**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**










**Form
      10-QSB**













**x**
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





**For
      the quarterly period ended March 31, 2007**





**OR**





** ̈**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT**





For
      the
      transition period from __________ to ___________




**Commission
      file number: 005-50985**








**GigaBeam
      Corporation**


**(Exact
      name of small business issuer as specified in its charter)**











**Delaware**
            
            
            
            **20-0607757****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**





**470
      Springpark Place, Suite 900**


**Herndon,
      VA 20170**


**(Address
      of principal executive offices)**





**(571)
      283-6200**


**(Issuer’s
      telephone number)**










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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)  Yes £  No T





The
      number of shares of the issuer’s Common Stock outstanding on May 10, 2007 was
      6,549,048.





Transitional
      Small Business Disclosure Format (check one): Yes £  No T











**GigaBeam
      Corporation**


**Form
      10-QSB**


**For
      the Quarter Ended March 31, 2007**


**Table
      of Contents**






PagePART
                I- FINANCIAL INFORMATIONItem
                1 -   Financial StatementsConsolidated
                Balance Sheets as of March 31, 2007 and December 31, 2006
            3Consolidated
                Statements of Operations for the three months ended March 31, 2007
                and the
                three months
              ended
                March 31, 2006
            4Consolidated
                Statements of Cash Flows for the three months ended March 31, 2007
                and
                2006
            5Notes
                to Consolidated Financial Statements
            7Item
                2 -   Management’s Discussion and Analysis of Financial
                Condition and Results of Operations
            20Item
                3 -   Controls and Procedures
            34PART
                II -OTHER
                INFORMATION
            35Item
                1 - Legal Proceedings
            35Item
                2 - Unregistered Sales of Securities and Use of Proceeds
            35Item
                5 - Other Information
            35Item
                6 - Exhibits
            35Signature
            36





2




**Part
      I - Financial Information, Item 1 - Financial Statements**





**GigaBeam
      Corporation**


**Consolidated
      Balance Sheets**





**March
                31,**
            
            **December
                31,****2007**
            
            **2006****(unaudited)**
            
            **(audited)****ASSETS****Current
                assets:**Cash
                and cash equivalents
            
            $
            9,683
            
            $
            653,734Accounts
                receivable, net of allowance of $724,012 and $533,761 at March 31,
                2007
                and December 31, 2006, respectively
            
            
            244,954
            
            
            807,500Inventories
            
            
            7,692,281
            
            
            7,621,574Prepaid
                expenses and other current assets
            
            
            214,978
            
            
            568,711**Total
                current assets**
            
            
            8,161,896
            
            
            9,651,519Property
                and equipment, net
            
            
            1,794,153
            
            
            1,986,735Other
                assets
            
            
            440,074
            
            
            445,630Debt
                issuance costs
            
            
            75,079
            
            
            181,976**Total
                assets**
            
            $
            10,471,202
            
            $
            12,265,860**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                liabilities:**Accounts
                payable
            
            $
            2,441,418
            
            $
            1,891,077Accrued
                liabilities
            
            
            1,456,526
            
            
            1,416,716Current
                portion of capital lease obligations
            
            
            29,530
            
            
            29,125Convertible
                notes payable, net of discount
            
            
            91,364Notes
                payable, related party
            
            
            65,000
            
            
            -**Total
                current liabilities**
            
            
            4,083,838
            
            
            3,336,918Capital
                lease obligations, non-current
            
            
            33,602
            
            
            41,159Convertible
                notes payable, net of discount
            
            
            -
            
            
            1,051,036**Total
                liabilities**
            
            
            4,117,440
            
            
            4,429,113**Stockholders’
                equity:**Series
                A redeemable preferred stock, $.001 par value, 20,000 shares authorized;
                11,277 shares issued and outstanding at March 31, 2007 and December
                31,
                2006
            
            
            11
            
            
            11Series
                B convertible preferred stock, $.001 par value; 20,000 shares authorized;
                15,100 shares issued and outstanding at March 31, 2007 and December
                31,
                2006
            
            
            15
            
            
            15Series
                  C convertible preferred stock, $.001 par value; 10,000 shares authorized;
                  10,000 shares issued and outstanding at March 31, 2007 and December
                  31,
                  2006
            
            
            10
            
            
            10Common
                  stock, $.001 par value, 40,000,000 shares authorized; 6,370,676
                  and
                  6,099,279 shares issued and outstanding at March 31, 2007 and December
                  31,
                  2006, respectively
            
            
            6,371
            
            
            6,099Additional
                paid in capital
            
            
            52,504,327
            
            
            50,876,530Accumulated
                deficit
            
            
            (46,156,972
            
            
            (43,045,918
            )**Total
                stockholders’ equity**
            
            
            6,353,762
            
            
            7,836,747**Total
                liabilities and stockholders’ equity**
            
            $
            10,471,202
            
            $
            12,265,860





*See
      notes to consolidated financial statements.*




3


**GigaBeam
      Corporation**


**Consolidated
      Statements of Operations**


**(Unaudited)**




**Three
                Months**
            
            **Three
                Months****Ended**
            
            **Ended****March
                31,**
            
            **March
                31,****2007**
            
            **2006**Net
                sales
            
            $
            284,142
            
            $
            1,658,541Cost
                of sales
            
            
            162,092
            
            
            1,485,634Gross
                margin
            
            
            122,050
            
            
            172,907**Operating
                expenses:**Research
                and development
            
            
            673,483
            
            
            1,341,682General
                and administrative
            
            
            1,202,545
            
            
            1,533,543Selling
                and marketing
            
            
            522,740
            
            
            1,174,820Service,
                install and link operations
            
            
            363,867
            
            
            668,193Total
                operating expenses
            
            
            2,762,635
            
            
            4,718,238Operating
                loss
            
            
            (2,640,585
            )
            
            (4,545,331
            )Other
                income (expense):Interest
                income
            
            
            1,778
            
            
            93,833Interest
                expense
            
            
            (435,550
            )
            
            (329,366
            )Loss
                on disposal of assets
            
            
            (36,697
            )
            
            -**Loss
                before provision for income taxes**
            
            
            (3,111,054
            )
            
            (4,780,864
            )**Provision
                for income taxes**
            
            
            -
            
            
            -**Net
                loss**
            
            $
            (3,111,054
            )
            $
            (4,780,864
            )Series
                B convertible preferred stock dividend
            
            
            (298,000
            )
            
            (231,034
            )Series
                C convertible preferred stock dividend
            
            
            (184,000
            )
            
            -Increasing
                rate preferred stock non-cash dividends
            
            
            (352,768
            )
            
            -**Net
                loss allocated to common shareholders**
            
            $
            (3,945,822
            )
            $
            (5,011,898
            )**Basic
                and diluted loss per share**
            
            $
            (.63
            )
            $
            (.99
            )**Basic
                and diluted weighted average shares outstanding**
            
            
            6,283,160
            
            
            5,087,277








See
      accompanying Notes to Consolidated Financial Statements








4


**GigaBeam
      Corporation**


**Consolidated
      Statements of Cash Flows**


**(Unaudited)**




**Three
                Months Ended****March
                31,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                loss
            
            $
            (3,111,054
            )
            $
            (4,780,864
            )Adjustments
                to reconcile net loss to net cash used for operating
                activities:Amortization
                of debt discount and beneficial conversion feature
            
            
            410,025
            
            
            278,232Provision
                for doubtful accounts
            
            
            190,246
            
            
            15,860Increase
                in inventory provision for obsolescence
            
            
            50,000
            
            
            492,054Warranty
                costs
            
            
            (35,723
            )
            
            102,000Depreciation
                and amortization
            
            
            158,134
            
            
            115,855Non-cash
                compensation expenses
            
            
            365,269
            
            
            608,014Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            372,300
            
            
            (780,718
            )Inventories
            
            
            (120,707
            )
            
            (899,952
            )Prepaid
                expenses and other current assets
            
            
            406,282
            
            
            62,849Deposits
            
            
            (34,494
            )
            
            (17,240
            )Accounts
                payable
            
            
            550,341
            
            
            (378,909
            )Accrued
                liabilities
            
            
            60,785
            
            
            (414,492
            )**Net
                cash used in operating activities**
            
            
            (738,596
            )
            
            (5,597,311
            )**Cash
                flows from investing activities:**Non-cash
                loss on asset disposition
            
            
            36,697
            
            
            -Purchases
                of property and equipment
            
            
            -
            
            
            (233,245
            )Acquisition
                of patents & intangibles
            
            
            -
            
            
            (24,075
            )**Net
                cash provided by (used in) investing activities**
            
            
            36,697
            
            
            (257,320
            )**Cash
                flows from financing activities:**Repayments
                of capital lease obligations
            
            
            (7,152
            )
            
            (82,889
            )Proceeds
                from note payable to related party
            
            
            65,000
            
            
            -Exercise
                of common stock warrants
            
            
            -
            
            
            172,820Exercise
                of common stock options
            
            
            -
            
            
            20,000Proceeds
                from warrant holders in advance of issuance of shares of common
                stock
            
            
            -
            
            
            389,173Series
                B convertible preferred stock dividend paid
            
            
            -
            
            
            (231,034
            )**Net
                cash provided by financing activities**
            
            
            57,848
            
            
            268,070**Net
                decrease in cash and cash equivalents**
            
            
            (644,051
            )
            
            (5,586,561
            )Cash
                and cash equivalents at beginning of period
            
            
            653,734
            
            
            12,726,986**Cash
                and cash equivalents at end of period**
            
            $
            9,683
            
            $
            7,140,425





*See
      notes to consolidated financial statements.*


5


**GigaBeam
      Corporation** **Consolidated
      Statements of Cash Flows**


**(Unaudited)**





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Supplemental
                disclosures for cash flow information:Interest
                Paid
            
            $
            1,869
            
            $
            52,424Non-cash
                investing and financing activities:Conversion
                of convertible notes payable into shares of common stock
            
            $
            1,262,800
            
            $
            103,667Conversion
                of Series B convertible preferred stock into shares of common
                stock
            
            $
            -
            
            $
            144Fair
                value adjustment of options granted
            
            $
            (74,309
            )
            $
            199,886Fair
                value of warrants issued with common stock
            
            $
            188,441
            
            $
            -Stock
                issued for Series B and Series C convertible preferred stock
                dividend
            
            $
            482,000
            
            
            -Non-cash
                increasing rate preferred stock dividend
            
            $
            352,768
            
            
            -




*See
      notes to consolidated financial statements.*




6




**GigaBeam
      Corporation**


**Notes
      to Consolidated Financial Statements (Unaudited)**








**1.
      Description of the Business:**





We
      were
      incorporated under the laws of the State of Delaware on January 5, 2004. Our
      primary activities to date have consisted of securing financing, developing
      strategic alliances associated with the development of our technology, design,
      development and deployment of our Series Gig *E* and
      WiFiber G Series Gig *E* products
      as well as initial sales, marketing, production and installation of these
      products. In October 2004, we completed our initial public offering (“IPO”),
      generating net proceeds of approximately $5,491,000. Since that date, we have
      completed various private placements of our debt and equity securities
      generating net proceeds of approximately $36,123,602. Additionally, we have
      received approximately $3,297,000 to date from the exercise of common stock
      purchase warrants and options.





