================================================================================


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

                                 ===============
                                  FORM 10 - KSB
                                 ===============

(MARK ONE)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 For the Fiscal Year Ended December 31, 2002.

 OR

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

                          ARC Wireless Solutions, Inc.
                          ----------------------------
        (Exact name of small business issuer as specified in its charter)

                                      Utah
                                      ----
                 (State or other jurisdiction of incorporation)

        000-18122                                       87-0454148
        ---------                                       ----------
 (Commission File Number)                   (IRS Employer Identification Number)

                           4860 Robb Street, Suite 101
                        Wheat Ridge, Colorado, 80033-2163
                        ---------------------------------
           (Address of principal executive offices including zip code)

                                 (303) 421-4063
                                 --------------
          (Small Business Issuer telephone number, including area code)

                 Securities registered pursuant to Section 12(b)
                              of the Exchange Act:
                                     (None)

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          $.0005 par value common stock

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
    -----      -----

<PAGE>


Check here if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Yes   X    No
    -----     -----

Issuer's revenues for its most recent fiscal year: $32,575,000

As of March 3, 2003, the aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $9,964,000. This calculation is
based upon the average of the closing bid price of $0.08 and ask price of $0.11
of the stock on March 3, 2003. Without asserting that any director or executive
officer of the issuer, or the beneficial owner of more than five percent of the
issuer's common stock, is an affiliate, the shares of which they are the
beneficial owners have been deemed to be owned by affiliates solely for this
calculation.

The number of shares of the Registrant's $.0005 par value common stock
outstanding as of March 3, 2003 was 153,222,930.



================================================================================



                                       2

<PAGE>



                          ARC Wireless Solutions, Inc.
                   10-KSB for the Year Ended December 31, 2002

                                Table of Contents

                                                                        Page No.
                                     PART I

Item 1.       Description of Business...................................     4

Item 2.       Description of Properties.................................    13

Item 3.       Legal Proceedings.........................................    14

Item 4.       Submission of Matters to a Vote of Security Holders.......    14

                                     PART II

Item 5.       Market for Common Equity and
              Related Stockholder Matters ..............................    15

Item 6.       Management's Discussion and Analysis
              or Plan of Operation......................................    18

Item 7.       Financial Statements......................................    22

Item 8.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure....................    22

                                    PART III

Item 9.       Directors, Executive Officers, Promoters
              and Control Persons; Compliance
              With Section 16(a) of the Exchange Act....................    23

Item 10.      Executive Compensation....................................    25

Item 11.      Security Ownership of Certain Beneficial
              Owners and Management and Related
              Stockholder Matters.......................................    31

Item 12.      Certain Relationships and Related Transactions............    33

Item 13.      Controls and Procedures...................................    33

Item 14.      Exhibits and Reports on Form 8-K..........................    34

Signatures    ..........................................................    36

Certifications Pursuant to Section
 302 of the Sarbanes-Oxley Act of 2002 .................................    37




                                       3

<PAGE>


                                     PART I

Item 1.  Description of Business
--------------------------------

Business Development.
---------------------

We were organized under the laws of the State of Utah on September 30, 1987 for
the purpose of acquiring one or more businesses. Our prior name was Westflag
Corporation, which was formerly Westcliff Corporation. In January 1989, we
completed our initial public offering of 10,545,000 units at $.04 per unit,
resulting in net proceeds of approximately $363,000. (The number of units and
price per unit have been adjusted to reflect our one-for-four reverse split in
April 1989). Each unit consisted of one share of common stock, one Class A
Warrant and one Class B Warrant. All the Class A and Class B Warrants expired
without exercise and no longer exist. In April 1989, we effected a one-for-four
reverse split so that each four outstanding shares of common stock prior to the
reverse split became one share after the reverse split. Unless otherwise
indicated, all references in this Annual Report to the number of shares of our
common stock have been adjusted for the effect of the 1989 one-for-four reverse
split.

On April 12, 1989, we merged with Antennas America, Inc., a Colorado corporation
that had been formed in September 1988 and had developed an antenna design
technique that would permit the building of flat (as compared to parabolic)
antenna systems. Pursuant to the merger, Antennas America, Inc. was merged into
us, all the issued and outstanding stock of Antennas America, Inc. was converted
into 41,952,000 of our shares, and our name was changed to Antennas America,
Inc. At the annual shareholders meeting held on October 11, 2000, our
shareholders voted to change our name to ARC Wireless Solutions, Inc. ("ARC
Wireless" or the "Company") from Antennas America, Inc.

On May 24, 2000, we purchased, through our subsidiary, Winncom Technologies
Corp. ("Winncom"), the outstanding shares of Winncom Technologies, Inc. Winncom
specializes in marketing, distribution and service, as well as selected design,
manufacturing and installation, of wireless component and network solutions in
support of both voice and data applications, primarily through resellers located
in the United States and selected international distributors. The acquisition
has been accounted for as a purchase, and accordingly, the operations for
Winncom have been included in the Company's consolidated statement of operations
from May 24, 2000 (the date of acquisition) forward. We paid $12.0 million in
aggregate consideration, consisting of $3 million in cash, a $1.5 million
non-interest bearing promissory note payable 90 days from the closing date, a
$1.5 million non-interest bearing promissory note payable 180 days from the
closing date and $6 million in shares of our restricted common stock (6,946,000
shares). The notes were paid in full by September 2000, with an $85,000
negotiated early payment reduction.

On September 29, 2000, we purchased, through our subsidiary, Starworks Wireless
Inc. ("Starworks"), the outstanding shares of Starworks Technology, Inc. (a/k/a
The Kit Company). Starworks specializes in the design, manufacturing, marketing,
distribution and service of direct-to-home satellite dish installation kits in
the United States, primarily through original equipment manufacturers (OEMs) and
third-party distributors, retailers and the Internet. The acquisition has been
accounted for as a purchase. We paid $2.3 million in aggregate consideration in
2000, consisting of $0.8 million in cash and $1.5 million in shares of our
restricted common stock (1,959,000 shares). As a result of a settlement
agreement reached with the former shareholders of Starworks Technology, Inc. in
December 2001, 1,459,499 shares of our common stock were returned to us and we
received an option to purchase the remaining 500,000 shares of common stock at
$.15 per share, which we exercised in January 2002.

                                       4

<PAGE>


On August 21, 2001, we purchased certain commercial assets of the wireless
communications product line from Ball Aerospace & Technology Corp. ("BATC"), a
subsidiary of Ball Corporation, for $925,000. Subsequent to the purchase, a
physical inventory was taken of the assets purchased and in accordance with the
purchase agreement Ball was required to refund approximately $85,000 of the
original purchase price as a result of there being less inventory than that
listed in the purchase agreement. The assets purchased consisted primarily of
raw materials inventory, finished goods inventory, production tooling equipment,
testing equipment and an exclusive license agreement to use patents related to
the wireless communications antenna products for commercial purposes.

Businesses of the Company
-------------------------

ARC Wireless provides high quality, timely, cost effective wireless network
component and end-to-end wireless network solutions. Our Wireless Communications
Products Division designs, develops, manufactures, markets and sells a
diversified line of antennas and related wireless communication systems,
including cellular base station, mobile, cellular, conformal and phased array
antennas. Our Winncom subsidiary specializes in marketing, distribution and
service, as well as selected design, manufacturing and installation, of wireless
component and network solutions in support of both voice and data applications,
in the United States and Worldwide. Our Starworks subsidiary specializes in the
design, manufacturing, marketing, distribution of direct-to-home satellite
installation kits in the United States, primarily through OEMs and third-party
distributors, retailers and the Internet.

Principal Products
------------------

     Principal products of our Wireless Communications Products Division include
the following:

     Cellular Base Station Antennas
     ------------------------------

     Included in the acquisition of certain commercial assets from BATC in 2001
was the right to use BATC's technology in the manufacturing of the line of base
station antennas, which consists of various models used in several frequency
bands for cellular systems. These cellular systems include several protocols and
technologies such as AMPS, GSM, PCS, GPRS, 2.5G and 3G. Our base station
antennas are now being deployed in some of the AT&T Wireless, Cingular and Qwest
mobile phone carrier networks. New base station models are being designed to
meet other carrier mobile 2.5G and 3G requirements and other companies' fixed
wireless high-speed internet systems as well.

     Portable Antennas
     -----------------

     Our portable antennas are unique yet flexible antenna systems that are used
to increase the antenna gain and product performance for a variety of wireless
devices. Typically, the product can be connected to a radio, cellular phone or
can be installed either directly in or on a computer or other device. We market
two primary portable antenna designs, the ARC Freedom Antenna(TM) and the "F"
antenna. The Freedom Antenna(TM) is a unique broadband, patent pending antenna
designed to work with cellular phones and other mobile wireless devices in a
frequency range of 800 MHz to 3 GHz. The "F" Antenna is designed mainly to work
with laptop computers and metering devises in the 800 MHz to 900 MHz frequency
range. The main design parameter of our mobile antennas is flexibility, creating
an antenna that will function in several wireless applications or installations
without requiring modification of the fundamental design of the antenna. We
market the portable antenna systems along with our existing commercial wireless
products to existing and new customers.

                                       5

<PAGE>


     Conformal Antennas
     ------------------

     A conformal antenna is one that is constructed so that it conforms
technically and physically to its product environment. We first introduced and
patented the disguised decal conformal antenna. This product, introduced in 1989
originally only for conventional automobile cellular phones, has been expanded
as an alternative to many conventional wire type antennas and has been expanded
to be used for numerous mobile applications, including domestic and
international cellular and law enforcement frequencies, passive repeaters,
vehicle tracking and GPS. The antenna is approximately 3 1/2"x 3 1/2"x 1/10"and
typically installs on the inside of the vehicle so that it is not detectable
from the outside of the vehicle. Several derivative products of this antenna
design have been developed for OEM and other special applications. We have used
our experience in these applications for developing antennas for Bluetooth(TM)
wireless technology, which is, among other features, setting standards for
short-range connectivity between computers and a wide variety of other
electronic devices.

     Global Positioning System (GPS) Antennas
     ----------------------------------------

     We have developed a proprietary, flat GPS antenna system that integrates
with a GPS receiver. GPS receivers communicate with a constellation of
globe-orbiting satellites that will identify longitude and latitude coordinates
of a location. These satellite systems have been used for years by the military,
civilian and commercial boats, planes, for surveying, recreational hikers, and
more recently in vehicle tracking and asset management. Accurate to within
several feet, there are several types of GPS systems, some of which are the size
of a cellular phone and are very easy to use. We are currently marketing our GPS
antenna products on an OEM basis for the purposes of fleet management, asset
management and vehicle tracking systems.

     We have also developed a proprietary, patented, amplified GPS/Cellular
combination antenna that integrates with a GPS receiver. We currently are
selling this product to fleet and asset management companies on a worldwide
basis. Conventional GPS antenna systems are mounted on the exterior of a vehicle
or other asset, however our product can be mounted on the interior of an
automobile or truck, protecting the antenna from weather, theft and vandalism.

     Flat Panel Antennas
     -------------------

     Our flat panel antennas are flat antennas that typically incorporate a
group of constituent antennas, all of which are equidistant from the center
point. These types of antennas are used to receive and/or transmit data, voice
and, in some cases, video from microwave transmitters or satellites. We have
developed, patented and sold various versions of these antennas to private,
commercial and governmental entities. The Company will add a second flat panel
antenna design in 2003, which it intends to market, with the Airbase(TM) design
purchased from BATC.

     Other Antennas
     --------------

     We are pursuing new business opportunities for our conformal and phased
array antennas by continuing to broaden and adapt existing technologies. We have
designed and currently manufacture antennas varying in frequencies up to 6 GHz.
These antennas use our newly developed antenna designs to provide inconspicuous
installation. All of our antennas are designed to be manufactured using our
proprietary design footprints. This allows us to better utilize our engineering,
technical and production staff, as well as existing tools, dies and radomes for
more than one product.

                                       6

<PAGE>


Principal products of our Winncom subsidiary include the following:

     Unlicensed Wireless Products
     ----------------------------

     Unlicensed wireless products use frequencies that require a license to
manufacture but not a license to use. Winncom's primary products are the Wi-Fi
license free products operating in the 2.4GHz to 5.8GHz frequency range for both
802.11b and 802.11a standards. Any business or consumer may use these
frequencies as long as they do not interfere with other users. Winncom currently
markets products manufactured by Avaya, Alvarion (Formerly Breezecom), Intel,
Proxim, KarlNet, Nomadix, all of which are leaders in the unlicensed
communications hardware market. These products are used in high-speed (up to
1G/bps) wireless networking applications, including, among others, internet
access, hot spots, local and wide area networks (LAN/WAN), Voice Over IP (VoIP),
telco applications and industrial process automation and data acquisition.

     Licensed Wireless Products
     --------------------------

     Licensed wireless products require a Federal Communication Commission
("FCC") license to operate on a specific frequency in a geographic area. Winncom
distributes point-to-point microwave products including DMC/Stratex. These
microwaves are used to connect Wireless Internet Service Providers cell sites or
enterprise multiple locations.

     Voice over Internet Protocol (VoIP)
     -----------------------------------

     VoIP allows voice communications to be placed over standard Internet
networks. This is critical for emerging Wireless Internet Service Providers so
they can offer complete voice and data service to generate revenue to compete
with DSL and Cable Modem service. Winncom has signed an agreement with SoftJoys
Labs for exclusive distribution of SoftJoys' voice-over-IP (VoIP) products. The
SoftJoys' VoIP product line provides very economical features for corporate,
service providers and individual customers. SoftJoys' labs software combined
with wireless environment delivers complete communication solutions for users of
mobile devices such as PDA's, WEB PADs and Tablet PCs. Winncom also distributes
Multitech VoIP products.

     Antennas
     --------

     Winncom sells both customer premises and base station antenna solutions as
well as a full range of antennas for point-to-point applications. Winncom offers
panel, a variety of sectorized and omni directional (which include unique
13.5dbi horizontally polarized), amplified CPE antennas and ethenet CPE antennas
for wireless Internet access.

     Accessories
     -----------

     Winncom is a full service value-added distributor, specializing in the
design and development of a host of accessories products. These products include
the amplifiers, 2.4GHz-5.8GHz and 2.4GHz-5.8GHz frequency converters, filters,
power supplies, power cords, and environmental enclosures necessary for the
installation and optimum performance of a wireless network. The 2.4GHz to 5.8GHz
frequency converters, designed by Winncom engineers, enhances the deployment of
the readily available low-cost 2.4GHz wireless WAN/ LAN equipment sold by
Winncom. The main applications for this new solution include wireless Internet
access, campus wireless LANs and wireless spectrum WANs. The frequency converter
will provide additional transmission channels in the unlicensed spectrum
resulting in a considerable increase in bandwidth capacity. It also promotes
usage of the 5.8GHz spectrum to supplement network performance where the 2.4GHz
spectrum is saturated. The product is sold both domestically and
internationally.

                                       7

<PAGE>


     Network Infrastructure Product
     ------------------------------

     Winncom offers a complete line of high-performance data infrastructure and
security products by AVAYA Communication. The VPNet(R) virtual private network
systems (VPN) enable organizations of all sizes, from small business to large
enterprises and managed data service providers, to securely connect remote
users, branch offices, business partners, and customers, taking full advantage
of the cost savings and productivity enhancing benefits of virtual private
networks. The AVAYA multi-service Cajun(TM) switches are designed for the new
generation of network architectures that cost-effectively integrate voice,
video, and data on a single infrastructure, while providing reliability,
ubiquity, and security to meet the challenges and dynamic requirements of the
enterprise business environment from converged networks to e-business solutions.

     Other Products
     --------------

     Winncom also sells ViewSonic and Fujitsu pen based computers and laptops
for wireless network applications such as government, medical, healthcare and
education. Winncom assembles cable products that consist of copper, coaxial and
fiber cables and lightning arrestors that are used in the installation,
extension and protection of wireless end-to-end systems. Winncom offers a verity
of environmental enclosures for a broad range of wireless products for outdoor
applications.

     Winncom continuously evaluates new products, exploring the new markets and
pursues distribution alliances with manufacturers whose equipment complements
Winncom's product offerings as well as the development of Winncom's proprietary
products that include amplifiers, frequency converters, antennas, outdoor
enclosures and RF accessories.

Principal products of our Starworks subsidiary include the following:

     Home Satellite Installation Components
     --------------------------------------

     The direct-to-home satellite dish industry has since its inception been
characterized as a consumer industry with a plug and play product. Starworks has
provided pre-packaged components to the satellite industry. To increase sales
and customer satisfaction, the satellite programming industry currently offers
professional installation with the purchase of a home satellite dish. Starworks
is currently transforming its business to provide installers with components for
satellite installation with the main marketing focus on installation kits and
cable jumpers.

