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

                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, 2001.

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: $30,940,000

As of March 1, 2002, the aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $20,022,000. This calculation is
based upon the average of the closing bid price of $0.16 and ask price of $0.19
of the stock on March 1, 2002. 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 1, 2002 was 152,343,784.

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                                       2

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                          ARC Wireless Solutions, Inc.
                   10-KSB for the Year Ended December 31, 2001

                                Table of Contents

                                                                        Page No.
                                     PART I

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

Item 2.       Description of Properties..................................  14

Item 3.       Legal Proceedings..........................................  15

Item 4.       Submission of Matters to a Vote of Security Holders........  15

                                     PART II

Item 5.       Market for Registrant's Common Equity
              and Related Stockholder Matters ...........................  16

Item 6.       Management's Discussion and Analysis
              or Plan of Operations......................................  19

Item 7.       Financial Statements.......................................  23

Item 8.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosures....................  23

                                    PART III

Item 9.       Directors, Executive Officers, Promoters and
              Control Persons; Compliance
              With Section 16(a) of the Exchange Act.....................  24

Item 10.      Executive Compensation.....................................  26

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

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

Item 13.      Exhibits and Reports on Form 8-K...........................  33

Signatures    .........................................................    35




                                       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 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. 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.

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

                                       4

<PAGE>


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
wireless communications 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, markets and sells a diversified line of
antennas and related wireless communication systems, including cellular base
station, 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, primarily through third party
distributors located in the United States. Our Starworks subsidiary specializes
in the design, manufacturing, marketing, distribution and service of cable and
related installation components 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 acquistion of certain commercial assets from BATC last year
was the right to use BATC's technology in the manufacturing of the line of base
station antennas, which consist 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 now being designed to
meet other carrier mobile 2.5G and 3G requirements and other companies' fixed
wireless high-speed internet systems as well.

     Mobile Antennas
     ---------------

     Our mobile 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 cellular phone or can be
installed either directly in or on a computer or other device. We market two
primary mobile antenna designs, the ARC Universal Portable Antenna and the "F"
antenna. The Universal Portable Antenna 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 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
mobile antenna systems along with our existing commercial wireless products to
existing and new OEM 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 antenna 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 are using
our experience in these applications for the developing antennas for the
Bluetooth(TM) wireless technology, which is setting standards for short-range
connectivity between computers and their accessories.

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

     In 2001, we redesigned our legacy flat panel antenna designs to increase
performance and reliability. 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.

     Multi-channel, Multipoint Distribution Systems (MMDS) Antennas
     --------------------------------------------------------------

     As with the other flat panel antenna products, we designed our MMDS
antennas for better performance and reliablity and to increase the bandwidth so
that the antenna can receive and transmit in a broad frequency range. MMDS was
originally marketed as a competitor to conventional cable with the exception
that it used a microwave frequency to transmit the channels for home viewing. In
recent years, the licenses for MMDS were sold with the intent to transform MMDS
into a wireless provider of digital data, telephony, and television services to
transmit and receive high-speed internet and telephony. The signals can usually
be received approximately 35 miles from the transmitter by installing a receive
antenna on the subscriber's home. The system uses new electronics to interface

                                       6

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with existing equipment, including antennas, and with commercial cable modems to
provide reliable, wireless high data throughput. Currently, the MMDS business is
undergoing a transition from a primarily direct line-of-sight technology, to
include non line-of-sight technology. At this time we are not aggressively
marketing our MMDS antenna products until the market for these products becomes
more reliable and predictable.

     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.

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 ISM
(Industrial Scientific and Medical) license free products 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, Agere Systems,
Alvarion (Formerly Breezecom), Intel, Proxim, and Western Multiplex, 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, local and wide area networks
(LAN/WAN), 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. 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

                                       7

<PAGE>


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.

     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) and amplified 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-3.5GHz 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.

     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 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 continuously evaluates new products 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 Dish Self-Installation Kits
     ------------------------------------------

     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. These kits can
support all of the current satellite dish home products such as Hughes Network
Systems, Sony, Philips Magnavox, DirecTV and The Dish Network.

                                       8
<PAGE>


     Home Satellite Dish Professional Installation Kits
     --------------------------------------------------

     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 cable and related products such as cable jumpers and connectors.


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
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.

     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 better product
availability, in-house technical expertise and customer support and can assist
with 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 O.E.M.
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.

                                       9

<PAGE>


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 efficient and more responsive to
customers, lowers the overall cost of production, 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.

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
involved in R&D, our R&D costs have not been material in 2001 and 2000. We spent
approximately $205,000 and $198,000 on R&D in 2001 and 2000, 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, 2001, the Company had 92 full time employees including 47 in
manufacturing and distribution, 12 in sales and customer support, 7 in
engineering and product development, and 26 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

                                       10

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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 Randall P. Marx, our Chief Executive Officer, are
the inventors of a patent relating to the technique and design of the
FREEDOM(TM) and WALLDO(TM) local TV, VHF/UHF antenna systems, which expires in
2016. Mr. Shoemaker and Mr. Marx are also inventors of a patent covering the
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, 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, and he is the inventor of a pending patent application. He has
agreed to permanently assign to us all of the rights to the patent and the
pending patent.

We have also filed a provisional patent application with Raymond L. Lovestead,
one of our engineers, as the inventor. Mr. Lovestead has permanently assigned to
the Company all patent and other rights in the products covered by this
provisional patent application and all other products that have been and will be
developed while employed by us. This technology is being used for the new
two-way MMDS antenna.

Furthermore, we have filed one provisional patent application with Dr. Donald A.
Huebner, a Director and a Consulting Engineer. Dr. Huebner has permanently
assigned to the Company all patent and other rights in the products covered by
this provisional patent application and all other products that have been and
will be developed while employed by us. We have also filed a provisional patent
with Mr. Lovestead and Dr. Huebner as the inventors of the technology that we
are using for our new ARC Universal mobile antenna.

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, all rights to which are owned by the Company as a result of the
acquisition of Starworks Technologies, Inc. on September 29, 2000.

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

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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. Profits for some of these years were
     marginal, and we cannot assure 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 1, 2002, the low bid price for the common stock
     was $0.16, the high asked price was $0.19 and the closing sale price was
     $0.18. Because of the matters described above, a holder of our shares may
     be unable to sell shares when desired, if at all.

10.  Penny stock regulation may discourage investors' interest. The SEC has
     adopted rules that regulate broker-dealer practices in connection with
     transactions in "penny stocks". Penny stocks generally are equity
     securities with a price of less than $5.00 (other than securities
     registered on certain national securities exchanges or quoted on the NASDAQ
     system, provided that current price and volume information with respect to
     transactions in such securities is provided by the exchange or system). If
     our shares are traded for less than $5 per share, then unless (1) our net
     tangible assets exceed $5,000,000 during our first three years of
     continuous operations or $2,000,000 after our first three years of

                                       13

<PAGE>


     continuous operations; or (2) we had average revenue of at least $6,000,000
     for the last three years, our shares will be subject to the SEC's penny
     stock rules unless otherwise exempt from those rules.

