
     Basic and diluted income (loss) per share from discontinued
     operations ................................................           $  0.72      $   (0.29)
                                                                           =======      =========
     Net loss ..................................................           $(1,790)     $  (6,431)
                                                                           =======      =========
     Weighted average shares of common stock outstanding .......               495          9,739
                                                                           =======      =========
     Basic and diluted net loss per share ......................           $ (3.62)     $   (0.66)
                                                                           =======      =========
</TABLE>

                                       8
<PAGE>

5.       Discontinued Operations

         In August 1999, the Board of Directors voted and authorized  management
to dispose of the Company's  millimeter-wave  products (MMWP) business  segment.
This segment  consists of the  development  and  manufacture of  millimeter-wave
components  and  assemblies,  including  antennas  and  quasi-optical  products,
multiplexer  products,  and passive waveguide products.  On February 8, 2000 the
Company  completed  the  sale of  substantially  all of the  assets  of the MMWP
segment to Millitech LLC for approximately $3.6 million.

         Accordingly,   the  Company  has  restated  its  historical   financial
statements to present the MMWP  segment's  operating  results as a  discontinued
operation.  The  results  of the MMWP  operations  have  been   segregated  from
continuing  operations  and reported as a separate line item in the statement of
operations and comprehensive loss.

         As a result of the sale,  the Company  received  cash  proceeds of $2.0
million and recorded a  subordinated  note for $1.2 million with interest on the
principal  at 12%.  The  principal  shall be payable  in five equal  semi-annual
payments of $50,000  beginning  on July 1, 2002 through  December  31, 2004.  On
December 31,  2004,  the entire  remaining  principal  balance of $960,000  plus
accrued  interest shall be due.  Interest shall be payable  semi-annually on the
first  day of  January  and  July of each  year  during  the  term of the  note,
beginning July 1, 2000. The Company has fully reserved this  subordinated  note.
The Company  recorded in the Statement of Operations  for the three months ended
March 31, 2000, stock compensation  expense totaling $2.8 million as a result of
accelerated  vesting of  incentive  stock  options  for  employees  who left the
Company and were hired by Millitech LLC.

         The assets and  liabilities  of the MMWP  segment at December 31, 1999,
consisting primarily of accounts receivable,  inventories,  equipment,  accounts
payable and accrued expenses,  have been segregated as net assets to be disposed
of in the amount of $1,954,000 in the  accompanying  balance sheet.  The Company
has accrued  liabilities of approximately  $646,000 at March 31, 2000 related to
the MMWP segment.

         Sales for the MMWP segment were  $2,650,000  and $770,000 for the three
months ended March 31, 1999 and 2000, respectively.

6.       Accrued Expenses

         Accrued expenses consist of the following (in thousands):
<PAGE>
<TABLE>
<CAPTION>
                                                                    December 31,   March 31,
                                                                    ------------   ---------
                                                                       1999           2000
                                                                      ------         ------
<S>                                                                   <C>            <C>
      Accrued payroll, commissions and related expenses......         $  978         $1,043
      Accrued warranty expense...............................            530            465
      Accrued contract costs.................................            168            240
      Accrued liabilities on discontinued operations.........            350            646
      Other accrued expenses.................................            254            447
                                                                      ------         ------
                                                                      $2,280         $2,841
                                                                      ======         ======
</TABLE>
7.       Initial Public Offering

         On February  7, 2000 the Company  made  available  4,600,000  shares of
common stock to the general public under the terms and  conditions  contained in
an underwriting agreement dated February 1, 2000 with various underwriters.  The
initial public offering  resulted in the Company receiving  approximately  $71.2
million of net proceeds primarily for general corporate purposes.


                                       9
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

Overview

         We develop and supply  broadband  point-to-multipoint  wireless  access
equipment used by network service providers to deliver  integrated voice,  video
and data services to business and residential subscribers.  We sell our products
primarily to network system integrators, which include our products in broadband
wireless  systems  sold to network  service  providers.  We have  developed  two
families of broadband  point-to-multipoint wireless access products. Our modular
hubs and customer  premises  equipment can be rapidly  tailored for  competitive
site demonstrations and initial commercial  deployments.  These modular products
address a network  service  provider's  need to offer new services and enter new
markets quickly, which is often referred to as "accelerated time-to-market." Our
planar hubs and customer  premises  equipment,  based on a printed circuit board
design,  can be mass-produced  using low-cost,  highly  automated  manufacturing
techniques.  These planar products address a network service provider's need for
cost-effective deployment to many subscribers.