Marketing And Distribution
--------------------------

     The Wireless Communications Products Division markets its commercial line
of antennas directly to distributors, installers and retailers of antenna
accessories. Current distribution consists of several domestic and international
distributors, including several hundred active retail dealers. The Wireless
Communications Products Division also markets our diversified proprietary
designs to our existing and potential customers in the commercial, government
and retail market places. Potential customers are identified through trade
advertising, phone contacts, trade shows, and field visits. The Company provides
individual catalog and specification brochures describing existing products. The
same brochures are utilized to demonstrate our capabilities to develop related
products for OEM and other commercial customers. Our web site,
www.arcwireless.net, includes information about our products and background as

                                       8

<PAGE>


well as financial and other shareholder-oriented information. The web site,
among other things, is designed to encourage both existing and potential
customers to view us as a potential source for diversified antenna solutions.
Inquiries through the web site are pursued by our in-house and outside sales
personnel. To help customers get answers quickly about our products, we have
established a toll-free telephone number administered by our customer service
personnel from 8:00 a.m. to 5:00 p.m. MT. All of our antenna products are
currently made in the United States, which we consider to be a marketing
advantage over most of our competitors. Many of our products are also marketed
internationally. We currently have numerous international distributors marketing
our products in several countries. The Company is currently negotiating with
various international manufacturers to manufacture its proprietary product for
that company. This process can save duty and freight costs making the Company
more competitive.

     Winncom Technologies is a value added distributor that supports
distribution of products with internal sales, technical support, system design
and feasibility studies, installation and training. Winncom's customer base
comprises networking value added resellers ("VARs"), system integrators, ISPs,
competitive local exchange carriers (CLECs) and incumbent local exchange
carriers (ILECs). Winncom promotes and supports the one-stop-source philosophy
for wireless data networking products and services. Consistent with our
one-stop-source approach, Winncom markets and sells a number of its own products
as well as private label products that fit into our marketing philosophy. We
believe we have an advantage over the competition due to our knowledge of
wireless networking, better product availability, in-house technical expertise
and customer support and can turnkey the implementation of most wireless network
projects or applications.

     Winncom continuously expends marketing and advertising efforts through
print media, trade shows and via the Internet. The main marketing focus is to
expand the reseller base of customers, which are active in medical, healthcare,
enterprise, government, education and industrial market segments. Winncom is
also expanding its marketing efforts to sell service providers and OEM. markets.
Additionally, Winncom continually expands its wireless certification training
programs, including vendor-authorized certification for Value Added Resellers
"VARs". Winncom provides wireless awareness seminars for system integrators and
consultant/design firms. We also have alliances with our vendors that include
road-shows, authorization/certification programs, trade shows and advertising.
Winncom's web site has complete E-commerce capability, enabling customers to
order and pay for products online.

Production
----------

The Wireless Communications Products Division currently produces most of the
customized items that we use to manufacture our products excluding cable,
connectors and other generic components. We believe that this control over the
production process allows us to be more competitive, efficient and more
responsive to customers and allows us to take advantage of more opportunities in
the wireless communications market.

Winncom offers a wide variety of high performance wireless system accessories
including antennas, amplifiers, lightning arrestors, custom cable assemblies and
environmental enclosures, as well as wireless access points, bridges, routers,
client adapters, modems, T1/E1, and licensed microwave systems from leading
manufacturers.

Starworks produces all cable assemblies and installation kits internally.
External purchases include bulk cable, coaxial connectors, and packaging
materials.

                                       9

<PAGE>


Research And Development
------------------------

Research and development (R&D) costs are charged to operations when incurred and
are included in operating expenses. Except for salaries of engineering personnel
and contract engineering involved in R&D, other R&D costs have not been material
in 2002 and 2001. We spent approximately $229,000 and $240,000 on R&D in 2002
and 2001, respectively. Our R&D personnel develop products to meet specific
customer, industry and market needs that we believe compete effectively against
products distributed by other companies. Quality assurance programs are
implemented into each development and manufacturing project, and we enforce
strict quality requirements on components received from other manufacturing
facilities.

Employees
---------

At December 31, 2002, the Company had 88 full time employees including 45 in
manufacturing and distribution, 12 in sales and customer support, 9 in
engineering and product development, and 22 in management and administration.
Our employees are not represented by any collective bargaining agreement and we
have never experienced a work slowdown or strike.

Competition
-----------

The market for wireless network components is highly competitive, and our
current and proposed products compete with products of larger companies that are
better financed, have established markets, and maintain larger sales
organizations and production capabilities. In marketing our products, we have
encountered competition from other companies, both domestic and international.
At the present time, our market share of the overall wireless network component
market is small. Our products are designed to be unique and in some cases are
patented. Our products normally compete with other products principally in the
areas of price and performance. However, we believe that our products work as
well as or better than competing products and usually sell for the same price or
less. Additionally, we have demonstrated to our customers and potential
customers that we are a more reliable source than some competitors and believe
this is a distinct competitive advantage.

Government Regulations
----------------------

We are subject to government regulation of our business operations in general,
and the telecommunications industry also is subject to regulation by federal,
state and local regulatory and governmental agencies. Under current laws and the
regulations administered by the FCC, there are no federal requirements for
licensing antennas that only receive (and do not transmit) signals. We believe
that our antennas that are also used to transmit signals are in compliance with
current laws and regulations. Current laws and regulations are subject to change
and our operations may become subject to additional regulation by governmental
authorities. We can be significantly impacted by a change in either statutes or
rules.

Patents
-------

The Company currently holds eight U.S. patents, which will remain valid until
their individual specific expiration dates. Kevin O. Shoemaker, our former Chief
Scientist, is the inventor of a patent valid through the year 2008, for micro
strip antennas and multiple radiator array antennas. Mr. Shoemaker also is the
inventor of a patent for a serpentine planar broadband antenna that expires in
2012. This is the design that we use for some of our conformal antennas,
including the vehicular disguised decal antennas and related products. In
addition, Mr. Shoemaker and Mr. Marx are inventors of a patent covering the

                                       10

<PAGE>


process used to manufacture certain of our flat planar antennas, which expires
in 2016. Mr. Shoemaker is the inventor of a patent, which expires in 2018,
covering creating antennas from coaxial cable, and Mr. Shoemaker and Mr. Marx
are also the inventors of a patent for a conformal antenna for a satellite dish,
which expires in 2017. Mr. Shoemaker and Mr. Marx each has agreed to permanently
assign to the Company all rights to these patents.

In addition, Dr. Mohamed Sanad, our former Principal Consulting Engineer, is the
inventor of a patent that was designed for remote wireless metering, which will
expire in 2019. He agreed to permanently assign to us all of the rights to the
patent.

We also have filed a utility patent application with Raymond L. Lovestead, one
of our former engineers, as the inventor. Mr. Lovestead has permanently assigned
to the Company all patent and other rights in the products covered by this
patent application and all other products that have been developed while
employed by us.

Furthermore, we have filed a utility patent application with Dr. Donald A.
Huebner, as the inventor, and a Director. Dr. Huebner has permanently assigned
to the Company all patent and other rights in the products covered by this
utility patent application and all other products that have been and will be
developed while employed by us. We also have filed a utility patent application
with Mr. Lovestead and Dr. Huebner as the inventors of the technology that we
are using for our new ARC Freedom Antenna(TM).

The former President of our subsidiary Starworks Wireless Inc., David E.
McConnell, is the inventor of a patent for a Coaxial Cable Connector, which will
expire in 2017, and all rights to which are owned by the Company as a result of
the acquisition of Starworks Technologies, Inc. on September 29, 2000.

We have filed a utility patent application with Steven C. Olson, our Chief
Technology Officer, as the inventor. Mr. Olson has permanently assigned to the
Company all patent and other rights in the products covered by this utility
patent application and all other products that have been and will be developed
while employed by us.

We also have the exclusive commercial licensing rights to the following patents,
which were included as part of the asset purchasse agreement to acquire certain
commercial assets from BATC in 2001: US6,121,929,US5,905,465, US6,239,751 and
US6,414,636. Per the terms of the asset purchase agreement with BATC we have
also filed a utility patent with Mr. Jeffrey A. Godard, currently an engineer
with BATC, and Mr. Olson as inventors of record, both of whom have assigned to
the Company all patent and other rights to any commercial products covered by
this utility patent application.

We currently have two trademarks, ANTENNAS AMERICA and AIRBASE, that are
registered marks. We also have in use the following trademarks, which we
anticipate will become registered: FREEDOM ANTENNA, WALLDO, PARITY, ARC VLPA,
DUALBASE, UNIPAK, OMNIBASE, EXSITE, and UNISHROUD.

We seek to protect our proprietary products, information and technology through
reliance on confidentiality provisions, and, when practical, the application of
patent, trademark and copyright laws. We cannot assure that these applications
will result in the issuance of patents, trademarks or copyrights of our
products, information or technology.

                                       11


<PAGE>


Disclosure Regarding Forward-Looking Statements And Cautionary Statements
-------------------------------------------------------------------------

Forward-Looking Statements.
---------------------------

This Annual Report on Form 10-KSB includes "forward-looking statements." All
statements other than statements of historical fact included in this Annual
Report, including without limitation under Item 1: "Business-Principal
Products", "Marketing and Distribution", "Production", "Research and
Development", "Competition", "Governmental Regulations" and "Patents", and Item
6: "Management's Discussion and Analysis or Plan of Operation", regarding our
financial position, business strategy, plans and objectives of our management
for future operations and capital expenditures, and other matters, other than
historical facts, are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements and the assumptions
upon which the forward-looking statements are based are reasonable, we can give
no assurance that such expectations will prove to have been correct.

Additional statements concerning important factors that could cause actual
results to differ materially from our expectations are disclosed in the
following "Cautionary Statements" section and elsewhere in this Annual Report.
All written and oral forward-looking statements attributable to us or persons
acting on our behalf subsequent to the date of this Annual Report are expressly
qualified in their entirety by the following Cautionary Statements.

Cautionary Statements.
----------------------

In addition to the other information contained in this Annual Report, the
following Cautionary Statements should be considered when evaluating the
forward-looking statements contained in this Annual Report:

1.   Prior losses. From inception in September 1987 through the fiscal year
     ended December 31, 1992, and again for the years ended December 31, 1998
     through the fiscal year ended December 31, 2001, we incurred losses from
     operations. We operated profitably during each of the fiscal years ended
     December 31, 1993 through 1997 and again for the fiscal year ended December
     31, 2002. Profits for some of these years were marginal, and we cannot be
     assured that our operations in the future will be profitable. See the
     financial statements included in Item 13 of this Annual Report on Form
     10-KSB.

2.   Our industry encounters rapid technological changes. We do business in the
     wireless communications industries. This industry is characterized by
     rapidly developing technology. Changes in technology could affect the
     market for our products and necessitate additional improvements and
     developments to our products. We cannot predict that our research and
     development activities will lead to the successful introduction of new or
     improved products or that we will not encounter delays or problems in these
     areas. The cost of completing new technologies to satisfy minimum
     specification requirements and/or quality and delivery expectations may
     exceed original estimates that could adversely affect operating results
     during any financial period.

3.   Protection of product design. We attempt to protect our product designs by
     obtaining patents, when available, and by manufacturing our products in a
     manner that makes reverse engineering difficult. These protections may not
     be sufficient to prevent our competitors from developing products that
     perform in a manner that is similar to or better than our products.
     Competitors' successes may result in decreased margins and sales of our
     products.

                                       12

<PAGE>


4.   Limited financial resources. We have limited financial resources available
     that may restrict our ability to grow. Additional capital from sources
     other than our operating cash flow may be necessary to develop new
     products. We cannot predict that this financing will be available from any
     source.

5.   Intense competition. The communications and antenna industries are highly
     competitive, and we compete with substantially larger companies. These
     competitors have larger sales forces and more highly developed marketing
     programs as well as larger administrative staffs and more available service
     personnel. The larger competitors also have greater financial resources
     available to develop and market competitive products. The presence of these
     competitors could significantly affect any attempts to develop our
     business. However, we believe that we will have certain advantages in
     attempting to develop and market our products, including a more
     cost-effective technology, the ability to undertake smaller projects, and
     the ability to respond to customer requests more quickly than some larger
     competitors. We cannot be certain that these conclusions will prove
     correct.

6.   Availability of efficient labor. We produce and assemble our antenna and
     coaxial cable kit products at our own facilities and are dependent on
     efficient workers for these functions. We cannot predict that efficient
     workers will continue to be available to us at a cost consistent with our
     budget.

7.   We depend on key employees. We are highly dependent on the services of our
     executive management, including Randall P. Marx, our Chief Executive
     Officer. The loss of the services of any of our executive management could
     have a material adverse effect on us.

8.   New government regulations. We are subject to government regulation of our
     business operations in general. Certain of our products are subject to
     regulation by the Federal Communications Commission ("FCC") because they
     are designed to transmit signals. Because current regulations covering our
     operations are subject to change at any time, and despite our belief that
     we are in substantial compliance with government laws and regulations, we
     may incur significant costs for compliance in the future.

9.   Trading of our shares and possible volatile prices. Historically, there has
     been an extremely limited public market for our shares. We cannot predict
     that the recent trading volume will be sustained. The prices of our shares
     are highly volatile. Due to the relatively low price of the shares, many
     brokerage firms may not effect transactions and may not deal with low
     priced shares, as it may not be economical for them to do so. This could
     have an adverse effect on sustaining the market for our shares. Further, we
     believe it is improbable that any investor will be able to use our shares
     as collateral in a margin account. For the foreseeable future, trading in
     the shares, if any, will occur in the over-the-counter market and the
     shares will be quoted on the OTC Bulletin Board. On March 3, 2003, the low
     bid price for the common stock was $0.08, the high asked price was $0.11and
     the closing sale price was $0.08. Because of the matters described above, a
     holder of our shares may be unable to sell shares when desired, if at all.

10.  No dividends with respect to our shares. We have not paid any cash
     dividends with respect to our shares, and it is unlikely that we will pay
     any dividends on our shares in the foreseeable future. We currently intend
     that any earnings that we may realize will be retained in the business for
     further development and expansion.

Item 2. Description of Properties
---------------------------------

Our principal offices are currently located in Wheat Ridge, Colorado. We
currently lease approximately 5,000 square feet of office space and 28,000
square feet of production space in Wheat Ridge, Colorado where we have our

                                       13

<PAGE>


corporate offices and where we manufacture antennas. These leases expire on
various dates through 2003. We are currently in negotiations for new warehouse
and office space and believe that the new space being negotiated will be
adequate to meet its needs over the next several years.

In addition, we lease approximately 24,000 square feet of office and warehouse
space at our Winncom facility in Solon, Ohio, where we sell and distribute
component solutions for LAN/WAN communications systems. This lease expires in
December 2005.

We had leased approximately 21,000 square feet of office and production space at
our Starworks facility in Atlanta, Georgia where we assembled and distributed
self-installation kits for satellite dish systems until June 2002 when the lease
expired.

Item 3. Legal Proceedings
-------------------------

The Company and its subsidiaries are involved in various legal proceedings of a
nature considered normal in the course of its operations, principally accounts
receivable collections. While it is not feasible to predict or determine the
final outcome of these proceedings, management has reserved as an allowance for
doubtful accounts for that portion of the receivable it estimates will be
uncollectible.

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

     The Company held its annual meeting of shareholders on August 8, 2002 and
120,488,044 shares were represented at the meeting. The following are the
results of the voting on matters submitted to the shareholders, all of which
were approved:

     (1) For election of the following nominees as directors:

             Name                    Number Of Shares For             Withheld
             ----                    --------------------             --------

          Sigmund A. Balaban             120,097,859                   390,185
          Donald A. Huebner              120,094,259                   393,785
          Randall P. Marx                119,931,747                   556,297
          Gregory Raskin                 120,064,359                   423,685


     (2)  Proposal to ratify the selection of HEIN + Associates, LLP as the
          Company's certified independent accountants.

          Number of Shares:

          119,413,471 (For)         686,212 (Against)          388,361 (Abstain)


                                       14


<PAGE>


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters
----------------------------------------------------------------

Trading in our common stock is very limited. Our shares are traded in the
over-the-counter market and prices for our shares are quoted on the OTC Bulletin
Board under the trading symbol "ARCS". Our shares are not quoted on any
established stock exchange or on the NASDAQ Stock Market. Because trading in our
shares is so limited, prices are highly volatile.

The table below represents the range of high and low sales prices for our common
stock during each of the quarters in the past two fiscal years as reported by
the OTC Bulletin Board.

                                  Common Stock
                                  ------------

                                                  Sales Price
                                                  -----------
         Quarter Ended                     High                 Low
         -------------                     ----                 ---
         March 31, 2001                    $.219               $.203
         June 30, 2001                      .300                .280
         September 30, 2001                 .200                .170
         December 31, 2001                  .180                .170
         March 31, 2002                     .220                .160
         June 30, 2002                      .180                .120
         September 30, 2002                 .180                .090
         December 31, 2002                  .140                .070

On March 3, 2003, the closing sale price for our common stock was $0.08 and the
number of our shareholders of record was 446. We have not declared or paid any
cash dividends on our common stock since our formation and do not presently
anticipate paying any cash dividends on our common stock in the foreseeable
future.

