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


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


                                   FORM 10 - K


(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, 2004.
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 registrant as specified in its charter)

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

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

                             10601 West 48th Avenue
                        Wheat Ridge, Colorado, 80033-2660
                        ---------------------------------
           (Address of principal executive offices including zip code)

                                 (303) 421-4063
                                 --------------
              (Registrant's 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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. To the best of registrants' knowledge, there are no
disclosures of delinquent filers required in response to Item 405 of Regulation
S-K.
Yes   X    No
     ---      ---

Indicate by check mark if the registrant is an accelerated  filer (as defined in
Rule 12b-2 of the Act) Yes |_| No |X|.

                                       1

<PAGE>


As of June 30, 2004, the Registrant's most recently completed second quarter,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $15,925,000. This calculation is based upon the
average of the closing bid price of $.147 and ask price of $.152 of the stock on
June 30, 2004 as reported by OTC Bulletin Board. Without asserting that any
director or executive officer of the registrant, or the beneficial owner of more
than five percent of the registrant'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, 2005 was 153,895,000.


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                                       2
<PAGE>


                          ARC Wireless Solutions, Inc.
                 Form 10-K for the Year Ended December 31, 2004

                                Table of Contents

                                                                        Page No.
                                                                        --------
                                     PART I

Item 1.    Business....................................................     4
Item 2.    Properties..................................................    15
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,
           Related Stockholder Matters and Issuer
           Purchases of Equity Securities .............................    16
Item 6.    Selected Consolidated Financial Data........................    18
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operation....................................    18
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..    23
Item 8.    Financial Statements and Supplementary Data.................    23
Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure....................................    24
Item 9A.   Controls and Procedures.....................................    24
Item 9B.   Other Information...........................................    24

                                 PART III

Item 10.   Directors and Executive Officers of the Registrant..........    24
Item 11.   Executive Compensation......................................    27
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters..................    32
Item 13.   Certain Relationships and Related Transactions..............    34
Item 14.   Principal Accountant Fees and Services......................    34

                                  Part IV

Item 15.   Exhibits, Financial Statement Schedules.....................    35

Signatures ............................................................    37

                                       3
<PAGE>


                                     PART I

Item 1.  Business
-----------------

                                    Overview
                                    --------

Our Company
-----------

We provide high quality, timely, cost effective wireless network component and
end-to-end wireless network solutions. Our Wireless Communications Solutions
Division designs, develops, manufactures, markets and sells a diversified line
of antennas and related wireless communication systems, including cellular base
station, mobile, cellular, conformal and flat panel antennas. Our Winncom
Technologies Corp subsidiary ("Wincomm") specializes in marketing, distribution
and service of wireless component and network solutions in support of both voice
and data applications, both domestically and internationally. Our Starworks
Wireless subsidiary ("Starworks") specializes in the design, manufacturing,
marketing and distribution of cable in the United States, primarily through OEMs
and third-party distributors, retailers and the Internet.

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

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

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

     Included in the acquisition of certain commercial assets from Ball
Aerospace & Technology Corp. ("BATC") in 2001 was the right to use BATC's
technology in the manufacturing of the line of base station antennas, which
consists of various models used in several frequency bands for cellular systems.
These cellular systems include several protocols and technologies such as AMPS,
GSM, PCS, GPRS, 2.5G and 3G. Our base station antennas are now being deployed in
some of the Cingular, Telefonica and Qwest mobile phone carrier networks as well
as other carrier networks across the United States and Latin America. We not
only supply our base station antenna products directly to the carriers, but
through other channels, such as Original Equipment Manufacturers ("OEMS") and
distributors. Our base station antenna products have been supplied to Alcatel,
Bechtel, General Dynamics, Tessco, Domital and Sprint North Supply. New base
station models are being designed to meet other carrier mobile 2.5G and 3G
requirements and other companies' fixed wireless high-speed Internet systems as
well.

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

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

                                       4

<PAGE>


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

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

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

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

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

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

     Our flat panel antennas are flat antennas that typically incorporate a
group of constituent antennas, all of which are equidistant from the center
point. These types of antennas are used to receive and/or transmit data, voice
and, in some cases, video from radio transmitters. We have developed, patented
and sold various versions of these antennas to private, commercial and
governmental entities. We added several new designs including 3.5Ghz and 5.8Ghz
flat panel antennas in 2004.

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

     We are pursuing many new business opportunities for our 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. In most cases 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.

                                       5

<PAGE>


Principal products of our Winncom subsidiary include the following:

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

     Unlicensed wireless products use frequencies that require a license to
manufacture but not a license to use. Winncom's primary products are the Wi-Fi
and other license free products operating in the 2.4GHz to 5.8GHz and 60Ghz
frequency ranges for most license free standards. Any business or consumer may
use these products as long as they do not interfere with other users. Winncom
currently markets products manufactured by Alvarion, Axxcelera, Bridgewave,
Proxim, KarlNet, Motorola, Nomadix, Orthogon Systems and Wavelink, all of which
are leaders in the unlicensed communications hardware market. These products are
used in high-speed (up to 1Gb) point-to-point and point-to-multi-point wireless
networking applications, including, among others, internet access, hot spots,
local and wide area networks (LAN/WAN), Voice Over IP (VoIP), telco applications
and industrial process automation and data acquisition.

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

     Licensed wireless products require a Federal Communication Commission
("FCC") license to operate on a specific frequency in a geographic area. Winncom
distributes point-to-point microwave products including Alvarion, Avante
(Witcom) and Sagem. These microwave products are used as a backbone to connect
Service Providers cell sites or enterprise multiple locations for data and voice
applications.

     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 distributes Avaya, Cisco, Lucent,
Multitech, Polycom and Sagem VoIP products and Broadvox VoIP solutions for
enterprise and residential markets. VoIP products combined with wireless
environment delivers complete communication solutions for users of mobile
devices such as PDAs, 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 and point-to-multi-point
applications. Winncom offers directional panel antennas, as well as a variety of
sectorized and omni-directional, amplified CPE antennas and ethernet CPE
antennas for wireless Internet access and various data and voice applications.

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

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

                                       6

<PAGE>


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

     Winncom offers a complete line of high-performance voice and data
infrastructure and security products by AVAYA Communication, Cisco, Lucent
Technologies, Multitech, Polycom and Sagem. The virtual private network systems
(VPN) enable organizations of all sizes, from small businesses 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 voice and data products are designed for the new generation of
network (NGN) 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 offers a wide range of copper, coaxial and fiber cables and cable
assembly products as well as lightning arrestors that are used in the
installation, extension and protection of wireless end-to-end systems. Winncom
also offers a variety of environmental enclosures for a broad range of wireless
products for outdoor applications.

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

Principal products of our Starworks subsidiary include the following:

     Cable and Related Components
     ----------------------------

     We design and market coaxial cable and related components through our
Starworks Wireless subsidiary. Starworks originally provided pre-packaged
components, primarily using cable, to the direct-to-home satellite dish
industry. To increase sales and customer satisfaction, the satellite programming
industry began offering professional installation with the purchase of a home
satellite dish, limiting the sales of pre-packaged components. Starworks has
transformed its business to provide installers and other OEM customers with
components for various wireless installations. Starworks' primary focus is no
longer specific to just the satellite industry but to the wireless industry in
general, offering bulk cable, jumper cables consisting of certain lengths of
cable with connectors pre-installed and related components. Now that the
transition of the Starworks business has been completed, we are working to
increase our sales of cable and related products to complement our overall
wireless business.

Marketing and Distribution
--------------------------

     Our Wireless Communications Solutions 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 Solutions 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. We provide
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 wireless solutions.
Inquiries through the web site are pursued by our in-house and outside sales

                                       7

<PAGE>


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. mountain time. Many of our products are
also marketed internationally. We currently have numerous international
distributors marketing our products in several countries. We are currently
negotiating with various international manufacturers to manufacture our
proprietary products for that country. This process can save duty and freight
costs making us more competitive.

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

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

     Winncom's suppliers generally warrant the products they distribute and
allow returns of defective products, including those returned to us by our
customers. Winncom does not independently warrant the products they distribute;
however, they do warrant their services and the products that they build to
order from components purchased from other sources. Provision for estimated
warranty costs is recorded at the time of sale and periodically adjusted to
reflect actual experience. Historically, warranty expense has not been material.

     Winncom has written distribution agreements with many of its suppliers;
however, these agreements usually provide for nonexclusive distribution rights
and often include territorial restrictions that limit the countries in which
they can distribute the products. The agreements are also generally short term,
subject to periodic renewal, and often contain provisions permitting termination
by either party without cause upon relatively short notice. A supplier who
elects to terminate a distribution agreement generally will repurchase its
products carried in the distributor's inventory.

     Winncom's business, like that of other distributors, is subject to the risk
that the value of our inventory will be affected adversely by suppliers' price
reductions or by technological changes affecting the usefulness or desirability
of the products comprising the inventory. It is the policy of many suppliers of
IT products to offer distributors like Winncom, who purchase directly from them,
limited protection from the loss in value of inventory due to technological
change or a supplier's price reductions. Under many of these agreements, the
distributor is restricted to a designated period of time in which products may
be returned for credit or exchanged for other products or during which price
protection credits may be claimed. Winncom takes various actions, including
monitoring our inventory levels and controlling the timing of purchases, to

                                       8

<PAGE>


maximize our protection under supplier programs and reduce our inventory risk.
However, no assurance can be given that current protective terms and conditions
will continue or that they will adequately protect Winncom against declines in
inventory value, or that they will not be revised in such a manner as to
adversely impact Winncom's ability to obtain price protection. In addition,
suppliers may become insolvent and unable to fulfill their protection
obligations to us. We are subject to the risk that our inventory values may
decline and protective terms under supplier agreements may not adequately cover
the decline in values. The loss of a distribution agreement with a major
supplier or the loss of a major supplier, such as Proxim Corporation, could have
a material adverse impact on the business of Winncom.

Production
----------

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

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

Starworks produces all cable jumpers and assemblies 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 and contract engineering involved in R&D, other R&D costs have not
been material in 2004, 2003 and 2002. We spent approximately $250,000 $289,000
and $229,000 on R&D in 2004, 2003 and 2002, 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.

Financial Information About Industry Segments.
----------------------------------------------

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. Please see Note 10 to our
consolidated financial statements, included in this report.

Employees
---------

At December 31, 2004, we had 94 full time employees including 46 in
manufacturing and distribution, 18 in sales and customer support, 10 in
engineering and product development, and 20 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

                                       9

<PAGE>


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 antenna products are designed to be unique and in some
cases are patented. Our products normally compete with other products
principally in the areas of price and performance. However, we believe that our
products work as well as or better than competing products and usually sell for
the same price or less. Additionally, we have demonstrated to our customers and
potential customers that we are a more reliable source than some competitors and
believe this is a distinct competitive advantage.

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

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

Patents
-------

We currently hold 12 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 2007, 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
2011. In addition, Mr. Shoemaker and Mr. Randall P. Marx, our Chief Executive
Officer, are 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, and Mr. Shoemaker and Mr. Marx are also the inventors of a patent
for a conformal antenna for a satellite dish, which expires in 2013, as well as
of a patent for conformal antenna assemblies, which expires in 2016. Mr.
Shoemaker and Mr. Marx each have permanently assigned to us all rights to these
patents.

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.

In addition, Dr. Mohamed Sanad, our former Principal Consulting Engineer, is the
inventor of a patent that was designed for remote wireless metering, which will
expire in 2019. He is also the inventor of another patent used for remote
wireless metering as well as mobile data collection, which will expire in 2019.
Dr. Sanad has permanently assigned to us all of the rights to the patent.

Raymond L. Lovestead, one of our former engineers, is the inventor of our low
cross-polarization microstrip patch radiator patent, which will expire in 2021.
Mr. Lovestead has permanently assigned to the Company all patent and other
rights in the products covered by this patent application and all other products
that have been developed while employed by us.

Dr. Donald A. Huebner, and Mr. Lovestead are the inventors of our
Ultra-Broadband Thin Planar antenna patent, which is used for our Freedom
Antenna(R) and will expire in 2022. Dr. Huebner is also one of our Directors.
Dr. Huebner has permanently assigned to the Company all patent and other rights
in the products covered by this utility patent.

                                       10

<PAGE>


Steven C. Olson, our Chief Technology Officer, is the inventor of our Partially
Shared Antenna Aperture patent, which will expire September 7, 2024 and which is
currently used in one of our fixed wireless access antennas

We have also filed a utility patent application with Mr. Olson, the inventor,
for technology which is for our Omni-Dualbase(TM) antenna. Mr. Olson has
permanently assigned to the Company all patent and other rights in the products
covered by this utility patent and patent application, and all other products
that have been and will be developed while employed by us.