     The penny stock rules require a broker-dealer, prior to a transaction in a
     penny stock not otherwise exempt from the rules, to deliver a standardized
     risk disclosure document prescribed by the SEC that provides information
     about penny stocks and the nature and level of risks in the penny stock
     market. The broker-dealer also must provide the customer with current bid
     and offer quotations for the penny stock, the compensation of the
     broker-dealer and its salesperson in the transaction and monthly account
     statements showing the market value of each penny stock held in the
     customer's account. The bid and offer quotations, and the broker-dealer and
     salesperson compensation information, must be given to the customer orally
     or in writing before or with the customer's confirmation. In addition, the
     penny stock rules require that prior to a transaction in a penny stock not
     otherwise exempt from such rules, the broker-dealer must make a special
     written determination that the penny stock is a suitable investment for the
     purchaser and receive the purchaser's written agreement to the transaction.
     These disclosure requirements may have the effect of reducing the level of
     trading activity in the secondary market for a stock that becomes subject
     to the penny stock rules. As long as our shares are subject to the penny
     stock rules, selling shareholders may find it difficult to sell our shares.

11.  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 located in Wheat Ridge, Colorado. We 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 corporate offices
and where we manufacture antennas. These leases expire on various dates from
2002 through 2003.

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 also lease approximately 21,000 square feet of office and production space at
our Starworks facility in Atlanta, Georgia where we assemble and distribute
self-installation kits for satellite dish systems. This lease expires in June
2002 and the Company does not intend to renew this lease at this time.

The Company believes that its current facility in Wheat Ridge, Colorado may not
be adequate to meet its needs over the next several years and is exploring other
alternatives. We anticipate that we would encounter little difficulty in
locating alternative facilities to meet our planned growth in the next few
years.

                                       14
<PAGE>



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

ARC Wireless acquired Starworks in September 2000 from David and Karen McConnell
for $1.5 million in cash and 1,959,499 shares of the Company's restricted stock.
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
McConnell's to pay damages for their alleged misrepresentations regarding the
sale of Starworks to us. The McConnell's 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
McConnell's whereby 1,459,499 shares of the Company's common stock paid to the
McConnell's 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 1,459,499 shares
being returned to the Company, goodwill has been reduced by approximately $1.1
million.

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

None.



                                       15
<PAGE>


                                     PART II

Item 5.  Market for Registrant's 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, 2000                   $3.594               $.130
         June 30, 2000                     1.469                .740
         September 30, 2000                1.290                .750
         December 31, 2000                  .770                .202
         March 31, 2001                     .219                .203
         June 30, 2001                      .300                .280
         September 30, 2001                 .200                .170
         December 31, 2001                  .180                .170

On March 1, 2002, the closing sale price for our common stock was $0.18 and the
number of our shareholders of record was 402. 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.

                                       16

<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. 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 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.

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

                                       17

<PAGE>


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 400,000 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.

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 and holders representing an aggregate of 1,148,000 Units had agreed
to participate in Alternative B.



                                       18
<PAGE>


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

                 Liquidity and Capital Resources (in Thousands)
                 ----------------------------------------------

                                                                December 31,
                                                             2001         2000
                                                          --------      --------

Components of Working Capital
-----------------------------
    Cash (including restricted cash)                       $   345      $ 1,422
    Accounts Receivable, trade                               4,687        4,021
    Accounts Receivable, vendors                             1,214          214
    Inventory                                                5,938        4,733
    Other Current Assets                                       117          383
    Bank Line of Credit - current                             (925)        (313)
    Accounts Payable                                        (5,273)      (5,904)
    Notes Payable and Capital Lease Obligations                (11)          (9)
    Notes Payable - Officers                                  --           --
    Other Current Liabilities                                 (503)        (508)
                                                           -------      -------
    Total Working Capital                                  $ 5,589      $ 4,039
                                                           =======      =======

In 2000 the Company was successful in raising approximately $11 million in
equity financing in which $6 million was used in the acquisition of Winncom and
$1 million was used in the acquisition of Starworks, both of which occurred in
2000. In addition, approximately $300,000 was used in March 2001 to pay off the
bank debt of Starworks. The remainder of the equity financing was used to fund
the net loss from operations in 2000 and 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 $1.5 million increase in working capital from December 31, 2000 to December
31, 2001 is primarily due to the financing of increases in inventory, accounts
receivable-vendors and accounts receivable-trade through our line of credit. Our
bank line of credit increased by $1.7 million from 2000 to 2001. The increase
was mainly used to finance the acquisition of certain commercial assets of the
wireless communications product line from BATC in August 2001 and to finance the
growth in accounts receivable and inventory. The acquisition of the wireless
communications products line resulted in new sales of base station antennas of
$1.5 million in the fourth quarter of 2001 resulting in receivables at December
31, 2001 from new customers that did not exist at December 31, 2000. In
addition, inventory for this product line was purchased, beyond that which was
purchased from BATC, to meet this 4th quarter sales demand as well as forecasted
sales demands for the first quarter of 2002. The Company has seen a significant
increase in receivables from vendors from 2000 to 2001 which represents 1)
credits due from vendors for sales of product under specified vendor sales
incentive programs to distributors and 2) credits due from vendors for product
returned for which credit memos have not yet been issued by the vendors.
Virtually all of the receivables from vendors at December 31, 2001 and 2000 are
for our subsidiary, Winncom. In 2001 there has been a substantial increase in
vendor sales incentive programs to stimulate sales in the flat market in 2001.

We had total assets of $24 million as of December 31, 2001 as compared with
$25.7 million as of December 31, 2000. The decrease is primarily due to the
impairment write-down of goodwill of $1.3 million in 2001 and a decrease in
goodwill of $1.1 million resulting from 1.4 million shares being returned to the
Company as part of the Starworks acquisition litigation settlement. This
decrease in intangible assets is partially offset by increases in receivables
and inventory as discussed in the previous paragraph.

                                       19

<PAGE>


Liabilities increased from $8.2 million on December 31, 2000 to $9.4 million on
December 31, 2001, or $1.2 million primarily due to an increase in the bank
lines of credit. The Company borrowed $925,000 from a short-term line of credit
when it acquired certain assets from BATC in August 2001, increased borrowing
under the long term bank line of credit by $1.7 million which was used to
finance the increase in receivables and inventory totaling $2.9 million. These
increases were offset by accounts payable which declined $600,000.

The Company had net cash used in operating activities of approximately $2.4
million for the year ended December 31, 2001 of which $2.7 million was an
increase in accounts receivable and inventory. The negative cash flow 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 the Company spent nearly $500,000 on legal and
other litigation costs associated with the McConnell litigation, which was
settled in November 2001. Management believes that these costs will not be
recurring in 2002 and with improvements in inventory turns, increased sales from
the base station antennas in 2002 we anticipate that operating activities for
all of 2002 will generate positive cash flow.

The Company had net cash used in operating activities of $2.8 million in 2000,
which was financed entirely from proceeds from the sale of common stock in 2000.

Management believes that current working capital, available borrowings on
existing bank lines of credit, the renegotiation of the $1 million line of
credit that was due January 31, 2002, 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, 2002 and into the
foreseeable future.

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

Fiscal Year Ended December 31, 2001 Compared To Fiscal Year Ended
December 31, 2000
--------------------------------------------------------------------------------

The results of operations of the Company include the results of Winncom and Kit
for all of 2001 being reported on, whereas the results of operations of the
Company for 2000 include the results of Winncom for the period May 24, 2000
(date of acquisition) to December 31, 2000 only and the results of operations of
Starworks from September 29, 2000 (date of acquisition) to December 31, 2000.