Recent Sales Of Unregistered Securities
---------------------------------------

In January 2000, we completed the sale of 22,000,000 units of common stock and
warrants to purchase common stock pursuant to a private placement at a price of
$.0525 per unit. The units were sold to a total of 24 investors who were all
accredited investors pursuant to one or more exemptions from registration in
accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the
Securities Act. Each unit consisted of one share of common stock and one
immediately exercisable warrant to purchase one share of common stock at an
exercise price of $.175 per share of common stock. The warrants provided that
they would expire the earlier to occur of (i) March 14, 2001, which is one year
after the date that a registration statement concerning the transfer of the
shares of common stock included in the units and the shares of common sock
issuable upon exercise of the warrants is declared effective by the Securities
And Exchange Commission, and (ii) five years after the issuance of the warrants.
At any time that the registration statement is effective, we may, upon 30-days'
notice to the holders of the warrants, repurchase the warrants for $.001 per
warrant at any time after the weighted average trading price for the common
stock has been at least $.2275 for 20 of the 30 consecutive business days
preceding the date of the notice of repurchase. The Company gave notice to
redeem in March 2000 and all the warrants were exercised. Proceeds from the
offering were $1,150,000, before costs of the offering of $51,000. There were no
fees or commissions paid to brokers or underwriters or placement agents in
conjunction with this placement.

                                       15

<PAGE>


On May 24, 2000, we purchased, through our Winncom Technologies Corp.
subsidiary, the outstanding shares of Winncom Technologies, Inc. We paid $12.0
million in aggregate consideration, consisting of $3.0 million in cash, a $1.5
million non-interest bearing promissory note payable 90 days from the closing
date, a $1.5 million non-interest bearing promissory note payable 180 days from
the closing date and $6 million in shares of restricted common stock (or
6,946,000 shares of our common stock). The notes were paid in full by September
2000, with an $85,000 negotiated early payment reduction. The shares were issued
to two individuals pursuant to an exemption from registration in accordance with
Section 4(2) of the Securities Act.

On September 29, 2000, we purchased, through our Starworks Wireless Inc.
subsidiary, the outstanding shares of Starworks Technology, Inc. (a/k/a The Kit
Company or Kit). We initially paid $2.3 million in aggregate consideration,
consisting of $0.8 million in cash and $1.5 million in shares of restricted
common stock (or 1,959,000 shares of our common stock). The shares were issued
to two individuals pursuant to an exemption from registration in accordance with
Section 4(2) of the Securities Act. As a result of alleged misrepresentations by
the sellers, this transaction led to litigation and in December 2001 the
litigation was settled and part of the consideration initially paid, 1,459,499
shares of common stock, was returned to the Company, and the Company received an
option to purchase the remaining 500,000 shares of common stock at $.15 per
share. The Company exercised its option in January 2002 and purchased the
remaining shares for $75,000. See "Item 3: Legal Proceedings".

In October 2000, we completed the sale of 15,000,000 units of common stock and
warrants to purchase common stock pursuant to a private placement at a price of
$.50 per unit. The units were sold to a total of 21 investors who were all
accredited investors pursuant to one or more exemptions from registration in
accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the
Securities Act. Each unit consisted of one share of common stock and one
immediately exercisable warrant to purchase one share of common stock at an
exercise price of $1.50 per share of common stock. The warrants expire the
earlier to occur of (i) one year after the date that a registration statement
concerning the transfer of the shares of common stock included in the units and
the shares of common stock issuable upon exercise of the warrants is declared
effective by the Securities And Exchange Commission, and (ii) five years after
the issuance of the warrants. We were obligated to file the registration
statement within 10 business days after filing our Annual Report on Form 10-KSB
with the SEC. This Registration Statement was filed on October 3, 2002. At any
time that the registration statement is effective, we may, upon 30-days' notice
to the holders of the warrants, repurchase the warrants for $.01 per warrant at
any time after the weighted average trading price for the common stock has been
at least $1.75 for 20 of the 30 consecutive business days preceding the date of
the notice of repurchase. We received gross cash proceeds of $7.4 million and
related offering expenses were $14,000. There were no fees or commissions paid
to brokers or underwriters or placement agents in conjunction with this
placement.

In July 2001, the Company offered each Unit Investor the opportunity to either
(1) exchange each three Warrants for one share of Common Stock ("Alternative
A"), or (2) reduce the exercise price of each Warrant from $1.50 per share to
$1.00 per share upon the Unit Investor's agreement to reduce the price
associated with the Company's 30-day notice of redemption from $1.75 to $1.50
("Alternative B"); provided, however, that if the Unit Investor determined to
participate in either Alternative A or B, the Unit Investor was required to
waive the Company's obligation to register the Unit Investor's sale or other
transfer of the Registrable Securities (the "Registration Obligation").

Each Unit Investor electing Alternative A also was required to enter into a
Restricted Sales Agreement (the "Restricted Sales Agreement") that includes the

                                       16

<PAGE>


following restrictions with respect to the sale of all shares of Common Stock
owned by the Unit Investor, except for any shares purchased subsequent to March
31, 2001:

     o    On any trading day during the one-year period beginning on the day
          Alternative A goes into effect (which was August 9, 2001), the Unit
          Investor may sell or otherwise dispose of up to the Pro Rata Share, as
          defined below, for that Unit Investor, of (i) 15 percent of the
          reported trading volume of the Common Stock for the immediately
          preceding trading day if the reported trading volume of the Common
          Stock for the prior trading day was 400,000 shares or less, or (ii) 20
          percent of the reported trading volume of the Common Stock for the
          immediately preceding trading day if the reported trading volume of
          the Common Stock for the prior trading day was greater than 400,000
          shares; and

     o    On any trading day during the one-year period between the first and
          second anniversaries of the effective date of Alternative A, the Unit
          Investor may sell or otherwise dispose of up to the Pro Rata Share for
          that Unit Investor of (i) 20 percent of the reported trading volume of
          the Common Stock for the immediately preceding trading day if the
          reported trading volume of the Common Stock for the prior trading day
          was 400,000 shares or less, or (ii) 25 percent of the reported trading
          volume of the Common Stock for the immediately preceding trading day
          if the reported trading volume of the Common Stock for the prior
          trading day was greater than 400,000 shares.

The number of shares of Common Stock that the Unit Investor may sell shall not
be increased as a result of any failure by the Unit Investor to sell the maximum
number of Unit Investor Shares permissible at a prior time.

For purposes of Alternative A, the "Pro Rata Share" of any Unit Investor means
the percentage obtained by dividing (1) the number of Units purchased by the
subject Unit Investor in the Year 2000 Placement, by (2) the aggregate total
number of Units purchased by all investors in the Year 2000 Placement who agree
to the sales restrictions described above (the "Contracting Unit Investors").
Notwithstanding the foregoing, if the aggregate number of Units purchased in the
Year 2000 Placement by the Contracting Unit Investors is less than 90 percent of
the total number of Units purchased in the Year 2000 Placement by all investors
in the Year 2000 Placement, then "Pro Rata Share" shall instead mean the
percentage obtained by dividing (X) the number of Units purchased by the subject
Unit Investor in the Year 2000 Placement, by (Z) 90 percent of the aggregate
number of Units purchased by all investors in the Year 2000 Placement.

In 2001 holders representing an aggregate of 13,062,000 Units had agreed to
participate in Alternative A and were issued 4,354,000 shares of common stock
and holders representing an aggregate of 1,148,000 Units had agreed to
participate in Alternative B.

In August 2001, we completed the sale of 5,000,000 shares of common stock
pursuant to a private placement at a price of $.20 per share. The shares were
sold to a total of 9 investors who were all accredited investors pursuant to one
or more exemptions from registration in accordance with Rules 505 and/or 506
and/or Sections 3(b) and/or 4(2) of the Securities Act.

The Company sold 754,545 shares of restricted common stock at $.165 per share in
a private placement offering in March 2002 from which it received gross cash
proceeds of $124,500. Offering costs associated with this private placement
offering were $6,600. Within 30 days following the filing with the SEC of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2001, the
Company was obligated to file a registration statement covering the resale of
these shares. This registration statement was filed with the SEC on October 3,
2002.

                                       17

<PAGE>


In March 2002, the Company issued 200,000 shares of restricted common stock for
consulting services valued at $34,000. The consulting agreement provides that,
because it was cancelled in September 2002, 100,000 of these shares are required
to be returned to the Company. The consultant is claiming the right to retain
all 200,000 shares although the Company believes she has no legal basis to do
so.

For the year ended December 31, 2002 the Company recorded the issuance of 26,841
shares of common stock to directors for outstanding obligations for accrued
directors fees in the amount of $7,900.

Securities authorized for issuance under equity compensation plans.

<TABLE>
<CAPTION>


                      Equity Compensation Plan Information

------------------------- ------------------------------- ------------------------ ------------------------
                            Number of securities to be       Weighted average       Number of securities
                             issued upon exercise of         exercise price of       remaining available
                          outstanding options, warrants    outstanding options,      for future issuance
                                    and rights              warrants and rights
------------------------- ------------------------------- ------------------------ ------------------------
                                       (a)                           (b)                      (c)
------------------------- ------------------------------- ------------------------ ------------------------
<S>                              <C>                           <C>                    <C>
Equity compensation
plans approved by
security holders                               4,060,000                     $.21                  940,000
------------------------- ------------------------------- ------------------------ ------------------------
Equity compensation
plans not approved by
security holders                                       0                        -                        -
------------------------- ------------------------------- ------------------------ ------------------------

Total                                          4,060,000                     $.21                  940,000
------------------------- ------------------------------- ------------------------ ------------------------


Item 6. Management's Discussion and Analysis or Plan of Operation
-----------------------------------------------------------------

                         Liquidity and Capital Resources

                                                                        December 31,
                                                                  2002               2001
                                                              ------------       ------------
Components of Working Capital
-----------------------------
    Cash (including restricted cash)                          $    265,000       $    345,000
    Accounts Receivable, trade                                   5,216,000          4,687,000
    Accounts Receivable, vendors                                   939,000          1,214,000
    Inventory                                                    5,397,000          5,938,000
    Other Current Assets                                           131,000            117,000
    Bank Line of Credit - current                               (3,718,000)          (925,000)
    Accounts Payable                                            (4,166,000)        (5,273,000)
    Notes Payable and Capital Lease Obligations                    (14,000)           (11,000)
    Notes Payable - Officers                                             -                  -
    Other Current Liabilities                                     (548,000)          (503,000)
                                                              ------------       ------------
    Total Working Capital                                      $ 3,502,000        $ 5,589,000
                                                               ===========        ===========
</TABLE>

In 2000 the Company was successful in raising approximately $11 million in
equity financing from which $6 million was used in the acquisition of Winncom,
$1 million was used in the acquisition of Starworks, approximately $300,000 was
used in March 2001 to pay off the bank debt of Starworks and the remainder of

                                       18

<PAGE>


the equity financing was used to fund the net loss from operations in 2001 and
for working capital.

In 2001 the Company was successful in raising approximately $1 million in equity
financing for which the funds were used for working capital.

The $2.1 million decrease in working capital from December 31, 2001 to December
31, 2002 is primarily due to the classification of $2.6 million of bank line of
credit to current in 2002 that was non-current in 2001 because the bank line of
credit is due April 30, 2003 and has not yet been renewed but the intent is to
renew this line. As a result of profitable operations in 2002 we were able to
reduce accounts payable by approximately $1.1 million through payments and by
reducing inventory by approximately $500,000 substantially all of which came
from the Wireless Communications Products Division. The bank line of credit
increased by only $200,000 from 2001 to 2002 and the increase was used primarily
to finance working capital at Winncom. The receivables from vendors at December
31, 2002 and 2001 are for our subsidiary, Winncom. In 2002 and 2001 there has
been a substantial increase in vendor sales incentive programs to stimulate
sales in the flat market in 2002 and 2001.

We had total assets of $23.5 million as of December 31, 2002 as compared with
$24 million as of December 31, 2001. The decrease is due to a reduction in
inventory of approximately $600,000 million, amortization of property, plant and
equipment of approximately $200,000, offset by an increase in receivables, both
trade and vendor, in 2002 of approximately $300,000.

Liabilities decreased from $9.4 million at December 31, 2001 to $8.4 million at
December 31, 2002, or $1 million primarily due to a decrease in accounts payable
of approximately $1.1 million offset by an increase in the bank line of credit
of approximately $200,000. Profitable operations for 2002 and reductions in
inventory in 2002 have allowed us to substantially reduce accounts payable from
2001.

The Company had net cash used in operating activities of $149,000 for the year
ended December 31, 2002 and approximately $2.4 million for the year ended
December 31, 2001. The improvement in the net cash used in operations is
partially the result of income from operations in 2002 of $261,000 as compared
to a loss from operations in 2001 of $2.6 million. In 2001 there was an increase
of $2.7 million in accounts receivable and inventory. In 2002 there was a net
decrease in inventory and accounts receivable of approximately $300,000. The
negative cash flow for 2002 was financed through a private placement and
borrowings under the line of credit. The negative cash flow in 2001 was financed
through an increase in line of credit borrowings of approximately $1.7 million
and proceeds from the sale of common stock of approximately $1 million. The
acquisition of certain commercial assets of the wireless communications products
line from BATC in August 2001 has resulted in new sales of base station antennas
in 2001 of approximately $1.5 million with profit margins of approximately 40%.
Additionally in 2001 the Company incurred nearly $500,000 on legal and other
litigation costs associated with the McConnell litigation, which was settled in
November 2001.

Management believes that current working capital, continued profitable
operations, new or renewed bank lines of credit together with additional equity
infusions that management believes will be available, will be sufficient to
allow the Company to maintain its operations through December 31, 2003 and into
the foreseeable future.

                                       19

<PAGE>


Results of Operations
---------------------

Fiscal Year Ended December 31, 2002 Compared To Fiscal Year Ended December 31,
2001
--------------------------------------------------------------------------------

Sales were $32.6 million and $30.9 million for the years ended December 31, 2002
and 2001, respectively. The primary reason for the increase in revenues
comparing 2002 to 2001 is attributable to an increase in revenues from the
Wireless Communications Products Division from $3.9 million in 2001 to $7.3
million in 2002. Sales for the Wireless Communications Products Division
increased by 87% primarily due to the addition of the base station antennas as a
result of the purchase of the wireless communications product line from Ball in
August 2001 and the increase in sales of the Company's redesigned panel antenna
systems. Sales of base station antennas were $1.5 million in 2001 and $3.9
million in 2002. Both Winncom and Starworks experienced reductions in revenue
comparing 2001 to 2002. Winncom's revenues declined from $25.9 million in 2001
to $25.1 million in 2002, primarily due to the weaker economy and Starworks
revenues declined from $1.2 million in 2001 to $400,000 in 2002 primarily as a
result of the closure of the facility in Atlanta, GA in July 2002.

Gross profit margins were 18.7% in 2002 and 19.6 % in 2001. The slight decrease
in gross margin for 2002 vs. 2001 is primarily the result of the decrease in
Winncom's profit margin from 17% in 2001 to 12.7% in 2002. This decrease in
Winncom's profit margin was, which we believe to be temporary due the economy,
offset by increased sales in the Wireless Communications Products Division,
which had margins in 2002 of approximately 36%. Winncom represented
approximately 77% of consolidated sales in 2002 and 84% of consolidated sales in
2001. Starworks sales represent only 1% and 4%, respectively of consolidated
sales so their impact on the overall margin was minimal in 2002 and 2001. The
decrease in Starworks sales in 2002 was primarily due to the closing of the
Atlanta facility in July 2002.

Selling, general and administrative (SG&A) expenses decreased by approximately
$900,000 from 2001 to 2002. SG&A as a % of revenues decreased from 20.7% in 2001
to 17.9% in 2002. Included in SG&A in 2001 are $497,000 in legal and other
professional fees associated with the McConnell litigation that was not settled
until November 2001. Also during the quarter ended March 31, 2001, termination
agreements were entered into with the former CEO and CFO of the Company. The
former CEO received $63,000 of severance payments plus options to purchase
250,000 shares of the Company's common stock at an exercise price of $0.325 per
share. The former CFO received $47,000 of severance payments plus options to
purchase 350,000 shares of the Company's common stock at $0.26 per share. The
Company recognized $136,000 of expense related to these termination agreements
during the quarter ended March 2001, including $122,000 of non-cash compensation
related to the issuance of the options.

In December 2001, the Company recorded a goodwill write-down of $1,257,000,
which eliminated the remaining goodwill associated with the acquisition of
Starworks in 2000. Goodwill was determined to be impaired because of the
uncertainty of the current financial and operating condition of Starworks and
the possibility that Starworks may be unable to generate future operating income
in its legacy business without the transformation of Starworks into a
conventional cable business. The goodwill write-down is included as a component
of operating expenses for 2001. There were no impairment write-downs in 2002.

Amortization of purchased intangibles represents the amortization of goodwill
and other specifically identifiable intangible assets recorded as part of the
acquisition of Winncom and Starworks in 2000. The 2001 amount represents a full
year of amortization of these intangibles. In accordance with SFAS 142, goodwill
is no longer amortized effective January 1, 2002.

                                       20

<PAGE>


The Company had income from operations in 2002 of approximately $260,000
compared to a loss from operations of $2.6 million in 2001. The loss from
operations in 2001 includes a $1.3 million impairment write-down of goodwill and
$1 million in amortization of purchased intangibles, neither of which occurred
in 2002. The income from operations in 2002 as compared to a net loss from
operations in 2001 is the result of a 5% increase in sales with no corresponding
increase in operating expenses and a substantial reduction of SG&A operating
expenses from 2001 to 2002.