GigaBeam
      Corporation and its subsidiary, GigaBeam Service Corporation (referred to as
      the
“Company,” “us,” “our,” “we” or similar pronouns) designs, develops, markets,
      sells, leases, installs and services advanced point-to-point wireless
      communication solutions for commercial and government customers. Our
      communication links are capable of transmission speeds at or above one
      gigabit-per-second under the trade name “WiFiber®.” Our products operate in the
      71-76 GHz and 81-86 GHz spectrum bands. We believe that the unprecedented
      amounts of bandwidth provided by these spectrum blocks and the quality of its
      proprietary product designs will provide for wireless communications at
      previously unattainable fiber-equivalent speed and reliability.





Our
      WiFiber product line is fast, reliable, cost effective and can be rapidly
      installed or moved. Our solutions address the requirements of fixed wireless
      carriers, service providers, enterprises, and government institutions through
      broadband wireless networks. WiFiber, by providing the last mile access and
      backhaul, is complementary to both wireless fiber (“WiFi”) and worldwide
      interoperability for microwave access (“WIMAX”).





*Basis
      of Presentation*





The
      consolidated financial statements include our accounts and those of our
      wholly-owned subsidiary, GigaBeam Services Corporation. Intercompany accounts
      and transactions have been eliminated in consolidation.





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in conformity with accounting principles accepted in the United States
      of America for interim financial information. Accordingly, they do not include
      all the information and notes required by accounting principles generally
      accepted in the United States of America for complete financial statements.
      In
      the opinion of management, all adjustments and reclassifications considered
      necessary for a fair and comparable presentation have been included and one
      of a
      normal recurring nature. The accompanying condensed consolidated financial
      statements should be read in conjunction with the Company’s most recent Form
      10-KSB for the year ended December 31, 2006. The condensed consolidated results
      of operations for the interim periods presented are not necessarily indicative
      of the results to be experienced for the entire fiscal year.





**2.
      Summary of Significant Accounting Policies:**





*Cash
      and Cash Equivalents*





Cash
      equivalents consist of highly liquid investments, which are readily convertible
      into cash and have original maturities of three months or less as of the date
      of
      purchase.





*Fair
      Value of Financial Instruments*





The
      carrying values reflected in our consolidated balance sheets for cash and
      equivalents, receivables, notes receivable and short and long-term debt
      approximate their fair values.





7




*Concentration
      of Credit Risk*





Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist principally of cash and cash equivalents. The Company
      deposits its cash with financial institutions that the Company considers to
      be
      of high credit quality.





The
      Company operates in a single business segment, and is primarily producing
      advanced point-to-point wireless communication solutions for commercial,
      governmental and enterprise customers. Accounts receivable are concentrated
      with
      certain customers in the global telecommunications industry, which may subject
      the Company to concentration of credit risk.





The
      following table summarized the number of our significant customers for the
      three
      months ended March 31, 2007, and 2006 each of who accounted for more than 10%
      of
      our revenues, along with the percentage of revenues they individually
      represent.


Three
                Months Ended
            
            Three
                Months EndedMarch
                31, 2007
            
            March
                31, 2006Number
                of significant customers
            4
            
            4Percentage
                of net sales
            38%,
                29%, 16%, 11%
            
            32%,
                12%, 11%, 11%





*Accounts
      Receivable*





Accounts
      receivable transactions are recorded net of allowances for doubtful accounts.
      Allowances are based on aging of accounts receivable balances and credit
      worthiness of customers as determined by credit reviews, and as applicable,
      a
      review of customer payment histories.





*Inventories*





Inventories
      are valued at lower of cost (first-in, first-out method) or market. We regularly
      review parts and finished goods inventories on hand and, when necessary, record
      a provision for excess or obsolete inventories based primarily on current
      selling price and sales prices in confirmed backlog orders.





Inventories
                include the following:March
                31, 2007
            
            December
                31, 2006**(Unaudited)**
            
            **(Unaudited)**Raw
                material
            
            $
            4,860,177
            
            $
            4,765,145Finished
                goods
            
            
            3,815,658
            
            
            3,789,9838,675,835
            
            
            8,555,128Less
                provision for obsolescence
            
            
            (983,554
            )
            
            (933,554
            )$
            7,692,281
            
            $
            7,621,574





*Property
      and Equipment*





Property
      and equipment and website development are recorded at cost less accumulated
      depreciation and amortization. Depreciation and amortization are computed using
      the straight-line method over the estimated useful lives, ranging from three
      to
      seven years. Maintenance and repairs are expensed as incurred. Capitalized
      leasehold improvements are amortized over the shorter of expected lives or
      initial lease term of related facility lease.





*Intangibles*


Intangible
        assets consist primarily of patents and trademarks. The Company has adopted
        the
        guidelines for accounting for these assets as set forth in SFAS No. 142,
        “Goodwill and Other Intangible Assets” (“SFAS 142”). Under the requirements as
        set out in SFAS 142, the Company amortizes the costs of acquired patents
        purchased over their remaining legal lives. Costs for current patent
        applications based on internally developed processes, primarily legal costs,
        are
        capitalized pending disposition of the individual patent application, and
        are
        subsequently either amortized based on initial patent life granted or evaluated
        for impairment periodically by the Company’s management. At March 31, 2007,
        patent application costs of $241,002 were included in other assets, compared
        to
        $241,002 at December 31, 2006. For the three months ended March 31, 2007
        amortization expense totaled $2,896, compared to $3,691 for the three months
        ended March 31, 2006.




8


At
        March
        31, 2007 and December 31, 2006 total intangible assets of $350,252 and $352,502,
        respectively, were included in non-current Other Assets.


*Impairment
      of Long-Lived Assets*





SFAS
      No.144, “Accounting for the Impairment of Long-lived Assets and for Long-lived
      Assets to be disposed of” addressed financial accounting and reporting for the
      impairment or disposal of long-lived assets.





The
      Company reviews its long-lived assets, other than goodwill, for impairment
      wherever events or circumstances indicate the carrying value of such assets
      may
      not be recoverable through the estimated discounted future cash flows from
      the
      use of these assets. Considerable judgment is required to estimate the
      appropriate discounting of future cash flows, if such comparisons can be
      reasonably ascertained. Factors that could indicate an impairment may exist
      include significant under performance relative to long-term projections,
      strategic changes in business strategy on significant negative economic trends
      in an industry. When and if such impairment exists, the related assets are
      written down to fair value. At March 31, 2007, management has determined that
      there were no indicators requiring review for impairment and therefore no
      adjustments have been made to the carrying value of long-lived assets. There
      can
      be no assurance, however, that market conditions will not change on demand
      for
      the Company’s products or services will continue which could result in
      impairment of long-lived assets in the future.





*Accrued
      Liabilities*





Accrued
      liabilities include the following:




**March
                31,**
            
            **December
                31,****2007**
            
            **2006****(Unaudited)**
            
            **(Unaudited)**Estimated
                contract based costs
            
            $
            225,000
            
            $
            500,000Accrued
                interest payable
            
            
            195,573
            
            
            171,221Accrued
                payroll and benefits
            
            
            587,104
            
            
            466,751Accrued
                warranty costs
            
            
            198,000
            
            
            233,723Other
            
            
            250,849
            
            
            45,021$
            1,456,526
            
            $
            1,416,716





During
      the three months ended March 31, 2007 and 2006 warranty costs of $(35,723)
      and
      $102,000, respectively, were expensed to cost of sales.





*Other
      Assets*





Other
      assets consist of deposits, intangible assets (patents and related trademarks)
      at amortized value.





*Revenue
      Recognition*





Revenue
      is recognized pursuant to SEC Staff Accounting Bulletin No. 104 “Revenue
      Recognition in Financial Statements” (“SAB 104”). Accordingly, revenue is
      recognized when all four of the following criteria
      are met: (i) persuasive evidence that an arrangement exits, (ii) delivery of
      the
      product and/or services has occurred, (iii) the selling process is fixed or
      determinable, and (iv) collectibility is reasonably assured. Further, if an
      arrangement other than a long-term contract requires the delivery or performance
      of multiple deliveries or elements under a bundled sale, we determine whether
      the individual elements represent “separate units of accounting” under the
      requirements of Emerging Issues Task Force Issue 00-21, “Multiple Delivery
      Revenue Arrangements.”





If
      the
      separate elements within a bundled sale are not considered separate units of
      accounting, the delivery of individual elements is considered not to have
      occurred if there are undelivered elements that are essential to the overall
      functionality of the bundled sale transaction.




9


In
      accordance with SAB 104 revenues from product sales are generally recognized
      when title and risk of loss pass to the customer, except when product sales
      are
      combined with significant post-shipment installation services or unless the
      terms of the sale specifically call for formal acceptance by the customer.
      Under
      this exception, revenues will be deferred until such services have been
      performed and/or acceptance is acknowledged. Unearned income on service
      contracts is amortized by the straight-line method over the term of the
      individual contract. Installation revenue is recognized when the related
      services are performed. Shipping and handling fees billed to customers are
      classified on the Consolidated Statement of Operations as “Net sales” and the
      associated costs are classified in “Cost of sales”.





*Product
      Warranties*




The
      Company has established an accrual for warranty work associated with its link
      sale. Such warranty accrual is recognized as a component of cost of sales.
      The
      Company’s standard warranty has been established generally for a period of 12
      months from the date of installation if the customer utilizes the Company’s
      personnel or any of its approved installer group to install the product;
      otherwise it is 12 months from the date of shipment. The warranty accrual at
      present represents the best estimate of the cost to settle existing and future
      claims on products sold and currently under warranty as of the balance sheet
      date. The Company has little historical trend of shipment levels return rates
      and repair costs related to shipment levels. As the number of product sales
      increase, we will accumulate information on returns and average costs to repair.
      As with any estimate that requires application of judgment, amounts estimated
      in
      the warranty accrual could differ materially from what will actually transpire
      in the future.





*Research,
      Engineering and Development*





Internal
      research, engineering and development expenses are expensed as incurred. The
      Company has entered into agreements with third parties in connection with
      development collaborations of its technology. Amounts charged by third parties
      in accordance with these agreements, which are deemed to correlate to costs
      incurred by such parties, are expensed as incurred.





*Net
      Loss Per Share*





Basic
      loss per share is computed by dividing loss available to common shareholders
      by
      the weighted average number of common shares outstanding for the period. Diluted
      loss per share reflects, in periods in which they have a dilutive effect, the
      effect of common shares issuable upon the exercise of stock options and warrants
      or conversion of any convertible equities securities. Diluted loss per share
      amounts  are
      the
      same as basic amounts because the impact of the stock equivalents was
      anti-dilutive. The following securities were excluded from the computation
      of
      diluted loss per common share for the period because their effect is
      anti-dilutive:





**Number
                of Shares**Notes
                convertible into common stock
            
            67,500Options
                to purchase common stock
            
            1,439,195Warrants
                to purchase common stock
            
            6,228,176Shares
                underlying Series B convertible preferred stock
            
            2,475,412Shares
                underlying Series C convertible preferred stock
            
            1,639,344





*Income
      Taxes*





The
      Company follows the provisions of SFAS No. 109, “Accounting for Income Taxes.”
Deferred taxes are provided on temporary differences that arise in the recording
      of transactions for financial and tax reporting purposes and result in deferred
      tax assets and liabilities. Deferred tax assets are reduced by an appropriate
      valuation allowance, if, in management’s judgment; it is more likely than not
      that the deferred tax asset will not be realized.