         We  commenced  operations  in 1982 and  have  derived  the  significant
majority  of our  sales  from our  millimeter-wave  products  business  segment.
Millimeter waves are  electromagnetic  waves having wavelengths  between one and
ten millimeters. In August 1999, we adopted a plan to focus all of our resources
on our broadband  point-to-multipoint  wireless access  business  segment and to
dispose of the  millimeter-wave  products segment. We decided to dispose of this
segment because it would have required us to reallocate financial and management
resources from the more attractive broadband point-to-multipoint wireless access
business segment. The segment was sold on February 8, 2000. As a result, we have
presented  the  operations  of  the   millimeter-wave   products  segment  as  a
discontinued  operation in our financial statements.  The following management's
discussion  and analysis  focuses on our ongoing  broadband  point-to-multipoint
wireless access business.

         Our  first  prototype  broadband  point-to-multipoint  wireless  access
equipment  was evaluated in a trial in 1995.  Before  receiving our first volume
order for  equipment in June 1999,  virtually  all of our  shipments of products
were for site demonstrations and initial commercial  deployments.  Through March
31, 2000 we have  assembled  all of our  products  in-house.  In the future,  we
intend  to  use  third-party   manufacturers  to  supplement  our  manufacturing
capacity.

         We  intend  to   increase   expenditures   in  all   areas,   including
manufacturing  and  engineering,   research  and  development,   and  sales  and
marketing.  These  increases in operating  expenses are not always apparent from
our  historical  financial  statements.  As  our  sales  continue  to  grow,  we
anticipate  that our  operating  expenses as a percentage of sales will decrease
even though we  anticipate  that will  significantly  increase  amounts spent on
research and development, selling and marketing, and general and administrative.
This spending will support expansion of our production and design areas, greater
recruiting  efforts,  and a larger customer support  organization to address the
continuing growth in the market for broadband wireless access equipment.

         For the three  months ended March 31,  2000,  approximately  93% of our
sales  were  to a  customer  located  in  Canada,  and 7% of our  sales  were to
customers  located in the United  States.  For the three  months ended March 31,
1999,  approximately 53% of our sales were to a customer located in Canada,  42%
of our sales were to customers located in the United States, and 5% of our sales
were to customers located in England.  We expect that sales to customers located
outside the United States will continue to be significant.


                                       10
<PAGE>
Result of Operations

         The following table provides continuing operations data as a percentage
of sales for the periods presented. The percentages may not add due to rounding.
<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                  March 31,
                                                                 (unaudited)
                                                               -----------------
                                                               1999         2000
                                                               -----       -----
<S>                                                            <C>         <C>
Sales ..................................................       100.0%      100.0%
Cost of sales ..........................................       140.2       103.1
                                                               -----       -----

Gross margin (loss) ....................................       (40.2)       (3.1)
Operating expenses
    Research and development, net ......................        79.4        26.6
    Selling and marketing ..............................        27.0         9.3
    General and administrative .........................        31.6        24.4

      Total operating expenses .........................       138.0        60.3
                                                               -----       -----

Operating loss .........................................      (178.2)      (63.4)
Other income (expense) .................................        (4.3)        6.7
                                                               -----       -----

Loss from continuing operations before income taxes ....      (182.5)      (56.7)
Income tax benefit .....................................        (0.0)       (0.0)
                                                               -----       -----

Loss from continuing operations ........................      (182.5)%     (56.7)%
                                                               =====       =====
</TABLE>
Three Months Ended March 31, 1999 and 2000

     Sales

         Sales increased 437% from $1.2 million for the three months ended March
31, 1999 to $6.3  million for the three  months  ended March 31,  2000.  Of this
increase,  approximately  $5 million was attributable to an increase in sales of
our planar  products  from  $558,000 to $5.6  million.  The  remaining  increase
resulted from an increase in sales of our modular products.

     Cost of Sales

         Cost of sales  consists of component and material  costs,  direct labor
costs,  overhead  related to  manufacturing  our products  and customer  support
costs.  Cost of sales  increased  $4.8  million  from $1.7 million for the three
months ended March 31, 1999 to $6.5 million for the three months ended March 31,
2000.  The  increase in cost of sales was  attributable  primarily  to increased
shipments of our planar products. Gross margins were a negative 40% in the three
months  ended March 31, 1999 and a negative 3% in the three  months  ended March
31, 2000.  The  improvement  in gross margin is primarily due to the shipment of
our higher  margin  planar  products  despite a delay in reaching  product  cost
reduction targets.
<PAGE>
     Research and Development Expenses