Net interest expense was $207,000 in 2002 and $241,000 in 2001. The decrease in
interest expense from 2001 to 2002 is due to the fact that the average interest
rate on bank borrowings was 7.8% in 2001 and 5% in 2002. Winncom's average line
of credit balance outstanding was $3,739,000 in 2002 and $2,694,000 in 2001.

The Company had net income of $307,000 for 2002 compared to a net loss of $2.8
million for 2001. The net income for 2002 is the result of increased revenues,
reduced operating expenses and gains from debt settlements. Gains from debt
settlements represents negotiated reductions of certain accounts payable. The
primary reasons for the net loss for 2001 were the goodwill impairment
write-down of approximately $1.3 million, the amortization of purchased
intangibles of $1 million, and the cost of the McConnell litigation, none of
which occurred in 2002.

Critical Accounting Policies

The Company's significant accounting policies are summarized in Note 1 of its
consolidated financial statements on Form 10-KSB. The preparation of financial
statements requires management to make estimates and assumptions that affect
amounts reported therein, including estimates about the effects of matters or
future events that are inherently uncertain. Policies determined to be critical
are those that have the most significant impact on the Company's financial
statements and require management to use a greater degree of judgment and/or
estimates. Actual results may differ from these estimates under different
assumptions or conditions.

On an on-going basis, management evaluates its estimates and judgments,
including those related to allowance for doubtful accounts, inventory valuations
and recoverability of intangible assets, including goodwill. Management bases
its estimates and judgments on historical experience and on various other
factors that are also believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources.
However, future events are subject to change and the best estimates and
assumptions routinely require adjustment. Our major operating assets are trade
and vendor accounts receivable, inventory, property and equipment and intangible
assets. Our reserve for doubtful accounts of $986,000 should be adequate for any
exposure to loss in our accounts receivable as of December 31, 2002. We have
also established reserves for slow moving and obsolete inventories and believe
the current reserve of $381,000 is adequate. We depreciate our property and
equipment over their estimated useful lives and we have not identified any items
that are impaired.

Recent Accounting Pronouncement

In June 2001, the FASB approved for issuance SFAS 143 "Asset Retirement
Obligations." SFAS 143 establishes accounting requirements for retirement
obligations associated with tangible long-lived assets, including (1) the timing
of the liability recognition, (2) initial measurement of the liability, (3)
allocation of asset retirement cost to expense, (4) subsequent measurement of
the liability and (5) financial statement disclosures. SFAS 143 requires that an
asset retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method. The Company will adopt the statement effective no later than

                                       21

<PAGE>


January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. The Company does not believe that the adoption of this
statement will have a material effect on its financial position, results of
operations, or cash flows.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003. The Company does not anticipate a significant impact on its
results of operations from adopting this Statement.

In December 2002, the FASB issued Statements of Financial Accounting Standards
No.148, "Accounting for Stock-Based compensation - Transition and Disclosure -
an amendment of FASB Statement 123" (SFAS 123). For entities that change their
accounting for stock-based compensation from the intrinsic method to the fair
value method under SFAS 123, the fair value method is to be applied
prospectively to those awards granted after the beginning of the period of
adoption (the prospective method). The amendment permits two additional
transition methods for adoption of the fair value method. In addition to the
prospective method, the entity can choose to either (i) restate all periods
presented (retroactive restatement method) or (ii) recognize compensation cost
from the beginning of the fiscal year of adoption as if the fair value method
had been used to account for awards (modified prospective method). For fiscal
years beginning December 15, 2003, the prospective method will no longer be
allowed. The Company currently accounts for its stock-based compensation using
the intrinsic value method as proscribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options , therefore, it does not intend to
adopt the transition requirements as specified in SFAS 148. The Company will
adopt the new SFAS 148 disclosure requirements in the first quarter of fiscal
2003.

Item 7. Financial Statements
----------------------------

The financial statements and schedules that constitute Item 7 of this Annual
Report on Form 10-KSB are included in Item 14 below.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
--------------------------------------------------------------------------------

There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or practices or financial
statement disclosure since the Company's inception. On December 11, 2001 the
Company dismissed Ernst & Young, LLP as its independent accountants and engaged
Hein + Associates LLP as the principal accountant to audit the registrant's
financial statements. The decision to change was approved by the Board of
Directors. A current report on Form 8-K was filed with the SEC on December 11,
2001 regarding the change of auditors.

                                       22

<PAGE>



                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


   Name                    Age       Position with the Company                          Director Since
   ----                    ---       -------------------------                          --------------

<S>                        <C>                                                                 <C>
   Randall P. Marx         50        Chief Executive Officer, Secretary, Director              1990

   Donald A. Huebner       57        Director                                                  1998

   Sigmund A. Balaban      61        Director                                                  1994

   Gregory E. Raskin       49        President, Director                                       2001

   Monty R. Lamirato       47        Chief Financial Officer, Treasurer

   Steve C. Olson          46        Chief Technology Officer
</TABLE>

Mr. Andrew Nester who served as a director since April 2000 resigned on December
1, 2001.

Randall P. Marx became our Chief Executive Officer in February 2001 and has
served as Director since May 1990. Mr. Marx served as Chief Executive Officer
from November 1991 until July 2000, as Treasurer from December 1994 until June
30, 2000 and as Director of Acquisitions from July 2000 until February 2001.
From 1983 until 1989, Mr. Marx served as President of THT Lloyd's Inc., Lloyd's
Electronics Corp. and Lloyd's Electronics Hong Kong Ltd., international consumer
electronics companies. Lloyd's Electronics had domestic revenues of $100 million
and international revenues of $30 million with over 400 employees worldwide. As
CEO and President of THT Lloyd's Inc., a $10 million electronics holding
company, Mr. Marx supervised the purchase of the Lloyd's Electronics business
from Bacardi Corp. in 1986. As CEO and President of Lloyd's Electronics, Mr.
Marx was directly responsible for all domestic and international operations
including marketing, financing, product design and manufacturing with domestic
offices in New Jersey and Los Angeles and international offices in Hong Kong,
Tokyo and Taiwan.

Sigmund A. Balaban has served as Director since December 1994. Mr. Balaban had
served as Senior Vice President / Corporate Secretary, of Fujitsu General
America, Inc. of Fairfield, New Jersey, from 2000 until July of 2001 when he
retired. Mr. Balaban was Vice President, Credit of Teknika Electronics since
1986 and as Senior Vice President and General Manager of Teknika Electronics
since 1992. In October 1995, Teknika Electronics changed its name to Fujitsu
General America, Inc. Fujitsu General America, Inc. is a subsidiary of Fujitsu
General, Ltd., a Japanese multiline manufacturer. Mr. Balaban currently is a
consultant to Fujitsu General America, Inc.

Gregory E. Raskin, President of the Company and Winncom, founded Winncom in 1995
and joined us coincident with the acquisition of Winncom in May 2000. Mr. Raskin
was elected as a Director of the Company in February 2001. Previous to Winncom,
he was founder and President of a company that introduced (and certified)
Wireless LANs to former Soviet Block Countries. He holds MS degrees in
Electrical Engineering and Control System Engineering.

                                       23

<PAGE>


Monty R. Lamirato, has been Chief Financial Officer and Treasurer since June
2001. Prior to joining the Company Mr. Lamirato served as the VP Finance for
GS2.Net, Inc, an application service provider, from November 2000 to May 2001
and from June 1999 to October 2000 he served as VP Finance for an e-commerce
retailer. From November 1993 to June 1999 Mr. Lamirato was President and
Shareholder of Monty R. Lamirato, PC, a business consulting firm. Mr. Lamirato
has been a certified public accountant in the State of Colorado since 1978.

Steven C. Olson, Prior to joining ARC Wireless in August 2001, Mr. Olson was
employed at Ball Aerospace for 14 years, including the last five years as
Director of Engineering for Ball's Wireless Communications Products Division. In
this capacity Mr. Olson led the development of new technologies, resulting in
industry leading antenna solutions for the wireless communications market.
Before the Ball Wireless Communications unit was formed, Mr. Olson developed
Ball's high performance, low cost AirBASE(TM) antenna technology, specifically
for use in its future commercial wireless business. He received his Bachelors
and Masters of Science degrees in Electrical Engineering from the University of
Utah in 1984 and 1985, respectively.

Donald A. Huebner was our Chief Scientist from July 2000 to January 2002 and a
consulting engineer from January 2002 to the present. He has served as a
Director of the Company since 1998. Mr. Huebner served as Department Staff
Engineer with Lockheed Martin Astronautics in Denver, Colorado from 1986 to July
2000. In this capacity, Dr. Huebner served as technical consultant for phased
array and spacecraft antennas as well as other areas concerning antennas and
communications. Prior to joining Lockheed Martin, Dr. Huebner served in various
capacities with Ball Communication Systems and Hughes Aircraft Company. Dr.
Huebner also served as a part-time faculty member in the electrical engineering
departments at the University of Colorado at Boulder, California State
University at Northridge, and University of California, Los Angeles ("UCLA").
Dr. Huebner also served as consultant to various companies, including as a
consultant to the Company from 1990 to the present. Dr. Huebner received his
Bachelor of Science in Electrical Engineering from UCLA in 1966 and his Masters
of Science in Electrical Engineering from UCLA in 1968. Dr. Huebner received his
Ph.D. from UCLA in 1972 and a Masters in Telecommunications from the University
of Denver in 1996. Dr. Huebner is a member of a number of professional
societies, including the Antennas And Propagation Society and Microwave Theory
And Technique Society of the Institute of Electrical and Electronic Engineers.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

Section 16(a) of the Securities Act of 1934, as amended (the "Exchange Act")
requires our directors, executive officers and holders of more than 10% of our
common stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of ours. We believe that during the year ended December 31,
2002, our officers, directors and holders of more than 10% of our common stock
complied with all Section 16(a) filing requirements. In making these statements,
we have relied upon the written representation of our directors and officers and
our review of the monthly statements of changes filed with us by our officers
and directors.

                                       24

<PAGE>


Item 10. Executive Compensation
-------------------------------

The following table sets forth in summary form the compensation of our current
and past Chief Executive Officer and each other executive officer who received
total salary and bonus exceeding $100,000 during any of the three successive
fiscal years ending December 31, 2002 (the "Named Executive Officers").
<TABLE>
<CAPTION>
                                                                                         Long Term Compensation
                                                                            --------------------------------------------------
                                           Annual Compensation                      Awards                   Payouts
                               --------------------------------------------         ------                   -------
                                                                            Restricted
                                                             Other Annual      Stock                   LTIP      All Other
                               Fiscal    Salary     Bonus    Compensation     Awards      Options    Payouts    Compensation
Name and Principal Position     Year    ($) (1)    ($) (2)      ($) (3)         ($)         (#)      ($) (4)        ($) (5)
------------------------------ -------- --------- ---------- -------------- ------------ ----------- --------- ---------------

<S>                            <C>       <C>         <C>                 <C>          <C>     <C>         <C>             <C>
Randall P. Marx                2002      195,000     70,000              0            0   1,000,000         0               0
Chief Executive Officer;
Secretary; and Director        2001      175,000          0              0            0           0         0               0

                               2000      115,000          0              0            0           0         0               0

Gregory E. Raskin              2002      277,000     50,000              0            0           0         0               0
President, Winncom; and
Director                       2001      250,000          0              0            0           0         0               0

                               2000      148,000    125,000              0            0     250,000         0               0

Monty R. Lamirato              2002      118,000     27,000              0            0     175,000         0               0
Chief Financial Officer;
Treasurer                      2001       56,000          0              0            0     175,000         0               0

Steve Olson                    2002      155,000     19,000              0            0           0         0               0
Chief Technology Officer
                               2001       58,000          0              0            0     500,000         0               0

Burton Calloway                2002      115,000     19,000              0            0     200,000         0               0
Executive Vice President(7)
                               2001      106,000          0              0            0     200,000         0               0

                               2000       55,000          0              0            0     150,000         0               0
</TABLE>


(1)  The dollar value of base salary (cash and non-cash) earned during the year
     indicated.

(2)  The dollar value of bonus (cash and non-cash) earned during the year
     indicated.

(3)  During the period covered by the Summary Compensation Table, we did not pay
     any other annual compensation not properly categorized as salary or bonus,
     including perquisites and other personal benefits, securities or property.

(4)  We do not have in effect any plan that is intended to serve as incentive
     for performance to occur over a period longer than one fiscal year except
     for our 1997 Stock Option And Compensation Plan.

(5)  All other compensation received that we could not properly report in any
     other column of the Summary Compensation Table including our annual
     contributions or other allocations to vested and unvested defined
     contribution plans, and the dollar value of any insurance premiums paid by,
     or on behalf of, the Company with respect to term life insurance for the
     benefit of the named executive officer, and, the full dollar value of the
     remainder of the premiums paid by, or on behalf of, us.

(6)  Mr. Befort served in these capacities from July 2000 until February 2001.

                                       25

<PAGE>


(7)  Mr. Calloway is Executive Vice President of the Wireless Communications
     Products Division

Option Grants in Last Fiscal Year

The following table provides certain summary information concerning individual
grants of stock options made to Named Executive Officers during the fiscal year
ended December 31, 2002 under the Company's incentive plans. Except as set forth
in the table below, during fiscal year 2002, the Company did not grant any stock
options under the Company's Incentive Plans to any of the Named Executive
Officers.

<TABLE>
<CAPTION>


                                         Option Grants In Last Fiscal Year

----------------------- -------------- -------------- ----------- --------------- ----------------------------
                                                                                  Potential Realizable Value
                           Number of     % of Total                                  at Assumed Annual Rates
                          Securities       Options                                of Stock Price Appreciation
                          Underlying    Granted to    Exercise                         for Option Term
                           Options     Employees in     Price       Expiration         ---------------
         Name            Granted (#)    Fiscal Year   ($/Share)        Date             5%             10%
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
<S>                         <C>                  <C>       <C>           <C>        <C>           <C>
Randall P. Marx             1,000,000            62%       $ .18        1/2/2007       $230,000      $290,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Gregory E. Raskin                   0                        N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Monty R. Lamirato             175,000            11%       $ .14       6/30/2005        $28,000       $33,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Steve Olson                         0                        N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Burton Calloway               200,000            12%       $ .33       5/30/2004        $73,000       $80,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------

Aggregated Option Exercises And Fiscal Year-End Option Value Table
------------------------------------------------------------------

The following table provides certain summary information concerning stock option
exercises during the fiscal year ended December 31, 2002 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of December 31, 2002.

                                            Aggregated Option Exercises
                                     For Fiscal Year Ended December 31, 2002
                                           And Year-End Option Values (1)

--------------------- -------------- ---------------------- --------------------------- ----------------------------
                                                                Number of Securities         Value of Unexercised
                                                               Underlying Unexercised             In-the-
                                                              Options at Fiscal Year-        Money Options at
                                                                   End (#) (4)            Fiscal Year-End ($) (5)
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

                      Shares
                      Acquired on
        Name          Exercise (2)   Value Realized ($)(3)  Exercisable  Unexercisable  Exercisable  Unexercisable
        ----          ------------   ---------------------  -----------  -------------  -----------  -------------

Randall P. Marx                   0                      0      500,000        500,000            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Gregory E. Raskin                 0                      0            0              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Monty Lamirato                    0                      0      350,000              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Steve Olson                       0                      0      500,000              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Burton Calloway                   0                      0      400,000              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------
</TABLE>

(1)  No stock appreciation rights are held by any of the Named Executive
     Officers.

                                       26

<PAGE>


(2)  The number of shares received upon exercise of options during the year
     ended December 31, 2002.

(3)  With respect to options exercised during the year ended December 31, 2002,
     the dollar value of the difference between the option exercise price and
     the market value of the option shares purchased on the date of the exercise
     of the options.

(4)  The total number of unexercised options held as of December 31, 2002,
     separated between those options that were exercisable and those options
     that were not exercisable on that date.

(5)  For all unexercised options held as of December 31, 2002, the aggregate
     dollar value of the excess of the market value of the stock underlying
     those options over the exercise price of those unexercised options. These
     values are shown separately for those options that were exercisable, and
     those options that were not yet exercisable, on December 31, 2002. As
     required, the price used to calculate these figures was the closing sale
     price of the common stock at year's end, which was $0.10 per share on
     December 31, 2002.

Employee Retirement Plans, Long-Term Incentive Plans, and Pension Plans
-----------------------------------------------------------------------

Other than our stock option and 401(k) plan, we have no employee retirement
plan, pension plan, or long-term incentive plan to serve as incentive for
performance to occur over a period longer than one fiscal year.

1997 Stock Option And Compensation Plan
---------------------------------------

In November 1997, the Board of Directors approved our 1997 Stock Option And
Compensation Plan (the "Plan"). Pursuant to the Plan, we may grant options to
purchase an aggregate of 5,000,000 shares of our common stock to key employees,
directors, and other persons who have or are contributing to our success. The
options granted pursuant to the Plan may be incentive options qualifying for
beneficial tax treatment for the recipient or they may be non-qualified options.
The Plan is administered by an option committee that determines the terms of the
options subject to the requirements of the Plan, except that the option
committee shall not administer the Plan with respect to automatic grants of
options to our directors who are not our employees. The option committee may be
the entire Board or a committee of the Board.