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

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

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.

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

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

On May 24, 2000, we purchased, through our subsidiary, Winncom Technologies
Corp. ("Winncom"), the outstanding shares of Winncom Technologies, Inc. Winncom
specializes in marketing, distribution and service, as well as selected design,
manufacturing and installation, of wireless component and network solutions in
support of both voice and data applications, primarily through resellers located
in the United States and selected international distributors. The acquisition
has been accounted for as a purchase, and accordingly, the operations for
Winncom have been included in the Company's consolidated statement of operations
from May 24, 2000 (the date of acquisition) forward. We paid $12.0 million in

                                       11

<PAGE>


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 $6.0 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
physical inventory was taken of the assets purchased and in accordance with the
purchase agreement Ball was required to refund approximately $85,000 of the
original purchase price as a result of there being less inventory than that
listed in the purchase agreement. The assets purchased consisted primarily of
raw materials inventory, finished goods inventory, production tooling equipment,
testing equipment and an exclusive license agreement to use patents related to
the wireless communications antenna products for commercial purposes.

Disclosure Regarding Forward-Looking Statements And Risk Factors
----------------------------------------------------------------

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

This Annual Report on Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. 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 7: Management's Discussion
and Analysis of Financial Condition and Results 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 "Risk Factors" section and elsewhere in this Annual Report. In
addition, the words "believe", "may", "will", "when", "estimate", "continue",
"anticipate", "intend", "expect" and similar expressions, as they relate to Arc
Wireless, our business or our management, are intended to identify
forward-looking statements. 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
Risk Factors.

Risk Factors.
-------------

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

                                       12

<PAGE>


1.   We have a history of prior losses and there is no assurance that our
     operations will be profitable in the future. 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 and for the fiscal year ended December 31, 2003, we incurred losses
     from operations. We operated profitably during each of the fiscal years
     ended December 31, 1993 through 1997 and again for the fiscal years ended
     December 31, 2002 and 2004. Profits for some of these years were marginal,
     and we cannot be assured that our operations in the future will be
     profitable. See the financial statements included in Item 14 of this Annual
     Report on Form 10-K.

2.   Our industry encounters rapid technological changes and there is no
     assurance that our research and development activities can timely lead to
     new and improved products when the market demands them. 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.   We rely on the protection of patents and certain manufacturing practices to
     protect our product designs and there is no assurance that these measures
     will be successful.. 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.

4.   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.   We face intense competition in our industry and there is no assurance that
     we will be able to adequately compete with our larger competitor. 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.   Our success depends on the availability of efficient labor and we cannot
     predict that we will continue to have access to this labor at an affordable
     cost. 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.   The success of our business is highly dependent on key employees, some of
     whom do not have employment agreements with us. We are highly dependent on
     the services of our executive management, including Randall P. Marx, our
     Chief Executive Officer and Gregory Raskin, Winncom's CEO. The loss of the
     services of any of our executive management could have a material adverse
     effect on us.

                                       13

<PAGE>


8.   We may incur significant costs in complying with new governmental
     regulations which affect our industry, and this may require us to divert
     funds we use for the development of our business and products . 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.   Historically, there has been an extremely limited public market for our
     shares. We and we cannot predict that the recent trading volume will be
     sustained. 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, 2005, the low bid price for the common
     stock was $0.147, the high asked price was $0.152 and the closing sale
     price was $0.147. Because of the matters described above, a holder of our
     shares may be unable to sell shares when desired, if at all.

10.  We have not paid any cash dividends with respect to our shares, and it is
     unlikely that we will pay any cash 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.

11.  Other Risks. In addition, there are other risks, which if realized, in
     whole or in part, could have a material adverse effect on our business,
     financial condition and/or results of operations, including, without
     limitation:

          o    intense competition, regionally and internationally, including
               competition from alternative business models, such as
               manufacturer-to-end-user selling, which may lead to reduced
               prices, lower sales or reduced sales growth, lower gross margins,
               extended payment terms with customers, increased capital
               investment and interest costs, bad debt risks and product supply
               shortages;

          o    Termination of a supply or services agreement with a major
               supplier or customer or a significant change in supplier terms or
               conditions of sale;

          o    the continuation or worsening of the severe downturn in economic
               conditions (particularly purchases of technology products) and
               failure to adjust costs in a timely fashion in response to a
               sudden decrease in demand;

          o    losses resulting from significant credit exposure to reseller
               customers and negative trends in their businesses;

          o    reductions in credit ratings and/or unavailability of adequate
               capital;

          o    failure to attract new sources of business from expansion of
               products or services or entry into new markets;

                                       14

<PAGE>


          o    inability to manage future adverse industry trends;

          o    future periodic assessments required by current or new accounting
               standards resulting in additional charges;

          o    the loss of a distribution agreement with a major supplier or the
               loss of a major supplier, such as Proxim Corporation, could have
               a material adverse impact on the business of Winncom.

We have instituted in the past and continue to institute changes in our
strategies, operations and processes to address these risk factors and to
mitigate their impact on our results of operations and financial condition.
However, no assurances can be given that we will be successful in these efforts.

Available Information.
----------------------
We make available free of charge on our website at www.arcwireless.net, our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K (including exhibits and supplementary schedules) and amendments to
those reports, filed or furnished under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as soon as reasonably practicable after these reports are
electronically filed with, or furnished to, the Securities Exchange Commission.

Item 2. Properties
------------------

Our principal offices are located in Wheat Ridge, Colorado, where we lease
approximately 50,000 square feet of office and warehouse space and where we have
our corporate offices and where we manufacture antennas. This lease commenced on
July 1, 2003 and expires on June 30, 2010.

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.

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

The Company and its subsidiaries are involved in various legal proceedings of a
nature considered normal in the course of its operations, principally accounts
receivable collections. While it is not feasible to predict or determine the
final outcome of these proceedings, management has reserved as an allowance for
doubtful accounts for that portion of the receivable it estimates will be
uncollectible. No litigation exists at December 31, 2004 or at the date of this
report that management believes will have a material impact on the financial
position or operations of the Company.

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

     The Company held its annual meeting of shareholders on November 9, 2004 and
143,624,165 shares were represented at the meeting. The following are the
results of the voting on matters submitted to the shareholders, all of which
were approved:

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

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

           Sigmund A. Balaban              142,382,378              1,241,787
           Donald A. Huebner               142,155,876              1,468,289
           Randall P. Marx                 142,459,811              1,164,354
           Gregory Raskin                  142,511,031              1,113,134

                                       15

<PAGE>


     (2)  Proposal to ratify the selection of HEIN + Associates, LLP as the
          Company's independent registered public accounting firm.

          Number of Shares:

          142,453,173 (For)         514,985 (Against)          656,007 (Abstain)

     (3)  Proposal recommended by the Board Of Directors to amend our 1997 Stock
          Option and Compensation Plan to increase from 5,000,000 to 10,000,000
          the number of shares of common stock issuable pursuant to options
          granted under our 1997 Stock Option and Compensation Plan;

          Number of Shares:

          71,567,004(For)           15,222,599 (Against)       392,399 (Abstain)
          56,440,223(Not Voting)

     (4)  Proposed recommendation by the Board Of Directors to authorize the
          Board Of Directors to determine whether to effect a reverse stock
          split of our outstanding Common Stock at the time and at the ratio
          between 1 for 10 and 1 for 50 that the Board of Directors deems
          appropriate.

          Number of Shares:

          128,357,141 (For)         10,807,667 (Against)     4,459,357 (Abstain)

                                     PART II

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

Our common stock is traded in the over-the-counter market, and prices for our
shares are quoted on the OTC Bulletin Board under the trading symbol "ARCS".
Because trading in our shares is so limited, prices can be 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. These over-the-counter quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessary
represent actual transactions.

                                       16
<PAGE>


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

                                         Sales Price
                                         -----------
Quarter Ended                     High                 Low
-------------                     ----                 ---
March 31, 2003                    $.12                $.08
June 30, 2003                      .16                 .09
September 30, 2003                 .26                 .10
December 31, 2003                  .24                 .12
March 31, 2004                     .22                 .13
June 30, 2004                      .17                 .09
September 30, 2004                 .16                 .10
December 31, 2004                  .21                 .12

On March 1, 2005, the closing sales price for our common stock was $0.147 and
the approximate number of our shareholders of record was 411. 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
---------------------------------------

For the year ended December 31, 2004, we recorded the issuance of 13,865 shares
of common stock to directors for outstanding obligations for directors' fees in
the amount of $2,000.

For the year ended Dececmber 31, 2004, the Company granted a total of 1,250,000
options, 1,000,000 to officers and 250,000 to outside directors.

Equity Compensation Plan Information.
-------------------------------------

Securities authorized for issuance under our equity compensation plans as of
December 31, 2004 are as follows:
<TABLE>
<CAPTION>

                                            Equity Compensation Plan Table

-------------------------------------- ------------------------- -------------------------- -------------------------
                                       Number of securities to       Weighted average         Number of securities
                                       be issued upon exercise       exercise price of      remaining available for
                                       of outstanding options,     outstanding options,         future issuance
                                         warrants and rights        warrants and rights
-------------------------------------- ------------------------- -------------------------- -------------------------
                                                 (a)                         (b)                      (c)
-------------------------------------- ------------------------- -------------------------- -------------------------
<S>                                          <C>                          <C>                       <C>
Equity compensation plans approved
by security holders                                   2,375,000                       $.15                 6,459,000
-------------------------------------- ------------------------- -------------------------- -------------------------
Equity compensation plans not
approved by security holders                                  0                          -                         -
-------------------------------------- ------------------------- -------------------------- -------------------------
Total                                                 2,375,000                       $.15                 6,459,000
-------------------------------------- ------------------------- -------------------------- -------------------------

                                       17
<PAGE>


ITEM 6.    Selected Consolidated Financial Data
------------------------------------------------

The following table sets forth selected consolidated financial data for each of
the Company's last five fiscal years. The results of operations for any period
are not necessarily indicative of the results to be expected for any future
period.

                                               Selected Annual Consolidated Data

                                                              For the Years Ended December 31,
                                     --------------------------------------------------------------------------------------
                                          2004             2003               2002               2001              2000
                                          ----             ----               ----               ----              ----

Revenues                             $ 37,365,000      $ 30,596,000       $ 32,275,000      $ 30,940,000       $ 18,480,000
Gross Profit                            6,784,000         4,984,000          6,082,000         6,054,000          3,025,000
Income (loss) from operations             594,000          (473,000)           261,000        (2,611,000)        (1,905,000)
Net income (loss)                    $    688,000      $   (285,000)      $    307,000      $ (2,801,000)      $ (1,841,000)
Earnings (loss) per share:
Basic and diluted                    $       .004      $      (.002)      $       .002      $      (.019)      $      (.015)

                                     ----------------------------------------------------------------------------------------
                                           2004              2003               2002               2001              2000
                                           ----              ----               ----               ----              ----

Cash and cash equivalents             $   321,000        $   227,000        $   265,000        $   345,000        $ 1,078,000
Working capital                         7,289,000          7,049,000          3,502,000          5,589,000          4,039,000
Total Assets                           22,493,000         22,740,000         23,455,000         24,001,000         25,689,000
Total Liabilities                       7,031,000          7,968,000          8,451,000          9,354,000          8,234,000
Stockholders' equity                  $15,462,000        $14,772,000        $15,004,000        $14,647,000        $17,455,000

The following table sets forth selected unaudited consolidated financial data for each of the Company's last eight fiscal quarters:

                                                                            2004
                                             December 31           September 30           June 30              March 31
                                             -----------           ------------           -------              --------
Net sales                                    $ 10,685,000          $  9,495,000         $  9,952,000         $  7,233,000
Gross profit                                    1,781,000             1,878,000            1,768,000            1,357,000
Net income (loss)                            $    (53,000)         $    336,000         $    324,000         $     81,000
Net income (loss) per share                  $      (.001)         $       .002         $       .002         $       .001

                                                                            2003
                                             December 31           September 30           June 30              March 31
                                             -----------           ------------           -------              --------
Net sales                                    $ 8,676,000           $ 8,928,000          $ 6,877,000          $ 6,115,000
Gross profit                                   1,233,000             1,309,000            1,345,000            1,097,000
Net income (loss)                            $   (65,000)          $    60,000          $   109,000          $  (389,000)
Net income (loss) per share                  $     (.001)                 --            $      .001          $     (.002)
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations
--------------------------------------------------------------------------------

Financial Condition

At December 31, 2004 we had approximately $7.3 million in working capital, which
is a slight improvement over working capital at December 31, 2003 of $7.0
million. The increase in working capital from December 31, 2003 to December 31,
2004 is primarily due to reductions in bank debt of $377,000 and in trade
payables of approximately $1 million while at the same time decreasing inventory
by approximately $400,000, through improved inventory turns. Accrued expenses at
December 31, 2004 were $890,000 which was $472,000 higher than in 2003. The
increase in other accrued expenses in 2004 was due to customer deposits of
$200,000, employer 401(k) matching of $58,000 and accrued bonuses of $170,000,
of which approximately $120,000 was accrued in the fourth quarter of 2004.