         Research and development  expenses  consist  primarily of personnel and
related costs  associated with our product  development  efforts.  These include
costs for development  and extension of products and components,  test equipment
and related facilities.  Gross research and development  expenses increased 100%
from $1.0  million in the three  months  ended March 31, 1999 to $2.0 million in
the three  months  ended March 31,  2000.  The  increase  reflected  significant
investments  to develop our planar  products and adapt our modular  products for
additional  frequency  ranges.  These  activities  required us to  substantially
increase  the  size of our  research  and  development  staff  by  72%,  from 39
personnel  at March  31, 1999 to 67 at March 31, 2000. Research and  development
costs were


                                       11
<PAGE>
partially  offset by  customer  funding of  $120,000  and  $357,000 in the three
months   ended  March  31,  1999  and  2000,   respectively.   Net  of  customer
reimbursements,  our  research  and  development  expenses  increased  80%  from
$934,000 in the three  months  ended March 31, 1999 to $1.7 million in the three
months ended March 31, 2000.

     Selling and Marketing Expenses

         Selling  and  marketing  expenses  consist  of  employee  salaries  and
benefits,  consultant  fees,  and expenses for  advertising,  travel,  technical
assistance,  trade shows, and promotional and demonstration  materials.  Selling
and  marketing  expenses  increased  85% from $318,000 in the three months ended
March 31,  1999 to  $588,000  in the three  months  ended  March 31,  2000.  The
increase  was  attributable  to our hiring of two  additional  personnel  in our
customer  support group,  and increased  consulting  support along with expenses
related to planned  attendance at two additional  trade shows aimed at enhancing
our relationships with major customers and prospects.  Our selling and marketing
expenses as a percentage of sales decreased significantly from 27% for the three
months  ended March 31,  1999 to 9.3% for the same period in 2000.  This was the
result of  increasing  sales while only adding  three  people to our selling and
marketing organization.

     General and Administrative Expenses

         General and  administrative  expenses  consist  primarily of executive,
administrative,  human  resources,  quality  assurance,  management  information
systems and finance related costs. General and administrative expenses increased
313% from $372,000 for the three months ended March 31, 1999 to $1.5 million for
the  three  months   ended  March  31,   2000.   The  increase  in  general  and
administrative  expenses was  primarily  attributable  to staffing  increases to
support the Company's  operation.  The company added several  senior  management
positions and additional support for finance and administration.  As a result of
the initial public offering, the Company has also incurred expenses for investor
and public relations  consulting firms.  Expenses associated with the recruiting
of additional  technical  personnel  have  increased  from $82,000 for the three
months ended March 31, 1999 to $160,000 for the same period in 2000.

     Other Income (Expense)

         Other  income  (expense)  consists of interest  earned on cash and cash
equivalents offset by interest expense and miscellaneous non-operating expenses.
Total other  expense  changed from $51,000 in expense for the three months ended
March 31, 1999 to $424,000 in income for the three  months ended March 31, 2000.
Interest  expense for the three months ended March 31, 2000 was $119,000  higher
than the same period in 1999 due  primarily to additional  equipment  financing.
Interest  income  increased by $594,000  from $17,000 for the three months ended
March 31, 1999 to $611,000  for the same period in 2000 as a result of increased
cash balances from our initial public offering in February 2000.
<PAGE>
Liquidity and Capital Resources

         We  have  financed  our  operations   primarily  through  the  sale  of
redeemable preferred stock, from cash generated by our discontinued  operations,
and from proceeds of our initial public  offering in February 2000. We have also
issued  subordinated  notes and used equipment lease financing and bank lines of
credit to  provide  cash.  Our line of credit and long term debt  agreements  in
effect at March 31, 2000 contain certain  financial  covenants of which the most
restrictive  are the maintenance of a minimum  debt-to-equity  ratio and various
profitability requirements. We raised net proceeds of $12.9 million in 1999 from
the issuance of redeemable preferred stock.

         On February 7, 2000 the Company completed an initial public offering of
4,600,000  shares of its common  stock at $17.00  per share  under the terms and
conditions  contained in an  underwriting  agreement dated February 1,

                                       12
<PAGE>
2000 with various underwriters. We received net proceeds from our initial public
offering of  approximately  $71.2  million,  after  underwriting  discounts  and
commission  and  estimated  offering  costs,  to be used  primarily  for general
corporate purposes.

         At March 31, 2000,  we had cash and cash  equivalents  of $54.5 million
and marketable  securities of $13.2  million.  At March 31, 2000, we had no bank
borrowings  under  our  line  of  credit  facility.   This  line  of  credit  is
collateralized by substantially all of our assets and interest is payable on the
outstanding  balance  at a rate of prime  plus 1%  (prime  was 9.0% at March 31,
2000).