*Use
      of Estimates*





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





10


*Share-Based
      Compensation*





Effective
      January 1, 2006, the Company adopted SFAS 123R which establishes standards
      for
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. SFAS 123R focuses primarily on accounting for transactions in which
      an
      entity obtains employee services in share-based payment transactions, including
      issuances of stock options to employees. As a result of the adoption of SFAS
      123R utilizing the Modified Prospective method, the Company recorded charges
      of
      $435,968 in the three months ended March 31, 2007, representing the effect
      on
      income from continuing operations, income before income taxes, and net income.
      The impact of the adoption of SFAS 123R was to reduce basic and diluted earnings
      per share by $0.07 in the three months ended March 31, 2007. The Company
      recorded charges of $404,519 in the three months ended March 31, 2006,
      representing the effect on income from continuing operations, income before
      income taxes, and net income. The impact of the adoption SFAS 123R was to reduce
      basic and diluted earnings per share by $0.08 in the three months ended March
      31, 2006.





No
      stock
      options were granted by the Company to employees and directors during the three
      months ended March 31, 2007. Compensation expense recognized during the three
      months ended March 31, 2007 amounted to $435,968. These amounts were charged
      to
      operations and added to paid-in capital in accordance with SFAS 123R. The
      Company granted 196,500 options to employees and directors during the three
      months ended March 31, 2006 with exercise prices ranging from $8.00 per share
      to
      $9.50 per share. Compensation expense recognized during the three months ended
      March 31, 2006 amount to $404,519. The total intrinsic value of options
      exercised during the three months ended March 31, 2007 was $0.





A
      summary
      of employee options activity under our plans as of March 31, 2007 and changes
      during the three-month period then ended is presented below:





Options
            
            Shares
            
            Weighted-Average
                Exercise Price
            
            Weighted-Average
                Remaining Contractual Terms (Years)
            
            Aggregate
                Intrinsic Value**Balance,
                January 1, 2007**
            
            1,444,355
            
            $8.71Granted
                during the period
            
            0
            
            -Exercised
                during the period
            
            0
            
            -Expired
                during the period
            
            (401,300)
            
            -**Outstanding,
                March 31, 2007**
            
            1,043,055
            
            $8.64
            
            8.62
            
            $8,707,268**Exercisable,
                March 31, 2007**
            
            306,854
            
            $6.05
            
            5.33
            
            $1,636,907





The
      closing market value of the Company’s common stock as of March 31, 2007 was
      $3.17 per share.





The
      fair
      value of each option award during the three months ended March 31, 2007 is
      estimated on the date of grant using the Black-Scholes option valuation model
      that uses the assumptions noted in the following table:





March
                31, 2007Expected
                volatility
            101%Weighted-average
                volatility
            113%Expected
                dividends
            0.0%Expected
                term (in years)
            6-7
                yearsRisk-free
                rate
            4.60-5.23%





*Earning
      (Loss) per Share*





Basic
      earnings (loss) per share (“EPS”) excludes dilution and is computed by dividing
      net income (loss) applicable to common shareholders by the weighted average
      number of common shares actually outstanding during the period. Diluted EPS
      reflects the potential dilution from potentially dilution securities, except
      where inclusion of such securities would have an anti-dilution effect, using
      the
      average stock price during the period in the computation.





11


Options
      to purchase 1,439,195 shares of the Company’s common stock were outstanding
      during the three month period ended March 31, 2007, but were not included in
      the
      computation of diluted EPS, as the effect would be anti-dilutive options to
      purchase 1,165,810 shares of the Company’s common stock were outstanding during
      the three month period ended March 31, 2006, but were not included in the
      computation of diluted EPS, as the effect would be anti-dilutive.





*Recent
      Accounting Pronouncements*





In
      June 2006, the FASB issued Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”
(“FIN 48”). This interpretation clarifies the application of SFAS 109 by
      defining a criterion that an individual tax position must meet for any part
      of
      the benefit of that position to be recognized in an enterprise’s financial
      statements and also provides guidance on measurement asset recognition,
      de-recognition, classification, interest and penalties, accounting in interim
      periods and disclosure. The criteria for asset recognition is that it is more
      likely than not that a tax position will be sustained based solely upon its
      technical merits. If the recognition standards are not satisfied, then no
      benefit from the tax benefit can be recorded for financial statement purposes.
      If the standard is satisfied, the amount of tax benefit recorded for financial
      statement purposes is the largest amount of tax benefit with a greater than
      50%
      likelihood of being realized upon settlement with a taxing authority. FIN 48
      is
      effective for the Company January 1, 2007. Upon adoption of FIN 48 on
      January 1, 2007, the Company did not record any interest or
      penalties.





The
      Company is subject to taxation in the U.S. and various state jurisdictions.
      The
      Company’s tax years for 2004 and 2005 are subject to examination by the U.S. tax
      authorities due to the carry forward of unutilized net operating
      losses.





The
      adoption of FIN 48 did not have a material impact on the financial condition,
      results of operations or cash flows. At January 1, 2007, the Company had US
      net
      operating loss (“NOL”) carry forwards of approximately $33 million. At January
      1, 2007, the Company had a net deferred tax asset of approximately $16,469,141
      related to these NOLs. Due to uncertainties surrounding the Company’s ability to
      generate future taxable income to realize these assets, a full valuation has
      been established to offset the net deferred tax asset. Additionally, the future
      utilization of the US NOL carry forwards to offset future taxable income may
      be
      subject to a substantial annual limitation as a result of Section 382 ownership
      changes that may have occurred previously or that could occur in the future.
      In
      general, an ownership change, as defined by Section 382, results from
      transactions increasing the ownership of certain shareholders or public groups
      in the stock of a corporation by more than 50 percentage points over a three
      year period. Since the Company’s formation, the Company has raised capital
      through the issuance of capital stock which, combined with the purchasing
      shareholders’ subsequent disposition of those shares, may have resulted in a
      change of control, as defined by Section 382, or could result in a change of
      control in the future upon subsequent disposition. If the Company has
      experienced a change in control at any time since the Company’s formation,
      utilization of the Company’s NOL carry forwards would be subject to an annual
      limitation under Section 382. Any limitation may result in expiration of a
      portion of the NOL carry forwards before utilization. Any carry forwards that
      will expire prior to utilization as a result of such limitations will be removed
      from deferred tax assets with a corresponding reduction of the valuation
      allowance. Due to the existence of the valuation allowance, future changes
      in
      our unrecognized tax benefits related to NOLs will not impact the Company’s
      effective tax rate .





In
      September 2006 the FASB issued SFAS No. 157 “Fair Value Measurement” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value and expands disclosure of fair value measurements. SFAS 157 applies under
      other accounting pronouncements that require or permit fair value measurement,
      and accordingly does not require any new fair value measurements. SFAS 157
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 (2008 for the Company).





In
      February 2007 the FASB issued SFAS No. 159 “Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS No. 159”) which upon adoption would
      allow entities to choose to measure many financial instruments and certain
      other
      items at fair value through earnings. The standard allows the fair value
      measurements to be applied instrument by instrument, is irrevocable for any
      instruments for which such selection is made, and applies to the entire
      instrument. SFAS No. 159 is effective for fiscal years beginning after November
      15, 2007. The Company is currently evaluating the impact of this standard on
      its
      future financial statements.





12


In
      September 2006, SEC Staff Accounting Bulletin No. 108 was issued to provide
      guidance on Quantifying Financial Statement Misstatements. Staff Accounting
      Bulletin No. 108 addresses how the effects of prior-year uncorrected
      misstatements should be considered when quantifying misstatements in
      current-year financial statement. The SAB requires registrants to quantify
      misstatements using both the balance sheet and income-statement approaches
      and
      to evaluate whether either approach results in quantifying an error that is
      material in light of relevant quantitative and qualitative factors. The SAB
      does
      not change the staff’s previous guidance in SAB 99 on evaluating the quality of
      misstatements. When the effect of initial adoption is determined to be material,
      the SAB allows registrants to record that effect as cumulative-effect adjustment
      to beginning-of-year retained earnings. The requirements are effective for
      annual financial statements covering the first fiscal year ending after November
      15, 2006. The Company has analyzed SAB 108 and determined that it will have
      no
      impact on its reported financial position, results of operations, or cash
      flows.





*Derivative
      Instruments*





The
      Company enters into financing arrangements that consist of freestanding
      derivative instruments or are hybrid instruments that contain embedded
      derivative features. The Company accounts for these arrangement in accordance
      with Statement of Financial Accounting Standards No. 133, "Accounting for
      Derivative Instruments and Hedging Activities", ("SFAS No. 133") and Emerging
      Issues Task Force Issue No. 00-19, "Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company's Own Stock",
      ("EITF 00-19"), as well as related interpretations of these standards. In
      accordance with accounting principles generally accepted in the United States,
      derivative instruments and hybrid instruments are recognized as either assets
      or
      liabilities in the statement of financial position and are measured at fair
      value with gains or losses recognized in earnings or other comprehensive income
      depending on the nature of the derivative or hybrid instruments. Embedded
      derivatives that are not clearly and closely related to the host contract are
      bifurcated and recognized at fair value with changes in fair value recognized
      as
      either a gain or loss in earnings if they can be reliably measured. When the
      fair value of embedded derivative features can not be reliably measured, the
      Company measures and reports the entire hybrid instrument at fair value with
      changes in fair value recognized as either a gain or loss in earnings. The
      Company determines the fair value of derivative instruments and hybrid
      instruments based on available market data using appropriate valuation models,
      giving consideration to all of the rights and obligations of each instrument
      and
      precluding the use of "blockage" discounts or premiums in determining the fair
      value of a large block of financial instruments. Fair value under these
      conditions does not necessarily represent fair value determined using valuation
      standards that give consideration to blockage discounts and other factors that
      may be considered by market participants in establishing fair
      value.





**3.
      Going Concern Consideration**





The
      Company’s financial statements have been presented on the basis that they are a
      going concern which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. During the years ended December
      31, 2006 and 2005 and through March 31, 2007, we have been unable to generate
      cash flows sufficient to support our operations and have been dependent on
      debt
      and equity raised from qualified individual investors.





At
      March
      31, 2007, we had cash and cash equivalents of $9,683. Our net working capital
      (current assets less current liabilities) as of March 31, 2007 was $4,078,058.
      Our accounts payable liabilities were $2,441,418 at March 31, 2007. Management
      believes we will continue to incur net losses from operating activities through
      at least December 31, 2007.





These
      factors raise substantial doubt about our ability to continue as a going
      concern. The financial statements contained herein do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts or amounts and classification of liabilities that might be necessary
      should we be unable to continue as a going concern. Our ability to continue
      as a
      going concern is dependent upon our ability to generate sufficient cash flows
      to
      meet our obligations on a timely basis, to obtain additional financing as may
      be
      required, and ultimately to attain profitable operations. However, there is
      no
      assurance that profitable operations or sufficient cash flows will occur in
      the
      future. Our independent auditors issued a going concern qualification in their
      report on our financial statements included with the Company’s December 31, 2006
      Form 10-KSB.