                                       18

<PAGE>


We had total assets of $22.5 million as of December 31, 2004 as compared with
$22.7 million as of December 31, 2003. The $200,000 decrease is primarily due to
a reduction in inventory.

Liabilities decreased from $7.97 million at December 31, 2003 to $7.03 million
at December 31, 2004, or approximately $940,000 primarily due to decreases in
bank debt of approximately $377,000 and trade accounts payable of approximately
$1.047 million offset by an increase in other accrued expenses of approximately
$472,000.

We had net cash provided by operating activities of $706,000 for the year ended
December 31, 2004 as compared to net used in operating activities of $239,000
for the year ended December 31, 2003 and $149,000 for the year ended December
31, 2002. The net cash provided by operations in 2004 is primarily the result of
net income of $688,000. While inventory decreased in 2004, accounts payable and
other accrued expenses were also decreased by approximately the same amount. The
increase in the net cash used in operations in 2003 over 2002 is primarily the
result of a net loss of $285,000 for 2003 as compared to net income of $307,000
in 2002. For 2003, there was a net decrease in accounts receivable from 2002 to
2003. Most of this decrease however was offset by increases in inventory and
reductions in trade accounts payable. The net cash used in operating activities
in 2003 was funded through increases in bank debt. The negative cash flow for
2002 was financed by the use of existing cash and increases in borrowings under
the line of credit.

Management believes that current working capital, new and renewed bank lines of
credit, see Note 2 to the Consolidated Financial Statements, 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,
2005 and into the foreseeable future.

Off-Balance Sheet Arrangements
-------------------------------

We do not have any off-balance sheet arrangements.

Contractual Obligations
<TABLE>
<CAPTION>

----------------------------------- --------------- ---------------------------------------------------------------
                                                                        Payments Due By Period
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
                                                    Less than 1                                      More than 5
                                    Total           Year           1-3 Years        3-5 Years            Years
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
<S>                                     <C>            <C>              <C>
Lines of credit                         $3,118,000     $        -       $3,118,000              -                -
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
Long-term debt                          $  618,000        493,000          125,000              -                -
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
Capital lease obligations (1)           $  189,000         84,000           96,000          9,000                -
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
Operating leases                        $1,491,000        319,000          479,000        530,000          163,000
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
Purchase obligations (2)                $2,077,000      2,077,000                -              -                -
----------------------------------- --------------- -------------- ---------------- -------------- ----------------
</TABLE>

(1) Obligation includes future payments of both principal and interest.

(2) Purchase obligations include agreements to purchase goods or services that
are enforceable and legally binding and that specify all significant terms,
including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction.
Purchase obligations exclude agreements that are cancelable without penalty.

                                       19

<PAGE>


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

Fiscal Year Ended  December 31, 2004 Compared To Fiscal Year Ended  December 31,
2003
--------------------------------------------------------------------------------

Sales were $37.4 million and $30.6 million for the years ended December 31, 2004
and 2003, respectively. The $6.8 million increase in revenues for the year ended
December 31, 2004 compared with the year ended December 31, 2003 is primarily
due to a $5.9 million increase in Winncom's revenues, a $500,000 increase in the
Wireless Communications Solutions Division's revenues, and a $400,000 increase
in Starworks' revenues.

Gross profit margins were 18.2% and 16.3% for the year ended December 31, 2004
and December 31, 2003, respectively or an 11% increase. The higher gross margin
for the year ended December 31, 2004 compared with the year ended December 31,
2003 is primarily the result of higher margins from the Wireless Communications
Solutions Division whose margins increased from 35.6% to 43.5% as a result of
product mix even though the percentage of revenues from the Wireless
Communications Solutions Division compared to total revenues declined. For the
year ended December 31, 2004, the Wireless Communications Solutions Division
sales accounted for 17.2% of revenues as compared with the year ended December
31, 2003, in which the Wireless Communications Solutions Division sales
accounted for 19.3% of revenues.

Selling, general and administrative expenses (SG&A) were approximately $6.190
million for the year ended December 31, 2004 compared to $5.457 million for the
year ended December 31, 2003, an increase of approximately $733,000. Despite the
increase in SG&A, SG&A as a percent of revenue decreased from 17.8% for the year
ended December 31, 2003 to 16.6% for the year ended December 31, 2004. Salaries
and wages remain the largest component of SG&A, constituting 55% of the total
SG&A for the year ended December 31, 2004 and 51% for the year ended December
31, 2003. The total dollar amount of salaries and wages increased from $2.8
million for the year ended December 31, 2003 to $3.4 million for the year ended
December 31, 2004. Nearly half the increase in salaries and wages between 2003
and 2004 is due to increases in sales commissions as a result of the 22%
increase in revenues.

Net interest expense was $300,000 for the year ended December 31, 2004 compared
with $190,000 for the year ended December 31, 2003. The primary reason for the
increase in interest expense was due to accounts receivable factoring by the
Wireless Communications Solutions Division, which commenced in December 2003.
Interest expense from trade accounts receivable factoring was $113,000 in 2004
as compared to $13,000 in 2003. While the average balance outstanding on the
line of credit was lower in 2004 as compared to 2003, the lower balance was
offset by slightly higher interest rates. The average interest rate on the line
of credit was 4.8% for the year ended December 31, 2004 as compared with 4.625%
for the year ended December 31, 2003.

Other income in 2004 is primarily vendor early payment discounts that Winncom
has taken advantage of as a result of it's improved cash flow. Those early
payment discounts amounted to $373,000 in 2004 as compared to $63,000 in 2003.
Also included in other income for the year ended December 31, 2003 is a gain
from debt settlements of $148,000 and a refund of prior years' franchise taxes
of $220,000, none of which occurred in 2004.

The Company had net income of $688,000 for the year ended December 31, 2004 as
compared with a net loss of $285,000 for the year ended December 31, 2003. A 22
% increase in revenues as well as an 11% increase in gross margin, are the two
main factors that contributed to profitability in 2004. Also contributing to
profitability in 2004 was the fact that because of improved cash flow, Winncom
could take advantage of early vendor payment discounts which were approximately
$300,000 higher in 2004 as compared to 2003.

                                       20
<PAGE>


Fiscal Year Ended  December 31, 2003 Compared To Fiscal Year Ended  December 31,
2002
--------------------------------------------------------------------------------

Sales were $30.6 million and $32.6 million for the years ended December 31, 2003
and 2002, respectively. The decrease in revenues for the year ended December 31,
2003 compared with the year ended December 31, 2002 is attributable to a
decrease in the Wireless Communications Solutions Division's revenues from base
station antennas from $3.9 million in 2002 to $1.8 million in 2003, and a
decrease in Starworks' revenues from $420,000 for the year ended December 31,
2002 to $21,000 for the year ended December 31, 2003. The overall decline in
revenues is primarily due to the continued unpredictable demand for base station
antennas and reduced component selling prices at Winncom.

Gross profit margins were 16.3% and 18.7% for the year ended December 31, 2003
and December 31, 2002, respectively. The lower gross margin for the year ended
December 31, 2003 compared with the year ended December 31, 2002 is primarily
the result of the larger percentage decrease in revenues from the Wireless
Communications Solutions Division, whose products have a higher margin than the
products of Winncom or Starworks. For the year ended December 31, 2003, the
Wireless Communications Solutions Division sales accounted for 18.3% of revenues
as compared with the year ended December 31, 2002, in which the Wireless
Communications Solutions Division sales accounted for 21.7% of revenues. In
August 2001, when the Company purchased certain commercial assets of the
wireless communications products line of BATC, which consisted of raw materials
and finished goods inventory among other assets, these assets were purchased at
a substantial discount from their fair market or replacement value. During the
year ended December 31, 2002, the Wireless Communications Solutions Division
benefited from the sale of portions of the inventory purchased from BATC
significantly more than in the year ended December 31, 2003, and this benefit is
reflected in higher gross margins. Depending on the product mix, the Company may
realize additional benefit from the below-market cost of the BATC inventory in
the future, but the benefit will diminish as the inventory is depleted and
replaced with inventory purchased at current market prices.

Selling, general and administrative expenses (SG&A) were approximately $5.4
million for the year ended December 31, 2003 and approximately $5.8 for the year
ended December 31, 2002 resulting in a decrease of approximately $400,000 from
2002 to 2003, despite incurring approximately $55,000 in costs moving to our new
manufacturing facility in Wheat Ridge, Colorado and an employer matching
contribution of common stock to the 401(K) Plan valued at $52,000. The decrease
in SG&A in 2003 is primarily due to a decrease in bad debt expense of $335,000
and the cessation of operations of Starworks in Atlanta, Georgia in July 2002
that has reduced SG&A expenses by approximately $120,000. SG&A as a percent of
revenue decreased slightly from 17.9% for the year ended December 31, 2002 to
17.8% for the year ended December 31, 2003. Salaries and wages remain the
largest component of SG&A constituting 50.6% of the total SG&A for the year
ended December 31, 2003 and 48.4% for the year ended December 31, 2002. The
total dollar amount of salaries and wages was relatively the same comparing the
year ended December 31, 2003 with the year ended December 31, 2002.

Net interest expense was $190,000 for the year ended December 31, 2003 compared
with $207,000 for the year ended December 31, 2002. The average balance
outstanding on the line of credit was $3.8 million for both the year ended
December 31, 2003 and 2002, but the interest rate was 4.625% for the year ended
December 31, 2003 as compared with 5% for the year ended December 31, 2002.

Included in other income for the year ended December 31, 2003 is a gain from
debt settlements of $148,000 and a refund of prior years franchise taxes of
$220,000 and included in other income for the year ended December 31, 2002 is a
gain from debt settlements of $226,000.

The Company had a net loss of $285,000 for the year ended December 31, 2003 as
compared with net income of $307,000 for the year ended December 31, 2002.
Despite the fact that SG&A decreased by $364,000 comparing 2003 to 2002, the net
loss in 2003 compared to net income in 2002 is primarily due to a 6% decrease in
sales comparing the year ended December 31, 2003 with the year ended December
31, 2002, a decrease in gross margin from 18.7% to 16.3% comparing the year

                                       21

<PAGE>


ended December 31, 2003 with the year ended December 31, 2002 and the gain from
debt settlements of $226,000 and a refund of prior years franchise taxes of
$220,000 recorded for the year ended December 31, 2002 as compared with a gain
from debt settlements for the year ended December 31, 2003 of $148,000.

Critical Accounting Policies and Estimates

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

Allowance for doubtful accounts: We continuously monitor payments from our
customers and maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. When we
evaluate the adequacy of our allowances for doubtful accounts, we take into
account various factors including our accounts receivable aging, customer
credit-worthiness, historical bad debts, and geographic risk. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. As of
December 31, 2004, our net accounts receivable balance was $4,145,000.

Inventory: Inventory is stated at the lower of cost or net realizable value.
Cost is based on a first-in, first-out basis. We review net realizable value of
inventory in detail on an on-going basis, with consideration given to
deterioration, obsolescence, and other factors. If actual market conditions are
less favorable than those projected by management, and our estimates prove to be
inaccurate, additional write-downs or adjustments to recognize additional cost
of sales may be required. As of December 31, 2004, our inventory balance was
$5,624,000.

Goodwill and other long-lived assets: We review the value of our long-lived
assets, including goodwill, for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the assets may not
be fully recoverable or that the useful lives of these assets are no longer
appropriate. As of December 31, 2004, we had $10,937,000 of goodwill and
intangible assets remaining on the balance sheet, the value of which we believe
is realizable based on market capitalization and estimated future cash flows.

On an on-going basis, management evaluates its estimates and judgments,
including those related to allowance for doubtful accounts, inventory valuations
and recoverability of intangible assets, including goodwill. Management bases
its estimates and judgments on historical experience and on various other
factors that are also believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources.
However, future events are subject to change and the best estimates and
assumptions routinely require adjustment. Our major operating assets are trade
and vendor accounts receivable, inventory, property and equipment and intangible
assets. Our reserve for doubtful accounts of $502,000 should be adequate for any
exposure to loss in our accounts receivable as of December 31, 2004. We have
also established reserves for slow moving and obsolete inventories and believe
the current reserve of $712,000 is adequate. We depreciate our property and
equipment over their estimated useful lives and we have not identified any items
that are impaired.