Through May 24, 2000, directors who were not also our employees ("Outside
Directors") automatically received options to purchase 250,000 shares pursuant
to the Plan at the time of their election as an Outside Director. These options
held by Outside Directors were not exercisable at the time of grant. Options to
purchase 50,000 shares became exercisable for each meeting of the Board of
Directors attended by each Outside Director on or after the date of grant of the
options to that Outside Director, but in no event earlier than six months
following the date of grant. The exercise price for options granted to Outside
Directors was equal to the closing price per share of our common stock on the
date of grant. All options granted to Outside Directors expired five years after
the date of grant. On the date that all of an Outside Director's options became
exercisable, options to purchase an additional 250,000 shares, which were
exercisable no earlier than six months from the date of grant, were
automatically granted to that Outside Director. On May 24, 2000, the Board of
Directors voted to (1) decrease the amount of options automatically granted to
Outside Directors from 250,000 to 25,000 options, and (2) decrease the amount of
exercisable options from 50,000 to 5,000 per meeting. The term of the outside
Director option granted in the future was lowered from five years to two years.
The other terms of the Outside Director options did not change. On July 5, 2002,
the Board of Directors voted to (1) increase the amount of options automatically
granted to Outside Directors from 25,000 to 125,000 options, and (2) increase
the amount of exercisable options from 5,000 to 25,000 per meeting. The other
terms of the Outside Director options did not change.

                                       27

<PAGE>


The Company granted a total of 250,000 options to Outside Directors under the
Plan during 2002, at an exercise price of $.13 per share and granted a total of
25,000 options to Outside Directors under the Plan during 2001, at an exercise
price of $.28 per share.

As of December 31, 2002 there were 775,000 exercisable options outstanding
related to the grants to Outside Directors. Mr. Donald Huebner's employment
terminated on January 31, 2002 but he continues as a Director of the Company, as
such all of his options are disclosed as Outside Directors options.

In addition to Outside Directors grants, the Board of Directors may grant
incentive options to our key employees pursuant to the Plan. In 2002, the Board
granted a total of 1,625,000 options under the Plan to employees at prices
ranging from $.13 to $.18. In 2001, the Board granted a total of 1,560,000
options under the Plan to employees at prices ranging from $.21 to $.58. In
2000, the Board granted a total of 11,870,000 options to employees, of which,
2,001,000 were granted under the Plan, at prices from $0.63 to $1.7187, and the
Board granted 600,000 options to employees under the Plan in 1999, at $0.06 per
share. Subsequent to December 31, 2000, the Company canceled a total of
9,900,000 options that were granted in 2000, including 676,000 granted under the
Plan, and replaced them with 600,000 new options outside of the Plan at a price
equal to the closing price per share on the dates of their respective
departures, in conjunction with the contract eliminations of the former CEO and
CFO (see below "Employment Contracts And Termination of Employment And
Change-in-Control Arrangements" and the "Subsequent Events" footnote to the
financial statements). As of December 31, 2002, there were 1,585,000 exercisable
options outstanding related to grants to employees, all of which were granted
under the Plan.

In connection with his separation from the Company, Glenn A. Befort was granted
options to purchase 250,000 shares for $0.325 per share until February 21, 2004.
See below, "Employment Contracts And Termination Of Employment And
Change-In-Control Arrangements".

Compensation Of Outside Directors
---------------------------------

Standard Arrangements. Outside Directors are paid $250 for each meeting of the
Board of Directors that they attend. For meetings in excess of four meetings per
year, Outside Directors receive $50 per meeting. Pursuant to the terms of the
1997 Stock Option and Compensation Plan, Outside Directors may elect to receive
payment of the meeting fee in the form of our restricted common stock at a rate
per share equal to the fair market value of the common stock on the date of the
meeting by informing our Secretary, Chief Executive Officer or President of that
election on or before the date of the meeting. Directors are also reimbursed for
expenses incurred in attending meetings and for other expenses incurred on our
behalf. In addition, each Outside Director receives options to purchase shares
of common stock (for details see the "1997 Stock Option And Compensation Plan"
section above).

Outside Directors vested 175,000 and 65,000 stock options, respectively, during
fiscal years ended December 31, 2002 and 2001. Outside Directors earned $2,250
in meeting attendance fees in 2002 and 2001 and were paid with the issuance of
23,670 shares of restricted common stock in 2002.

Other Arrangements. During the year ended December 31, 2001, no compensation was
paid to our Outside Directors other than pursuant to the standard compensation
arrangements described in the previous section. During the year ended December
31, 2002 Mr. Sig Balaban, one of our outside directors was paid $15,000 in
connection with implementing improved credit control policies and procedures.

                                       28

<PAGE>


Employment Contracts And Termination Of Employment And Change-In-Control
Arrangements
--------------------------------------------------------------------------------

We entered into a written employment agreement with Glenn A. Befort, our former
Chief Executive Officer and Treasurer on July 3, 2000. The agreement provided
for a term of three years with an annual salary rate of $250,000 and a
guaranteed bonus of $75,000 for the year 2000. Mr. Befort was eligible for a
bonus in an amount equal to the greater of $150,000 or five percent of EBIDTA
for each fiscal year ending in the year 2001 and beyond, if our EBIDTA for the
applicable fiscal year is at least $1.00. Mr. Befort was granted options to
purchase not more than 8,400,000 shares of our common stock at an exercise price
equal to the weighted average trading price of the common stock on July 3, 2000
and with all his options expiring on July 3, 2005, and with all the options
subject to the following terms:

     o    2,800,000 of the options were to become exercisable on July 3, 2001,
          if Mr. Befort remained employed by us on that date;
     o    2,800,000 of the options were to become exercisable on July 3, 2002,
          if Mr. Befort remained employed by us on that date;
     o    2,800,000 of the options were to become exercisable on July 3, 2003,
          if Mr. Befort remained employed by us on that date; and
     o    The options were, to the maximum extent permissible by the Internal
          Revenue Code (the "Code"), considered Incentive Stock Options as that
          term is interpreted in the Code.

On February 9, 2001, we entered into a separation agreement and release with Mr.
Befort under which it was mutually agreed to terminate Befort's employment
effective February 21, 2001 (the "Termination Date"). Mr. Befort agreed to
resign from his positions as an officer and director of the Company and, as
applicable, from the Company's subsidiaries and affiliates in exchange for the
following compensation, benefits and options, which replaced the compensation,
benefits and options provided in Mr. Befort's employment agreement described
above:

     o    Payment, for 90 days after the Termination Date, of the same salary
          that we have been paying him under the Befort Agreement, with payments
          being made on our usual payroll dates. No additional compensation for
          vacation and sick days will accrue or be payable to Mr. Befort during
          the 90-day period; and
     o    Issuance of options (the "Severance Options") to purchase 250,000
          shares of our restricted common stock for a period of three years
          commencing on the Termination Date at an exercise price of $0.325 per
          share.

Effective, January 8, 2001, Mr. Marx entered into a one-year employment
agreement with total annual base salary of $175,000. Effective February 12,
2001, Mr. Marx replaced Glenn A. Befort as Chief Executive Officer of the
Company. We entered into a new employment agreement with Mr. Marx effective
January 2, 2002, which terminates on January 2, 2004. Mr. Marx is to receive an
annual base salary of $195,000 per year during the term of the agreement and is
eligible to receive a bonus ranging from $50,000 to $80,000 for the year ending
December 31, 2002 if the Company achieves certain predetermined revenue and
earnings before interest, taxes, depreciation, and amortization ("EBITDA")
goals. Mr. Marx earned a bonus of $70,000 for 2002. Mr. Marx is eligible to
receive another bonus for 2003 ranging from $50,000 to $100,000 if the Company
achieves certain predetermined revenue and EBIDTA goals for the year ending
December 31, 2003.

We entered into a written employment agreement with Gregory E. Raskin, President
of our Winncom subsidiary and beneficial owner of 2.7 percent of our stock, or
4,069,162 shares, effective May 24, 2000. The employment agreement is for the
period May 24, 2000 through May 31, 2002, at an annual base salary of $250,000.

                                       29

<PAGE>


Mr. Raskin also is eligible to earn bonuses of up to $500,000 over the term of
the agreement, based on Winncom's periodic attainment of certain revenues and
earnings objectives. Mr. Raskin earned his maximum bonus of $125,000 in 2000 but
no bonus was earned in 2001. Mr. Raskin also received options to purchase
250,000 shares of our common stock at a price of $0.89 per share from December
19, 2000 through May 24, 2002. We entered into a new employment agreement with
Mr. Raskin effective as of June 1, 2002 with a term of two and one-half years.
Pursuant to the new agreement, Mr. Raskin is to receive an annual base salary of
$300,000 per year. Mr. Raskin is eligible to receive bonuses for each of the
years ending December 31, 2002, 2003 and 2004 of between $50,000 and $300,000
depending upon Winncom achieving certain predetermined revenues and EBIDTA goals
for those periods. Mr. Raskin earned a bonus of $50,000 for 2002.

We entered into a written employment agreement with Burton J. Calloway,
Executive Vice President of the Wireless Communications Products Division,
effective May 30, 2000. The employment agreement is for the period May 30, 2000
through May 29, 2003, at an annual base salary of $100,000. The base salary was
adjusted to $115,000 effective October 1, 2001. Mr. Calloway also is eligible to
earn bonuses of 3% of net profits in excess of $180,000 of the Wireless
Communications Products Division over the term of the agreement. A nominal bonus
was earned for 2001 and a bonus of $19,000 was earned in 2002. Mr. Calloway also
received options to purchase 150,000 shares of our common stock at a price of
$1.01 on May 30, 2000 and was granted options to purchase 200,000 shares, at
exercise prices ranging from $.145 to $1.01 on May 30, 2001 and May 30, 2002.

We entered into a written employment agreement with Monty R. Lamirato, our Chief
Financial Officer and Treasurer, effective June 22, 2001. The employment
agreement is for the period June 22, 2001 through June 30, 2004, at an annual
base salary of $111,000, adjusted to $125,000 on July 1, 2002. Mr. Lamirato also
is eligible to earn bonuses of $35,000 or 3% of EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), whichever is greater, over the
term of the agreement. Mr. Lamirato earned a bonus of $27,000 for 2002 and no
bonus was earned for 2001. Mr. Lamirato also received options to purchase
350,000 shares of our common stock at prices ranging from $.14 to $0.33 per
share exercisable from June 22, 2001 through June 30, 2004.

We entered into a written employment agreement with Steven C. Olson, our Chief
Technology Officer, effective August 13, 2001. The employment agreement is for
the period August 13, 2001 through August 13, 2004 at an annual base salary of
$155,000. Mr. Olson also is eligible to earn bonuses, upon achieving certain
gross margin objectives, over the term of the agreement. Mr. Olson earned a
bonus of $19,000 in 2002 and no bonus was earned for 2001. Mr. Olson also
received options to purchase 500,000 shares of our common stock at a price of
$0.27 per share from August 13, 2001 through August 13, 2004.

We entered into a written employment agreement with David McConnell, former
President of our subsidiary, Starworks, effective October 1, 2000. The
employment agreement was originally for the period October 1, 2000 through
October 1, 2003, at an annual base salary of $150,000. Mr. McConnell also was
eligible to earn bonuses of up to $100,000 over the term of the agreement, based
on certain sales of the LTVA Antenna System Model 3000/6000. Mr. McConnell's
agreement was terminated as of February 12, 2001 as described above in "Item 3.
Legal Proceedings".

We have no compensatory plan or arrangement that results or will result from the
resignation, retirement, or any other termination of an executive officer's
employment with us or from a change-in-control or a change in an executive
officer's responsibilities following a change-in-control, except that the Plan
provides for vesting of all outstanding options in the event of the occurrence
of a change-in-control.

                                       30
<PAGE>


Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

The following table summarizes certain information as of March 3, 2003 with
respect to the beneficial ownership of our common stock by each director, by all
executive officers and directors as a group, and by each other person known by
us to be the beneficial owner of more than five percent of our common stock:
<TABLE>
<CAPTION>

                                                      Number of Shares
     Name and Address of Beneficial Owner          Beneficially Owned (1)         Percent of Class
     ------------------------------------          ----------------------         ----------------

<S>                                                     <C>                            <C>
Randall P. Marx                                         8,881,128(2)                   5.8%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Sigmund A. Balaban                                      1,628,594(3)                    1%
10 Grecian Street
Parsippany, NJ  07054

Donald A. Huebner                                         653,377(4)                     *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Gregory E. Raskin                                       4,069,162(5)                   2.7%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Steve Olson                                               500,000(8)                     *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Monty R. Lamirato                                         350,000(6)                     *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Burton Calloway                                            400,000(7)                    *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Barry Nathanson                                         11,798,559                     7.7%
6 Shore Cliff Place
Great Neck, NY  11023


                                       31

<PAGE>


                                                      Number of Shares
     Name and Address of Beneficial Owner          Beneficially Owned (1)         Percent of Class
     ------------------------------------          ----------------------         ----------------

Hudson River Investments, Inc.                          12,718,225                     8.3%
Nemazee Capital Corp.
720 Fifth Avenue
New York, NY 10019

Evansville Limited                                      10,117,860                     6.6%
c/o Quadrant Management Inc.
720 Fifth Avenue, 9th Floor
New York, NY  10019

All officers and directors
 as a group (seven persons)                             16,482,261(2)(3)(4)(5)(6)     10.7%
</TABLE>

* Less than one percent.

     (1)  "Beneficial ownership" is defined in the regulations promulgated by
          the U.S. Securities and Exchange Commission as having or sharing,
          directly or indirectly (1) voting power, which includes the power to
          vote or to direct the voting, or (2) investment power, which includes
          the power to dispose or to direct the disposition, of shares of the
          common stock of an issuer. The definition of beneficial ownership
          includes shares underlying options or warrants to purchase common
          stock, or other securities convertible into common stock, that
          currently are exercisable or convertible or that will become
          exercisable or convertible within 60 days. Unless otherwise indicated,
          the beneficial owner has sole voting and investment power.

     (2)  Includes 8,312,665 shares directly held by Mr. Marx, 40,000 shares
          held by his spouse's IRA and 28,463 shares owned beneficially through
          a 50% ownership of an LLC. Includes options to purchase 500,000 shares
          at $.18 per share until January 2, 2007, granted under the 1997 Stock
          Option and Compensation Plan all of which are currently exercisable.
          This does not include 900,000 shares owned plus warrants to purchase
          150,000 shares at $1.00 per share owned by the Harold and Theora Marx
          Living Trust, of which Mr. Marx's parents are trustees, as Mr. Marx
          disclaims beneficial ownership of these shares. This also does not
          include 155,000 shares owned by Warren E. Spencer Living Trust, of
          which Mr. Marx's mother-in-law is trustee, as Mr. Marx disclaims
          beneficial ownership of these shares.

     (3)  Includes 1,428,594 shares directly held by Mr. Balaban; Outside
          Director options granted under the 1997 Stock Option and Compensation
          Plan to purchase 200,000 shares at prices ranging from $.13 to $0.25
          per share until September 8, 2004, all of which are currently
          exercisable.

     (4)  Includes 78,377 shares directly held by Dr. Huebner; Outside Director
          options granted under the 1997 Stock Option and Compensation Plan to
          purchase 250,000 shares at $0.085 per share until May 15, 2003,
          250,000 shares at $0.06 per share until May 10, 2004, and 75,000
          shares at $.13 per share until July 7, 2004, all of which are
          currently exercisable.

     (5)  Includes 3,898,389 shares directly held by Mr. Raskin and 170,773
          shares beneficially owned by a partnership in which Mr. Raskin is a
          partner.

                                       32

<PAGE>


     (6)  Consists of options to purchase 175,000 shares at $.33 per share until
          June 22, 2004, and options to purchase 175,000 shares at $.14 per
          share until June 30, 2005 all granted under the 1997 Stock Option and
          Compensation Plan all of which are currently exercisable.

     (7)  Consists of options to purchase 400,000 shares at prices ranging from
          $.145 to $.33 per share until May 30, 2004 granted under the 1997
          Stock Option and Compensation Plan all of which are currently
          exercisable.

     (8)  Consists of options to purchase 500,000 shares at $.27 per share until
          August 13, 2004, granted under the 1997 Stock Option and Compensation
          Plan all of which are currently exercisable.

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

     Not applicable.

Item 13. Controls and Procedures
--------------------------------

(a) Evaluation of disclosure controls and procedures

     Based on an evaluation carried out under the supervision, and with the
participation of ARC management, including the Chief Executive Officer and the
Chief Financial Officer during the 90 day period prior to the filing of this
report, the Company's Chief Executive Officer and Chief Financial Officer
believe ARC's disclosure controls and procedures, as defined in Securities
Exchange Act Rules 13a-14 and 15d-14, are to the best of their knowledge,
effective.