To
      date,
      we have supported our operations by: 1) selling our products and related
      services, 2) raising additional operating cash through the private sale of
      our
      redeemable preferred and convertible preferred stock, 3) selling convertible
      debt in a private sale, 4) issuing common stock shares upon conversion of common
      stock warrants issued at the time of our IPO and 5) issuing notes to existing
      investors.





These
      steps have provided us with the cash flows to continue our business through
      the
      date of this report, but have not resulted in significant improvement in our
      financial position. The following efforts have been undertaken or are in process
      as part of our efforts to secure suitable financings, improve working capital
      and increase cash flows with the objective to improve our long-term financial
      viability:





13


-
            On
                January 5, 2007, we reduced our total work force levels from 53 to
                26
                persons.





-
            With
                the agreement of our landlord, and with no further lease payment
                obligations, we closed our Lewisville, Texas location in early January,
                2007 and combined these operations into our Durham, N.C.
                facility.





-
            Vigorous
                collection of accounts receivable balances, and in certain cases,
                we are
                requiring substantial money in advance of shipment of
                links.





-
            On
                January 3, 2006, April 1, 2006, July 3, 2006 and October 2, 2006,
                we paid
                the quarterly dividend to holders of Series B stock in cash amounting
                to
                $231,034, $371,311, $319,067, and $314,781, respectively, since the
                20
                trading days average trading volume in our stock did not exceed the
                threshold 20,000 share figure noted above. In January, 2007, to conserve
                cash, we requested a waiver from the Series B stockholders to receive
                their quarterly dividend in shares of our common stock in lieu of
                a cash
                dividend. All of the Series B preferred stockholders agreed to the
                waiver
                except one, who elected a cash dividend. Consequently, in January
                2007, we
                issued 70,203 shares of our common stock and agreed to pay the non-waiving
                stockholder $4,000 in cash. Subsequently, the non-waiving shareholder
                agreed to take the dividend in shares as well. We issued a total
                of 941
                shares of our common stock to this shareholder in lieu of cash. The
                shares
                of common stock were valued at $4.2449 (90% of the average of the
                Volume
                Weighted Average Price (“VWAP”) for the 20 consecutive trading days ending
                December 29, 2006.-
            In
              January 2007, in order to conserve cash, we requested a waiver from
              the
              Series C preferred stockholders in order to pay their quarterly dividend
              in shares of our common stock in lieu of a cash dividend. All of the
              Series C preferred stockholders agreed to the waiver except two, who
              elected a cash dividend. Consequently, in January 2007, we issued 43,344
              shares of our common stock and agreed to pay the non-waiving stockholders
              $16,000 in cash. Subsequently, the non-waiving shareholders agreed
              to take
              the dividend in shares as well. We issued a total of 3,771 shares of
              our
              common stock to these shareholders in lieu of cash. The shares of common
              stock were valued at $4.2449 (90% of the average of the VWAP for the
              20
              consecutive trading days ending December 29, 2006. In addition, in
              consideration for agreeing to the waiver we agreed to issue a number
              of
              our common stock purchase warrants equal to 50% of the number of shares
              of
              common stock issued as payment for the January 2007 dividend.





-
            In
                    April, 2007, again to conserve cash, we requested a waiver from
                    the Series
                    B and Series C shareholders to receive their quarterly dividend
                    in shares
                    of our common stock in lieu of a quarterly cash dividend. Additionally,
                    in
                    consideration for agreeing to the waiver, we offered to the holders
                    of the
                    Series B and Series C stock a number of our common stock purchase
                    warrants
                    equal to 50% of the number of shares of common stock as payment
                    for the
                    April 2007 dividend. All of the Series B and Series C shareholders
                    agree
                    to the waiver and payment in shares. Consequently, in May 2007,
                    we issued
                    173,660 shares of our common stock. The common stock shares were
                    valued at
                    $2.8907 (90% of the VWAP for the 20 consecutive trading days
                    ending March
                    30, 2007), and common stock purchase warrants equal to 50% of
                    the number
                    of common stock shares issued as payment for the April 2007 dividends.





-
            On
                April 17, 2007, we received proceeds of $500,000 under a note payable
                as
                part of a $1 million financing commitment from an existing investor.





-
            Reducing
                cash operating expenses to levels that are in line with current revenues.
                We may seek reductions in certain operations expenses through the
                issuance
                of additional common shares of our stock in lieu of cash payments
                to key
                vendors. We have no assurance that we will enter into any such
                arrangements with any of our
                vendors.





These
      alternatives could result in substantial dilution of existing stockholders.
      There can be no assurances that our current financial position can be improved,
      that we can raise additional working capital or that we can achieve positive
      cash flows from operations. Our short and long-term viability as a going concern
      is dependent upon the following:





14




-
            Our
                ability to locate sources of debt or equity funding to meet current
                commitments and near-term future
                requirements.





-
            Our
                ability to achieve profitability and ultimately generate sufficient
                cash
                flow from operations to sustain our continuing
                operations.




**4.
      Convertible notes payable:**





Convertible
      notes payable consist of the following:




**March
                31,**
            
            
            **December
                31,****2007**
            
            
            **2006**8%
                senior notes payable
            
            $
            540,000
            
            $
            1,802,800Less
                unamortized discount
            
            
            (258,068
            )
            
            (433,170
            )Less
                unamortized beneficial conversion feature
            
            
            (190,568
            )
            
            (318,594
            )$
            91,364
            
            $
            1,051,036





On
      January 28, 2005 and February 1, 2005, the Company issued 8% senior convertible
      notes and common stock warrants with an aggregate principal amount of
      $2,500,000, due January 28, 2008 (“Notes”), in an asset-backed financing.
      Additionally, warrants to purchase common stock were issued in connection with
      the financing.





The
      principal amount of the Notes is convertible at the election of the holders
      into
      shares of the Company’s common stock at $8.00 per share. One-half of the
      interest on the Notes is payable in cash, semi-annually beginning July 31,
      2005,
      and the balance is payable, on the earlier of the Note’s maturity or conversion,
      in cash or, at each holder’s option, in shares of the Company’s common stock
      valued at the lesser of (i) $10.00 per share and (ii) the volume weighted
      average per-share price of the common stock for the ten trading days ended
      five
      business days prior to the applicable interest payment date. The Notes are
      collateralized by substantially all of the Company’s assets as well as by the
      personal pledge of shares of common stock of the Company by each of the
      Company’s Chief Executive Officer and President.





The
      warrants issued in conjunction with the Notes are exercisable to purchase an
      aggregate of 446,429 shares of common stock at an exercise price of $7.00 per
      share through January 28, 2011. The Company estimated the fair value of the
      warrants using the Black-Scholes model. The resulting fair value of $1,194,761
      was recorded as a debt discount, which is being amortized over the term of
      the
      debt. The debt discount was recorded as a reduction to convertible notes payable
      and the amortization of the debt discount is being recorded as a component
      of
      interest expense. During the year ended December 31, 2006 and 2005, the Company
      recorded amortization of $398,253 and $363,338, respectively.





In
      connection with the issuance of the Notes, the Company paid issuance costs
      of
      $330,519. In addition, the placement agent received warrants (identical to
      the
      warrants issued to the investors in the financing) to purchase 44,642 shares
      of
      common stock and options to purchase 31,250 shares of common stock for $8.00
      per
      share. The Company estimated the fair value of the placement agent warrants
      and
      options using the Black-Scholes model to be $384,835. The resulting aggregate
      debt issuance costs of $715,354 are being amortized as a component of interest
      expense over the term of the debt. During the three months ended March 31,
      2007
      and 2006, the Company recorded amortization of $281,998 and $106,511,
      respectively.





The
      proceeds from the issuance of the Notes and warrants were allocated between
      the
      Notes and the warrants based on the relative fair values of the components.
      The
      portion of the proceeds allocated to the warrants was classified as additional
      paid-in capital. The proceeds allocated to the Notes were compared to the fair
      value of the common stock that would be received on the conversion and the
      Company determined that a beneficial conversion feature existed. The Company
      has
      estimated the fair value of such beneficial conversion feature to be
      approximately $882,261 and recorded such amount as a debt discount. Such
      discount is required to be amortized to interest expense over the period from
      the date of issuance of the notes until the stated redemption date, January
      28,
      2008. During the three months ended March 31, 2007 and 2006, the Company
      recorded interest expense of $128,026 and $73,521, respectively, related to
      the
      amortization of the beneficial conversion feature. The unamortized balance
      of
      $190,568 and $318,594 has been recorded as a reduction to convertible notes
      payable at March 31, 2007 and December 31, 2006, respectively.




During
      the three months ended March 31, 2007 note holders exercised conversion rights
      with respect to $1,262,800 in face value of notes to shares of common stock.
      During the year ended December 31, 2006, note holders exercised conversion
      rights with respect to $540,867in face value of Notes to shares of common stock.
      Shares of common stock were issued and the related Notes were retired or reduced
      in face value.





15


The
      carrying values as of March 31, 2007 and December 31, 2006 of $91,364 and
      $1,051,036 respectively, are comprised of the aggregate principal amount
      outstanding, net of unamortized discount and the net unamortized beneficial
      conversion feature. The net decrease in the carrying value at March 31, 2007
      is
      due to conversion of $1,262,800 principal amount of the notes to common stock
      shares during the quarter, and is offset by the amortization of the debt
      discount and beneficial conversation feature during the quarter.




At
      March
      31, 2007 and December 31, 2006, the Company estimated the fair value of the
      Notes to be equal to their face value of $540,000 and $1,802,000,
      respectively.




As
      of May
      8, 2007 we had not paid a total of $34,404 that was due and payable in cash
      to
      note holders as of the January 31, 2007 interest payment due date.





**5.
      Capital Leases**





The
      Company entered into various capital leases for test equipment. As of March
      31,
      2007, the future minimum payments under leases are as follows:




Year
                  ended December 31,
 2007
              
              $
              24,7472008
              
              
              20,9082009
              
              
              9,7442010
              
              
              9,7442011
              
              
              6,498
 Total
                  payment obligation
              
              
              71,641Less
                  amount representing interest
              
              
              (8,509
              )
 Present
                  value of net minimum obligation
              
              
              63,132Less
                  current portion
              
              
              (29,530
              )Non
                  current portion
              
              $
              33,602




**6.** **Income
      Taxes** ****





No
      provision for federal or state income taxes has been recorded, as the Company
      incurred net operating losses for all periods presented for all jurisdictions
      in
      which it operates. The Company has U. S. Federal and state net operating loss
      carry forwards of approximately $33,683,000 at December 31, 2006 to reduce
      future federal income taxes, if any. As of March 31, 2007, the Company has
      fully
      reserved for these net operating loss carry forwards. These carry forwards
      expire beginning in 2024 and are subject to review and possible adjustment
      by
      the Internal Revenue Service.