Sales were $30.9 million and $18.5 million for the years ended December 31, 2001
and 2000, respectively. The primary reason for the increase in revenues
comparing 2001 to 2000 is attributable to 1) the inclusion of the results of
operations of Winncom and Starworks for all of 2001 compared to only part of the
year for 2000, as noted in the previous paragraph, 2) Winncom's revenues were
$15.3 million in 2000 compared to $25.9 million on 2001 and Starworks revenues
were $.6 million in 2000 compared to $1.2 million in 2001, 3) an increase in
revenues from the Wireless Communications Products Division from $2.6 million in
2000 to $3.9 million in 2001. The average monthly sales for Winncom were $2.16
million on both 2001 and 2000. The average monthly sales for Starworks decreased
from $200,000 in 2000 to $100,000 in 2001 primarily due to the increase in free
professional installation of satellite dishes from DirecTV and Dish Network in
the second half of 2001. Sales for the Wireless Communications Products Division

                                       20

<PAGE>


increased by 50% 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.

Gross profit margins were 19.6% in 2001 and 15.4 % in 2000. The increase in
gross margin for 2001 vs. 2000 is primarily the result of the increase in
revenues from the Wireless Communications Products Division. Winncom's profit
margin increased slightly from 16% in 2000 to 17% in 2001. Winncom represented
approximately 83% of consolidated sales in 2001 and 2000. Starworks sales
represent only 4% of consolidated sales so their impact on the overall margin
was minimal in 2001 and 2000.

Selling, general and administrative (SG&A) expenses increased by $2.2 million or
52% from 2000 to 2001. SG&A as a % of revenues decreased to 20.7% in 2001
compared to 22.8% in 2000. Even though SG&A decreased as a percentage of
revenues comparing 2001 to 2000 there were some expenditures in 2001 that
resulted in a higher than expected SG&A. 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 also 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.

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 whereas 2000 represents only a partial
year amortization.

The loss from operations was $2.6 million in 2001 and $1.9 million in 2000. If
you exclude from the loss from operation in 2001 the goodwill impairment
write-down and the amortization of intangibles, both non-cash expenses, the
result would be an adjusted loss from operations of $334,000. The same exclusion
in 2000 would result in an adjusted loss from operations of $1.4 million. The
significant improvement of this adjusted loss from operations between 2001 and
2000 is the result of higher sales at greater margins and a reduction of other
operating expenses as a % of revenue.

Net interest expense was $241,000 in 2001 and $98,000 in 2000. The increase in
interest expense of $143,000 from 2000 to 2001 is due to the fact that the
results of operations for 2000 include Winncom's results of operations since the
date of acquisition, which was May 24, 2000. Winncom's average line of credit
balance outstanding was $1,028,000 in 2000 and $2,525,000 in 2001. The line of
credit balance was increased by $925,000 in September 2001 as the proceeds were
used to finance the BATC assets acquisition (see Note 4 to the Consolidated
Financial Statements). In addition, the average interest rate on bank borrowings
was 7.8% in 2001 and 9.6% in 2000.

                                       21

<PAGE>


The net loss for the year ended December 31, 2001 was $2.8 million compared to
$1.8 million for 2000. The primary reason for the increase in the net loss from
2000 to 2001 was the non-cash goodwill impairment write-down of approximately
$1.3 million in 2001 and an increase in amortization of purchased intangibles
from $500,000 in 2000 to $1 million in 2001.

Critical Accounting Policies

Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. We review the accounting policies we use in reporting
our financial results on a regular basis. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to accounts receivable, inventories,
intangible assets, income taxes and warranty obligations. We base our estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Results may differ from these estimates due
to actual outcomes being different from those on which we based our assumptions.
These estimates and judgments are reviewed by management on an ongoing basis,
and by the Audit Committee at the end of each quarter prior to the public
release of our financial results.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 also establishes
specific criteria for the recognition of intangible assets separately from
goodwill and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain, rather than deferred and amortized. SFAS
142 changes the accounting for goodwill and other intangible assets after an
acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and
intangible assets with indefinite lives will no longer be amortized; 2) goodwill
and intangible assets with indefinite lives must be tested for impairment at
least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years. SFAS 142 is effective for fiscal
years beginning after December 15, 2001, with early application permitted in
certain circumstances. The Company believes that the adoption of SFAS 142
will have a material effect on its financial position, results of operations and
cash flows. At this time, the Company estimates that the effect of the adoption
of Statement SFAS 142 will reduce operating expenses by approximately $836,000
as a result of reducing amortization of purchased intangibles. The adoption of
Statement SFAS 141 is not expected to have any impact on the Company's financial
position or cash flows.

In June 2001, the FASB also 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

                                       22

<PAGE>


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 October 2001, the FASB also approved SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
new accounting model for long-lived assets to be disposed of by sale applies to
all long-lived assets, including discontinued operations, and replaces the
provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, for the disposal of segments of
a business. Statement 144 requires that those long-lived assets be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured at net realizable value or include amounts
for operating losses that have not yet occurred. Statement 144 also broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. The provisions of Statement 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001 and,
generally, are to be applied prospectively. 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.

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 13 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 December11, 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.


                                       23
<PAGE>
<TABLE>
<CAPTION>

                                    PART III

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

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

<S>                              <C>                                                                          <C>
   Randall P. Marx               49            Chief Executive Officer, Secretary, Director                   1990

   Donald A. Huebner             56            Director                                                       1998

   Sigmund A. Balaban            60            Director                                                       1994

   Gregory E. Raskin             48            President, Director                                            2001

   Monty R. Lamirato             46            Chief Financial Officer, Treasurer

   Steve C. Olson                45            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.

                                       24

<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 was 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, Mr. Olson was employed at Ball
Aerospace for 14 years, including the past 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 and has served as Director beginning in
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,
2001, 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.

                                       25

<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, 2001 (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>
Glenn A. Befort                2001       99,000          0              0            0           0         0               0
Former Chief Executive
Officer; Treasurer; and        2000      123,000     76,000              0            0   8,400,000         0               0
Director (6)

Randall P. Marx                2001      175,000          0              0            0           0         0               0
Chief Executive  Officer;
Secretary; and Director        2000      115,000          0              0            0           0         0               0

                               1999      115,000          0              0            0           0         0               0

Gregory E. Raskin              2001      250,000          0              0            0           0         0               0
President, Winncom; and
Director                       2000      148,000     125,000             0            0     250,000         0               0

Burton Calloway                2001      106,000           0             0            0     200,000         0               0
Executive Vice President(7)
                               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.

     (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

                                       26

<PAGE>


ended December 31, 2001 under the Company's incentive plans. Except as set forth
in the table below, during fiscal year 2001, 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

----------------------- -------------- -------------- ----------- --------------- ----------------------------
                          Number of     % of Total                                Potential Realizable Value
                         Securities       Options                                   at Assumed Annual Rates
                         Underlying     Granted to    Exercise                          of Stock Price
                           Options     Employees in   Price         Expiration          Appreciation for
          Name            Granted (#)   Fiscal Year   ($/Share)        Date               Option Term
          ----            -----------   -----------   ---------        ----               -----------
                                                                                            5%             10%
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
<S>                                 <C>            <C>
Randall P. Marx                     0              0         N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Gregory E. Raskin                   0              0         N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Burton Calloway               200,000          12.8%       $ .33         5/30/03        $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, 2001 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of December 31, 2001.