(b) Changes in internal controls

     Subsequent to the date of this evaluation, the Chief Executive Officer and
Chief Financial Officer are not aware of any significant changes in the
Company's internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses, or in other factors that could
significantly affect these controls to ensure that information required to be
disclosed by ARC, in reports that it files or submits under the Securities Act
of 1934, is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and regulations.


                                       33
<PAGE>



Item 14. Exhibits and Reports on Form 8-K
-----------------------------------------

(a)      Financial Statements

         Report of Independent Auditors...................................F-1

         Consolidated Balance Sheets at December 31, 2002 and 2001........F-2

         Consolidated Statements of Operations for the Years Ended
                December 31, 2002 and 2001................................F-3

         Consolidated Statements of Changes in Stockholders' Equity
                for the Years Ended December 31, 2002 and 2001............F-4

         Consolidated Statements of Cash Flows for the Years Ended
                December 31, 2002 and 2001................................F-5

         Notes to Consolidated Financial Statements.......................F-6



                                       34
<PAGE>



     (a)(2) Exhibits.
            ---------

                                  EXHIBIT INDEX
Exhibit
Number                   Description
------                   -----------
3.1a         Articles of Incorporation of Westcliff  Corporation,  now known as
             Antennas America, Inc. (the "Company"), are incorporated herein by
             reference from the Company's Form S-18  Registration Statement
             dated December 1, 1987 (File No. 33-18854-D).
3.1b         Articles of Amendment of the Company dated January 26,
             1988 are incorporated herein by reference from the
             Company's Post-Effective Amendment No. 3 to Form S-18
             Registration Statement dated December 5, 1989 (File No.
             33-18854-D).
3.1c         Articles and Agreement of Merger between the Company and
             Antennas America, Inc., a Colorado corporation, dated
             March 22, 1989, are incorporated herein by reference from
             the Company's Post-Effective Amendment No. 3 to Form S-18
             Registration Statement dated December 5, 1989 (File No.
             33-18854-D)
3.1d         Amended And Restated Articles Of Incorporation dated October 11,
             2000 (5)
3.2          Bylaws of the Company as amended and restated on March 25, 1998 (6)
10.1         Employment Agreement dated as of October 1, 1998 between the
             Company and Randall P. Marx is incorporated by reference from the
             Company's Annual Report on From 10-KSB for the year ended
             December 31, 1998 (File No. 000-18122)
10.2         Promissory Note dated February 15, 1999 from the Company to Jasco
             Products Co., Inc. (2)
10.3         Stock Option Agreement dated February 15, 1999 between the Company
             and Jasco Products Co., Inc. (2)
10.4         Agreement between and among Winncom Technologies Inc., Winncom
             Technologies Corp. and the Company dated May 24, 2000 (3)
10.5         Employment Agreement dated as of May 24, 2000 between Winncom
             Technologies Corp. and Gregory E. Raskin (5)
10.6         Agreement between and among Starworks Technology, Inc., Starworks
             Wireless Inc. and the Company dated September 29, 2000 (4)
10.7         Employment Agreement dated as of June 22, 2001 between ARC Wireless
             Solutions, Inc. and Monty R. Lamirato (7)
10.8         Employment Agreement dated as of August 13, 2001 between ARC
             Wireless Solutions, Inc. and Steven C. Olson (7)
10.9         Employment Agreement dated as of May 30, 2000 between ARC Wireless
             Solutions, Inc. (formerly Antennas America, Inc.) and Burton J.
             Calloway (7)
10.10        Employment Agreement dated as of January 2, 2002 between the
             Company and Randall P. Marx.
10.11        Employment Agreement dated as of June 1, 2002 between Winncom
             Technologies  Corp. and Gregory  E. Raskin.
10.12        Employment Agreement dated as of July 1, 2002 between ARC Wireless
             Solutions, Inc. and Monty R. Lamirato.
99           Certification Pursuant to 18 U.S.C. Section 1350, as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
21           Subsidiaries of the Registrant

------------------

     (1)  Incorporated by reference from the Company's Form SB-2 Registration
          Statement dated June 8, 1998 (File No. 333-53453)

                                       35

<PAGE>


     (2)  Incorporated by reference from the Company's Form SB-2 Registration
          Statement filed February 9, 2000 (File No. 333-96485)
     (3)  Incorporated by reference from Exhibit 2.1 of the Company's Form 8-K
          filed on June 8, 2000
     (4)  Incorporated by reference from Exhibit 2.1 of the Company's Form 8-K
          filed on October 13, 2000
     (5)  Incorporated by reference from the Company's Form 10-KSB for December
          31, 2000 filed on April 2, 2001
     (6)  Incorporated by reference from the Company's Form 10-KSB for December
          31, 1997 filed on March 31, 1998
     (7)  Incorporated by reference from the Company's Form 10-KSB for December
          31, 2001 filed on April 1, 2002

            (b) Reports on Form 8-K

                None



                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                          ARC Wireless Solutions, Inc.


Date:  March 26, 2003                By:  /s/ Randall P. Marx
                                         ---------------------------------------
                                     Randall P. Marx, Chief Executive Officer

Date:  March 26, 2003                By:  /s/ Monty R. Lamirato
                                         ---------------------------------------
                                     Monty R. Lamirato, Chief Financial Officer


In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities and on the dates
indicated.

Date                                                Signatures
----                                                ----------



March 26, 2003                                       /s/ Sigmund A. Balaban
                                                    ----------------------------
                                                    Sigmund A. Balaban, Director



March 26, 2003                                       /s/ Gregory E. Raskin
                                                    ----------------------------
                                                    Gregory E. Raskin, Director



March 26, 2003                                       /s/ Donald A. Huebner
                                                    ----------------------------
                                                     Donald A. Huebner, Director

                                       36

<PAGE>



CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Randall P. Marx, certify that:

1. I have reviewed this annual report on Form 10-KSB of ARC Wireless Solutions,
Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

March 26, 2003                                        /s/ Randall P. Marx
                                                      --------------------------
                                                      Randall P. Marx
                                                      Chief Executive Officer

                                       37
<PAGE>


CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Monty R. Lamirato, certify that:

1. I have reviewed this annual report on Form 10-KSB of ARC Wireless Solutions,
Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

March 26, 2003                                        /s/ Monty R. Lamirato
                                                      --------------------------
                                                      Monty R. Lamirato
                                                      Chief Financial Officer

                                       38

<PAGE>


Reports of Independent Auditors


The Board of Directors and Stockholders
ARC Wireless Solutions, Inc.

We have audited the accompanying consolidated balance sheets of ARC Wireless
Solutions, Inc. as of December 31, 2002 and 2001 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ARC Wireless
Solutions, Inc. at December 31, 2002 and 2001, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.


/s/ Hein + Associates LLP

Denver, Colorado
February 17, 2003





                                      F-1


<PAGE>
<TABLE>
<CAPTION>


                                   ARC Wireless Solutions, Inc.
                                    Consolidated Balance Sheets

                                                                                       December 31,
                                                                                  2002           2001
                                                                               ---------------------------
<S>                                                                            <C>             <C>
Assets
Current assets:
   Cash                                                                        $   265,000    $   345,000

   Accounts receivable trade, net of allowance for doubtful accounts
     of $986,000 and $999,000, respectively                                      5,216,000      4,687,000
   Accounts receivable vendors                                                     939,000      1,214,000
   Inventory, net                                                                5,397,000      5,938,000
   Other current assets                                                            131,000        117,000
                                                                               --------------------------
Total current assets                                                            11,948,000     12,301,000

Property and equipment, net                                                        505,000        729,000

Other assets:
   Intangible assets, net                                                       10,934,000     10,907,000
   Other assets                                                                     68,000         64,000
                                                                               --------------------------
Total assets                                                                   $23,455,000    $24,001,000
                                                                               ==========================

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                                            $ 4,166,000    $ 5,273,000
   Bank line of credit - current                                                 3,718,000        925,000
   Accrued expenses                                                                548,000        503,000
   Current portion of capital lease obligations                                     14,000         11,000
                                                                               --------------------------
Total current liabilities                                                        8,446,000      6,712,000

Capital lease obligations, less current portion                                      5,000         21,000
Bank line of credit, less current portion                                                -      2,621,000
                                                                               --------------------------
Total liabilities                                                                8,451,000      9,354,000
                                                                               --------------------------


Commitments (Notes 4, 7, 8 and 10)
Stockholders' equity: (Note 3)
   Common stock, par value $.0005;
      250,000,000 shares authorized; 155,185,000 and
      154,304,000 shares issued, respectively                                       78,000         77,000
   Preferred stock, par value $.001;
      2,000,000 shares authorized; no shares issued and outstanding                      -              -
   Additional paid-in capital                                                   21,649,000     21,522,000
    Treasury stock (1,961,000 and 1,459,000 shares, respectively)               (1,195,000)    (1,117,000)
   Accumulated deficit                                                          (5,528,000)    (5,835,000)
                                                                               --------------------------
Total stockholders' equity                                                      15,004,000     14,647,000
                                                                               --------------------------
Total liabilities and stockholders' equity                                     $23,455,000    $24,001,000
                                                                               ==========================

See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>



                              ARC Wireless Solutions, Inc.
                         Consolidated Statements of Operations

                                                           Years ended December 31,
                                                          2002                 2001
                                                      ---------------------------------


Sales, net                                            $32,575,000           $30,940,000
Cost of sales                                          26,493,000            24,886,000
                                                      ---------------------------------
      Gross profit                                      6,082,000             6,054,000

Operating expenses:
   Selling, general and administrative expenses         5,821,000             6,388,000
   Impairment write down                                        -             1,257,000
   Amortization of intangibles                                  -             1,020,000
                                                      ---------------------------------
Total operating expenses                                5,821,000             8,665,000
                                                      ---------------------------------
      Income (Loss) from operations                       261,000            (2,611,000)

Other income (expense):
   Interest expense, net                                 (207,000)             (241,000)
   Other income                                           303,000               169,000
                                                      ---------------------------------
      Total other income (expense)                         96,000               (72,000)
                                                      ---------------------------------

Income (Loss) before income taxes                         357,000            (2,683,000)
Less provision for income taxes                            50,000               118,000
                                                      ---------------------------------
Net income (loss)                                     $   307,000           $(2,801,000)
                                                      =================================

Basic and diluted income (loss) per share             $      .002           $     (.019)
                                                      =================================



See accompanying notes to consolidated financials statements.


                                        F-3

<PAGE>


                                                  ARC Wireless Solutions, Inc.
                                  Consolidated Statements of Changes in Stockholders' Equity
                                               (Shares and amounts in thousands)


                                                      Common Stock         Common      Additional
                                                   --------------------     Stock       Paid in     Treasury  Accumulated
                                                     Shares     Amount     Reserved     Capital      Stock      Deficit     Total
                                                   ---------------------------------------------------------------------------------
Balances, January 1, 2001                           142,891    $     71    $  1,500    $ 18,918        --      $ (3,034)   $ 17,455

Common stock issued in a private                      5,000           3        --           975        --          --           978
placement transaction, net of expenses
of $22
Common stock issued in connection with                1,959           1      (1,500)      1,499        --          --             _
   Starworks acquisition (1,959 shares)
Common stock returned in connection                    --          --          --          --        (1,117)       --        (1,117)
   with settlement of Starworks
   litigation (1,459 shares)
Common stock issued upon exercise of                    100        --          --             6        --          --             6
   options
Common stock issued for directors' fees                --          --          --             4        --          --             4
Common stock issued in exchange for                   4,354           2        --            (2)       --          --          --
   warrants
Issuance of common stock options                       --          --          --           122        --          --           122
Net loss                                               --          --          --          --          --        (2,801)     (2,801)
                                                    -------------------------------------------------------------------------------
Balances, December 31, 2001                         154,304    $     77        --      $ 21,522    $ (1,117)   $ (5,835)   $ 14,647

Common stock issued in a private                        755           1                     107                                 108
placement transaction, net of expenses
of $17
Common stock acquired in connection                                                                     (75)                    (75)
   with settlement of Starworks
   litigation (500 shares)
Common stock issued for consulting                      100                                  17                                  17
   services
Common stock issued for directors' fees                  26                                   3                                   3
Common stock odd lot repurchase
   (2 shares)                                                                                            (3)                     (3)
Net income                                                                                                          307         307
                                                    -------------------------------------------------------------------------------
Balances, December 31, 2002                         155,185    $     78        --      $ 21,649    $ (1,195)   $ (5,528)   $ 15,004
                                                    ===============================================================================


See accompanying notes to consolidated financial statements.

                                                              F-4
<PAGE>


                                        ARC Wireless Solutions, Inc.
                                   Consolidated Statements of Cash Flows

                                                                             Year Ended December 31,
                                                                            2002                 2001
                                                                        ---------------------------------

Operating activities
Net Income (loss)                                                       $   307,000           $(2,801,000)
Adjustments to reconcile net income (loss) to net cash used in
   operating activities:
     Depreciation and amortization                                          308,000             1,260,000
       Provision for doubtful receivables                                   (13,000)              459,000
     Non-cash expense for issuance of stock and options                      20,000               126,000
     Impairment write-down                                                     --               1,257,000
     Gain on debt settlements                                              (267,000)                 --
     Loss on disposition of assets                                            9,000                  --
     Changes in operating assets and liabilities:
       Restricted cash                                                         --                 344,000
       Accounts receivable, trade and vendor                               (241,000)           (2,125,000)
       Inventory                                                            541,000              (619,000)
       Other current assets                                                 (14,000)              266,000
       Accounts payable and accrued expenses                               (795,000)             (634,000)
       Other                                                                 (4,000)               74,000
                                                                        ---------------------------------
Net cash used in operating activities                                      (149,000)           (2,393,000)

Investing activities
Patent acquisition costs                                                    (41,000)              (25,000)
Acquisition of certain commercial assets                                       --                (826,000)
Purchase of property and equipment                                          (79,000)             (193,000)
                                                                        ---------------------------------
Net cash used in investing activities                                      (120,000)           (1,044,000)

Financing activities
Repayment of notes payable - others and capital lease obligations           (13,000)              (15,000)
Purchase of treasury stock                                                  (78,000)                 --
Proceeds from private placement, including warrant exercises, net           108,000               978,000
Proceeds from exercise of options, net                                         --                   6,000
Net borrowings under line of credit agreements                              172,000             1,735,000
                                                                        ---------------------------------
Net cash provided by financing activities                                   189,000             2,704,000
                                                                        ---------------------------------

Net decrease in cash                                                        (80,000)             (733,000)
Cash, beginning of period                                                   345,000             1,078,000
                                                                        ---------------------------------
Cash, end of period                                                     $   265,000           $   345,000
                                                                        =================================

Supplemental disclosure of cash flow information:
  Cash paid for interest                                                $   190,000           $   241,000
   Cash paid for taxes                                                       50,000                55,000
Supplemental schedule of non-cash investing and financing activities:
  Purchase of assets under capital lease financing                             --             $    36,000


See accompanying notes to consolidated financial statements.

                                                        F-5
</TABLE>


<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies

Organization

The Company was organized under the laws of the State of Utah on September 30,
1987 for the purpose of acquiring one or more businesses, under the name of
Westflag Corporation, which was formerly Westcliff Corporation. In January 1989,
the Company completed its initial public offering.

In 1989, the Company merged with Antennas America, Inc., a Colorado corporation
that had been formed in September 1988. Pursuant to the merger, all the issued
and outstanding stock of Antennas America, Inc. was converted into 41,952,000
shares, and the Company name was changed to Antennas America, Inc. At the annual
shareholders meeting held on October 11, 2000, the shareholders voted to change
the Company's name to ARC Wireless Solutions, Inc. from Antennas America, Inc.
The Wireless Communications Products Division designs, develops, markets and
sells a diversified line of antennas and related wireless communication systems,
including base station panel antennas, conformal and phased array antennas,
distributed primarily through third party OEMs and distributors located in the
United States.

On May 24, 2000, the Company purchased, through its subsidiary, Winncom
Technologies, Corp. ("Winncom"), the outstanding shares of Winncom Technologies,
Inc. Winncom specializes in marketing, distribution and service, as well as
selected design, manufacturing and installation, of wireless component and
network solutions in support of both voice and data applications, primarily
through third party distributors located in the United States. The acquisition
has been accounted for as a purchase, and accordingly, the operations for
Winncom have been included in the Company's consolidated statement of operations
from May 24, 2000 (the date of acquisition) forward. (See Note 4)

On September 29, 2000, the Company purchased, through its subsidiary, Starworks
Wireless Inc. ("Starworks"), the outstanding shares of Starworks Technology,
Inc. (a/k/a The Kit Company). Starworks specializes in the design,
manufacturing, marketing, distribution and service of direct-to-home dish
satellite installation kits in the United States, primarily through OEMs and
third-party distributors, retailers and the Internet. The acquisition has been
accounted for as a purchase and accordingly, the operations for Starworks have
been included in the Company's consolidated statement of operations from
September 29, 2000 (the date of acquisition) forward.

Consolidation

The accompanying consolidated financial statements include the accounts of ARC
Wireless Solutions, Inc. ("ARC"), and its wholly-owned subsidiary corporations,
Winncom Technologies Corp. ("Winncom") and Starworks Wireless Inc. ("Kit"),
since their respective acquisition dates, after elimination of all material
intercompany accounts, transactions, and profits.