                                       22
<PAGE>


Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based Payment," which
is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No.
123(R) is  effective  for the Company for  interim or annual  periods  beginning
after June 15, 2005,  supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees, and amends SFAS No. 95, Statement of Cash Flows.

SFAS No. 123(R) requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income statement based on
their fair values. Pro-forma disclosure is no longer an alternative. The new
standard will be effective for the company, beginning July 1, 2005. The company
has not yet completed their evaluation but expects the adoption to have an
effect on the financial statements similar to the pro-forma effects reported in
Footnote 1 to the Consolidated Financial Statements under the caption "Stock
Based Compensation".

In November 2004, the FASB issued SFAS 151, Inventory Costs, which revised ARB
43, relating to inventory costs. This revision is to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material (spoilage). This Statement requires that these items be recognized as a
current period charge regardless of whether they meet the criterion specified in
ARB 43. In addition, this Statement requires the allocation of fixed production
overheads to the costs of conversion be based on normal capacity of the
production facilities. SFAS 151 is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company does not believe the
adoption of SFAS 151 will have a material impact on the Company's financial
statements.

The FASB issued SFAS 153, Exchanges of Nonmonetary Assets, which changes the
guidance in APB Opinion 29, Accounting for Nonmonetary Transactions. This
Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
153 is effective during fiscal years beginning after June 15, 2005. The Company
does not believe the adoption of SFAS 153 will have a material impact on the
Company's financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

We have not used derivative financial instruments.

We are exposed to market risk through interest rates related to our note payable
to the bank which has a variable interest rate equal to KeyBank's existing bank
prime rate (5.0% as of December 31, 2004) plus one-half percent. The prime
interest rate increased from 4.0% to 5.0% in 2004 and increased to 5.25% in
January 2005. An increase in the bank's prime interest rates on the notes
payable by 1% would increase our yearly interest expense by approximately
$37,000, assuming borrowed amounts remain outstanding at current levels. Our
management believes that fluctuation in interest rates in the near term will not
materially affect our consolidated operating results, financial position or cash
flow.

Item 8. Financial Statements and Supplementary Data
---------------------------------------------------

Information regarding Financial Statements and Supplementary Data appears on
pages F-1 through F-21 under the caption "Consolidated Balance Sheets,"
"Consolidated Statements of Operations," "Consolidated Statements of
Shareholders' Equity," "Consolidated Statements
of Cash Flows" and "Notes to Consolidated Financial Statements."

                                       23

<PAGE>


Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure
--------------------------------------------------------------------------------

None

Item 9A. Controls and Procedures
--------------------------------

(a) Evaluation of disclosure controls and procedures

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

(b) Changes in internal controls

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

Item 9B Other Information
-------------------------

     None

                                    PART III

Item 10. Directors and Executive Officersof the Registrant
----------------------------------------------------------

Directors and Executive Officers.
---------------------------------

Our directors and executive officers are as follows:
----------------------------------------------------
<TABLE>
<CAPTION>

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

<S>                          <C>                                                              <C>
     Randall P. Marx         52      Chief Executive Officer, Secretary, Director             1990

     Donald A. Huebner       59      Director                                                 1998

     Sigmund A. Balaban      63      Director                                                 1994

     Gregory E. Raskin       51      President, Director                                      2001

     Monty R. Lamirato       49      Chief Financial Officer, Treasurer                        -

     Steve C. Olson          48      Chief Technology Officer                                  -

</TABLE>


Randall P. Marx. Mr. 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

                                       24

<PAGE>


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 Taipei.

Donald A. Huebner. Mr. Huebner was our Chief Scientist from July 2000 to January
2002 and has been a consulting engineer from January 2002 to the present. He has
served as a Director of the Company since 1998. Mr. Huebner served as Department
Staff Engineer with Lockheed Martin Astronautics in Denver, Colorado from 1986
to July 2000. In this capacity, Dr. Huebner served as technical consultant for
phased array and spacecraft antennas as well as other areas concerning antennas
and communications. Prior to joining Lockheed Martin, Dr. Huebner served in
various capacities with Ball Communication Systems and Hughes Aircraft Company.
Dr. Huebner also served as a part-time faculty member in the electrical
engineering departments at the University of Colorado at Boulder, California
State University at Northridge, and University of California, Los Angeles
("UCLA"). Dr. Huebner also has 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.

Sigmund A. Balaban. Mr. 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.

Gregory E. Raskin. Mr. Raskin, President of the Company and Winncom. He 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.

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

Steven C. Olson. Mr. Olson serves as our Chief Technology Officer. Prior to
joining ARC Wireless in August 2001, Mr. Olson was employed at Ball Aerospace
for 14 years, including the last five years as Director of Engineering for
Ball's Wireless Communications Solutions 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.

                                       25

<PAGE>


Audit Committee of the Board of Directors

The audit committee consists of one independent director, Mr. Sigmund A.
Balaban, who is chairman of the committee, and M. Randall P. Marx, our CEO and
Mr. Gregory E. Raskin, our President. The responsibilities of the audit
committee include overseeing our financial reporting process, reporting the
results of its activities to the board, retaining and ensuring the independence
of our auditors, approving services to be provided by our auditors, reviewing
our periodic filings with the independent auditors prior to filing, and
reviewing and responding to any matters raised by the independent auditors in
their management letter.

Audit Committee Financial Expert

The board of directors has determined that at least one member of the audit
committee, Mr. Sigmund A. Balaban, is an audit committee financial expert.

Audit Committee Charter

Our Board of Directors has adopted a written charter for the Audit Committee.
The Audit Committee will review and assess the adequacy of the Audit Committee
charter annually.

Compensation Committee

The Board of Directors currently has a Compensation Committee, consisting of
Randall P. Marx, Gregory E. Raskin and Sigmund A. Balaban, which did not meet
during the fiscal year ended December 31, 2003.

Nominating Committee

The Company does not currently have a standing nominating committee of the Board
of Directors because it believes that the nominating functions should be
relegated to the full Board. There have been no material changes to the
procedures by which security holders may recommend nominees to our Board of
Directors.

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,
2003, 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.

Code of Ethics
--------------

The Company endeavors to adhere to provide assurances to outside investors and
interested parties that the Company's officers, directors and principal
financial officer adhere to a reasonably responsible code of ethics and as such,
we have adopted a code of ethics that applies to our executive officers,
including Mr. Marx, our Chief Executive Officer, Mr. Raskin, our President, Mr.
Lamirato, our Chief Financial Officer, and Mr. Olson, our Chief Technology
Officer.

                                       26

<PAGE>


Item 11. Executive Compensation
-------------------------------

Summary Compensation Table.
---------------------------

The following table sets forth in summary form the compensation of our 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, 2004 (the "Named Executive Officers").
<TABLE>
<CAPTION>

                                                                                         Long Term Compensation
                                                                            --------------------------------------------------
                                           Annual Compensation                      Awards                   Payouts
                               --------------------------------------------         ------                   -------
                                                                            Restricted  Securities
                                                             Other Annual   Stock       Underlying     LTIP      All Other
                               Fiscal    Salary     Bonus    Compensation     Awards      Options    Payouts    Compensation
Name and Principal Position     Year    ($) (1)    ($) (2)      ($) (3)        ($)          (#)      ($) (4)        ($) (5)
------------------------------ -------- --------- ---------- -------------- ----------- ------------ --------- ---------------

<S>                            <C>       <C>         <C>                 <C>         <C>          <C>       <C>             <C>
Randall P. Marx                2004      195,000     90,000              0           0            0         0               0
Chief Executive Officer,
Secretary and Director         2003      195,000          0              0           0            0         0               0

                               2002      195,000     70,000              0           0    1,000,000         0               0

Gregory E. Raskin              2004      321,000     90,000              0           0            0         0               0
President, and Director
                               2003      300,000     25,000              0           0            0         0               0

                               2002      277,000     50,000              0           0            0         0               0

Monty R. Lamirato              2004     135,000           0                                 500,000         0               0
Chief Financial Officer and
Treasurer                      2003     125,000      20,000              0           0            0         0               0

                               2002     118,000      27,000              0           0      175,000         0               0

Steve C. Olson                 2004     162,000      37,000              0           0      500,000         0               0
Chief Technology Officer
                               2003     155,000      16,000              0           0            0         0               0

                               2002     155,000      19,000              0           0            0         0               0

Burton Calloway                2003     107,000           0              0           0            0         0               0
Executive Vice President(6)
                               2002     115,000      19,000              0           0      200,000         0               0

(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.

                                       27

<PAGE>


(6)  Mr. Calloway was Executive Vice President of our Wireless Communications
     Solutions Division until July 7, 2003 when his employment terminated.
     Salary for 2003 includes severance paid through November 2003.

Option Grants in Last Fiscal Year
---------------------------------

The following table provides certain summary information concerning individual
grants of stock options made to Named Executive Officers during the fiscal year
ended December 31, 2004 under the Company's incentive plans. During fiscal year
2004, the Company granted stock options totaling 1,000,000 under the Company's
Incentive Plans to Named Executive Officers.

                        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 Option Term
         Name            Granted (#)    Fiscal Year   ($/Share)        Date             5%             10%
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Randall P. Marx                     0              -         N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Gregory E. Raskin                   0              -         N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Monty R. Lamirato             500,000            40%        $.12        7/1/2007        $69,000       $80,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Steve C. Olson                500,000            40%        $.12       8/22/2007        $69,000       $80,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Burton Calloway (1)                 0              -         N/A             N/A            N/A           N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------

(1)  Mr. Calloway was Executive Vice President of our Wireless Communications
     Solutions Division until July 7, 2003 when his employment terminated.


Aggregated Option Exercises for Last Fiscal Year and Fiscal Year-End
Option Values
--------------------------------------------------------------------------------

The following table provides certain summary information concerning stock option
exercises during the fiscal year ended December 31, 2004 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of December 31, 2004.

                           Aggregated Option Exercises
                     For Fiscal Year Ended December 31, 2004
                         And Year-End Option Values (1)

---------------------- -------------- --------------------- --------------------------- ----------------------------
                                                               Number of Securities        Value of Unexercised
                                                              Underlying Unexercised              In-the-
                                                             Options at Fiscal Year-         Money Options at
                                                                   End (#) (4)            Fiscal Year-End ($) (5)
---------------------- -------------- --------------------- ------------ -------------- ------------ ---------------
                       Shares
                       Acquired on
        Name           Exercise (2)   Value Realized ($)    Exercisable  Unexercisable  Exercisable  Unexercisable
        ----           ------------   -------------------   -----------  -------------  -----------  -------------
                                      (3)
---------------------- -------------- --------------------- ------------ -------------- ------------ ---------------

Randall P. Marx                    0                     0    1,000,000                           0               0
---------------------- -------------- --------------------- ------------ -------------- ------------ ---------------

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

Monty R. Lamirato                  0                     0      675,000              0      $10,000               0
---------------------- -------------- --------------------- ------------ -------------- ------------ ---------------

Steve C. Olson                     0                     0      500,000              0      $10,000               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, 2004.

                                       28

<PAGE>


(3)  With respect to options exercised during the year ended December 31, 2004,
     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, 2004,
     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, 2004, 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, 2004. As
     required, the price used to calculate these figures was the closing sale
     price of the common stock at year's end, which was $0.14 per share on
     December 31, 2004.

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

Other than our 1997 Stock Option and Compensation Plan and 401(k) plan, we have
no employee retirement plan, long-term incentive plan or pension 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. On November 9, 2004, the
shareholders approved to amend the 1997 Stock Option and Compensation Plan to
allow for an aggregate of 10,000,000 options to be granted under "the Plan".

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

The Company granted a total of 250,000 options to Outside Directors under the
Plan during 2004 and 2002, at an exercise price of $.16 and $.13 per share,
respectively. No options were granted during 2003.

                                       29

<PAGE>


As of December 31, 2004, there were 200,000 exercisable options outstanding
related to the grants to Outside Directors. Dr. Donald Huebner's employment
terminated on January 31, 2002 but he continues as a Director of the Company, as
such all of his options are disclosed as Outside Directors options.
In addition to Outside Directors grants, the Board of Directors may grant
incentive options to our key employees pursuant to the Plan. There were no
options granted in 2003 but in 2004 and 2002, the Board granted a total of
2,175,000 options under the Plan to employees with exercise prices ranging from
$.12 to $.18. As of December 31, 2004, there were 2,175,000 exercisable options
outstanding related to grants to employees, all of which were granted under the
Plan.