                                                 Aggregated Option Exercises
                                          For Fiscal Year Ended December 31, 2001
                                                And Year-End Option Values (1)

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

                                                               Number of Securities
                                                              Underlying Unexercised       Value of Unexercised
                                                             Options at Fiscal Year-      In-the-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            0              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Gregory E. Raskin                 0                      0      250,000              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Burton Calloway                   0                      0      350,000              0            0               0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------
</TABLE>

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

     (2)  The number of shares received upon exercise of options during the year
          ended December 31, 2001.

     (3)  With respect to options exercised during the year ended December 31,
          2001, 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, 2001,
          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, 2001, 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, 2001. As required, the price used to calculate these
          figures was the closing sale price of the common stock at year's end,
          which was $0.18 per share on December 31, 2001.

                                       27

<PAGE>


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.

The Company granted a total of 275,000 options to Outside Directors under the
Plan during 2000, at exercise prices from $0.89 to $1.01 per share.

As of March 1, 2002, there were 1,010,000 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 a result, 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 2001, the Board
granted a total of 1,560,000 options under the Plan to employees at prices
ranging form $.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

                                       28

<PAGE>


Termination of Employment And Change-in-Control Arrangements" and the
"Subsequent Events" footnote to the financial statements). As of March 1, 2002,
there were 1,985,000 exercisable options outstanding related to grants to
employees, of which 1,708,727 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 325,000 stock options during fiscal year ended December
31, 2000, and earned $2,000 in meeting attendance fees (paid with 27,000 shares
in 2000). Outside Director fees were $3,900 in 2001.

Other Arrangements. During each of the years ended December 31, 2001 and 2000,
no compensation was paid to our Outside Directors other than pursuant to the
standard compensation arrangements described in the previous section.

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.

                                       29

<PAGE>


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.

We entered into a written employment agreement with Randall P. Marx on October
1, 1998 with an effective date of September 1, 1998. Mr. Marx is the beneficial
owner of 5.5 percent of our stock or 8,381,128 shares. The agreement was for a
period of two years with an annual salary of $115,000. Mr. Marx was also
eligible for a bonus of five percent of the income from our operations per
fiscal year for each fiscal year during the term. No bonus was earned in either
year. As a part of this agreement, Mr. Marx agreed to not compete with us for a
period of two years following his termination as our employee. Effective,
January 8, 2001, Mr. Marx entered into a one-year employment agreement with
total annual compensation of $175,000. Effective February 12, 2001, Mr. Marx
replaced Glenn A. Befort as Chief Executive Officer of the Company.

We entered into a written employment agreement with Gregory E. Raskin, President
of our Winncom subsidiary, effective May 24, 2000. Mr. Raskin is the beneficial
owner of 2.4 percent of our stock or 4,319,162 shares. The employment agreement
is for the period May 24, 2000 through May 31, 2002, at an annual base salary of
$250,000. 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, 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 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 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 over $180,000 of the Wireless Communications
Products Division over the term of the agreement. A nominal bonus was earned for
2001. 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 will be granted options to
purchase 200,000 on May 30, 2001 and May 30, 2002, respectively as long as he is
employed on those dates.

                                       30

<PAGE>


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. 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. No bonus
was earned for 2001. Mr. Lamirato also received options to purchase 175,000
shares of our common stock at a price of $0.33 per share 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. 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 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.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

The following table summarizes certain information as of March 1, 2002 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:

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

Randall P. Marx                             8,381,128(2)              5.5%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Sigmund A. Balaban                          1,514,721(3)               1%
10 Grecian Street
Parsippany, NJ  07054

Donald A. Huebner                             979,500(4)                *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Gregory E. Raskin                           4,319,162(5)              2.84%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

                                       31

<PAGE>



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

Monty R. Lamirato                             175,000(6)                *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Burton Calloway                                350,000(7)               *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO  80033

Barry Nathanson                              9,524,509                6.25%
6 Shore Cliff Place
Great Neck, NY  11023

Hudson River Investments, Inc.               6,266,667                4.11%
c/o Nemazee Capital Corp.
720 Fifth Avenue
New York, NY 10019

Evansville Limited                           8,446,667                5.54%
c/o Quadrant Management Inc.
720 Fifth Avenue, 9th Floor
New York, NY  10019

All officers and directors
as a group (six persons)                     15,719,511(2)(3)         10.3%
                                                       (4)(5)(6)
* 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. 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.

                                       32

<PAGE>


     (3)  Includes 1,414,721 shares directly held by Mr. Balaban; Outside
          Director options granted under the 1997 Stock Option and Compensation
          Plan to purchase 100,000 shares at $0.15 per share until September 8,
          2004, all of which are currently exercisable.

     (4)  Includes 69,500 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 10,000
          shares at $1.01 per share until May 30, 2002, all of which are
          currently exercisable; and 200,000 shares granted to Dr. Huebner in
          connection with his employment agreement exercisable at $.23 until
          April 30, 2002.

     (5)  Includes 3,898,389 shares directly held by Mr. Raskin, 170,773 shares
          beneficially owned by a partnership in which Mr. Raskin is a partner
          and options to purchase 250,000 shares at $0.89 until May 24, 2002
          granted to Mr. Raskin in connection with his employment agreement.

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

     (7)  Consists of options to purchase 350,000 shares at prices ranging from
          $.33 to $1.01 per share until May 30, 2003 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.  Exhibits and Reports on Form 8-K
------------------------------------------

(a)      Financial Statements

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

         Consolidated Balance Sheets at December 31, 2001 and 2000...........F-3

         Consolidated Statements of Operations for the Years Ended
                December 31, 2001 and 2000...................................F-4

         Consolidated Statements of Changes in Stockholders' Equity
                for the Years Ended December 31, 2001 and 2000...............F-5

         Consolidated Statements of Cash Flows for the Years Ended
                December 31, 2001 and 2000...................................F-6

         Notes to Consolidated Financial Statements..........................F-7


                                       33
<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
10.8           Employment Agreement dated as of August 13, 2001 between ARC
               Wireless Solutions, Inc. and Steven C. Olson
10.9           Employment Agreement dated as of May 30, 2000 between ARC
               Wireless Solutions, Inc. (formerly Antennas America, Inc.) and
               Burton J. Calloway
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)
(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


                                       34
<PAGE>



      (b) Reports on Form 8-K

          During the quarter ended December 31, 2001, the Company filed Current
          Reports on Form 8-K regarding events occurring on each of December 11,
          2001, November 30, 2001 and October 16, 2001 reporting the change of
          accountants pursuant to Item 4 of that form, reporting a litigation
          settlement reported on Item 5 of that form and reporting a press
          release filed on that date, respectively.

                                   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 29, 2002           By:  /s/ Randall P. Marx
                                   ---------------------------------------------
                                Randall P. Marx, Chief Executive Officer

Date:  March 29, 2002           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 29, 2002                                       /s/ Sigmund A. Balaban
                                                    ----------------------------
                                                    Sigmund A. Balaban, Director



March 29, 2002                                       /s/ Gregory E. Raskin
                                                    ----------------------------
                                                    Gregory E. Raskin, Director



March 29, 2002                                       /s/ Donald A. Huebner
                                                    ----------------------------
                                                    Donald A. Huebner, Director


                                       35
<PAGE>


Reports of Independent Auditors


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

We have audited the accompanying consolidated balance sheet of ARC Wireless
Solutions, Inc. as of December 31, 2001 and the related consolidated statement
of operations, changes in stockholders' equity, and cash flows for the year 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 audit.