                                      F-6
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                               December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

Inventory

Inventory is valued at the lower of cost or market using standard costs that
approximate average cost. Inventories are reviewed periodically and items
considered to be slow moving or obsolete are reduced to estimated net realizable
value through an appropriate reserve. Inventory consists of the following at
December 31:

                                              2002             2001
                                          ----------------------------
         Raw materials                    $  984,000        $1,352,000
         Work in progress                    100,000           150,000
         Finished goods                    4,695,000         4,738,000
                                          ----------------------------
                                           5,779,000         6,240,000
         Inventory reserve                  (382,000)         (302,000)
                                          ----------------------------
         Net inventory                    $5,397,000        $5,938,000
                                          ============================

Property and Equipment

Property and equipment are stated at acquired cost. The Company uses the
straight-line method over estimated useful lives of three to seven years to
compute depreciation for financial reporting purposes and accelerated methods
for income tax purposes. Leasehold improvements and leased equipment are
amortized over the lesser of the estimated useful lives or over the term of the
leases. Upon sale or retirement, the cost and related accumulated depreciation
of disposed assets are eliminated from the respective accounts and the resulting
gain or loss is included in the statements of income. Property and equipment
consist of the following at December 31:

                                                   2002             2001
                                              -----------------------------
         Machinery and equipment              $   860,000       $   852,000
         Computer equipment and software          366,000           323,000
         Furniture and fixtures                   177,000           173,000
         Leasehold improvements                    81,000            76,000
                                              -----------------------------
                                                1,484,000         1,424,000
         Accumulated depreciation                (979,000)         (695,000)
                                              -----------------------------

                                              $   505,000       $   729,000
                                              =============================

Depreciation expense, which includes amortization of fixed assets acquired
through capital leases, amounted to $294,000 and $234,000 during the years ended
December 31, 2002 and 2001, respectively.

Patent Costs

Patent costs are stated at cost and amortized over ten years using the
straight-line method. Patent amortization expense amounted to $14,000 and
$11,000 for the years ended December 31, 2002 and 2001, respectively.

                                      F-7
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

Intangible Assets

Intangible assets consist principally of purchased intangible assets and the
excess acquisition cost over the fair value of tangible and identified
intangible net assets of businesses acquired (goodwill). Purchased intangible
assets include developed technology, trademarks and trade names, assembled
workforces and distribution network. The Company continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of
future cash flows expected to result from the use of the assets in comparison
with the assets carrying amount in deciding whether the goodwill is recoverable.
Intangible assets, except goodwill, are being amortized using the straight-line
method over estimated useful lives ranging from 5 to 15 years.

                                                   2002              2001
                                                   ----              ----

            Patents                            $   200,000       $   149,000
            Assembled workforce                    125,000           125,000
            Distribution network                   150,000           150,000
            Goodwill                            11,889,000        11,888,000
                                               -----------------------------
                                                12,364,000        12,312,000
            Accumulated amortization            (1,430,000)       (1,405,000)
                                               -----------------------------
            Intangible assets, net             $10,934,000       $10,907,000
                                               =============================

The Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" effective January 1, 2002. Pursuant to
SFAS No. 142, Goodwill and other indefinite lived intangible assets are no
longer amortized, but must be test for impairment at least annually. The Company
has performed both the transitional impairment test and annual impairment test
required by SFAS No. 142, using certain valuation techniques, and has determined
that no impairment exists at this time. It is possible but not predictable that
a change in the Company's wireless business, market capitalization, operating
results or other factors could affect the carrying value of goodwill or other
intangible assets and cause an impairment write-off.

The following reconciles the reported net income (loss) and earnings (loss) per
share to that which would have resulted had SFAS No.142 been applied to the year
ended December 31, 2001.

                                                       Year Ended
                                                    December 31, 2001

         Reported net loss                             $ (2,801,000)
         Add: Goodwill amortization, net of tax           1,020,000
                                                       ------------
         Adjusted net income (loss)                    $ (1,781,000)
                                                       ============

         Reported basic loss per share                       $(.019)
         Add: Goodwill amortization,
         net of tax, per basic share
                                                               .007
                                                       ------------
         Adjusted basic income (loss) per share              $(.012)
                                                       ============

                                      F-8

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

Fourth Quarter Adjustment

During the fourth quarter of 2001, the Company recorded the following year-end
adjustments, which it believes are material to the results of that quarter.
Goodwill was determined to be impaired because of the uncertainty of the current
financial and operating condition of Starworks and the possibility that
Starworks may be unable to generate future operating income in its legacy
business without the transformation of Starworks into a conventional cable
business.

                                                            2001
                                                            ----
Impairment write down of goodwill
associated with Starworks acquisition                   $ 1,257,000

Long-lived Assets

The carrying value of long-lived assets are reviewed annually; if at any time
the facts or circumstances at any of the Company's individual subsidiaries
indicate impairment of long-lived asset values, as a result of a continual
decline in performance or as a result of fundamental changes in a subsidiary's
market, a determination is made as to whether the carrying value of the
property's long-lived assets exceeds estimated realizable value.

Research and Development

Research and development costs are charged to expense as incurred. Such expenses
were $229,000 and $235,000 respectively, for the years ended December 31, 2002
and 2001.

Revenue

Revenue is recorded when goods are shipped. The Company has established reserves
for anticipated sales returns based on historical return percentages as well as
specific identification and reserve of potential problem accounts. The Company
has several major commercial customers who incorporate the Company's products
into other manufactured goods, and returns from these customers have not been
significant. Additionally, returns related to retail sales have been immaterial
and within management's expectations.

Cash

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash. From time to time the
Company has cash balances in excess of Federally Insured amounts.

Fair Value of Financial Instruments

The Company's short-term financial instruments consist of cash, accounts
receivable, and accounts payable and accrued expenses. The carrying amounts of
these financial instruments approximate fair value because of their short-term
maturities. Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and accounts
receivable.

The Company does not hold or issue financial  instruments  for trading  purposes
nor  does it hold or  issue  interest  rate or  leveraged  derivative  financial
instruments.

                                      F-9

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

Estimates

The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.

Basis of Presentation

The Company has experienced recurring losses, and has accumulated a deficit of
$5.5 million since inception in 1989. During 2002 and 2001, the Company was able
to increase sales, increase gross margin and decrease SG&A expenses as a
percentage of revenues and in 2002 generate net income. There can be no
assurance however that the Company will achieve the desired result of net income
and positive cash flow from operations. Management believes that current working
capital and available borrowings on existing bank lines of credit, together with
additional equity infusions that management believes would be available, will be
sufficient to allow the Company to maintain its operations through December 31,
2003.

Advertising Costs

Advertising costs are charged to operations when the advertising is first shown.
Advertising costs charged to operations were $86,000 and $48,000 in 2002 and
2001, respectively.

Net Income Per Common Share

Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution of securities that could share in the earnings of the entity. For the
year ended December 31, 2001 the Company incurred a net loss and stock options
and stock warrants, totaling 6,598,000 were not included in the computation of
diluted loss per share because their effect was anti-dilutive; therefore, basic
and fully diluted loss per share are the same for 2001.




                                      F-10

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

The following table represents a reconciliation of the shares used to calculate
basic and diluted earnings per share for the respective periods indicated:

                                          Year Ended               Year Ended
                                       December 31, 2002       December 31, 2001

Numerator: Net Income (Loss)             $  307,000             $ (2,801,000)
                                        ====================================

Denominator:
Denominator for basic  arnings per
share - weighted average shares
                                        153,100,000             148,568,000
Effect of dilutive securities
  Employee stock options                    400,000                       -
  Common stock warrants                           -                       -
                                        -----------------------------------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed conversion
                                        153,500,000             148,568,000
                                        ===================================

Basic earnings per share                      $.002                  $(.019)
                                        ===================================

Diluted earnings per share                    $.002                  $(.019)
                                        ===================================

Stock Option Plans

The Company applies Accounting Principles Board ("APB") Opinion 25, "Accounting
for Stock Issued to Employees," and the related interpretations in accounting
for all stock option plans. Under APB Opinion 25, no compensation cost has been
recognized for stock options issued to employees as the exercise price of the
Company's stock options granted equals or exceeds the market price of the
underlying common stock on the date of grant. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
requires the Company to provide pro forma information regarding net income as if
compensation cost for the Company's stock options plans had been determined in
accordance with the fair value based method prescribed in SFAS No. 123. To
provide the required pro forma information, the Company estimates the fair value
of each stock option at the grant date by using the Black-Scholes option-pricing
model.

Reclassifications

Certain balances in the prior year consolidated financial statements have been
reclassified in order to conform to the current year presentation. The
reclassifications had no effect on financial condition or results of operations.


                                      F-11

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


1. Organization and Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements

In June 2001, the FASB approved for issuance SFAS 143 "Asset Retirement
Obligations." SFAS 143 establishes accounting requirements for retirement
obligations associated with tangible long-lived assets, including (1) the timing
of the liability recognition, (2) initial measurement of the liability, (3)
allocation of asset retirement cost to expense, (4) subsequent measurement of
the liability and (5) financial statement disclosures. SFAS 143 requires that an
asset retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method. The Company will adopt the statement effective no later than
January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. The Company does not believe that the adoption of this
statement will have a material effect on its financial position, results of
operations, or cash flows.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003. The Company does not anticipate a significant impact on its
results of operations from adopting this Statement.

In December 2002, the FASB issued Statements of Financial Accounting Standards
No.148, "Accounting for Stock-Based compensation - Transition and Disclosure -
an amendment of FASB Statement 123" (SFAS 123). For entities that change their
accounting for stock-based compensation from the intrinsic method to the fair
value method under SFAS 123, the fair value method is to be applied
prospectively to those awards granted after the beginning of the period of
adoption (the prospective method). The amendment permits two additional
transition methods for adoption of the fair value method. In addition to the
prospective method, the entity can choose to either (i) restate all periods
presented (retroactive restatement method) or (ii) recognize compensation cost
from the beginning of the fiscal year of adoption as if the fair value method
had been used to account for awards (modified prospective method). For fiscal
years beginning December 15, 2003, the prospective method will no longer be
allowed. The Company currently accounts for its stock-based compensation using
the intrinsic value method as proscribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options , therefore, it does not intend to
adopt the transition requirements as specified in SFAS 148. The Company will
adopt the new SFAS 148 disclosure requirements in the first quarter of fiscal
2003.

2. Revolving Bank Loan Agreements and Notes Payable

In conjunction with the acquisition of Winncom Technologies, Inc. on May 24,
2000, the Company assumed a $1,500,000 revolving line of credit from a bank
bearing an interest rate of prime plus 0.5% (4.75% at December 31, 2002 and 5.5%
at December 31, 2001). The line is collateralized by accounts receivable,
inventory and otherwise unencumbered fixed assets of Winncom. ARC is a general
corporate guarantor of this loan. On November 27, 2000 the line was increased to
$3,000,000. On October 29, 2002 this line of credit and the $1 million line of
credit discussed below were combined into a single $4 million revolving line of
credit due April 30, 2003 of which $3,718,000 was outstanding at December 31,
2002 and $2,621,000 was outstanding at December 31, 2001.

                                      F-12

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


2. Revolving Bank Loan Agreements and Notes Payable, continued

In connection with the acquisition of the Ball Assets in August 2001 Winncom
established a new line of credit in the amount of $1 million bearing an interest
rate of prime plus 0.5% (5.5% at December 31, 2001). This line was
collateralized by accounts receivable, inventory and otherwise unencumbered
fixed assets of Winncom. ARC was the general corporate guarantor of this loan.
As of December 31, 2001 $925,000 was outstanding under this line of credit. On
October 29, 2002 this line of credit was combined with Winncom's other line of
credit into a single $4 million facility.

Revolving bank lines of credit at December 31, 2002 and 2001 consist of:

                                                   2002             2001
                                                ---------------------------
    Bank line of credit - Winncom               $3,718,000        3,546,000
                                                ---------------------------
                                                 3,718,000        3,546,000
    Less current portion                        (3,718,000)        (925,000)
                                                ---------------------------
                                                $        -       $2,621,000
                                                ===========================

3. Stockholders' Equity

In July 2001, the Company offered each Unit Investor, from its October 2000
private placement, the opportunity to either (1) exchange each three Warrants
for one share of Common Stock ("Alternative A"), or (2) reduce the exercise
price of each Warrant from $1.50 per share to $1.00 per share upon the Unit
Investor's agreement to reduce the price associated with the Company's 30-day
notice of redemption from $1.75 to $1.50 ("Alternative B"); provided, however,
that if the Unit Investor determined to participate in either Alternative A or
B, the Unit Investor was required to waive the Company's obligation to register
the Unit Investor's sale or other transfer of the Registrable Securities (the
"Registration Obligation").

Each Unit Investor electing Alternative A also was required to enter into a
Restricted Sales Agreement (the "Restricted Sales Agreement") that includes the
following restrictions with respect to the sale of all shares of Common Stock
owned by the Unit Investor, except for any shares purchased subsequent to March
31, 2001:

     o    On any trading day during the one-year period beginning on the day
          Alternative A goes into effect (which was August 9, 2001), the Unit
          Investor may sell or otherwise dispose of up to the Pro Rata Share, as
          defined below, for that Unit Investor, of (i) 15 percent of the
          reported trading volume of the Common Stock for the immediately
          preceding trading day if the reported trading volume of the Common
          Stock for the prior trading day was 400 shares or less, or (ii) 20
          percent of the reported trading volume of the Common Stock for the
          immediately preceding trading day if the reported trading volume of
          the Common Stock for the prior trading day was greater than 400
          shares; and

     o    On any trading day during the one-year period between the first and
          second anniversaries of the effective date of Alternative A, the Unit
          Investor may sell or otherwise dispose of up to the Pro Rata Share for
          that Unit Investor of (i) 20 percent of the reported trading volume of
          the Common Stock for the immediately preceding trading day if the
          reported trading volume of the Common Stock for the prior trading day
          was 400 shares or less, or (ii) 25 percent of the reported trading
          volume of the Common Stock for the immediately preceding trading day
          if the reported trading volume of the Common Stock for the prior
          trading day was greater than 400 shares.

                                      F-13

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


3. Stockholders' Equity, continued

The number of shares of Common Stock that the Unit Investor may sell shall not
be increased as a result of any failure by the Unit Investor to sell the maximum
number of Unit Investor Shares permissible at a prior time.

For purposes of Alternative A, the "Pro Rata Share" of any Unit Investor means
the percentage obtained by dividing (1) the number of Units purchased by the
subject Unit Investor in the Year 2000 Placement, by (2) the aggregate total
number of Units purchased by all investors in the Year 2000 Placement who agree
to the sales restrictions described above (the "Contracting Unit Investors").
Notwithstanding the foregoing, if the aggregate number of Units purchased in the
Year 2000 Placement by the Contracting Unit Investors is less than 90 percent of
the total number of Units purchased in the Year 2000 Placement by all investors
in the Year 2000 Placement, then "Pro Rata Share" shall instead mean the
percentage obtained by dividing (X) the number of Units purchased by the subject
Unit Investor in the Year 2000 Placement, by (Z) 90 percent of the aggregate
number of Units purchased by all investors in the Year 2000 Placement.

As of December 31, 2001 holders representing an aggregate of 13,062,000 Units
had agreed to participate in Alternative A and were issued 4,354,000 shares of
common stock, holders representing an aggregate of 1,148,000 Units had agreed to
participate in Alternative B and holders representing an aggregate of 790,000
units elected not to participate in Alternative A or B.

In December 2001, a settlement agreement was reached between the Company and the
former owners of Starworks whereby 1,459,000 shares of the Company's common
stock paid to the former owners as part of the consideration was returned to the
Company and the Company received an option to purchase the remaining 500,000
shares of common stock at $.15 per share. The Company exercised its option in
January 2002 and purchased the remaining shares 500,000 shares for $75,000.

The Company sold 5,000,000 shares of restricted common stock at $.20 per share
in a private placement offering through September 2001 from which it received
gross cash proceeds of $1,000,000. Related offering expenses were $22,000.

The Company sold 754,545 shares of restricted common stock at $.165 per share in
a private placement offering in March 2002 from which it received gross cash
proceeds of $124,500. Offering costs associated with this private placement
offering were $6,600. Within 30 days following the filing with the SEC of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2001, the
Company was obligated to file a registration statement covering the resale of
these shares. This registration statement was filed with the SEC on October 3,
2002 and registration costs were approximately $10,000.

In March 2002, the Company issued 200,000 shares of restricted common stock for
consulting services valued at $34,000. The consulting agreement provides that,
because it was cancelled in September 2002, 100,000 of these shares are required
to be returned to the Company. The consultant is claiming the right to retain
all 200,000 shares although the Company believes she has no legal basis to do
so.

For the year ended December 31, 2002 the Company recorded the issuance of 26,841
shares of common stock to directors for outstanding obligations for accrued
directors fees in the amount of $3,000.

                                      F-14

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


3. Stockholders' Equity, continued

In November 2002 the Company completed the purchase of odd lot shares of less
than 100 shares resulting in the purchase of 2,240 shares for approximately
$2,800.