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 200,000, 100,000 and 175,000 stock options,
respectively, during fiscal years ended December 31, 2004, 2003 and 2002.
Outside Directors earned $2,000, $1,000 and $2,250, respectively in meeting
attendance fees in 2004, 2003 and 2002, respectively and were paid with the
issuance of 13,865 shares of restricted common stock in 2004, the issuance of
9,280 shares of restricted common stock in 2003 and 26,841 shares of restricted
common stock in 2002.

Other Arrangements. During the year ended December 31, 2001, no compensation was
paid to our Outside Directors other than pursuant to the standard compensation
arrangements described in the previous section. During the years ended December
31, 2004, 2003 and 2002 Mr. Sigmund Balaban, one of our outside directors was
paid $30,000, $30,000 and $15,000, respectively, in connection with his position
as Chairman of the Audit Committee.

Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
--------------------------------------------------------------------------------

We entered into a new employment agreement with Mr. Marx effective January 2,
2002, which terminated on January 2, 2004. In accordance with his employment
agreement, Mr. Marx received an annual base salary of $195,000 in 2002 and 2003
and a bonus of $70,000 for 2002. He did not earn a bonus for 2003. We entered
into a new three year employment agreement with Mr. Marx effective January 2,
2004. In accordance with his employment agreement, Mr. Marx is to receive an
annual base salary of $195,000 in 2004, $235,000 in 2005 and $245,000 in 2006.
In addition, Mr. Marx can receive bonuses up to $90,000, $100,000 and $150,000
in 2004, 2005 and 2006, respectively if certain net profit goals are achieved.
Mr. Marx earned a bonus for $90,000 for 2004.

We entered into a written employment agreement with Gregory E. Raskin, President
of our Winncom subsidiary and beneficial owner of 2.7 percent of our stock, or
4,069,162 shares, effective May 24, 2000. The employment agreement was for the
period May 24, 2000 through May 31, 2002, at an annual base salary of $250,000.
Mr. Raskin also was 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, no bonus was earned in 2001. Mr. Raskin also received
options to purchase 250,000 shares of our common stock at a price of $0.89 per
share from December 19, 2000 through May 24, 2002. We entered into a new
employment agreement with Mr. Raskin effective as of June 1, 2002 with a term of
two and one-half years. Pursuant to the new agreement, Mr. Raskin is to receive
an annual base salary of $300,000 per year. Mr. Raskin was eligible to receive
bonuses for each of the years ending December 31, 2002, 2003 and 2004 of between
$50,000 and $300,000 depending upon Winncom achieving certain predetermined
revenues and EBIDTA goals for those periods. Mr. Raskin earned a bonus of
$25,000 and $50,000 for 2003 and 2002, respectively. In September 2004, we
entered into a new two and one-half year employment agreement with Mr. Raskin
effective October 1, 2004. Pursuant to the new agreement, Mr. Raskin is to

                                       30

<PAGE>


receive an annual base salary of $385,000 per year. Mr. Raskin was eligible to
receive bonus for the year ending December 31, 2004 between $25,000 and $90,000
depending upon Winncom achieving certain predetermined net income goals and MR.
Raskin will earn a bonus of $10% of net income for the years ended December 31,
2005 and 2006. Mr. Raskin earned a bonus of $90,000, $25,000 and $50,000 for
2004, 2003 and 2002, respectively.

We entered into a written employment agreement with Burton J Calloway, Executive
Vice President of the Wireless Communications Solutions Division, effective May
30, 2000. The employment agreement was 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 was eligible to earn
bonuses of 3% of net profits in excess of $180,000 of the Wireless
Communications Solutions Division over the term of the agreement. A nominal
bonus was earned for 2001, and a bonus of $19,000 was earned in 2002. Mr.
Calloway did not earn a bonus in 2003. Mr. Calloway also received options to
purchase 150,000 shares of our common stock at a price of $1.01 on May 30, 2000
and was granted options to purchase 200,000 shares, at exercise prices ranging
from $.145 to $1.01 on May 30, 2001 and May 30, 2002. Mr. Calloway's employment
with us terminated on July 7, 2003.

We entered into a written employment agreement with Monty R. Lamirato, our Chief
Financial Officer and Treasurer, effective June 22, 2001. The employment
agreement is for the period June 22, 2001 through June 30, 2004, at an annual
base salary of $111,000, adjusted to $125,000 on July 1, 2002. Mr. Lamirato also
is eligible to earn bonuses of $35,000 or 3% of EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), whichever is greater, over the
term of the agreement. Mr. Lamirato earned a bonus of $20,000 for 2003, and
$27,000 for 2002. Mr. Lamirato also received options to purchase 350,000 shares
of our common stock at prices ranging from $.14 to $0.33 per share exercisable
from June 22, 2001 through June 30, 2004. We entered into a new written
employment agreement with Monty R. Lamirato, our Chief Financial Officer and
Treasurer, effective July 1, 2004. The employment agreement is for the period
July 1, 2004 through June 30, 2005, at an annual base salary of $145,000. In
addition, Mr. Lamirato also received options to purchase 500,000 shares of our
common stock at $0.12 per share exercisable from July 1, 2004 to July 1, 2007.

We entered into a written employment agreement with Steven C. Olson, our Chief
Technology Officer, effective August 13, 2001. The employment agreement is for
the period August 13, 2001 through August 13, 2004 at an annual base salary of
$155,000. Mr. Olson also is eligible to earn bonuses, upon achieving certain
gross margin objectives, over the term of the agreement. Mr. Olson earned a
bonus of $16,000, in 2003 and $19,000 in 2002. Mr. Olson also received options
to purchase 500,000 shares of our common stock at a price of $0.27 per share
from August 13, 2001 through August 13, 2004. We entered into a new written
employment agreement with Steven C. Olson, our Chief Technology Officer,
effective August 22, 2004. The employment agreement is for the period August 22,
2004 through August 22, 2007 at an annual base salary of $175,000. Mr. Olson
also is eligible to earn bonuses, upon achieving certain gross margin
objectives, over the term of the agreement. Mr. Olson earned a bonus of $37,000
in 2004. Mr. Olson also received options to purchase 500,000 shares of our
common stock at a price of $0.12 per share from August 22, 2004 through August
22, 2007.

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 1997
Stock Option and Compensation Plan provides for vesting of all outstanding
options in the event of the occurrence of a change-in-control.

                                       31

<PAGE>


Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

The Compensation Committee is composed of our Chief Executive Officer/Secretary,
our President and one non-employee director.

On September 25, 2001 the Company and Randall Marx signed a 6% promissory note
pursuant to which Mr. Marx borrowed $35,000 from the Company. This note was
repaid in full on May 31, 2003.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and
          Related Stockholder Matters

The following table summarizes certain information as of March 1, 2005 with
respect to the beneficial ownership of our common stock by each director, by all
executive officers and directors as a group, and by each other person known by
us to be the beneficial owner of more than five percent of our common stock:
<TABLE>
<CAPTION>

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

<S>                                                 <C>                              <C>
Randall P. Marx                                     9,454,195(2)                     6.1%
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Sigmund A. Balaban                                  1,566,892(3)                      1%
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Donald A. Huebner                                     163,224(4)                       *
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Gregory E. Raskin                                   4,069,162(5)                     2.6%
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Steve Olson                                           561,422(8)                       *
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Monty R. Lamirato                                     719,210(6)                       *
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

Michael Maness                                         219,405(7)                      *
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO  80033

                                       32

<PAGE>


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

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

Hudson River Investments, Inc.                      12,373,225                       8.0%
Nemazee Capital Corp.
720 Fifth Avenue
New York, NY 10019

Evansville Limited                                   9,415,410                       6.1%
c/o Quadrant Management Inc.
720 Fifth Avenue, 9th Floor
New York, NY  10019

All officers and directors                          16,753,510(2)(3)(4)(5)(6)       10.8%
as a group (seven persons)
</TABLE>

* Less than one percent.

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

(2)  Includes 8,312,665 shares directly held by Mr. Marx, 73,067 shares in his
     ARC Wireless 401(k) account, 40,000 shares held by his spouse's IRA and
     28,463 shares owned beneficially through a 50% ownership of an LLC.
     Includes options to purchase 1,000,000 shares at $.18 per share until
     January 2, 2007, granted under the 1997 Stock Option and Compensation Plan
     all of which are currently exercisable. This does not include shares owned
     and warrants owned by the Harold and Theora Marx Living Trust, of which Mr.
     Marx's parents are trustees, as Mr. Marx disclaims beneficial ownership of
     these shares. This also does not include 155,000 shares owned by Warren E.
     Spencer Living Trust, of which Mr. Marx's mother-in-law is trustee, as Mr.
     Marx disclaims beneficial ownership of these shares.

(3)  Includes 1,441,892 shares directly held by Mr. Balaban and Outside Director
     options granted under the 1997 Stock Option and Compensation Plan to
     purchase 125,000 shares at $0.16 per share until February 26, 2006, all of
     which are currently exercisable.

(4)  Includes 88,224 shares directly held by Dr. Huebner and Outside Director
     options granted under the 1997 Stock Option and Compensation Plan to
     purchase 75,000 shares at $0.16 per share until February 26, 2006, all of
     which are currently exercisable.

                                       33

<PAGE>


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

(6)  Consists of 44,210 shares in Mr. Lamirato's ARC Wireless 401(k) account and
     options to purchase 175,000 shares at $.14 per share until June 30, 2005
     and options to purchase 500,000 shares until July 1, 2007, all granted
     under the 1997 Stock Option and Compensation Plan all of which are
     currently exercisable.

(7)  Consists of 196,400 shares directly held by Mr. Maness and 23,005 shares in
     his ARC Wireless 401(k) account.

(8)  Consists of 61,422 shares in Mr. Olson's ARC Wireless 401(k) account and
     options to purchase 500,000 shares at $.16 per share until August 22, 2007,
     granted under the 1997 Stock Option and Compensation Plan and all of which
     are currently exercisable.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

Other than the employment agreements describe above under the subheading
"--Employment Contracts and Termination of Employment and Change-In-Control
Arrangements", there have been no transactions involving the Company and any
director, officer of 5% or greater shareholder, or any of their respective
family members, involving a dollar amount in excess of $60,000.

Item 14. Principal Accountant Fees and Services
-----------------------------------------------

The Audit Committee reviews and determines whether specific projects or
expenditures with our independent registered public accounting firm (auditors),
HEIN & ASSOCIATES LLP potentially affect their independence. The Audit
Committee's policy requires that all services the Company's independent
registered public accounting firm (auditor) may provide to the Company,
including audit services and permitted audit-related services, be pre-approved
in advance by the Audit Committee. In the event that an audit or non-audit
service requires approval prior to the next scheduled meeting of the Audit
Committee, the auditor must contact the Chairman of the Audit Committee to
obtain such approval. The approval will be reported to the Audit Committee at
its next scheduled meeting.

The following table sets forth the aggregate fees billed to us by HEIN &
ASSOCIATES LLP for the years ended December 31, 2004, 2003 and 2002:


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

Audit fees                       $ 99,000(1)    $ 90,000 (1)   $83,000 (1)
Audit-related fees                     --(2)          -- (2)        -- (2)
Tax fees                            9,000(3)      12,000 (3)    11,000 (3)
All other fees                         --                        2,000
                                 -------------------------------------
Total audit and non-audit fees   $108,000       $102,000       $96,000
                                 =====================================

(1)  Includes fees for professional services rendered for the audit of ARC's
     annual financial statements and review of ARC's annual report on Form 10-K
     for the year 2004, 2003 and 2002 and for reviews of the financial
     statements included in ARC's quarterly reports on Form 10-Q for the first
     three quarters of fiscal 2004, 2003 and 2002 and related SEC registration
     statements.

(2)  Includes fees billed for professional services rendered in fiscal 2004,
     2003 and 2002, in connection with acquisition planning and due diligence.

(3)  Includes fees billed for professional services rendered in fiscal 2004,
     2003 and 2002, in connection with tax compliance (including U.S. federal
     and state returns) and tax consulting.