We conducted our audit 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 audit provides 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, 2001 and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.


/s/ Hein + Associates LLP

Denver, Colorado
February 28, 2002




                                      F-1


<PAGE>


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

We have audited the accompanying consolidated balance sheet of ARC Wireless
Solutions, Inc. as of December 31, 2000 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for the year 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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, 2000 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.


/s/ Ernst & Young LLP

Denver, Colorado
March 2, 2001


                                      F-2
<PAGE>


                          ARC Wireless Solutions, Inc.
                           Consolidated Balance Sheets
           (Shares and amounts in thousands except per share amounts)

                                                                December 31,
                                                           2001          2000
                                                         -----------------------
Assets
Current assets:
   Cash                                                  $    345      $  1,078
   Restricted cash                                           --             344
   Accounts receivable trade, net of
     allowance for doubtful accounts
     of $999 and $541, respectively                         4,687         4,021
   Accounts receivable vendors                              1,214           214
   Inventory, net                                           5,938         4,733
   Other current assets                                       117           383
                                                         ----------------------
Total current assets                                       12,301        10,773

Property and equipment, net                                   729           509

Other assets:
   Intangible assets, net                                  10,907        14,357
   Other assets                                                64            50
                                                         ----------------------
Total assets                                             $ 24,001      $ 25,689
                                                         ======================

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                      $  5,273      $  5,904
   Bank line of credit - current                              925           313
   Accrued expenses                                           503           508
   Current portion of capital lease obligations                11             9
                                                         ----------------------
Total current liabilities                                   6,712         6,734

Capital lease obligations, less current portion                21             2
Bank line of credit, less current portion                   2,621         1,498
                                                         ----------------------
Total liabilities                                           9,354         8,234
                                                         ----------------------

Commitments (Notes 4, 7, 8 and 10)
Stockholders' equity: (Note 3)
   Common stock, par value $.0005;
      250,000 shares authorized; 154,304 and
      142,891 shares issued, respectively                      77            71
   Preferred stock, par value $.001;
      2,000 shares authorized;
      no shares issued and outstanding                       --            --
   Additional paid-in capital                              21,522        18,918
   Common stock reserved (1,959 shares)                      --           1,500
    Treasury stock (1,459 shares)                          (1,117)
   Accumulated deficit                                     (5,835)       (3,034)
                                                         ----------------------
Total stockholders' equity                                 14,647        17,455
                                                         ----------------------
Total liabilities and stockholders' equity               $ 24,001      $ 25,689
                                                         ======================

See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>


                          ARC Wireless Solutions, Inc.
                      Consolidated Statements of Operations
           (Shares and amounts in thousands except per share amounts)


                                                        Years ended December 31,
                                                          2001           2000
                                                        ------------------------


Sales, net                                              $  30,940     $  18,480
Cost of sales                                              24,886        15,626
                                                        -----------------------
      Gross profit                                          6,054         2,854

Operating expenses:
   Selling, general and administrative expenses             6,388         4,225
   Impairment write down                                    1,257          --
   Amortization of intangibles                              1,020           534
                                                        -----------------------
Total operating expenses                                    8,665         4,759
                                                        -----------------------
      Loss from operations                                 (2,611)       (1,905)

Other income (expense):
   Interest expense, net                                     (241)          (98)
   Other income                                               169           169
                                                        -----------------------
      Total other income (expense)                            (72)           71
                                                        -----------------------

Loss before income taxes                                   (2,683)       (1,834)
Provision for income taxes                                    118             7
                                                        -----------------------
Net loss                                                $  (2,801)    $  (1,841)
                                                        =======================

Basic and diluted loss per share                        $   (.019)    $  (0.015)
                                                        =======================
Weighted average shares outstanding                       148,568       125,229
                                                        =======================



See accompanying notes to consolidated financials statements.


                                      F-4


<PAGE>
<TABLE>
<CAPTION>


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


                                              Common Stock        Common     Additional
                                            -------------------   Stock       Paid in   Treasury   Accumulated
                                             Shares     Amount    Reserved    Capital     Stock       Deficit      Total
                                            -----------------------------------------------------------------------------

<S>                                          <C>      <C>        <C>         <C>         <C>         <C>         <C>
Balances, January 1, 2000                    95,090   $     47   $   --      $  1,892    $   --      $ (1,193)   $    746

Issuance of common stock and warrants        36,544         18       --        10,900        --          --        10,918
   in private placement transactions,
   net of expenses of $69
Issuance of common  stock in connection       6,946          3       --         5,997        --          --         6,000
   with Winncom acquisition
Cashless exercise of warrants and             3,411          2       --            (2)       --          --          --
   stock options
Exercise of stock options for cash              900          1       --            38        --          --            39
Common stock reserved in connection
   with Starworks acquisition 1,959            --         --         1,500       --          --          --         1,500
   shares)
Issuance of stock options for services         --         --         --            92        --          --            92
Issuance of common stock for  directors'       --         --         --             1        --          --             1
   fees
Net loss                                       --         --         --          --          --        (1,841)     (1,841)
                                            -----------------------------------------------------------------------------
Balances, December 31, 2000                 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
                                            =============================================================================


See accompanying notes to consolidated financial statements.

                                                            F-5
<PAGE>


                                     ARC Wireless Solutions, Inc.
                                  Consolidated Statements of Cash Flows
                    (Shares and amounts in thousands except per share amounts)

                                                                                 Year Ended December 31,
                                                                                 2001               2000
                                                                              ----------------------------

Operating activities
Net loss                                                                      $ (2,801)           $ (1,841)
Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation and amortization                                               1,260                 678
     Provision for doubtful receivables                                            459                 366
     Non-cash expense for issuance of stock and options                            126                  93
     Impairment write-down                                                       1,257                --
     Changes in operating assets and liabilities:
       Restricted cash                                                             344                (311)
       Accounts receivable, trade and vendor                                    (2,125)             (1,709)
       Inventory                                                                  (619)             (2,311)
       Other current assets                                                        266                (368)
       Accounts payable and accrued expenses                                      (634)              2,631
       Other                                                                        74                 (36)
                                                                              ----------------------------
Net cash used in operating activities                                           (2,393)             (2,808)

Investing activities
Patent acquisition costs                                                           (25)                (35)
Acquisition of businesses, net of cash acquired                                   --                (7,309)
Acquisition of certain commercial assets                                          (826)               --
Purchase of property and equipment                                                (193)               (213)
                                                                              ----------------------------
Net cash used in investing activities                                           (1,044)             (7,557)

Financing activities
Repayment of notes payable - others and capital lease obligations                  (15)               (276)
Proceeds from private placement, including warrant exercises, net                  978              10,918
Proceeds from exercise of options, net                                               6                  39
Repayment of notes payable - officers                                             --                   (33)
Net borrowings under line of credit agreements                                   1,735                 617
                                                                              ----------------------------
Net cash provided by financing activities                                        2,704              11,265
                                                                              ----------------------------

Net increase (decrease) in cash                                                   (733)                900
Cash, beginning of period                                                        1,078                 178
                                                                              ----------------------------
Cash, end of period                                                           $    345            $  1,078
                                                                              ============================

Supplemental disclosure of cash flow information:
  Cash paid for interest                                                      $    241            $     95
   Cash paid for taxes                                                              55                --
Supplemental schedule of non-cash investing and financing activities:
  Acquisition of stock in exercise of warrants and options for
     issuance of newly issued shares of common stock                          $   --              $    562
  Purchase of assets under capital lease financing                                  36                --
                                                                              ----------------------------

See accompanying notes to consolidated financial statements.