         The increase in accounts  receivable  from $2.9 million at December 31,
1999 to $6.7 million at March 31, 2000,  the increase in  inventories  from $7.1
million to $13.5 million, and the increase in accounts payable from $4.3 million
to $8.6  million over the  comparable  period  reflects the net working  capital
buildup  resulting from the significant  increase in production and sales of our
broadband wireless access equipment.

         At March 31, 2000, we had approximately $2.6 million in long-term debt,
of which  $559,400 is due through  December  2000 with an interest  rate of 10%,
$225,000 is due through June 2003 with an interest  rate of 10%, and  $1,776,000
is due through April 2003 with an interest rate of 12%.

         At March 31, 2000, we had  approximately  $1.4 million in capital lease
obligations, which are due through 2002.

         Cash used in operating  activities  in the three months ended March 31,
2000 was $8.7 million  compared to $1.4 million for the same period in 1999. For
the three  months ended March 31, 2000,  cash used in operating  activities  has
primarily  represented  funding of our net losses  and  inventory  build to meet
production requirements. For the three months ended March 31, 1999, cash used in
operating activities primarily represented funding of our net losses.

         Cash used in investing  activities  in the three months ended March 31,
2000 was $14.7 million  compared to $359,000 for the same period in 1999. In the
three months ended March 31, 2000 these amounts related primarily to purchase of
equipment and the purchase of marketable  securities.  In the three months ended
March 31, 1999,  these  amounts  related  primarily to the purchase of equipment
used in our manufacturing and research and development activities.

         Cash  provided by financing  activities in the three months ended March
31, 2000 was $71.3 million compared to cash used of $303,000 for the same period
in 1999.  The  financing  activities  for the three  months ended March 31, 2000
consisted  primarily  of the  proceeds  from our initial  public  offering.  The
financing  activities  for the  three  months  ended  March 31,  1999  consisted
primarily of capital lease and debt repayments.

         Our future  cash  requirements  will  depend  upon a number of factors,
including the timing and level of research and development  activities and sales
and  marketing  campaigns,   and  our  ability  to  significantly  increase  our
manufacturing volumes. We believe that our cash and cash equivalent balances and
the proceeds  from this  offering  will provide  sufficient  capital to fund our
operations for at least 12 months. Thereafter, we may require additional capital
to fund our operations. In addition, from time to time we evaluate opportunities
to acquire  complementary  technologies or companies.  Should we identify any of
these  opportunities,  we may  need to  raise  additional  capital  to fund  the
acquisitions  and our operations.  There can be no assurance that financing will
be available to us on favorable terms or at all.
<PAGE>
Disclosures About Market Risk

         The following  discusses our exposure to market risk related to changes
in interest  rates,  equity prices and foreign  currency  exchange  rates.  This
discussion  contains  forward-looking  statements  that are exposed to risks and
uncertainties,  many of which are out of our control.  Actual results could vary
materially as a result of a number of factors,  including  those discussed above
under "Part I - Financial Information."


                                       13
<PAGE>
         As of  March  31,  2000,  we had cash  and  cash  equivalents  of $54.5
million.   Substantially  all  of  these  amounts  consisted  of  highly  liquid
investments  with  remaining  maturities at the date of purchase of less than 90
days.  These  investments are exposed to interest rate risk and will decrease in
value if market interest rates increase. A hypothetical  increase or decrease in
market interest rates by 10 percent from the December 31, 1999 rates would cause
the fair value of these  short-term  investments to decline by an  insignificant
amount. Due to the short duration of these investments, an immediate increase in
interest  rates would not have a material  effect on our financial  condition or
results of  operations.  Declines  in  interest  rates over time will,  however,
reduce our interest income.  As of March 31, 2000, we had marketable securities
of  $13.2  million  which  consisted  of  municipal  and  government  bonds  and
commercial paper with maturities through June 2001.

         We do not own any significant equity investments.  Therefore, we do not
currently have any direct equity price risk.

         Currently,  all sales to  international  customers are  denominated  in
United States dollars and, accordingly,  we are not currently exposed to foreign
currency exchange rate risks.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

         See  Item  2  -  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations, Disclosures about Market Risk.


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         We are not currently a party to any material legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds.

Conversion of Preferred Stock into Common Stock

         In January  2000,  there were  approximately  20,977,000  shares of the
Company's  preferred  stock  outstanding.  In  accordance  with the terms of the
Company's  Restated  Articles of  Organization,  those shares of preferred stock
automatically  converted  into  shares of common  stock upon the  closing of the
initial  public  offering of the Company's  common stock in February  2000.  The
preferred  stock  converted  into common stock at a ratio of one share of common
stock for two  shares  of  preferred  stock.  This  ratio was the  result of the
reverse one for two split of the  Company's  common  stock  effected in December
1999. There was no amendment or modification of the Company's  Restated Articles
of Organization in connection with this conversion.