                                       34

<PAGE>


Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a) The following documents are filed as a part of this report:

         (1) Financial Statements

         Report of Independent Registered Public Accounting Firm...........F-1

         Consolidated Balance Sheets at December 31, 2004 and 2003.........F-2

         Consolidated Statements of Operations for the Years Ended
                December 31, 2004, 2003 and 2002...........................F-3

         Consolidated Statements of Changes in Stockholders' Equity
                for the Years Ended December 31, 2004, 2003 and 2002.......F-4

         Consolidated Statements of Cash Flows for the Years Ended
                December 31, 2004, 2003 and 2002...........................F-5

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

         (2) Financial Statement Schedules

           Schedule II
           -----------

           Consolidated Valuation Accounts
<TABLE>
<CAPTION>

           -------------------------------------- ---------------- ----------------- ---------------- --------------
                                                    Balance,         Charges to
                                                   Beginning of       Cost and          Write-offs,        Balance,
                                                       Year           Expenses       Net of Recoveries   End of Year
           -------------------------------------- ---------------- ----------------- ---------------- --------------
           Allowance for Doubtful Accounts
           -------------------------------------- ---------------- ----------------- ---------------- -------------
           Years Ended December 31,
            -------------------------------------- ---------------- ----------------- ---------------- -------------
<S>        <C>                                          <C>                 <C>             <C>             <C>
           2004                                        $  257,000           308,000         (63,000)        $502,000
           -------------------------------------- ---------------- ----------------- ---------------- --------------
           2003                                        $  987,000           193,000        (923,000)        $257,000
           -------------------------------------- ---------------- ----------------- ---------------- --------------
           2002                                        $1,000,000           528,000        (541,000)        $987,000
           -------------------------------------- ---------------- ----------------- ---------------- --------------

                                       35
<PAGE>


     (3) Exhibits.
         ---------
                                  EXHIBIT INDEX

   Exhibit Number                                Description
   --------------                                -----------

   3.1a              Articles of Incorporation of Westcliff  Corporation,  now known as Antennas America,  Inc. (the
                     "Company"),  are  incorporated  herein by reference from the Company's  Form S-18  Registration
                     Statement dated December 1, 1987 (File No. 33-18854-D).
   3.1b              Articles of Amendment of the Company dated January 26, 1988 are incorporated herein by reference from the
                     Company's Post-Effective Amendment No. 3 to Form S-18 Registration Statement dated December 5, 1989
                     (File No. 33-18854-D).
   3.1c              Articles and Agreement of Merger between the Company and Antennas America, Inc., a Colorado corporation, dated
                     March 22, 1989, are incorporated herein by reference from the Company's Post-Effective Amendment No. 3 to
                     Form S-18 Registration Statement dated December 5, 1989 (File No. 33-18854-D)
   3.1d              Amended And Restated Articles Of Incorporation dated October 11, 2000 (5)
   3.2               Bylaws of the Company as amended and restated on March 25, 1998 (6)
   10.1              Employment  Agreement  dated as of October 1, 1998  between  the Company and Randall P. Marx is
                     incorporated by reference from the Company's Annual Report
                     on From 10-KSB for the year ended December 31, 1998 (File No. 000-18122)
   10.2              Promissory Note dated February 15, 1999 from the Company to Jasco Products Co., Inc. (2)
   10.3              Stock Option Agreement dated February 15, 1999 between the Company and Jasco Products Co., Inc. (2)
   10.4              Agreement between and among Winncom Technologies Inc.,  Winncom Technologies Corp. and the
                     Company dated May 24, 2000 (3)
   10.5              Employment  Agreement dated as of May 24, 2000 between Winncom Technologies Corp. and Gregory
                     E. Raskin (5)
   10.6              Agreement between and among  Starworks Technology, Inc., Starworks Wireless Inc. and the Company dated
                     September 29, 2000 (4)
   10.7              Employment Agreement dated as of June 22, 2001 between ARC Wireless Solutions, Inc. and Monty R. Lamirato (7)
   10.8              Employment  Agreement  dated as of August 13, 2001  between ARC  Wireless  Solutions,  Inc. and
                     Steven C. Olson (7)
   10.9              Employment  Agreement dated as of May 30, 2000 between ARC Wireless  Solutions,  Inc. (formerly
                     Antennas America, Inc.) and Burton J. Calloway (7)
   10.10             Employment Agreement dated as of January 2, 2002 between the Company and Randall P. Marx. (8)
                     Employment  Agreement dated as of June 1, 2002 between Winncom  Technologies  Corp. and Gregory
   10.11             E. Raskin. (8)
   10.12             Employment Agreement dated as of July 1, 2002 between the Company and Monty R. Lamirato.(8)
   10.13             Employment Agreement effective January 2, 2004 between the Company and Randall P. Marx.
   10.14             Employment  Agreement effective October 1, 2004 between Winncom  Technologies Corp. and Gregory
                     E. Raskin.
   10.15             Employment Agreement effective July 1, 2004 between the Company and Monty R. Lamirato.
   14.1              Code of Ethics (9)
   31.1              Officers'  Certifications of Periodic Report pursuant to Section 302 of  Sarbanes-Oxley  Act of 2002
   32.1              Officers'  Certifications of Periodic Report pursuant to Section 906 of  Sarbanes-Oxley  Act of 2002
   21                Subsidiaries of the Registrant


                                       36

<PAGE>

---------------------------
(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
(7)      Incorporated by reference from the Company's Form 10-KSB for December 31, 2001 filed on April 1, 2002
(8)      Incorporated by reference from the Company's Form 10-KSB for December 31, 2002 filed on March 28, 2003.
(9)      Incorporated by reference from the Company's Form 10-K for December 31, 2003 filed on March 30, 2004
</TABLE>

                                   SIGNATURES

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

                                     ARC Wireless Solutions, Inc.


Date:  March 29, 2005                By:  /s/ Randall P. Marx
                                        --------------------------------
                                     Randall P. Marx, Chief Executive Officer

Date:  March 29, 2005                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, 2005                                      /s/ Sigmund A. Balaban
                                                    ----------------------------
                                                    Sigmund A. Balaban, Director

March 29, 2005                                      /s/ Gregory E. Raskin
                                                    ---------------------------
                                                     Gregory E. Raskin, Director

March 29, 2005                                      /s/ Donald A. Huebner
                                                    ---------------------------
                                                     Donald A. Huebner, Director

                                       37
<PAGE>


Reports of Independent Registered Public Accounting Firm


The Board of Directors
ARC Wireless Solutions, Inc.
Wheat Ridge, Colorado

We have audited the consolidated balance sheets of ARC Wireless Solutions, Inc.
as of December 31, 2004 and 2003, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2004. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ARC Wireless
Solutions, Inc. at December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.


/s/ Hein & Associates LLP

Denver, Colorado
February 18, 2005



                                      F-1

<PAGE>


                                       ARC Wireless Solutions, Inc.
                                       Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                       December 31,
                                                                                2004                  2003
                                                                           ----------------------------------
<S>                                                                         <C>                  <C>
Assets
Current assets:
   Cash                                                                    $    321,000          $    227,000
   Accounts receivable trade, net of allowance for doubtful accounts
     of $502,000 and $257,000, respectively                                   4,145,000             4,543,000
   Accounts receivable vendors                                                  688,000               248,000
   Inventory, net                                                             5,624,000             6,081,000
   Other current assets                                                         209,000               117,000
                                                                           ----------------------------------
Total current assets                                                         10,987,000            11,216,000

Property and equipment, net                                                     527,000               531,000

Other assets:
   Goodwill, net                                                             10,824,000            10,824,000
   Intangible assets, net                                                       113,000               110,000
   Other assets                                                                  42,000                59,000
                                                                           ----------------------------------
Total assets                                                               $ 22,493,000          $ 22,740,000
                                                                           ==================================

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                                        $  2,253,000          $  3,300,000
   Bank debt - current                                                          493,000               409,000
   Accrued expenses                                                             890,000               418,000
   Current portion of capital lease obligations                                  62,000                40,000
                                                                           ----------------------------------
Total current liabilities                                                     3,698,000             4,167,000

Capital lease obligations, less current portion                                  90,000                97,000
Bank debt, less current portion                                               3,243,000             3,704,000
                                                                           ----------------------------------
Total liabilities                                                             7,031,000             7,968,000
                                                                           ----------------------------------

Commitments (Notes 7 and 9)
Stockholders' equity: (Note 3)
   Common stock, par value $.0005;
      250,000,000 shares authorized; 155,857,000 and
      155,843,000 shares issued, respectively                                    78,000                78,000
   Preferred stock, par value $.001;
      2,000,000 shares authorized; no shares issued and outstanding                --                    --
   Additional paid-in capital                                                21,704,000            21,702,000
    Treasury stock (1,962,000 shares)                                        (1,195,000)           (1,195,000)
   Accumulated deficit                                                       (5,125,000)           (5,813,000)
                                                                           ----------------------------------
Total stockholders' equity                                                   15,462,000            14,772,000
                                                                           ----------------------------------
Total liabilities and stockholders' equity                                 $ 22,493,000          $ 22,740,000
                                                                           ==================================

See accompanying notes to consolidated financial statements.

                                                         F-2
<PAGE>


                          ARC Wireless Solutions, Inc.
                      Consolidated Statements of Operations

                                                                        Year Ended December 31,
                                                            2004                   2003                  2002
                                                        --------------------------------------------------------

Sales, net                                              $ 37,365,000          $ 30,596,000          $ 32,575,000
Cost of sales                                             30,581,000            25,612,000            26,493,000
                                                        --------------------------------------------------------
      Gross profit                                         6,784,000             4,984,000             6,082,000

Operating expenses:
   Selling, general and administrative expenses            6,190,000             5,457,000             5,821,000
                                                        --------------------------------------------------------
Total operating expenses                                   6,190,000             5,457,000             5,821,000
                                                        --------------------------------------------------------
      Income (Loss) from operations                          594,000              (473,000)              261,000

Other income (expense):
   Interest expense                                         (300,000)             (190,000)             (207,000)
   Other income                                              447,000               444,000               303,000
                                                        --------------------------------------------------------
      Total other income (expense)                           147,000               254,000                96,000
                                                        --------------------------------------------------------

Income (Loss) before income taxes                            741,000              (219,000)              357,000
Less provision for income taxes                              (53,000)              (66,000)              (50,000)
                                                        --------------------------------------------------------
Net income (loss)                                       $    688,000          $   (285,000)         $    307,000
                                                        --------------------------------------------------------

Basic and diluted income (loss) per share               $       .004          $      (.002)         $       .002
                                                        --------------------------------------------------------


See accompanying notes to consolidated financials statements.

                                      F-3
<PAGE>


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


                                                 Common Stock          Common     Additional   Treasury
                                            -----------------------    Stock     Paid in         Stock          Accumulated
                                             Shares      Amount      Reserved    Capital    Shares     Amount     Deficit
                                            -------------------------------------------------------------------------------
Balances, January 1, 2002                    154,304    $     77        --     $ 21,522     (1,459)   $ (1,117)   $ (5,835)

Common stock issued in a private                 755           1                    107
 placement transaction, net of
 expenses of $17
Common stock acquired in connection                                                           (500)        (75)
 with settlement of Starworks
 litigation (500 shares)
Common stock issued for consulting               100                                 17
 services
Common stock issued for directors' fees           26                                  3
Common stock odd lot repurchase
 (2 shares)                                                                                     (3)         (3)
Net income                                                                                                             307
                                             -----------------------------------------------------------------------------
Balances, December 31, 2002                  155,185    $     78        --     $ 21,649     (1,962)   $ (1,195)   $ (5,528)

Issuance of common stock to 401(K) Plan          649                                 52
Common stock issued for directors' fees            9                                  1
Net loss                                                                                                              (285)
                                             -----------------------------------------------------------------------------
Balances, December 31, 2003                  155,843    $     78        --     $ 21,702     (1,962)   $ (1,195)   $ (5,813)
                                             -----------------------------------------------------------------------------

Common stock issued for directors' fees           14        --                        2                                688
Net income
                                             -----------------------------------------------------------------------------
Balances, December 31, 2004                  155,857    $     78        --     $ 21,704     (1,962)   $ (1,195)   $ (5,125)
                                             =============================================================================

See accompanying notes to consolidated financial statements.