In
        June 2006, the FASB issued Interpretation No. 48, “Accounting for
        Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”
(“FIN 48”). This interpretation clarifies the application of SFAS 109 by
        defining a criterion that an individual tax position must meet for any part
        of
        the benefit of that position to be recognized in an enterprise’s financial
        statements and also provides guidance on measurement asset recognition,
        de-recognition, classification, interest and penalties, accounting in interim
        periods and disclosure. The criteria for asset recognition is that it is
        more
        likely than not that a tax position will be sustained based solely upon its
        technical merits. If the recognition standards are not satisfied, then no
        benefit from the tax benefit can be recorded for financial statement purposes.
        If the standard is satisfied, the amount of tax benefit recorded for financial
        statement purposes is the largest amount of tax benefit with a greater than
        50%
        likelihood of being realized upon settlement with a taxing authority. FIN
        48 is
        effective for the Company January 1, 2007. Upon adoption of FIN 48 on
        January 1, 2007, the Company did not record any interest or
        penalties.
 
 The
        Company is subject to taxation in the U.S. and various state jurisdictions.
        The
        Company’s tax years for 2004 and 2005 are subject to examination by the U.S. tax
        authorities due to the carry forward of unutilized net operating
        losses.
 
 The
        adoption of FIN 48 did not have a material impact on the financial condition,
        results of operations or cash flows. At January 1, 2007, the Company had
        US net
        operating loss (“NOL”) carry forwards of approximately $33 million. At January
        1, 2007, the Company had a net deferred tax asset of approximately $16,469,141
        related to these NOLs. Due to uncertainties surrounding the Company’s ability to
        generate future taxable income to realize these assets, a full valuation
        has
        been established to offset the net deferred tax asset. Additionally, the
        future
        utilization of the US NOL carry forwards to offset future taxable income
        may be
        subject to a substantial annual limitation as a result of Section 382 ownership
        changes that may have occurred previously or that could occur in the future.
        In
        general, an ownership change, as defined by Section 382, results from
        transactions increasing the ownership of certain shareholders or public groups
        in the stock of a corporation by more than 50 percentage points over a three
        year period. Since the Company’s formation, the Company has raised capital
        through the issuance of capital stock which, combined with the purchasing
        shareholders’ subsequent disposition of those shares, may have resulted in a
        change of control, as defined by Section 382, or could result in a change
        of
        control in the future upon subsequent disposition. If the Company has
        experienced a change in control at any time since the Company’s formation,
        utilization of the Company’s NOL carry forwards would be subject to an annual
        limitation under Section 382. Any limitation may result in expiration of
        a
        portion of the NOL carry forwards before utilization. Any carry forwards
        that
        will expire prior to utilization as a result of such limitations will be
        removed
        from deferred tax assets with a corresponding reduction of the valuation
        allowance. Due to the existence of the valuation allowance, future changes
        in
        our unrecognized tax benefits related to NOLs will not impact the Company’s
        effective tax rate .





16


**7.
        Equity Issues- Preferred Stock**
 
 During
        the period May 6, 2005 through July 26, 2005, we completed a private placement
        of 11,277 shares of our 10% Series A redeemable preferred stock (“Series A
        stock”), with a stated value of $700 per share, and 1,127,700 common stock
        purchase warrants for aggregate proceeds of $7,950,285, before payment of
        approximately $1,250,000 in placement and legal fees. Dividends are payable,
        at
        the rate of 10% per year, semi-annually, commencing November 15, 2005. Dividends
        can be paid, at our option, in either cash or shares of our common stock.
        At any
        dividend date, if we choose to make the dividend payment in shares of common
        stock, the number of shares to be issued will be based on a ten trading days
        volume weighted average price per share of the common stock ending five trading
        days before the dividend date.
 
 Each
        warrant is exercisable to purchase one share of common stock at an exercise
        price of $7.00 per share until January 28, 2011.
 
 In
        the
        event we conduct a financing with gross proceeds of $30 million or more (a
        “Qualified Financing”), holders of the Series A stock will have the right to
        exchange all or a portion of their then outstanding shares into securities
        identical to those issued in the Qualified Financing, at an exchange rate
        per
        share equal to the then-applicable redemption price of the shares. Following
        the
        completion of a Qualified Financing, shares of Series A stock still outstanding
        are mandatory redeemable, in accordance with the terms of the Certificate
        of
        Designation governing the Series A stock. Prior to the completion of a Qualified
        Financing we may redeem all or any of the outstanding shares of the Series
        A
        stock in cash, and upon notice annually on May 15 at a stipulated premium
        price,
        which declines annually until May 15, 2010, when the redemption price will
        be at
        the $700 per share stated price.


In
      June
      and July 2005, we issued 92,500 shares of our common stock in an offshore
      offering as part of a unit that included 92,500 common stock purchase warrants
      for aggregate proceeds of $652,125, before payment of approximately $75,000
      in
      placement and legal fees. The stated price of each unit was $705. Each warrant
      is exercisable to purchase one share of common stock at an exercise price of
      $7.00 per share until January 28, 2011. The warrants have been listed together
      with warrants issued with the Series A stock and with warrants issued in
      February 2005 related to our $2,500,000 Notes financing (the “Z warrants”) on
      the Nasdaq Capital Market under the symbol “GGBMZ”.





On
      November 15, 2005, we paid the first required dividend on the Series A stock
      in
      shares of common stock. The total shares issued to holders of the Series A
      stock
      were 42,392 based on the formula as noted above. On May 15, 2006 and November
      15, 2006, we paid the semi-annual required dividend through the issuance of
      31,798 shares and 59,941 shares of common stock, respectively, based on the
      stated formula.





Our
      common stock, the Z warrants described above and our IPO warrants commenced
      trading on the Nasdaq Capital Market on March 27, 2006. Prior to March 27,
      2006
      our common stock, Z warrants and IPO warrants were traded on the Over the
      Counter Bulletin Board.





On
      November 7, 2005, we issued 18,900 shares of our variable dividend series B
      convertible preferred stock (“Series B stock”), and 1,302,191 common stock
      purchase warrants at a price of $1,000 per unit for gross proceeds of
      $18,900,000 before payment of placement fees of approximately $1,323,000 and
      other related expenses of approximately $125,000, resulting in net proceeds
      to
      us of approximately $17,452,000 in a private placement of such securities to
      institutional investors. The proceeds from the issuance of the Series B stock
      and warrants were allocated between the Series B stock and the warrants based
      on
      the relative fair value of the components. The proceeds allocated to the shares
      were compared to the par value of the common stock that would be received upon
      conversion and we determined that a beneficial conversion feature existed.
      We
      have estimated the fair value of such beneficial conversion feature, through
      use
      of the Black-Scholes model, to be $3,936,794. The value of the beneficial
      conversion feature is included as an adjustment to the net loss to arrive at
      the
      net loss allocated to common stockholders while such Series B stock is
      outstanding.





Pursuant
      to the anti-dilution provisions contained in the Certificate of Designation
      of
      Preferences, Rights and Limitations of the Series B stock, at the time of any
      issuance of common stock or common stock equivalents at an effective price
      below
      the conversion price then in effect, the conversion price of the Series B stock
      shall be adjusted to the effective price of the subsequently issued common
      stock
      or common stock equivalents as of the date of such issue. On August 21, 2006
      we
      issued 10,000 shares of our variable dividend Series C convertible preferred
      stock (“Series C stock”) with a conversion price of $6.10 which was below the
      Series B stock conversion price. Consequently, the original conversion price
      of
      the Series B stock of $7.6199 per share was adjusted to equal the effective
      price of our variable dividend Series C stock of $6.10 that we issued in August
      2006. Based upon the adjusted conversion price of $6.10 per share, and based
      upon the number of outstanding shares of Series B stock at August 21, 2006
      (15,300), the number of common shares issuable upon conversion of the Series
      B
      stock was adjusted from 2,007,906 shares to 2,508,204 shares.





Additionally,
      pursuant to the anti-dilution provisions of the warrants issued to the holders
      of the Series B stock, the number of shares of common stock issuable upon
      exercise of the warrants issued to the Series B stock shareholders has been
      adjusted from 1,274,630 shares to 1,668,032 shares and the exercise price has
      been adjusted from $7.9827 to $6.10.





The
      variable dividend rate on the Series B stock is 8% per annum for the first
      three
      years, then 11% for the fourth year, and 14% thereafter.





We
      may
      redeem any then outstanding shares of the Series B stock in whole or in part,
      after November 7, 2008, subject to certain conditions and limitations, upon
      appropriate notice, at a cash redemption price equal to 110% of the stock’s
      stated value if redeemed prior to November 7, 2009, and at 100% of the stated
      value after November 7, 2009.





17


Under
      terms of the Series B stock, so long as any shares of the Series B stock remain
      outstanding, we are prohibited from paying dividends on our common stock or
      other designated junior securities, other than dividend payments in the ordinary
      course under our Series A stock provided we are current in our obligations
      under
      our Series B stock, and the terms of our Series A stock have not been amended
      since November 7, 2005.





Dividends
      on the Series B stock are due quarterly on the first day of January, April,
      July
      and October to shareholders of record on the immediately preceding day of the
      prior month. Dividends are payable in cash unless certain stipulated events
      have
      occurred or are reached, and unless the daily trading volume for our common
      stock on the trading market exceeds 20,000 shares per trading day for 20
      consecutive trading days prior to the specified dividend date. Should the
      stipulated events occur and the minimum trading volume noted reached, and if
      funds required for the quarterly dividend payment are legally available, solely
      at our election, the dividend may be paid in cash or in shares of our common
      stock.





On
      January 3, 2006, April 1, 2006, July 3, 2006 and October 2, 2006, we paid the
      quarterly dividend to holders of Series B stock in cash amounting to $231,034,
      $371,311, $319,067, and $314,781, respectively, since the 20 trading days
      average trading volume in our stock did not exceed the threshold 20,000 share
      figure noted above. In January, 2007, to conserve cash, we requested a waiver
      from the Series B stockholders to receive their quarterly dividend in shares
      of
      our common stock in lieu of a cash dividend. All of the Series B preferred
      stockholders agreed to the waiver except one, who elected a cash dividend.
      Consequently, in January 2007, we issued 70,203 shares of our common stock
      and
      agreed to pay the non-waiving shareholder $4,000 in cash. Subsequently, the
      non-waiving shareholder agreed to take the dividend in shares as well. In April
      2007, we issued a total of 941 shares of our common stock to this shareholder
      in
      lieu of cash. The shares of common stock were valued at $4.2449 (90% of the
      average of the Volume Weighted Average Price (“VWAP”) for the 20 consecutive
      trading days ending December 29, 2006. In addition, in consideration for
      agreeing to the waiver we agreed to issue a number of our common stock purchase
      warrants equal to 50% of the number of shares of common stock issued as payment
      for the January 2007 stock dividend. We issued, with the dividend shares, a
      total of 35,572 common stock warrants to the Series B shareholders at an
      exercise price of $6.39 per share. We have treated the warrants as equity
      securities under the requirements of EITF 00-19. Using the Black-Scholes model,
      we have calculated the fair value of the warrants issued, and included the
      fair
      value in the equity section of our balance sheet as March 31, 2007.