                                                   F-6
</TABLE>

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


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
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-7
<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


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:

                                            2001              2000
                                         ----------------------------
         Raw materials                   $  1,352            $    763
         Work in progress                     150                 128
         Finished goods                     4,738               3,974
                                         ----------------------------
                                            6,240               4,865
         Inventory reserve                   (302)               (132)
                                         --------------- ------------
         Net inventory                   $  5,938             $ 4,733
                                         ============================

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:

                                                    2001                2000
                                                 ----------------------------
         Machinery and equipment                 $    852             $   522
         Computer equipment and software              323                 261
         Furniture and fixtures                       173                 138
         Leasehold improvements                        76                  53
                                                 ----------------------------
                                                     1424                 974
         Accumulated depreciation                    (695)               (465)
                                                 ----------------------------
                                                 $    729             $   509
                                                 ============================

Depreciation expense, which includes amortization of fixed assets acquired
through capital leases, amounted to $234 and $138 during the years ended
December 31, 2001 and 2000, respectively.

Patent Costs

Patent costs are stated at cost and amortized over ten years using the
straight-line method. Patent amortization expense amounted to $11 and $6 for the
years ended December 31, 2001 and 2000, respectively.

                                      F-8
<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


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 are being amortized using the straight-line method over
estimated useful lives ranging from 5 to 15 years.

                                                  2001          2000
                                                  ----          ----

            Patents                            $       149     $     132
            Assembled workforce                        125           125
            Distribution network                       150           150
            Goodwill                                11,888        14,547
                                               -------------------------
                                                    12,312        14,954
            Accumulated amortization                (1,405)         (597)
                                               -------------------------
            Intangible assets, net             $    10,907     $  14,357
                                               =========================

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

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 $205 and $198, respectively, for the years ended December 31, 2001 and
2000.

                                      F-9

<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


1.  Organization and Summary of Significant Accounting Policies, continued

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.

Restricted Cash

The Company had established a $300 standby letter of credit that guarantees
payment for coaxial cable imported from China. The letter of credit was
guaranteed by a certificate of deposit in the amount of $300 that matured on
November 7, 2001 and had an annual percentage yield of 6.34%. The Letter of
Credit expired on November 7, 2001 and was not renewed. The Company also had
restricted cash under a revolving bank loan agreement that terminated in
February 2001(Note 2).

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.

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
$5.8 million since inception in 1989. During 2001, the Company was able to
increase sales, increase gross margin and decrease SG&A expenses as a percentage
of revenues. There can be no assurance however that the Company will achieve the
desired result of positive cash flow from operations. Management believes that
current working capital and available borrowings on existing bank lines of


                                      F-10

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


1.  Organization and Summary of Significant Accounting Policies, continued

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, 2002.

Advertising Costs

Advertising costs are charged to operations when the advertising is first shown.
Advertising costs charged to operations were $48 and $145 in 2001 and 2000,
respectively.

Net Income Per Common Share

As of December 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 provides for the
calculation of "Basic" and "Dilutive" earnings per 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 years ended
December 31, 2001 and 2000, the Company incurred net losses and stock options
and stock warrants, totaling 6,598 and 12,570, respectively, 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 those years.

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.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. For all business combinations for which


                                      F-11

<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


1.  Organization and Summary of Significant Accounting Policies, continued

the date of acquisition is after June 30, 2001, SFAS 141 also establishes
specific criteria for the recognition of intangible assets separately from
goodwill and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain, rather than deferred and amortized. SFAS
142 changes the accounting for goodwill and other intangible assets after an
acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and
intangible assets with indefinite lives will no longer be amortized; 2) goodwill
and intangible assets with indefinite lives must be tested for impairment at
least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years. SFAS 142 is effective for fiscal
years beginning after December 15, 2001, with early application permitted in
certain circumstances. The Company believes that the adoption of SFAS 142 will
have a material effect on its financial position, results of operations and cash
flows. At this time, the Company estimates that the effect of the adoption of
Statement SFAS 142 will reduce operating expenses by approximately $836 as a
result of reducing amortization of purchased intangibles. The adoption of
Statement SFAS 141 is not expected to have any impact on the Company's financial
position or cash flows.

In June 2001, the FASB also 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 October 2001, the FASB also approved SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
new accounting model for long-lived assets to be disposed of by sale applies to
all long-lived assets, including discontinued operations, and replaces the
provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, for the disposal of segments of
a business. Statement 144 requires that those long-lived assets be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured at net realizable value or include amounts
for operating losses that have not yet occurred. Statement 144 also broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. The provisions of Statement 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001 and,
generally, are to be applied prospectively. 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.


                                      F-12

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


2. Revolving Bank Loan Agreements and Notes Payable

In conjunction with the acquisition of Starworks Technology, Inc. on September
29, 2000, the Company assumed a $1,500 revolving bank loan agreement. The
agreement was collaterallized by accounts receivable and restricted cash
maintained in a non-collection reserve account as discussed below. In connection
with the agreement, the Company assigned Starworks' accounts receivable to the
bank for collection by the bank. In February 2001 the revolving bank loan
agreement was terminated by the Company and all balances outstanding under the
bank loan agreement were paid. At December 31, 2001 and 2000, $0 and $308,
respectively were outstanding under this arrangement.

The amounts advanced under the terms of the agreement were equivalent to the
gross amount of the accounts receivable assigned, net of a one-time bank service
charge of 2.65% and a reserve for non-collection of 10%. The service charge was
adjusted on a quarterly basis and may be adjusted to 3.15% based on the average
collection period of the accounts receivable. Total service charges under the
agreement were approximately $22 from the date of acquisition on September 29,
2000 through December 31, 2000 and $14 for 2001.

The amount of the required non-collection reserve was calculated based on the
age of the specific invoices assigned. The non-collection reserve had been
established in the form of an interest-bearing restricted cash account.
Restricted cash in connection with this arrangement totaled $44 at December 31,
2000.

In conjunction with the acquisition of Winncom Technologies, Inc. on May 24,
2000, the Company assumed a $1,500 revolving line of credit from a bank bearing
an interest rate of prime plus 0.5% (5.5% at December 31, 2001 and 10.0% at
December 31, 2000). 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 of
which, $2,621 was outstanding at December 31, 2001 and $1,498 was outstanding
under the agreement at December 31, 2000. This agreement expires in April 2003,
at which time all borrowings are due in full in the event the line is not
renewed.

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 is also
collateralized by accounts receivable, inventory and otherwise unencumbered
fixed assets of Winncom. ARC is a general corporate guarantor of this loan. As
of December 31, 2001 $925 was outstanding under this line of credit. This
balance due under this letter of credit was due January 31, 2002. The Company is
currently negotiating with the bank to convert this line of credit, currently
due, to a long-term credit facility.

Also in conjunction with the acquisition of Winncom Technologies, Inc. on May
24, 2000, the Company assumed a $6 payroll account overdraft protection facility
with a bank, of which $5 was outstanding under the facility at December 31,
2000.