                                                             F-4
<PAGE>


                                                  ARC Wireless Solutions, Inc.
                                              Consolidated Statements of Cash Flows

                                                                                       Year Ended December 31,
                                                                               2004              2003              2002
                                                                           -----------------------------------------------

Operating activities
Net Income (loss)                                                          $   688,000       $  (285,000)      $   307,000
Adjustments to reconcile net income (loss) to net cash
 provided by (used in) operating activities:
     Depreciation and amortization                                             251,000           286,000           308,000
     Provision for doubtful receivables                                        308,000           193,000           528,000
     Non-cash expense for issuance of stock and options                          2,000            53,000            20,000
     Gain on debt settlements                                                     --            (148,000)         (267,000)
     Loss on disposition of assets                                                --                --               9,000
     Changes in operating assets and liabilities:
       Accounts receivable, trade and vendor                                  (349,000)        1,170,000          (782,000)
       Inventory                                                               457,000          (684,000)          541,000
       Other current assets                                                    (92,000)           14,000           (14,000)
       Accounts payable and accrued expenses                                  (575,000)         (848,000)         (795,000)
       Other                                                                    16,000            10,000            (4,000)
                                                                           -----------------------------------------------
Net cash provided by (used in) operating activities                            706,000          (239,000)         (149,000)

Investing activities
Patent acquisition costs                                                       (19,000)          (15,000)          (41,000)
Purchase of property and equipment                                            (164,000)         (158,000)          (79,000)
                                                                           -----------------------------------------------
Net cash used in investing activities                                         (183,000)         (173,000)         (120,000)

Financing activities
Repayment of notes payable - others and capital lease obligations             (513,000)          (21,000)          (13,000)
Purchase of treasury stock                                                        --                --             (78,000)
Proceeds from private placement, including warrant exercises, net                 --                --             108,000
Net borrowings under line of credit agreements                                  84,000           395,000           172,000
                                                                           -----------------------------------------------
Net cash provided by (used in) financing activities                           (429,000)          374,000           189,000
                                                                           -----------------------------------------------

Net decrease in cash                                                            94,000           (38,000)          (80,000)
Cash, beginning of period                                                      227,000           265,000           345,000
                                                                           -----------------------------------------------
Cash, end of period                                                        $   321,000       $   227,000       $   265,000
                                                                           ===============================================

Supplemental disclosure of cash flow information:
  Cash paid for interest                                                   $   328,000       $   190,000       $   190,000
   Cash paid for taxes                                                          51,000            79,000            50,000
Supplemental schedule of non-cash investing and financing activities:
  Purchase of assets under capital lease financing                         $    67,000       $   139,000              --

See accompanying notes to consolidated financial statements

                                                           F-5
</TABLE>

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies

Organization

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

In 1989, the Company merged with Antennas America, Inc., a Colorado corporation
that had been formed in September 1988. Pursuant to the merger, all the issued
and outstanding stock of Antennas America, Inc. was converted into 41,952,000
shares, and the Company name was changed to Antennas America, Inc. At the annual
shareholders meeting held on October 11, 2000, the shareholders voted to change
the Company's name to ARC Wireless Solutions, Inc. from Antennas America, Inc.
The Wireless Communications Solutions 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.

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.

Principles of Consolidation

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

                                      F-6
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies, continued

Basis of Presentation

The Company has experienced recurring losses, and has accumulated a deficit of
$5.1 million since inception in 1989. In 2004 and 2002 the Company was able to
increase sales, increase gross margin and decrease SG&A expenses as a percentage
of revenues and generate net income but in 2003 the Company had a slight
decrease in sales, gross margin and SG&A costs and generated a loss of $285,000.
There can be no assurance that the Company will achieve the desired result of
net income and positive cash flow from operations in future years. Management
believes that current working capital and available borrowings on existing bank
lines of credit, together with additional equity infusions that management
believes would be available, will be sufficient to allow the Company to maintain
its operations through December 31, 2005.

Use of Estimates

The preparation of the Company's consolidated financial statements in accordance
with generally accepted accounting principles of the United States of America
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.

Cash

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

Fair Value of Financial Instruments

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

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

Accounts Receivable

Trade receivables consist of uncollateralized customer obligations due under
normal trade terms requiring payment usually within 30 days of the invoice date.
Payments on trade receivables are applied to the earliest unpaid invoices.
Management reviews trades receivables periodically and reduces the carrying
amount by a valuation allowance that reflects management's best estimate of the
amount that may not be collectible.

                                      F-7

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

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:

                                           2004                2003
                                       -------------------------------
         Raw materials                 $   917,000         $   963,000
         Work in progress                  112,000             127,000
         Finished goods                  5,307,000           5,489,000
                                       -------------------------------
                                         6,336,000           6,579,000
         Inventory reserve                (712,000)           (498,000)
                                       -------------------------------
          Net inventory                $ 5,624,000         $ 6,081,000
                                       ================================

Property and Equipment

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

                                                       2004             2003
                                                   ----------------------------

         Machinery and equipment                   $ 1,116,000      $ 1,031,000
         Computer equipment and software               510,000          420,000
         Furniture and fixtures                        251,000          215,000
         Leasehold improvements                        132,000          112,000
                                                   ----------------------------
                                                     2,009,000        1,778,000
         Accumulated depreciation                   (1,482,000)      (1,247,000)
                                                   ----------------------------
                                                   $   527,000      $   531,000
                                                   ============================

Depreciation expense, which includes amortization of fixed assets acquired
through capital leases, amounted to $235,000, $271,000 and $294,000 during the
years ended December 31, 2004, 2003 and 2002, respectively.

Patent Costs

Patent costs are stated at cost and amortized over ten years using the
straight-line method. Patent amortization expense amounted to $16,000, $15,000
and $14,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

                                      F-8
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies, continued

Intangible Assets

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

                                                    2004              2003
                                                    ----              ----

     Patents                                    $    235,000      $    216,000
     Assembled workforce                             125,000           125,000
     Distribution network                            150,000           150,000
     Goodwill                                     11,889,000        11,889,000
                                                ------------------------------
                                                  12,399,000        12,380,000
     Accumulated amortization                     (1,462,000)       (1,446,000)
                                                ------------------------------
     Goodwill and intangible assets, net        $ 10,937,000      $ 10,934,000
                                                ==============================

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

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.

Revenue Recognition

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.

                                      F-9

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies, continued

Shipping and Handling Costs

The Company classifies shipping and handling costs as a component of cost of
sales.

Research and Development

Research and development costs are charged to expense as incurred. Such expenses
were $250,000, $289,000 and $229,000 respectively, for the years ended December
31, 2004, 2003 and 2002.

Advertising Costs

Advertising costs are charged to operations when the advertising is first shown.
Advertising costs charged to operations were $22,000, $105,000 and $86,000 in
2004, 2003 and 2002, respectively.

Product Warranty

The Company's vendors generally warrant the products distributed by the Company
and allow the Company to return defective products, including those that have
been returned to the Company by its customers. The Company does not
independently warrant the products it distributes. The Company does warranty
products it manufactures and records a provision for estimated warranty costs at
the time of the sale and periodically adjusts the provision to reflect actual
experience. Warranty expense was not material to the Company's consolidated
statements of operations for the years ended December 31, 2004, 2003 and 2002.

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.

Stock Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123"), and Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation--Transition and Disclosure, an
amendment of FASB Statement No. 123," ("SFAS 148") encourages, but does not
require, companies to recognize compensation expense associated with stock-based
compensation plans over the anticipated service period based on the fair value
of the award on the date of grant. As allowed by SFAS 123 and SFAS 148, the
Company has elected to continue to report stock-based compensation in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and,
accordingly, no compensation expense has been recognized for options granted.

                                      F-10

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies, continued

Stock Based Compensation, continued

The following table illustrates the effect on net income (loss) and earnings
(loss) per share had compensation expense for the Company's plans been
determined using the fair value-based method:
<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                -------------------------------------------------------
                                                                     2004                 2003                   2002
                                                                -------------------------------------------------------
<S>                                                             <C>                  <C>                  <C>
      Net income (loss) as reported                             $     688,000        $    (285,000)       $     307,000
      Add: tock based compensation includedin
      reported net income (loss)                                         --                   --
      Deduct: Stock-based compensation cost
       under SFAS 123                                                (86,000)             (81,000)            (177,000)
                                                                -------------        -------------        -------------
      Pro forma net income (loss)                               $     602,000        $    (366,000)       $     130,000
                                                                =============        =============        =============

      Pro forma shares used in the calculation of pro
      forma net income (loss) per common share-basic
      and diluted                                                 153,888,000          153,400,000          153,500,000
      Reported  net income (loss) per common share -
      basic and diluted                                         $        .004        $       (.002)       $        .002
      Pro forma net income (loss) per common share -
      basic and diluted                                         $        .004        $       (.002)       $        .001

Pro forma information regarding net loss is required by SFAS 123, which also
requires that the information be determined as if the Company had accounted for
grants subsequent to December 31, 1994 under a method specified by SFAS 123.
Options granted were estimated using the Black-Scholes valuation model. The
following weighted average assumptions were used:

     -----------------------------------------------------------------------------
                                                  Year Ended December 31,
     -----------------------------------------------------------------------------
                                             2004           2003          2002
     ------------------------------------------------- --------------- -----------
     Volatility                                  1.04               -         1.5
     ------------------------------------------------- --------------- -----------
     Expected life of options (in years)            2               -           2
     ------------------------------------------------- --------------- -----------
     Dividend Yield                             0.00%               -%       0.00%
      ------------------------------------------------- --------------- ----------
     Risk free interest rate                      3.0               -%       4.50%
     ------------------------------------------------- --------------- -----------
</TABLE>


Net Income (Loss) Per Common Share

Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution of securities that could share in the earnings of the entity. For the
year ended December 31, 2004 and 2002, options and warrants totaling 4,252,000
and 5,598,000, respectively were not included in the calculation of diluted
earnings per share because their effect is anti-dilutive. For the year ended
December 31, 2003 the Company incurred a net loss and stock options and stock
warrants, totaling 5,013,000 were not included in the computation of diluted
loss per share because their effect was anti-dilutive; therefore, basic and
fully diluted loss per share are the same for 2003.

                                      F-11
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Organization and Summary of Significant Accounting Policies, continued

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

                                                                          Year Ended December 31,
                                                               2004                2003                  2002

<S>                                                       <C>                  <C>                  <C>
Numerator: Net Income (Loss)                              $    688,000         $  (285,000)         $    307,000
                                                          ======================================================

Denominator:
Denominator for basic earnings per share - weighted
average shares                                             153,888,000         153,400,000           153,100,000
Effect of dilutive securities
  Employee stock options                                       111,000                --                 400,000
  Common stock warrants                                           --                  --                    --
                                                          ------------------------------------------------------
Denominator for diluted earnings per share                        --
adjusted weighted average shares and assumed
conversion                                                 153,999,000         153,400,000           153,500,000
                                                          ======================================================

Basic earnings per share                                  $       .004         $     (.002)         $       .002
                                                          ======================================================

Diluted earnings per share                                $       .004         $     (.002)         $       .002
                                                          ======================================================
</TABLE>

Recent Accounting Pronouncements


In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No.
123(R) is effective for the Company for interim or annual periods beginning
after June 15, 2005, supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees, and amends SFAS No. 95, Statement of Cash Flows.

SFAS No. 123(R) requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income statement based on
their fair values. Pro-forma disclosure is no longer an alternative. The company
has not yet completed their evaluation but expects the adoption to have an
effect on the financial statements similar to the pro-forma effects reported in
Footnote 1 to the Consolidated Financial Statements under the caption above
"Stock Based Compensation".

In November 2004, the FASB issued SFAS 151, Inventory Costs, which revised ARB
43, relating to inventory costs. This revision is to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material (spoilage). This Statement requires that these items be recognized as a
current period charge regardless of whether they meet the criterion specified in
ARB 43. In addition, this Statement requires the allocation of fixed production
overheads to the costs of conversion be based on normal capacity of the
production facilities. SFAS 151 is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company does not believe the
adoption of SFAS 151 will have a material impact on the Company's financial
statements.

                                      F-12

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

1.  Organization and Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements, continued

The FASB issued SFAS 153, Exchanges of Nonmonetary Assets, which changes the
guidance in APB Opinion 29, Accounting for Nonmonetary Transactions. This
Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
153 is effective during fiscal years beginning after June 15, 2005. The Company
does not believe the adoption of SFAS 153 will have a material impact on the
Company's financial statements.

2. Revolving Bank Loan Agreements and Notes Payable

On October 1, 2003 Winncom executed a new $4,000,000 line of credit agreement
with the bank with interest at prime plus .5% (5.5% at December 31, 2004 and
4.5% at December 31, 2003) due April 30, 2005 and converted $500,000 of the
balance outstanding under the line of credit at September 30, 2003 into a
36-month term loan with monthly principal payments of $13,888 plus interest at
prime plus .75%. The term loan shall come due on October 26, 2006. On November
9, 2004 the bank extended the due date on the line of credit to April 30, 2006.

The line and the term loan are collateralized by accounts receivable, inventory
and otherwise unencumbered fixed assets of Winncom. ARC is a general corporate
guarantor of this loan. The agreement contains several covenants, which, among
other things, require that Winncom maintain certain financial ratios as defined
in the line-of-credit agreement. In addition, the agreement limits the payment
of management fees to ARC Wireless, dividends and the purchase of property and
equipment. As of December 31, 2004, Winncom was in compliance with these
covenants.