On
      August
      21, 2006, we issued 10,000 shares of our Series C stock with a conversion price
      of $6.10 per common share and warrants to purchase an aggregate of 860,651
      shares of common stock for gross proceeds of $10 million resulting in net
      proceeds of $9,224,705 after payment of placement fees and other expenses of
      $775,295. The proceeds from the issuance of the Series C stock and warrants
      were
      allocated between the Series C stock and the warrants based on the relative
      fair
      value of the components. The proceeds allocated to the shares were compared
      to
      the par value of the common stock that would be received upon conversion and
      we
      determined that a beneficial conversion feature existed. We have estimated
      the
      fair value of such beneficial conversion feature, through use of the
      Black-Scholes model, to be $2,252,398. The value of the beneficial conversion
      feature is included as an adjustment to the net loss to arrive at the net loss
      allocated to common stockholders while such Series C stock is outstanding.





The
      conversion price of the Series C stock is $6.10 per share, subject to adjustment
      as set forth in the Certification of Designation of Preferences, Rights and
      Limitations covering the Series C stock.





The
      exercise price of the common stock purchase warrants issued to holders of the
      Series C stock is $6.39, subject to adjustment.





The
      variable dividend rate on the Series C stock is 8% per annum for the first
      three
      years, 11% for the fourth year and 14% thereafter.





We
      may
      redeem the outstanding Series C stock in whole or in part after August 21,
      2009,
      subject to certain conditions and limitations upon appropriate notice at a
      cash
      redemption price equal to 110% of the stated value if redeemed prior to August
      21, 2010, and at 100% of the stated value if redeemed after August 21,
      2011.





Under
      terms of the Series C stock, so long as any shares of the Series C stock remain
      outstanding, we are prohibited from paying dividends on our common stock or
      other designated junior securities, other than dividend payments in the ordinary
      course under our Series A stock and Series B stock provided we are current
      in
      our obligations under our Series C stock, and that the terms of our Series
      A
      stock have not been amended since November 7, 2005.





Dividends
      on the Series C stock are due quarterly on the first day of January, April,
      July
      and October to shareholders of record on the immediately preceding day of the
      prior month. Dividends are payable in cash unless certain stipulated events
      have
      occurred or are reached, and unless the daily trading volume for our common
      stock on the trading market exceeds 20,000 shares per trading day for 20
      consecutive trading days prior to the specified dividend date. Should the
      stipulated events occur and the minimum trading volume noted reached, and if
      funds required for the quarterly dividend payment are legally available, solely
      at our election, the dividend may be paid in cash or in shares of our common
      stock.





18


On
      October 2, 2006 we paid the quarterly dividend to holders of Series C stock
      in
      cash, amounting to $91,111, since the 20 trading days average trading volume
      in
      our stock did not exceed the threshold 20,000 share figure noted above. In
      January 2007, in order to conserve cash, we requested a waiver from the Series
      C
      preferred stockholders in order to pay their quarterly dividend in shares of
      our
      common stock in lieu of a cash dividend. All of the Series C preferred
      stockholders agreed to the waiver except two, who elected a cash dividend.
      Consequently, in January 2007, we issued 43,344 shares of our common stock
      and
      agreed to pay the non-waiving shareholders $16,000 in cash. Subsequently, the
      non-waiving stockholders agreed to take the dividend in shares as well. In
      April
      2007, we issued a total of 3,771 shares of our common stock to these
      stockholders in lieu of cash. The shares of common stock were valued at $4.2449
      (90% of the average of the VWAP for the 20 consecutive trading days ending
      December 29, 2006. In addition, in consideration for agreeing to the waiver
      we
      agreed to issue a number of our common stock purchase warrants equal to 50%
      of
      the number of shares of common stock issued as payment for the January 2007
      dividend. We issued, with the dividend shares, a total of 23,558 common stock
      warrants to the Series C stockholders at an exercise price of $6.39 per share.
      We have treated the warrants as equity securities under the requirements of
      EITF
      00-19. Using the Black-Scholes model, we have calculated the fair value of
      the
      warrants issued, and included the fair value in the equity section of our
      balance sheet at March 31, 2007.





In
      April,
      2007, again to conserve cash, we requested a waiver from the Series B and Series
      C shareholders to receive their quarterly dividend for the quarter ended March
      31, 2007 in shares of our common stock in lieu of a quarterly cash dividend.
      Additionally, in consideration for agreeing to the waiver, we offered to the
      holders of the Series B and Series C stock a number of our common stock purchase
      warrants equal to 50% of the number of shares of common stock issued as payment
      for the April 2007 dividend.





All
      of
      the Series B and Series C stockholders agreed to the waiver and to payment
      of
      the dividends in shares. Consequently, in April, 2007, we issued 104,473 shares
      of our common stock to the Series B stockholders and 69,187 shares to the Series
      C stockholders. The shares of common stock were valued at $2.8907 (90% of the
      VWAP for the 20 consecutive trading days ending March 30, 2007), and issued
      common stock purchase warrants to such stocksholders equal to 50% of the number
      of common stock shares issued in payment for the April 2007
      dividends.





**8.
      Commitments and contingencies**





The
      Company leases certain office space, roof rental rights and equipment under
      non
      cancelable operating leases.





Future
      minimum lease payments under these operating leases are as follows:





2007
            
            $
            643,1672008
            
            
            285,4592009
            
            
            137,7612010
            
            
            117,656$
            1,184,043





Rental
      expense for operating leases was $309,864 and $125,942 through three months
      ended March 31, 2007 and 2006, respectively. The amounts for the first quarter
      of 2007 include an accrual for the total accelerated amount claimed by the
      Waltham, MA facility landlord under our lease agreement of $137,135 per a
      judgment lien in Massachusetts.





On
      October 13, 2004, our employment agreements with Messrs. Slaughter and Lockie
      became effective. Our employment agreement with Mr. Peck commenced in May 2004.
      Each employment agreement establishes, among other things, base salary levels
      at
      amounts designed to be competitive with executive positions at similarly
      situated companies. Messrs. Slaughter, Lockie, and Peck are entitled to receive
      annual base salaries of $250,000, $225,000 and $194,250, respectively, effective
      January 1, 2006. These agreements were amended effective September 26, 2006,
      to
      reduce these officers’ salary levels to $125,000, $112,500 and $145,687,
      respectively. These annual base salaries will be reviewed annually and may
      be
      increased by the board of directors or compensation committee. In addition
      to
      their base salaries, each executive is eligible to participate in any bonus
      plans or incentive compensation programs that we may establish from time to
      time.





19


We
      may be
      obligated to make severance payments to these executives under their employment
      agreements. Pursuant to their employment agreements, we may terminate the
      agreements for cause at any time and without cause upon 30 days written notice.
      Any of these executives may terminate his employment agreement for good reason,
      upon 60 days written notice, if his duties are substantially altered or reduced,
      his salary is reduced or we materially breach his agreement. If we terminate
      the
      employment of the executive without cause or if the executive terminates his
      agreement for good reason, we must pay the executive his base salary for a
      severance term of eighteen months in the case of Messrs. Slaughter and Lockie
      and twelve months in the case of Mr. Peck; provided, however, that in order
      to
      receive the severance payment, the executive officer must sign a general
      release.





Each
      of
      the employment agreements contains restrictive covenants to protect us for
      non-competition, non-solicitation/non-piracy and non-disclosure during the
      term
      of the agreement and for a period of two years after its termination or
      expiration and requires us to indemnify the executive for liability incurred
      as
      a result of acts performed by him in his capacity as an officer of the company,
      including reasonable legal expenses.





As
      of May
      18, 2007, the Company and ThinKom Solutions, Inc. have agreed to terminate
      the
      2004 strategic supply agreement, as amended, between the companies, with the
      agreement that no further obligations are owed by either party.




**9.
      Subsequent Events**





The
      Company issued on April 17, 2007 a 14% secured promissory note in the principal
      amount of $500,000 to an existing investor. The principal purpose for the note
      issuance and related funding is to fund short term working capital needs of
      the
      Company. The note is secured by the personal pledge of the Company’s common
      stock shares owned by each of the Company’s Chief Executive Officer and its
      President. The principal and related accrual interest is due upon the earlier
      of
      (1) written demand to the demand of the Company by the lender, or (2) December
      31, 2007 or such later date as agreed to in writing by the lender. The lender
      maintain certain rights to convert the note amount plus any accrued interest
      into securities that might be issued subsequently by the Company in future
      equity or debt financings.





On
      May
      10, 2007, an aggregate of 173,660 shares of common stock and 86,830 common
      stock
      warrants were issued to all of the holders of the Company’s Series B and Series
      C preferred stock for the April 1, 2007 regular quarterly dividend due to these
      stockholders. The shares and warrants were issued, based upon waivers requested
      and received from the stockholders, in lieu of cash payment of the dividends.


On
        or
        about May 7, 2007, the Company was verbally notified by its customer, the
        Ministry of Interior for the Kingdom of Bahrain (“MOI”) that a Bahraini court
        had ordered the MOI to cease payments to the Company under certain sales
        orders
        pending resolution of a claim filed by a former reseller for the Company
        in the
        Middle East and African region.
  On
        or about April 24, 2007, the landlord of the
        Company’s Waltham, MA office filed a breach of lease claim for non-payment of
        rent in the State of Massachusettes, Superior Court of Suffolk Country seeking
        damages in the amount of approximately $174,637 and executed an attachment
        in
        the amount of $50,000.


**10.
      Related Party Transactions**





On
      March
      27, 2007 Louis Slaughter, the Company’s Chairman and Chief Executive Officer,
      loaned $65,000 to the Company through an interest-bearing note. The note bears
      interest at 7% per annum. The maturity date is March 26, 2008, with interest
      accruing to and payable on the maturity date. Interest expense on the loan
      through March 31, 2007 was $50.




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





The
      following Management’s Discussion and Analysis of Financial Condition and
      Results of Operations (“MD&A”) is intended to help the reader understand our
      business and financial position. The MD&A is provided as a supplement to,
      and should be read in conjunction with, and is qualified in its entirety by
      reference to, our unaudited Condensed Consolidated Financial Statements and
      related notes to Consolidated Financial Statements (“Notes”) appearing elsewhere
      in this report. In
      addition, reference should be made to our condensed consolidated financial
      statements and other financial information for the fiscal year ended December
      31, 2005, which were included in our Annual Report on Form 10-KSB filed
      with the SEC on April 18, 2007. This
      discussion and analysis contains forward-looking statements that involve risks,
      uncertainties, and assumptions. Our actual results may differ materially from
      those anticipated in these forward-looking statements as a result of certain
      factors, including, but not limited to, those set forth under “Risk Factors”
found and elsewhere in this Quarterly Report on Form 10-QSB.





20


**OPERATIONS
      REVIEW**




Our
      primary business is to design, develop, market, sell, lease, install and service
      advanced point-to-point wireless communications links capable of transmission
      speeds at or in excess of one gigabit-per-second. Our products operate in the
      71-76 GHz and 81-86 GHz spectrum bands. We believe that the unprecedented
      amounts of bandwidth provided by these spectrum blocks and the quality of our
      proprietary product designs allows for wireless communications at previously
      unattainable fiber-equivalent speed and reliability. Our target customers are
      telecom operators, carriers and network operators, communications and IT service
      providers, including WiLECs, system integrators and value added resellers,
      government agencies and other enterprises including financial services
      organizations seeking cost-effective millimeter wave wireless
      solutions.