                                      F-13

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


2. Revolving Bank Loan Agreements and Notes Payable, continued

Revolving bank lines of credit and notes payable to others at December 31, 2001
and 2000 consist of:

                                                      2001            2000
                                                 ---------------------------
    Bank line of credit - Starworks              $          -      $     308
    Bank line of credit - Winncom                       3,546          1,503
                                                 ---------------------------
                                                        3,546          1,811
    Less current portion                                 (925)          (313)
                                                 ---------------------------
                                                 $      2,621      $   1,498
                                                 ===========================

3. Stockholders' Equity

In January 2000, we completed a private placement offering of 22,000 units, with
each unit consisting of one share of our restricted common stock and one
redeemable common stock purchase warrant to purchase one share of our common
stock, receiving proceeds of $1,034 in 1999 and $121 in 2000. Each unit entitled
the holder to purchase one share of common stock at an exercise price of $.175
per share and became exercisable on March 14, 2000, the date a registration
statement on Form SB-2 relating to the resale of the common stock sold in the
private placement and of the common stock underlying the warrants was declared
effective by the Securities and Exchange Commission. The holders of 19,235
warrants exercised their warrants in 2000 and the Company received gross
proceeds of approximately $3,400. Total proceeds received in 2000 from the sale
of units and exercise of warrants was approximately $3,400, net of related
offering expenses of approximately $51

In March 2000, as approved by the Board of Directors, an officer/director, a
former officer/director and one other director, exercised 2,765 warrants,
acquired in a private placement, with an exercise price of $484 by exchanging
219 previously owned shares of the Company's common stock valued at $484. The
value of the 219 shares of common stock received by the Company in this
transaction was based on the average closing price of the Company's common stock
on the five trading days prior to the transaction, which was $2.2062. Also in
March 2000, a director of the Company used previously owned common stock, valued
at $78, to exercise 900 common stock options with an aggregate exercise price of
$78. Based on the same average closing price as used in the warrant exercise
transaction previously noted, a total of 35 shares of previously owned common
stock were exchanged as payment of the exercise price for the 900,000 common
stock options. The Company received a total of 255 shares of common stock from
these two cashless exercises. The common stock received was recorded as treasury
stock then retired.

The Company also completed a second private placement offering in October 2000.
This transaction provided for the issuance of up to 16,000 units, with each unit
consisting of one share of restricted common stock at a price of $0.50 per share
plus one redeemable common stock purchase warrant to purchase one share of
common stock at an exercise price of $1.50 per share. The warrants are
exercisable immediately and expire upon the earlier of one year from the date of
registration of the underlying securities or five years from the date of
offering. The Company sold 15,000 units in this private placement, from which
the Company received gross cash proceeds of $7,500, all of which occurred during
2000. Related offering expenses were $18 in 2000 and $5 in 2001. 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

                                      F-14

<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


3. Stockholders' Equity, continued

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.

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


                                      F-15

<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


3. Stockholders' Equity, continued

The Company sold 5,000 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. Related offering expenses were $22.

In November 1997, the Board of Directors approved the Company's 1997 Stock
Option and Compensation Plan ("the Plan"). Pursuant to the Plan, the Company may
grant options to purchase an aggregate of 5,000 shares of the Company's common
stock to key employees, directors, and other persons who have or are
contributing to the success of the Company. The options granted pursuant to the
Plan may be incentive options qualifying for beneficial tax treatment for the
recipient or they may be nonqualified options. The options granted are valued at
the stock price on the date of grant and have varying exercise periods. During
2001 and 2000 the Company granted 1,560 and 2,061 options under the plan,
respectively.

Through May 24, 2000, directors who were not also employees ("Outside
Directors") automatically received options to purchase 250 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 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 fair market value per share of our common stock on the date of
grant. All options granted to Outside Directors expire 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 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 to 25 options, and (2) decrease the amount of
exercisable options from 50 to 5 per meeting. The term of the Outside Director
options granted in the future was lowered from five years to two years. The
other terms of the Outside Director options did not change. The Company granted
a total of 275 options to Outside Directors under the Plan during 2000, at
exercise prices from $0.89 to $1.01 per share. Outside Directors earned $2 in
meeting attendance fees (which will be paid through issuance of 27 shares in
2000) and vested 325 stock options during fiscal year ended December 31, 2000.
Outside Directors earned $4 in meeting attendance fees. During 2001 and 2000,
the Company granted options for 600 and 9,809 shares, respectively, of the
Company's common stock outside of the Plan. These options were granted to former
officers, with an exercise price equal to the average stock price on the date of
grant with varying exercise periods.

                                      F-16
<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


3. Stockholders' Equity, continued

The following table summarizes the option activity for 2001 and 2000:


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

2000 Activity:
  Outstanding at beginning of year            2,500              0.074
  Granted                                    11,870              0.909
  Exercised                                  (1,300)             0.079
  Forfeited or expired                         (500)             0.052

                                            --------------------------
  Outstanding at end of year                 12,570              0.921

                                            ==========================
  Exercisable at end of year                  1,870              0.629

  2001 Activity:
  Outstanding at beginning of year           12,570              0.921
  Granted                                     2,160              0.283
  Exercised                                    (100)             0.06
  Forfeited or expired                       (9,970)             0.976
                                            --------------------------
  Outstanding at end of year                  4,660              0.525
                                            ==========================
  Exercisable at end of year                  3,590              0.487
                                            ==========================

At December 31, 2001, there are 600 options exercisable from $0.06 to $0.15,
1,660 from $.21 to $.58, 970 at $0.63 to $.90, and 360 at $1.01 to $1.03. These
options expire between 2001 and 2005. The weighted average grant date fair
values of the options granted during 2001 and 2000 were $0.209 and $.868,
respectively. All option exercise prices were granted at market. The weighted
average remaining contractual life of options outstanding at the end of 2001 and
2000 were 2.02 years and 3.75 years, respectively.

 In February 2001 the Company's former Chief Executive Officer and Chief
Financial Officer relinquished a combined 9,900 options granted during 2000, of
which 676 were granted under the Plan and 9,224 were granted outside of the
Plan. As part of the termination agreement the Company granted new fully vested
options for 550 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 is $122,
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


                                      F-17

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


3. Stockholders' Equity, continued

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.

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 2001 and 2000: 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 1.428 to 1.509 and an expected life of one 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,
                                                     2001           2000
                                                   ------------------------
      Net loss:
        As reported                                $(2,801)        $(1,841)
        Pro forma                                  $(3,264)        $(2,692)
      Loss per share:
        As reported                                 $(.019)        $(0.015)
        Pro forma                                   $(.022)        $(0.021)

Additionally, the Company recorded $122 and $92 of expense during 2001 and 2000,
respectively related to non-employee options that were granted and vested.

4. Acquisitions

In May 2000, the Company purchased, through its subsidiary, Winncom Technologies
Corp., the outstanding shares of Winncom Technologies, Inc. The Company paid
$12,000 in aggregate consideration, consisting of $3,000 in cash, a $1,500
non-interest bearing promissory note payable 90 days from the closing date, a
$1,500 non-interest bearing promissory note payable 180 days from the closing
date and $6,000 in shares of the Company's common stock (6,946 shares). The
Company recorded $12,237 of goodwill in connection with the acquisition.