Recent Sales of Unregistered Securities

         The Company has issued or sold the following unregistered securities in
the three months ended March 31, 2000:

         o     An aggregate of 102,750  shares of common stock at prices ranging
               from  $1.00 to $8.00 per  share  through  March  31,  2000 to our
               employees upon the exercise of options held by those  individuals
               and issued under one or more of our stock plans.

         o     An aggregate of 40,000  shares of common stock at $1.00 per share
               in March 2000 to a warrant holder upon the exercise of warrants.


                                       14
<PAGE>
         The foregoing  numbers  relating to our common stock have been adjusted
to reflect  the one for two  reverse  stock  split  which  became  effective  on
December 16, 1999. As a result of the reverse  stock split,  every two shares of
our outstanding  preferred stock were automatically  converted into one share of
our common stock upon the closing of our initial public offering of common stock
on February 7, 2000.

         Each of the sales described above were completed  without  registration
under  the  Securities  Act in  reliance  upon  one  or  more  of the  following
exemptions:

         o     Section 4(2) of the  Securities  Act or Rule 506 of  Regulation D
               promulgated   under  the  Securities  Act  for  transactions  not
               involving a public offering; or

         o     Rule 701  promulgated  under the  Securities  Act with respect to
               certain of the options and shares of common  stock  issued to the
               Company's employees, directors and consultants.

         None of the sales of the unregistered  securities issued by the Company
described above have involved the use of an underwriter, and no commissions were
paid in connection with the sale of any of the unregistered securities issued by
the Company described above.

Use of Proceeds from Registered Offerings

         Common  Stock.  On  February  1,  2000,  the  Securities  and  Exchange
Commission  declared  effective  a Form S-1  Registration  Statement  (File  No.
333-87885) filed by the Company in connection with an initial public offering of
4,600,000  shares of its Common Stock, par value $.01 per share. The offering of
Common  Stock  commenced on February 2, 2000 and closed on February 7, 2000 with
all of the 4,600,000 shares sold at a price of $17.00 per share for an aggregate
price of $78.2  million.  All  shares  were sold by the  Company;  there were no
selling  stockholders.   Credit  Suisse  First  Boston  was  the  lead  managing
underwriter  of the offering and Banc of America  Securities  LLC and CIBC World
Markets Corp. were co-managers of the offering.

         The gross  proceeds of the offering were  approximately  $78.2 million.
The Company incurred  approximately  $7.0 million of expenses in connection with
the  offering,  of which  approximately  $5.5 million  represented  underwriting
discounts and  commission,  and an estimated $1.5 million  represented  offering
costs,  including  legal  fees,  accounting  fees,  underwriters'  out-of-pocket
expenses and printing expenses.

         The Company received  approximately  $71.2 million of net proceeds from
the offering. Those net proceeds will be used for general corporate purposes and
for  potential  acquisitions.  Pending  such uses,  the net  proceeds  have been
invested in short-term, interest-bearing,  investment grade securities or direct
or  guaranteed  obligations  of the U.S.  government.  From the time of  receipt
through  March 31,  2000,  the Company has  applied  its net  proceeds  from the
offering toward working capital,  financing  capital  expenditures,  and funding
operating  losses.  Net cash used from the  offering  for  operating  activities
totaled $4.4 million.
<PAGE>
Item 3.  Exhibits and Reports on Form 8-K.

         (a)       Exhibits

         Exhibit 27.1 - Financial Data Schedule

         (b)       Reports on Form 8-K

         The  Company  filed a Form 8-K on  February  8, 2000 to report that the
Company had sold its Millitech  Division to MMW Acquisition,  LLC (to be renamed
Millitech, LLC) ("Millitech") pursuant to an Asset Purchase Agreement,  dated as
of that date (the "Asset Purchase Agreement").  The Millitech Division contained
the  millimeter-wave  components and assemblies business as well as the military
satellite communications antenna business of Telaxis.

                                       15
<PAGE>


                                   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.

                              Telaxis Communications Corporation

Date:  May 12, 2000          By:   /s/ Dennis C. Stempel
                                   ---------------------
                                   Dennis C. Stempel,
                                   Chief Financial Officer, Principal Financial
                                   Officer, Principal Accounting Officer and
                                   Duly Authorized Officer





                                       16