Since
      our
      inception in January 2004, our focus has been primarily on the design,
      continuing development, production, sale and installation of our Series
      Gig *E* and
      WiFiber G Series Gig *E* marketing product lines, developed both internally and through our strategic
      partnering activities, as well as obtaining debt and equity financings and
      conversions of our IPO common stock warrants to fund such efforts. Our financing
      activities have totaled (net to us) approximately $48.3 million since January
      2004.





We
      have
      not yet generated significant revenues or achieved a cash flow breakeven level
      from operations. Consequently, we continue to be dependent on debt and equity
      financings to fund our cash requirements. Without additional such financings
      and/or significant additional revenues, we will not have sufficient capital
      to
      implement fully our current plan of operations and meet our anticipated working
      capital needs with respect thereto through the next 12 months. As of January
      2007, we announced a significant work force reduction and our plans to
      consolidate our corporate and after sales support activities into our Durham,
      North Caroline facilities. We have also significantly reduced our operating
      expense level in the current quarter as cost savings measures.





We
      had
      very limited cash as of March 31, 2007. Our most likely near-term sources of
      cash as of May 8, 2007 are to close funding of an additional $500,000 of a
      total $1 million bridge loan facility from an existing investor from whom we
      have an executed term sheet as of April 2, 2007, in the form of a 14% secured
      promissory note, as part of a total interim financing that we are seeking of
      up
      to $5 million. Additionally, we previously announced a $1.37 million sale of
      our
      WiFiber links to the Kingdom of Bahrain. We received payment in the amount
      of
      $612,500 of the total sale price prior to April 30, 2007. Future payments for
      the remainder of this sale are uncertain at the time of this filing, since
      on or
      about May 7, 2007, the Company was verbally notified by its customer, the
      Ministry of Interior, that a Bahrani court had ordered it to cease further
      payments to the Company related to this sale pending resolution of a claim
      by a
      former reseller for the Company in the region. Our ability to obtain additional
      working capital required for funding our operations over the next 12 month
      period is dependent on our ability to increase significantly our product sales
      volume and commence accounts receivable financings, generate cash through the
      exercise of our outstanding stock warrants, as well as obtain future financing
      from public and/or private debt and/or equity market including current investor
      or shareholders. Any assumption as to obtaining cash through the exercise of
      our
      outstanding stock warrants is dependent upon the price of our common shares
      exceeding the exercise price of any of the outstanding warrants. Our inability
      to obtain additional capital could require us to change our business strategy,
      which could include a further reduction, curtailment or cessation of our
      operations to conserve cash and maintain liquidity until such time, if ever,
      that sufficient cash proceeds from operations are realized. Any future sale
      of
      our equity securities would dilute the ownership and control of our existing
      stockholders.


For
      the
      three months ended March 31, 2007, our net sales totaled $284,142 primarily
      from
      the sale of our WiFiber G Series Gig *E* products. Sales for the three months ended March 31, 2006, totaled
      $1,658,541.





**Critical
      Accounting Policies**





The
      accounting policies we believe are most important to the presentation of our
      financial statements and which require the most difficult, subjective and
      complex judgments are outlined in our Annual Report on Form 10-KSB for the
      year
      ended December 31, 2006 and have not changed significantly.





**Trends
      and uncertainties affecting our revenue**





The
      following are key factors currently and potentially affecting our
      revenue:





·
            Economic
                conditions - An important factor affecting our ability to generate
                revenue
                is the effect of general economic conditions on our customers’ willingness
                to spend on wireless technology, and particularly, last mile
                implementation and enterprise communication technology. As economic
                conditions have globally improved since our inception, we have seen
                indications that enterprises may be more willing to spend capital
                on
                communication technology. While the world economy is expected to
                grow,
                variability in corporate profit growth, interest rates, energy prices
                and
                other factors in specific markets could impact the willingness of
                corporate, governmental and enterprise target markets to spend capital
                on
                communication technology in the near term. Additionally, the by-country
                variability in worldwide economic growth could also impact our business
                as
                growth rates of developed and more stable economies tend to be lower
                than
                that of emerging economies, where there could be more variables affecting
                the economic growth.





21


·
            Competitive
                environment - Although we believe that we are one of the first entrants
                into the higher spectrum bands and at the speeds of our current millimeter
                wave product, other companies are marketing products using the same
                spectrum bands as of March 31, 2007. As the carrier, reseller and
                enterprise communication markets evolve, we expect more companies,
                who may
                not currently compete with us, to enter the high speed bandwidth
                wireless
                communication sector in the future.





·
            The
                period from initial customer trials of our links to date of purchase
                commitment and sale is unpredictable and can often cover several
                months.





**Research
      and development**





Research
      and development expenditures include payrolls and benefits, engineering and
      product design fees paid to contractors and software and material costs used
      by
      employees and contractors in the development of new or enhanced product
      offerings. Research and development expenses also include depreciation of
      capitalized testing and production equipment purchased.





Depending
      on our overall liquidity position, we expect to continue, investing resources
      to
      introduce and commercially deploy our products, develop subsequent generations
      of these products and identify and address demand for new solutions with
      additional products. We are currently devoting resources to completing the
      development of our WiFiber G series *OC-48* ,
      which
      we expect to introduce in the fourth quarter of 2007 and to initiatives related
      to product unit cost reduction.





**General
      and administrative**





General
      and administrative expenses consists primarily of salaries and related costs
      for
      legal, accounting, auditing, administration, human resources, information
      systems and the costs of operating as a publicly traded company.





**Selling
      and marketing**





Selling
      and marketing expenses consists primarily to travel, trade shows, salaries
      and
      related costs and expenses to pursue new market opportunities domestically
      and
      abroad.





**Service,
      install and link operations**





Expenses
      are primarily related to site analysis, installation and after sales maintenance
      for our products. The link operations group supports our global sales
      activities; expenses consist primarily of salaries and related benefits contract
      worker expenses, travel costs and supplies for daily operations.





**RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THE THREE
      MONTHS ENDED MARCH 31, 2006**





***Net
      sales, gross margin and net loss***





For
      the
      three months ended March 31, 2007 our sales totaled $284,142, primarily from
      the
      sale of our WiFiber G series Gig *E* links.
      Sales for the three months ended March 31, 2006 totaled $1,658,541, primarily
      from the sale of link and installation contracts. In the 2006 quarter, we closed
      several sales with resellers and a multi-link sale to a large distributor in
      the
      Middle East. In the first quarter of 2007, the number of sales transactions
      and
      relative dollar level per transaction were lower than those of the first quarter
      of 2006. Several of our WiFiber G series Gig *E* links
      were in test phase at customer sites as of the end of the quarter ended March
      31, 2007.





Net
      loss
      for the three months ended March 31, 2007 was $3,111,054 compared to $4,780,864
      for the three months ended March 31, 2006. We reduced our operating expenses
      significantly in the 2007 quarter, although our sales for the 2007 quarter
      were
      lower than those of the 2006 quarter by $1,374,399.





22


Net
      loss
      applicable to common shareholders for the three months ended March 31, 2007
      was
      $3,945,822, or $0.63 per share, compared to $5,011,898, or $.99 per share,
      for
      the three months ended March 31, 2006. We were required to pay cash dividends
      to
      the holders of our Series B and Series C convertible preferred stock in the
      2007
      quarter. The Series C stock was not issued until the quarter ended September
      30,
      2006. In the three months ended March 31, 2007, we requested and received a
      waiver from the Series B and Series C stockholders of the cash payment of
      dividends and such stockholders agreed to accept common stock and related common
      stock purchase warrants in lieu of cash . In addition, because the dividend
      percentage was considered below market for accounting purposes, we recorded
      an
      incremental non-cash dividend of $352,768 to reflect an effective interest
      rate
      of 14%.





**Manufacturing
      plan**





Our
      products have a modular design. The detailed designs of our initial products
      have been completed and the necessary components and modules (subassemblies)
      to
      produce these products have been developed for commercial production. We
      outsource the manufacture of key components and modules to leading companies
      in
      their respective fields, including some of our strategic partners, who are
      currently adapting their particular components and/or modules to fit within
      our
      product designs. The final assembly of our products’ modules and final quality
      control testing of the finished products, however, will occur at our facilities.
      Currently, our final assembly is handled at our Sunnyvale, CA facility.
      Depending on the ultimate scale of our operation, we may contract out
      significant aspects of assembly and testing of our products.





We
      slowed
      our inventory acquisition program in mid-2006 due to uncertainties in our sales
      forecasts in the second half of the year and through the quarter ended March
      31,
      2007. All of the WiFiber G Series Gig *E* finished
      goods and parts are in good condition and we expect to use substantially the
      entire inventory in the next 12 months. We expect to continue our on premises
      manufacturing activities during the next 12 months as we consider outsourcing
      substantial parts of our manufacturing assembly and test activities for
      commercial production.





Gross
      margins from sales were 43% for the three months ended March 31, 2007, compared
      to 10.4% for the comparable quarter in 2006. The increase quarter to quarter
      is
      primarily attributed to (1) inclusion of a change for inventory obsolescence
      in
      the quarter ended March 31, 2006 of $492,054, related to valuation of our
      WiFiber II Series Gig *E* links,
      and (2) significant reduction in direct manufacturing overhead levels in the
      quarter ended March 31, 2007, following cost reduction actions at the outset
      of
      the quarter.





***Research
      and development.*** Research
      and development expenses decreased from $1,341,682 for the three months ended
      March 31, 2006 to $673,483 for the three months ended March 31, 2007, a decrease
      of $668,199, or 50%. The decrease is attributable primarily to lower development
      costs paid to third party software development and design parties by $393,000,
      and reduced contract consultants payments, lowering expenses by $131,142.
      Payroll taxes in the 2007 quarter were $17,560 lower than in the comparable
      2006
      quarter, due to salary reductions instituted for all management personnel
      effective with fourth quarter of 2006, which levels have not been restored
      to
      date.





***General
      and administrative.*** **** For
      the
      quarter ended March 31, 2007, general and administrative expenses were
      $1,202,545, compared to $1,533,543 for the quarter ended March 31, 2006, a
      decrease of $330,998, or 22%. The reduction of expenses was due to a reduction
      in contract employee and legal expenses of $93,000 in 2007 compared to 2006,
      lower insurance premium expenses by $47,000, primarily due to dropping key
      man
      life coverage after June 2006, reduced consultant costs and banking fees between
      the periods, offset by an increase in stock compensation expense of $85,000
      due
      to options granted to senior executives in April, 2006. The fair value is
      charged to operations as well as the expense of a sales tax settlement of
      $37,000 in first quarter of 2007.





***Selling
      and marketing.*** **** For
      the
      quarter ended March 31, 2007 selling and marketing expenses totaled $522,740,
      a
      decrease of $652,080, or 56% compared to the quarter ended March 31, 2006.
      The
      decrease is attributable primarily to a reduction in the overall sales and
      marketing staff levels between the periods. The impact of this reduction
      decreased salary and payroll taxes, travel expenses and stock based compensation
      expense by a cumulative $588,141. Additionally, consulting expenses were reduced
      by $8,954. The reduced expense level was offset partially by a charge of
      $137,135 for charges related to accelerated rent in 2007 on our vacated office
      facility in Waltham, MA.