ARC Wireless Solutions, Inc ("ARC ") entered into a new financing agreement with
Wells Fargo Business Credit, Inc. ("WFBC"), (the "WFBC Facility") on December 9,
2003. The new financing agreement is for a term on one year and is renewable for
additional one-year terms. The WFBC Facility provides for the sale of accounts
receivable by ARC to WFBC at a 1% discount for the first 15 days and an
additional .055 of 1% per day until the account receivable is paid in full.
Sales of accounts receivable and advances under the WFBC Facility are subject to
conditions and restrictions, including, without limitation, accounts receivable
eligibility restrictions, verification, and approval. Obligations under the WFBC
Facility are collateralized by substantially all of the assets of ARC. As of
December 31, 2004 and 2003, advances of approximately $326,000 and $242,000 were
outstanding, respectivley. Advances under the WFBC Facility are made only at the
sole discretion of WFBC, even if the accounts receivable offered by ARC for sale
to WFBC satisfy all necessary conditions and restrictions. WFBC is under no
obligation to purchase accounts receivable from ARC or advance any funds or
credit to ARC under the WFBC Facility.

                                      F-13

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

2. Revolving Bank Loan Agreements and Notes Payable, continued


Revolving bank lines of credit and other bank debt at December 31, 2004 and 2003
consist of:

                                                     2004               2003
                                                 ------------------------------
    Bank line of credit - Winncom                $ 3,118,000        $ 3,399,000
    Bank term loan - Winncom                         292,000            472,000
    Bank Facility - ARC                              326,000            242,000
                                                 ------------------------------
                                                   3,736,000          4,113,000
    Less current portion                            (493,000)          (409,000)
                                                 ------------------------------
    Long-term portion                            $ 3,243,000        $ 3,704,000
                                                 ==============================

3. Stockholders' Equity

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

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

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

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

In November 1997, the Board of Directors approved our 1997 Stock Option And
Compensation Plan (the "Plan"). Pursuant to the Plan, we may grant options to
purchase an aggregate of 5,000,000 shares of our common stock to key employees,
directors, and other persons who have or are contributing to our success. In
November 2004, the shareholders approved to amend the Plan to increase the
aggragate number of option to be issued under the Plan from 5,000,000 to
10,000,000. 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.

                                      F-14

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

3. Stockholders' Equity, continued

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

The Company granted a total of 250,000 options to Outside Directors under the
Plan during 2004 and 2002, at an exercise price of $.16 and $.13 per share,
respectively.


                                      F-15
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

3. Stockholders' Equity, continued

The following table summarizes the option activity for 2004, 2003 and 2002:

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

   2002 Activity:
   Outstanding at beginning of year                4,451,000               0.504
   Granted                                         1,625,000               0.164
   Exercised                                            --
   Forfeited or expired                           (2,016,000)              0.765
                                                  ------------------------------
   Outstanding at end of year                      4,060,000               0.212
                                                  ==============================
   Exercisable at end of year                      2,960,000               0.225
                                                  ==============================

   2003 Activity:
   Outstanding at beginning of year                4,060,000               0.504
   Granted                                              --
                                                  ------------------------------
   Exercised                                            --
                                                  ------------------------------
   Forfeited or expired                             (985,000)               0.23
                                                  ==============================
   Outstanding at end of year                      3,075,000                0.21
                                                  ==============================
   Exercisable at end of year                      3,075,000                0.21
                                                  ==============================

   2004 Activity:
   Outstanding at beginning of year                3,075,000                0.21
   Granted                                         1,250,000                0.13
   Exercised                                            --
   Forfeited or expired                           (1,900,000)               0.16
                                                  ==============================
   Outstanding at end of year                      2,425,000                0.15
                                                  ==============================
   Exercisable at end of year                      2,375,000                0.15
                                                  ==============================

At December 31, 2004, there are 2,425,000 options exercisable from $0.12 to
$0.18. These options expire between 2006 and 2007. The weighted average grant
date fair value of the options granted is $.07.

All option exercise prices were granted at market. The weighted average
remaining contractual life of options outstanding at the end of 2004, 2003 and
2002 were 2.04, 1.33 years and 1.90 years, respectively.

                                      F-16
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

4. 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, 2004, 2003 and 2002 is as follows:

                                               2004              2003
                                            ---------------------------
      Current                                 $53,000         $  66,000
      Deferred                                      -                 -
                                            ---------------------------
      Total                                   $53,000         $  66,000
                                            ===========================

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

                                                         2004            2003
                                                       ------------------------
      Deferred tax assets:
          Net operating loss carry-forwards            $ 149,000      $ 610,000
          Inventory reserve                              264,000        184,000
          Accrued expenses                                84,000         31,000
          Bad debt reserves                              186,000         95,000
          Property and equipment                           9,000           --
                                                       ------------------------
                                                         692,000        920,000
      Deferred tax liabilities:
          Prepaids                                                         --
          Other assets                                   (12,000)       (12,000)
          Property and equipment                            --          (13,000)
                                                       ------------------------
                                                         (12,000)       (25,000)

      Deferred tax assets                                680,000        895,000
      Valuation allowance                               (680,000)      (895,000)
                                                       ------------------------
      Net deferred tax assets                          $    --        $    --
                                                       ========================

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

                                                             2004                 2003                  2002
                                                          ---------------------------------------------------
<S>                                                       <C>                  <C>                  <C>
Tax (benefit) expense computed at statutory rate          $ 261,000            $ (97,000)           $ 121,000
State income tax                                             53,000               66,000               50,000
Valuation allowance                                        (214,000)             105,000             (107,000)
Effect of permanent differences                              (6,000)              (8,000)             (14,000)
Other                                                       (41,000)                --
                                                          ---------------------------------------------------
Provision for income taxes                                $  53,000            $  66,000            $  50,000
                                                          ===================================================
</TABLE>

                                      F-17

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

4. Income Taxes, continued

As of December 31, 2004, 2003 and 2002, 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 2004 decreased by $214,000 and for 2003 increased by
$105,000.

The Company has a net operating loss carry-forward of approximately $402,000,
which will begin to expire from 2005 to 2018. The net operating loss
carry-forwards may be subject to further limitation pursuant to IRS section 382
and may expire unused.

5. Sales to Major Customers

The Company had no sales in excess of 10% of its net sales to any unrelated
parties for the years ended December 31, 2004, 2003 and 2002.

6. Significant Suppliers

During 2004, the Company purchased approximately 65% of its product from four
vendors, in 2003, the Company purchased approximately 65% of its product from
two vendors and in 2002 the Company purchased approximately 56% of its product
from five vendors. The loss of any of these vendors could have a material
adverse impact on the operations of the Company.

7.  Leasing Activities

The Company leases its facilities under operating leases through 2010. Minimum
future rentals payable under the leases are as follows:

                    2005                            $   319,000
                    2006                                233,000
                    2007                                246,000
                    2008                                259,000
                    2009                                271,000
                    2010                                163,000
                                                     ----------
                                                     $1,491,000
                                                     ==========

Rent expense was $373,000, $406,000 and $481,000 for the years ended December
31, 2004, 2003 and 2002, respectively.

                                      F-18
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

7. Leasing Activities, continued

Property, plant and equipment included the following amounts for leases that
have been capitalized at December 31, 2004 and December 31, 2003.

                                                      December 31,  December 31,
                                                        2004            2003

        Machinery and Equipment                       $ 177,000       $ 161,000
        Computers and Software                           83,000          31,000
        Furniture and Fixtures                           13,000          13,000
                                                      -------------------------
                                                        273,000         205,000
        Less accumulated amortization                   (93,000)        (55,000)
                                                      -------------------------
                                                      $ 180,000       $ 150,000
                                                      =========================

The Company recorded amortization expense of $39,000, $20,000 and $15,000,
respectively, on assets recorded under capitalized leases for 2004, 2003 and
2002.

Future minimum lease payments under capital leases are as follows at December
31, 2004:

         2005                                       $ 84,000
         2006                                         72,000
         2007                                         24,000
         2008                                          5,000
         2009                                          4,000
                                                    ---------
         Total minimum lease payments                189,000
         Amount representing interest                 (37,000)
                                                    ---------
         Present value of lease payments             $152,000
                                                    =========

8. 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. For the year ended December 31, 2004 the Board
of Directors approved a discretionary match in Company common stock, as such the
Company has accrued $58,000 which represent the value of the employer matching
contribution. In September 2003 the Company contributed 649,278 shares of common
stock, valued at $52,000, into the Company 401(k) Plan as an employer matching
contribution.

9. Commitments

We entered into a new employment agreement with our CEO, effective as of January
2, 2004, which terminates on January 2, 2007. Mr. Marx is to receive an annual
base salary of $195,000, $235,000 and $245,000 per year, respectively, during
the term of the agreement and is eligible to receive annual bonuses ranging from
$25,000 to $150,000 if the Company achieves certain predetermined net income
goals.

                                      F-19

<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

9. Commitments, continued

We entered into a new employment agreement with our President, effective as of
October 1, 2004 with a term of two and one-half years. Pursuant to the new
agreement, Mr. Raskin is to receive an annual base salary of $385,000 per year.
Mr. Raskin is eligible to receive bonuses for each of the years ending December
31, 2004, 2005 and 2006 of 10% of net income.

We entered into a new employment agreement with our Chief Financial Officer and
Treasurer, effective July 1, 2004. The employment agreement is for the period
July 1, 2004 through June 30, 2005, at an annual base salary of $145,000. Mr.
Lamirato also received options to purchase 500,000 shares of our common stock at
a price of $.12 per share exercisable from July 1, 2004 through June 30, 2007.

The Company entered into a written employment agreement with our Chief
Technology Officer, effective August 22, 2004. The employment agreement is for
the period August 22, 2004 through August 22, 2007 at an annual base salary of
$175,000. Mr. Olson also is eligible to earn bonuses, upon achieving certain
gross margin objectives, over the term of the agreement.

10. 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.

The following table sets forth our net sales by geographic segment.

----------- ------------------- --------------------- ------------------
               North America       Eastern Europe        Total Net Sales
----------- ------------------- --------------------- ------------------
2004              $ 31,251,000           $ 6,114,000        $ 37,365,000
----------- ------------------- --------------------- ------------------
2003              $ 27,009,000           $ 3,587,000        $ 30,596,000
----------- ------------------- --------------------- ------------------
2002              $ 29,275,000           $ 3,300,000        $ 32,575,000
----------- ------------------- --------------------- ------------------

Sales in North America include the United States and Canada and sales in Eastern
Europe also include Russia, Kazakhstan and Uzbekistan.

                                      F-20
<PAGE>


                          ARC Wireless Solutions, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2004

10. Segment Information, continued

Financial information regarding the Company's three operating segments for the
years ended December 31, 2004, 2003 and 2002 are as follows:
<TABLE>
<CAPTION>

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

<S>                           <C>         <C>               <C>               <C>            <C>             <C>
Net Sales                        2004   $ 30,916,000    $ 6,433,000      $  379,000    $   (363,000)   $ 37,365,000
                                 2003     24,978,000      5,904,000          21,000        (307,000)     30,596,000
                                 2002     25,079,000      7,285,000         420,000        (209,000)     32,575,000

Net Income (Loss)                2004      1,046,000        710,000         (56,000)     (1,012,000)        688,000
                                 2003        488,000        (45,000)         84,000        (812,000)       (285,000)
                                 2002        195,000        546,000         (43,000)       (391,000)        307,000

Income (Loss) before Income      2004      1,099,000        710,000         (56,000)     (1,012,000)        741,000
Taxes                            2003        554,000        (45,000)         84,000        (812,000)       (219,000)
                                 2002        245,000        546,000         (43,000)       (391,000)        357,000

Identifiable Assets              2004     20,650,000       3,320,000        250,000      (1,727,000)     22,493,000
                                 2003     20,698,000      3,472,000         260,000      (1,690,000)     22,740,000
                                 2002     20,996,000      3,954,000         222,000      (1,717,000)     23,455,000

Capital Expenditures             2004         88,000         76,000            --              --           164,000
                                 2003         13,000        145,000            --              --           158,000
                                 2002          9,000         70,000            --              --            79,000

Depreciation and                 2004         50,000        199,000           2,000            --           251,000
Amortization                     2003         41,000        243,000           2,000            --           286,000
                                 2002         39,000        260,000           9,000            --           308,000

Interest Expense                 2004        186,000        114,000            --              --           300,000
                                 2003        177,000         13,000            --              --           190,000
                                 2002        201,000          6,000            --              --           207,000
</TABLE>

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

                                      F-21