In November 1997, the Board of Directors approved our 1997 Stock Option And
Compensation Plan (the "Plan"). Pursuant to the Plan, we may grant options to
purchase an aggregate of 5,000,000 shares of our common stock to key employees,
directors, and other persons who have or are contributing to our success. The
options granted pursuant to the Plan may be incentive options qualifying for
beneficial tax treatment for the recipient or they may be non-qualified options.
The Plan is administered by an option committee that determines the terms of the
options subject to the requirements of the Plan, except that the option
committee shall not administer the Plan with respect to automatic grants of
options to our directors who are not our employees. The option committee may be
the entire Board or a committee of the Board.

Through May 24, 2000, directors who were not also our employees ("Outside
Directors") automatically received options to purchase 250,000 shares pursuant
to the Plan at the time of their election as an Outside Director. These options
held by Outside Directors were not exercisable at the time of grant.

Options to purchase 50,000 shares became exercisable for each meeting of the
Board of Directors attended by each Outside Director on or after the date of
grant of the options to that Outside Director, but in no event earlier than six
months following the date of grant. The exercise price for options granted to
Outside Directors was equal to the closing price per share of our common stock
on the date of grant. All options granted to Outside Directors expired five
years after the date of grant. On the date that all of an Outside Director's
options became exercisable, options to purchase an additional 250,000 shares,
which were exercisable no earlier than six months from the date of grant, were
automatically granted to that Outside Director. On May 24, 2000, the Board of
Directors voted to (1) decrease the amount of options automatically granted to
Outside Directors from 250,000 to 25,000 options, and (2) decrease the amount of
exercisable options from 50,000 to 5,000 per meeting. The term of the outside
Director option granted in the future was lowered from five years to two years.
The other terms of the Outside Director options did not change. On July 5, 2002,
the Board of Directors voted to (1) increase the amount of options automatically
granted to Outside Directors from 25,000 to 125,000 options, and (2) increase
the amount of exercisable options from 5,000 to 25,000 per meeting. The other
terms of the Outside Director options did not change.

The Company granted a total of 250,000 options to Outside Directors under the
Plan during 2002, at an exercise price of $.13 per share and granted a total of
25,000 options to Outside Directors under the Plan during 2001, at an exercise
price of $.28 per share.



                                      F-15
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


3. Stockholders' Equity, continued

The following table summarizes the option activity for 2002 and 2001:

                                               Number of    Weighted Average
                                                Shares     Exercise Price ($)
                                             ===================================

    2001 Activity:
    Outstanding at beginning of year           12,570,000          0.921
    Granted                                     2,185,000          0.283
    Exercised                                    (100,000)         0.060
    Forfeited or expired                      (10,204,000)         0.975
                                             -----------------------------------
    Outstanding at end of year                  4,451,000          0.504
                                             ===================================
    Exercisable at end of year                  3,546,000          0.478

    2002 Activity:
    Outstanding at beginning of year            4,451,000          0.504
    Granted                                     1,625,000          0.164
    Exercised

    Forfeited or expired                       (2,016,000)         0.765
                                             -----------------------------------
    Outstanding at end of year                  4,060,000          0.212
                                             ===================================
    Exercisable at end of year                  2,960,000          0.225

At December 31, 2002, there are 1,125,000 options exercisable from $0.06 to
$0.18 and 1,835,000 exercisable from $.28 to $.58. These options expire between
2003 and 2005. The weighted average grant date fair values of the options
granted during 2002 and 2001 were $0.164 and $.283, respectively.

All option exercise prices were granted at market. The weighted average
remaining contractual life of options outstanding at the end of 2002 and 2001
were 1.90 years and 2.02 years, respectively.

In February 2001 the Company's former Chief Executive Officer and Chief
Financial Officer relinquished a combined 9,900,000 options granted during 2000,
of which 676,000 were granted under the Plan and 9,224,000 were granted outside
of the Plan. As part of the termination agreement the Company granted new fully
vested options for 550,000 shares outside of the Plan to these former employees,
with an exercise price equal to the average stock price on the date of their
respective departures. The Black-Scholes value of these non-qualified options
was $122,000, which the Company recognized as expense in the first quarter of
2001.

The Company has elected to follow Accounting Principles Board Opinion No., 25,
Accounting for Stock Issued to Employees (APB 25), and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123), requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, if the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

                                      F-16

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


3. Stockholders' Equity, continued

Pro forma recognition regarding net loss and loss per share is required by SFAS
123, which also requires that the information be determined as if the Company
has accounted for its employee stock options under the fair value method of SFAS
123. The fair value for options was estimated at the date of grant using a
Black-Scholes option valuation model with the following assumptions used for all
options granted in 2002 and 2001: risk-free interest rate ranging from 4% to 6%,
a dividend yield of 0%, volatility factors of the expected market price of the
Company's common stock of between .89 to 1.509 and an expected life of two to
five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
sensitive assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

                                                        December 31,
                                                   2002              2001
                                                ----------------------------
      Net income (loss):
        As reported                             $307,000         $(2,801,000)
        Pro forma                                $58,000         $(3,264,000)
      Income (Loss) per share:
        As reported                                $.002             $(0.019)
        Pro forma                                    $ -             $(0.022)

Additionally, the Company recorded $122,000 of expense during 2001 related to
non-employee options that were granted and vested. No such expense was recorded
in 2002.

4. Acquisitions

In September 2000, the Company purchased, through its subsidiary, Starworks, the
outstanding shares of Starworks Technology, Inc. The original aggregate
consideration was $3,000,000, consisting of $1,500,000 in cash (of which the
Company paid $1,000,000 at closing) and $1,500,000 in shares of the Company's
common stock (1,959,000 shares). The purchase agreement provided for a reduction
in the cash purchase price in the event that the audited net assets of Starworks
at closing were less than $592,000. Pursuant to this provision, in December 2000
the sellers forfeited the $500,000 of the cash portion of the purchase price
that was not paid at closing and returned an additional $194,000 of cash as a
result of the certified audit of the closing balance sheet. The Company recorded
$2,506,000 of goodwill in connection with the acquisition.

In January 2001 in the Federal District Court in the Northern District of
Georgia, the Company commenced litigation against Mr. and Mrs. McConnell and
other parties claiming either for the transaction to be reversed or for the
McConnells to pay damages for their alleged misrepresentations regarding the
sale of Starworks to the Company. The McConnells also filed suit against the
Company claiming damages from the Company for alleged misrepresentations by the
Company. In December 2001, a settlement agreement was reached between the
Company and the McConnells whereby 1,459,000 shares of the Company's common

                                      F-17

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


4. Acquisitions, continued

stock paid to the McConnells as part of the consideration was returned to the
Company and the Company received an option to purchase the remaining 500,000
shares of common stock at $.15 per share. The Company exercised its option in
January 2002 and purchased the remaining shares for $75,000. As a result of the
1,459,000 shares being returned to the Company, goodwill has been reduced by
approximately $1.1 million.

These acquisitions have been accounted for as purchases; accordingly, the
consolidated financial statements include the operations of the acquired
businesses from the date of each acquisition.

On August 21, 2001 the Company acquired certain commercial assets of the
wireless communications products line of Ball Aerospace & Technologies Corp.
("BATC"), a wholly owned subsidiary of Ball Corporation, for $925,000. The
assets acquired consist mainly of raw materials and finished goods inventory,
and testing and production equipment, and the purchase price has been allocated
to these specifically identifiable assets. In November 2001 the purchase price
was adjusted in accordance with the Purchase Agreement for variances in actual
assets delivered to the Company by BATC. BATC has agreed to refund to the
Company $99,000 pursuant to the Agreement and such refund was received
subsequent to December 31, 2001.

5. Income Taxes

The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Income tax credits are used to
reduce the provision for income taxes in the year in which such credits are
allowed for tax purposes. Deferred taxes are provided to reflect the income tax
effects of amounts included for financial purposes in different periods than for
tax purposes, principally accelerated depreciation for income tax purposes. Such
amounts have not been significant. Income tax expense for the years ended
December 31, 2002 and 2001 is as follows:

                                         2002              2001
                                     ----------------------------
      Current                        $   50,000      $    118,000
      Deferred                                -                 -
                                      ---------------------------
      Total                          $   50,000      $    118,000
                                     ============================

The Company has not recorded a liability for federal income taxes payable
currently, or for deferred taxes to future periods due to the existence of
substantial net operating loss carry-forward amounts available to offset taxable
income. The components of the deferred taxes asset as of December 31 are as
follows:

                                      F-18

<PAGE>

                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


5. Income Taxes, continued

                                                        2002           2001
                                                   ----------------------------
Deferred tax assets:
    Net operating loss carry-forwards              $   353,000      $   530,000
    Stock option compensation                             --             45,000
    Inventory reserve                                  142,000          112,000
    Accrued expenses                                     8,000            9,000
    Bad debt reserves                                  366,000          371,000
                                                   -----------      -----------
                                                       869,000        1,067,000
Deferred tax liabilities:
    Prepaids                                           (38,000)         (35,000)
    Property and equipment                             (41,000)         (54,000)
                                                   ----------------------------
                                                       (79,000)         (89,000)

Deferred tax assets                                    790,000          978,000
Valuation allowance                                   (790,000)        (978,000)
                                                   ----------------------------
Net deferred tax assets                            $      --        $      --
                                                   ============================

A reconciliation of federal income taxes computed by multiplying pretax net loss
by the statutory rate of 34% to the provision for income taxes is as follows at
December 31:

                                                           2002         2001
                                                        -----------------------
Tax (benefit) expense computed at statutory rate        $ 121,000     $(912,000)
State income tax                                           50,000       118,000
Valuation allowance                                      (107,000)      (38,000)
Effect of permanent differences                           (14,000)      950,000
Other                                                        --            --
                                                        -----------------------
Provision for income taxes                              $  50,000     $ 118,000
                                                        =======================

As of December 31, 2002 and 2001, an evaluation of the reserve determined that
it was more likely than not that the net operating loss asset may not be
realized and therefore a valuation allowance for the full amount was recorded.
The valuation allowance for 2002 and 2001 decreased $188,000 and $80,000,
respectively.

The Company has a net operating loss carry-forward of approximately $950,000 ,
which will begin to expire from 2004 to 2016. The net operating loss
carry-forwards may be subject to further limitation pursuant to IRS section 382
and may expire unused.

6. Sales to Major Customers

The Company had no sales in excess of 10% of its net sales to any unrelated
parties for the year ended December 31, 2002 and 2001.


                                      F-19

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


7. Significant Suppliers

During 2002 the Company purchased approximately 56% of its product from five
vendors and during 2001 the Company purchased approximately 66% of its product
from four vendors. The loss of any of these vendors could have a material
adverse impact on the operations of the Company.
8.  Leases

The Company leases its facilities under operating leases through 2005. Minimum
future rentals payable under the leases are as follows:

                    2003                          $   205,000
                    2004                               94,000
                    2005                               98,000
                                                  -----------
                                                  $   397,000
                                                  ===========

Rent expense was $481,000 and $459,000 for the years ended December 31, 2002 and
2001, respectively.

Property, plant and equipment included the following amounts for leases that
have been capitalized at December 31, 2002 and December 31, 2001.

                                              December 31,    December 31,
                                                  2002            2001

       Machinery and Equipment                $ 42,000           $ 39,000
       Computers and Software                   42,000             42,000
       Furniture and Fixtures                   20,000             20,000
                                              ---------------------------
                                               104,000            101,000
       Less accumulated amortization           (64,000)           (50,000)
                                               --------------------------
                                              $ 40,000           $ 51,000
                                              ===========================

The Company recorded amortization expense of $15,000 and $12,000, respectively,
on assets recorded under capitalized leases for 2002 and 2001.

Future minimum lease payments under capital leases are as follows at December
31, 2002:

         2003                                      $  14,000
         2004                                          7,000
                                                   ---------
         Total minimum lease payments                 21,000
         Amount representing interest                 (2,000)
                                                   ---------
         Present value of lease payments           $  19,000
                                                   =========


                                      F-20
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


9. Defined Contribution Plan

In November 1999, the Board of Directors approved the establishment of the
Antennas America, Inc. 401(k) Plan for employee contributions effective January
1, 2000. The name of the Plan was subsequently changed to the ARC Wireless
Solutions, Inc. 401(k) Plan. The Plan allows for discretionary matching in
Company common stock of employee contributions by the Company if the Company has
a profit for the preceding year. The Company made no contributions to the Plan
for fiscal years 2002 or 2001.

10. Commitments

We entered into a new employment agreement with our CEO, effective as of January
2, 2002, which terminates on January 2, 2004. Mr. Marx is to receive an annual
base salary of $195,000 per year during the term of the agreement and is
eligible to receive a bonus ranging from $50,000 to $80,000 for the year ending
December 31, 2002 if the Company achieves certain predetermined revenue and
earnings before interest, taxes, depreciation, and amortization ("EBITDA")
goals. Mr. Marx earned a bonus of $70,000 for 2002. Mr. Marx is eligible to
receive another bonus for 2003 ranging from $50,000 to $100,000 if the Company
achieves certain predetermined revenue and EBIDTA goals for the year ending
December 31, 2003.

We entered into a new employment agreement with our President, effective as of
June 1, 2002 with a term of two and one-half years. Pursuant to the new
agreement, Mr. Raskin is to receive an annual base salary of $300,000 per year.
Mr. Raskin is eligible to receive bonuses for each of the years ending December
31, 2002, 2003 and 2004 of between $50,000 and $300,000 depending upon Winncom
achieving certain predetermined revenues and EBIDTA goals for those periods. Mr.
Raskin earned a bonus of $50,000 for 2002.

We entered into a written employment agreement with our Chief Financial Officer
and Treasurer, effective June 22, 2001. The employment agreement is for the
period June 22, 2001 through June 30, 2004, at an annual base salary of
$111,000, adjusted to $125,000 on July 1, 2002. Mr. Lamirato also is eligible to
earn bonuses of $35,000 or 3% of EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization), whichever is greater, over the term of the
agreement. Mr. Lamirato earned a bonus of $27,000 for 2002 and no bonus was
earned for 2001. Mr. Lamirato also received options to purchase 350,000 shares
of our common stock at prices ranging from $.14 to $0.33 per share exercisable
from June 22, 2001 through June 30, 2004.

The Company entered into a written employment agreement with the Executive Vice
President of the Wireless Communications Products Division, effective May 30,
2000. The employment agreement is for the period May 30, 2000 through May 29,
2003, at an annual base salary of $100,000. The base salary was adjusted to
$115,000 effective October 1, 2001. Mr. Calloway also is eligible to earn
bonuses of 3% of net profits over $180,000 of the Wireless Communications
Products Division over the term of the agreement. Mr. Calloway earned a bonus of
$19,000 for 2002 and earned a nominal bonus for 2001.

The Company entered into a written employment agreement with our Chief
Technology Officer, effective August 13, 2001. The employment agreement is for
the period August 13, 2001 through August 13, 2004 at an annual base salary of
$155,000. Mr. Olson also is eligible to earn bonuses, upon achieving certain
gross margin objectives, over the term of the agreement. Mr. Olson earned a
bonus of $19,000 for 2002 and no bonus was earned for 2001.

                                      F-21

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2002


12. Segment Information

The Company has three reportable segments that are separate business units that
offer different products as follows: distribution of wireless communication
products, antenna manufacturing and cable products. Each segment consists of a
single operating unit and the accounting policies of the reporting segments are
the same as those described in the summary of significant accounting policies.
Intersegment sales and transfers are recorded at cost plus an agreed upon
intercompany profit on intersegment sales and transfers.

Financial information regarding the Company's three operating segments for the
years ended December 31, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>


                                       Distribution    Manufacturing        Cable         Corporate          Total
                                       -------------------------------------------------------------------------------
<S>                            <C>     <C>             <C>              <C>              <C>               <C>
Net Sales                      2002    $ 25,079,000    $  7,285,000     $    420,000     $   (208,000)     $32,575,000
                               2001    $ 25,922,000    $  3,917,000     $  1,210,000     $   (109,000)     $30,940,000

Net Income (Loss)              2002         195,000         546,000          (43,000)        (391,000)         307,000
                               2001         386,000         369,000       (1,904,000)      (1,652,000)      (2,801,000)

Income (Loss) before Income    2002         245,000         546,000          (43,000)        (391,000)         357,000
Taxes                          2001         504,000         369,000       (1,904,000)      (1,652,000)      (2,683,000)

Identifiable Assets            2002      20,996,000       3,954,000          222,000       (1,717,000)      23,455,000
                               2001      20,675,000       4,724,000          531,000       (1,929,000)      24,001,000

Capital Expenditures           2002           9,000          70,000             --               --             79,000
                               2001          71,000         350,000            1,000             --            422,000

Depreciation and               2002          39,000         260,000            9,000             --            308,000
Amortization                   2001         877,000         201,000          182,000             --          1,260,000

Interest Expense               2002         201,000           6,000             --               --            207,000
                               2001         192,000          29,000           14,000            6,000          241,000
</TABLE>

Corporate represents the operations of the parent Company, including segment
eliminations.


                                      F-22