In September 2000, the Company purchased, through its subsidiary, Starworks, the
outstanding shares of Starworks Technology, Inc. The original aggregate
consideration was $3,000, consisting of $1,500 in cash (of which the Company
paid $1,000 at closing) and $1,500 in shares of the Company's common stock
(1,959 shares). The purchase agreement provided for a reduction in the cash


                                      F-18

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


4. Acquisitions (continued)

purchase price in the event that the audited net assets of Starworks at closing
were less than $592. Pursuant to this provision, in December 2000 the sellers
forfeited the $500 of the cash portion of the purchase price that was not paid
at closing and returned an additional $194 of cash as a result of the certified
audit of the closing balance sheet. The Company recorded $2,506 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
McConnell's to pay damages for their alleged misrepresentations regarding the
sale of Starworks to the Company. The McConnell's 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 McConnell's whereby 1,459 shares of the Company's common stock
paid to the McConnell's as part of the consideration was returned to the Company
and the Company received an option to purchase the remaining 500 shares of
common stock at $.15 per share. The Company exercised its option in January 2002
and purchased the remaining shares for $75. As a result of the 1,459 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. Summarized unaudited pro forma
results of operations reflecting the acquisitions of Winncom Technologies, Inc.
and Starworks Technology, Inc. assuming acquisition as of January 1, 2000 are as
follows:
                                                   For the Year
                                                  Ended December 31
                                                  -----------------
                                                       2000
                                                  -----------------

    Net sales                                         $27,553
                                                  =================
    Net loss                                           (2,079)
                                                  =================
    Loss per share                                    $ (0.02)
                                                  =================

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. The assets
acquired consist mainly of raw materials and finished goods inventory, 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 pursuant to the Agreement and such refund was received subsequent to
December 31, 2001.

In accordance with the Purchase Agreement with BATC, the Company may be
obligated to purchase materials under a long-term supply contract. The contract
is for deliveries over a one-year period and is for approximately $233.

                                      F-19

<PAGE>




                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


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, 2001 and 2000 is as follows:

                                             2001           2000
                                         ----------------------------

      Current                            $      118     $           7
      Deferred                                    -                 -
                                         ------------ ---------------
      Total                              $      118     $           7
                                         ============ ===============

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:

                                                     2001              2000
                                                 ------------------------------
   Deferred tax assets:
      Net operating loss carry-forwards          $        530     $         864
      Stock option compensation                            45                 -
      Inventory reserve                                   112                49
      Accrued expenses                                      9                 -
      Bad debt reserves                                   371               202
                                                 ------------------------------
                                                        1,067             1,115
  Deferred tax liabilities:
      Prepaids                                            (35)                -
      Property and equipment                              (54)              (57)
                                                 ------------------------------
                                                          (89)              (57)

  Deferred tax assets                                     978             1,058
  Valuation allowance                                    (978)           (1,058)
                                                 ------------------------------
  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:

                                                       2001              2000
                                                   ----------------------------
      Tax benefit computed at statutory rate       $     (912)     $       (624)
      State income tax                                    118               (49)
      Valuation allowance                                 (38)              613
      Effect of permanent differences                     950               113
      Other                                                 -               (46)
                                                   ----------------------------
      Provision for income taxes (benefit)         $      118      $          7
                                                   ============================


                                      F-20
<PAGE>




                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


5. Income Taxes, continued

As of December 31, 2001 and 2000, 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 2001 and 2000 decreased $80 and increased $620,
respectively.

The Company has a net operating loss carry-forward of approximately $1.4
million, which begin to expire from 2004 to 2015. 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, 2001 and 2000.

7. Significant Suppliers

During 2001, the Company purchased approximately 66% of its product from four
vendors and in 2000 the Company purchased approximately 80% of its product from
two 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:

                    2002                             $   395
                    2003                                 205
                    2004                                  94
                    2005                                  98
                                                     -------
                                                     $   792
                                                     =======

Rent expense was $459 and $292 for the years ended December 31, 2001 and 2000,
respectively.


                                      F-21

<PAGE>



                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


8.  Leases, continued

Property, plant and equipment includes the following amounts for leases that
have been capitalized at December 31, 2001 and December 31, 2000.

                                                December 31,       December 31,
                                                   2001               2000

         Machinery and Equipment                 $    39            $     6
         Computers and Software                       42                 39
         Furniture and Fixtures                       20                 20
                                                 --------------------------
                                                     101                 65
         Less accumulated amortization               (50)               (38)
                                                 -------- -----------------
                                                 $    51            $    27
                                                 ==========================

The Company recorded amortization expense of $12 on assets recorded under
capitalized leases for 2001 and 2000. Future minimum lease payments under
capital leases are as follows at December 31, 2001:

                     2002                                      $   17
                     2003                                          15
                     2004                                           5
                                                               ------
                     Total minimum lease payments                  37
                     Amount representing interest                  (5)
                                                               ------
                     Present value of lease payments           $   32
                                                               ======

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 2001 or 2000.


10. Commitments

Effective, January 8, 2001, Mr. Marx entered into a one-year employment
agreement with total annual compensation of $175. Effective February 12, 2001,
Mr. Marx replaced Glenn A. Befort as Chief Executive Officer of the Company.

The Company entered into a written employment agreement with Gregory E. Raskin,
President of our Winncom subsidiary, 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. Mr. Raskin also is eligible to earn bonuses of up to $500 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 in
2000 and no bonus was earned in 2001.

                                      F-22

<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


10. Commitments, continued

The Company 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. The base salary was
adjusted to $115 effective October 1, 2001. Mr. Calloway also is eligible to
earn bonuses of 3% of net profits over $180 of the Wireless Communications
Products Division over the term of the agreement. A nominal bonus was earned for
2001.

The Company 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. Mr. Lamirato also is eligible to earn bonuses of
$35 or 3% of EBITDA, whichever is greater, over the term of the agreement. No
bonus was earned for 2001.

The Company 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. Mr. Olson also is eligible to earn bonuses, upon achieving
certain gross margin objectives, over the term of the agreement. No bonus was
earned for 2001.

11. Subsequent Events

In January 2002 the Company exercised its option to repurchase the remaining 500
shares from the McConnell litigation settlement for $75.

13. 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.



                                      F-23
<PAGE>


                          ARC Wireless Solutions, Inc.
             Notes to Consolidated Financial Statements (continued)
                                December 31, 2001
            (Shares and Dollars in Thousands, Except Per Share Data)


13. Segment Information, continued

Financial information regarding the Company's three operating segments for the
years ended December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>



                                           Distribution     Manufacturing        Cable       Corporate       Total
                                         ----------------- ----------------- -------------- ------------- ------------

<S>                             <C>           <C>             <C>             <C>           <C>            <C>
Net Sales                       2001          $ 25,922        $ 3,917         $ 1,210       $   (109)      $30,940
                                2000            15,343          2,609             572            (44)       18,480

Net Earnings (Loss)             2001               386            369          (1,904)        (1,652)       (2,801)
                                2000               350           (507)            (99)        (1,585)       (1,841)

Earnings  (Loss) before Income  2001               504            369          (1,904)        (1,652)       (2,683)
Taxes                           2000               357           (507)            (99)        (1,585)       (1,834)

Identifiable Assets             2001            20,675          4,724             531         (1,929)       24,001
                                2000            19,107          2,807           3,598            177        25,689

Capital Expenditures            2001                71            350               1                          422
                                2000                69            144                                          213

Depreciation and Amortization   2001               877            201             182                        1,260
                                2000               501            133              44                          678

Interest Expense                2001               192             29              14              6           241
                                2000                70              6              22                           98
</TABLE>

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

                                      F-24