***Service,
      install and link operations.*** **** Expenses
      related to service operations, net of expenses charged to cost of sales, were
      $363,867 for the first quarter of 2007, compared to $668,193 for the first
      quarter of 2006. The reduction is primarily related to a significant reduction
      in the number of employees in this area effective the beginning of the first
      quarter of 2007, commensurate with our previously announced relocation and
      re-organization of this group from the closed Lewisville, Texas facility to
      our
      engineering and operations center in Research Triangle Park in North Carolina.
      Due to these changes in the organization, expenses related to salaries, payroll
      taxes and recruiting were reduced by $231,654. Travel related expenses were
      reduced by $42,252 in the three months ended March 31, 2007 compared to the
      three months ended March 31, 2006.





23


***Interest
      expense.*** Interest
      expense for the three months ended March 31, 2007 was $435,550, an increase
      of
      $106,184 from the comparative quarter in 2006. The net increase was due to
      acceleration of the amortization of debt discount and beneficial conversion
      feature rate in the three months ended March 31, 2007 related to the conversion
      of $1,262,800 in principal of the 8% convertible notes due January 2008 in
      the
      quarter, offset by a reduction in the interest calculated related to the 8%
      convertible notes due to the 2007 conversions and a reduction of $288 in
      interest expense related to capital leases between the periods due to the pay
      out of several of the capital lease obligations between March 31, 2006 and
      March
      31, 2007.





**LIQUIDITY
      AND CAPITAL RESOURCES**




**Cash
      Flows**


**Three
                Months Ended March 31, 2007**
            
            **Three
                Months Ended March 31, 2006**Net
                cash used in operating activities
            
            $
            (738,596
            )
            $
            (5,597,311
            )Net
                cash (used in) provided by investing activities
            
            
            36,697
            
            
            (257,320
            )Net
                cash provided by financing activities
            
            
            57,848
            
            
            268,070Net
                decrease in cash and cash equivalents****
            
            $
            (644,051
            )
            $
            (5,586,561
            )





***Cash
      and equivalents*** **.** Our
      cash
      and cash equivalents balance was $9,683 at March 31, 2007, and $653,734 at
      December 31, 2006. The decrease of $644,051 for the three months ended March
      31,
      2007 was related to operating expenses incurred for such quarter and the
      relatively low cash collection level in the first quarter due to sales levels
      of
      only $422,774 in the fourth quarter of 2006 and $284,142 in the first quarter
      of
      2007. Operating expenses for the Company for the quarter ended March 31, 2007
      were $2,762,635, compared to $5,464,217 for the quarter ended December 31,
      2006
      and $4,718,238 for the quarter ended March 31, 2006, resulting in a
      significantly reduced use of cash in operations in the first quarter of 2007
      over previous comparative periods.





As
      of
      March 31, 2007 we did not have sufficient working capital cash to fully satisfy
      our upcoming obligations for the next twelve months. As part of a $1 million
      financing commitment from an existing investor, we received $500,000 in proceeds
      from issuance of a promissory note to this investor on April 17, 2007. We are
      seeking additional financing of up to $4 million. Additionally, we previously
      announced a $1.37 million sale of our WiFiber links to the Kingdom of Bahrain.
      We received funding of $612,500 of the total sale price prior to April 30,
      2007.
      Payments for the remainder of this sale have been delayed at the time of this
      filing, since on or about May 7, 2007, the Company was verbally notified by
      its
      customer, the Ministry of the Interior, that a Bahrani court had ordered it
      to
      cease further payments to the Company related to this sale pending resolution
      of
      a claim by a former reseller for the Company in the region.





Our
      liquidity is dependent upon our ability to continue to meet our obligations,
      to
      control ongoing operating expenses, to obtain additional financings as may
      be
      required, and to reach and maintain cash flow break even and eventually
      profitability. If we are unable to maintain adequate cash balances or generate
      sufficient internal cash flows from sales of products or raise funds through
      the
      sale of debt and/or equity securities, and further reduce operating and capital
      expenditures to bring in line with sales over the next twelve months, we may
      be
      required to further reduce overhead, curtail or cease some or all of our
      operations, or otherwise significantly change our business development plans.





Our
      management consistently looks for opportunities to reduce operating expenses
      to
      conserve our cash balances. In January 2007, based on changing U.S. market
      demands and a refocusing of our service operations, we reduced our employee
      level from 53 to 26, primarily by re-organizing our link operations sales
      support staff and changing our sales strategy for 2007 to more focused domestic
      markets, including WiLEC projects. We also announced the closing of an after
      sales support office in Lewisville, Texas and our plan is to consolidate two
      other locations in 2007. We have reduced our travel expenses across the
      organization. We expect these actions and a continual assessment of necessary
      costs in the Company to significantly reduce our operating overhead expense
      in
      2007 compared to the prior year. Additionally, we are seeking to raise
      additional capital through sales of our common or preferred stock or debt
      securities.





24


***Net
      cash used in operating activities.*** Net
      cash
      used in operations for the three months ended March 31, 2007 was $738,596,
      compared to $4,070,327 for the three months ended December 31, 2006 and
      $5,597,311 for the quarter ended March 31, 2007. We were able to achieve these
      significant reductions through a combination of employee reduction, combining
      facilities, reducing capital expenditure levels and expenditures for outside
      consultants, as well as reducing the purchase levels of inventory parts and
      components.





***Net
      cash provided by financing activities.*** Net
      cash
      provided by financing activities for the three months ended March 31, 2007
      was
      $57,848, compared to a net usage of $361,364 for the three months ended December
      31, 2006 and net cash provided of $268,070 for the three months ended March
      31,
      2006. The cash provided in the current quarter included proceeds from a note
      issued to Louis Slaughter, our Chief Executive Officer, for $65,000 as further
      detailed in our note 10 to the consolidated Financial Statements.





***Future
      Cash Requirements.*** Our
      primary cash requirements over the next twelve months will be to fund working
      capital requirements including any past due trade accounts, capital expenditures
      as necessary, preferred stock dividend requirements, interest on outstanding
      debt, and future product development activities as allowed by our ongoing cash
      position.





In
      January 2007 and again in April 2007, in order to conserve cash, we requested
      a
      waiver from the cash payment requirements due to our Series B and Series C
      convertible preferred stock holders, and instead issued shares of our common
      stock in lieu of the cash amounts due at those dates. We received such waivers
      from all of the Series B and Series C stock holders. The total dividends due
      at
      January 1, 2007 and April 1, 2007 were $502,000 at each date. We issued a total
      of 118,259 shares of our common stock in connection with to the January 1
      dividend due, and an additional 173,660 shares of our common stock for the
      April
      1 dividend requirement, based on a formula contained in the respective documents
      underlying the Series B and Series C convertible preferred stock transactions.





Our
      reduced operating expense plan for 2007 is predicated on effective cost-cutting
      and cost control measures, including our January reduction in the number of
      overall employees, a more cost effective approach to sales support and after
      sales support activities, and a reduction in overall travel related expenses.
      Our continuing research and development program level will be dependent in
      part
      on our ability to control our overall operating expenses, our ability to attract
      additional equity and debt capital, and our quarter to quarter collections
      of
      sales proceeds.





***Future
      Sources of Liquidity.*** We
      expect
      our primary sources of cash receipts during the next twelve months to be (1)
      accessing public and private capital markets for additional equity and/or debt
      financings, (2) collection of accounts receivable balances, (3) common stock
      warrant exercise, and (4) increased sales and related collections based on
      anticipated funding for domestic WiLEC entities. We have received $500,000
      toward a committed $1 million bridge loan funding. There are no assurances
      of
      further capital funding commitments at this time. Any expectations as to cash
      that would arise from the exercise of common stock warrants is dependent upon
      the inherent conversion price of said warrants relative to the price at which
      our common stock trades in the future. Our abilities to maintain the required
      level of liquidity for continuing operations is also dependent to economic,
      financial, competitive, legislative, regulatory and other factors that are
      in
      large part beyond our control.





***Uncertainties
      Regarding our Liquidity.*** We
      believe the following uncertainties exist regarding our ability to maintain
      sufficient cash and operating capital liquidity:





• *Ability
      to increase and maintain revenue levels* - Our
      ability to generate net cash from future sales of equipment and services is
      critical to our maintaining adequate operating liquidity. If our revenues were
      not to increase substantially and/or continue to fluctuate, our ability to
      generate net cash from operating activities in a sufficient amount to meet
      our
      cash needs and obligations can and would be adversely affected.





• *Ability
      to access capital markets and debt markets* - To
      date, we have depended largely on our ability to obtain funding from capital
      markets to fund ongoing operations. If we are unable to access these markets
      at
      reasonable rates, or at all, it could require us to curtail or significantly
      further reorganize our planned business operations in order to conserve cash
      until such time, if ever, that sufficient proceeds from operations are
      generated.





• *Ability
      to manage working capital requirements efficiently -* Maintaining
      adequate liquidity for operations needs includes timely and satisfactorily
      collecting of our outstanding trade receivables, obtaining satisfactory purchase
      and payment terms from our significant inventory and service suppliers, and
      the
      ability to achieve acceptable inventory turnover rates.





• *Ability
      to manage current trade payables levels -* Our
      trade
      payable as of May 1, 2007 amounted to approximately $2,300,000. Several vendors
      have turned our accounts over to collection agencies, and we are out of terms
      with numerous services and product suppliers. The landlord at our vacated
      Waltham, MA. offices has filed a judgment lien against us for approximately
      $180,000 in past due and future rents payable through the end of the current
      lease period of February 15, 2008, including attaching $50,000 from our
      operating bank account. It is critical that we will be able to satisfy vendors
      on an ongoing basis to insure uninterrupted delivery of critical supplies or
      services for our operations.





25


**FORWARD-LOOKING
      STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS**





Statements
      made in the report on Form 10-QSB relating to the future, including those
      related to (1) our strategy, competitive forces, strategic partnership alliances
      and opportunities; (2) competitive advantages over existing wireless
      communications solutions providers; (3) the contemplated activity of regulatory
      bodies; (4) expectations regarding our future financial performance, such as
      our
      expectations of continued net losses; of increased sales and/or operating
      expense levels; that our revenues will continue to be concentrated among a
      few
      customers; that our gross margins will continue to fluctuate; of continuing
      significant levels of research and development expenses; and regarding
      accounting pronouncements; (5) the continued access to public and private
      capital markets; and (6) the adequacy of our facilities, are forward-looking
      statements within the meaning of the “safe harbor” provisions of the Private
      Securities Litigation Reform Act of 1995. Our discussion and analysis of the
      financial condition and results of operations are based upon our consolidated
      financial statements, which have been prepared in accordance with accounting
      principles generally accepted in the United States. The preparation of financial
      statements in conformity with generally accepted accounting principles requires
      us to make estimates and assumptions that affect the reported amounts of assets
      and liabilities, disclosure of any contingent assets and liabilities at the
      financial statement date and reported amounts of revenue and expenses during
      the
      reporting period. Our estimates were based on our historical experience and
      various other assumptions that we believe to be reasonable under the
      circumstances. Actual results are likely to differ from those estimates but
      we
      do not believe such differences will materially affect our financial position
      or
      results of operations. Terminology such as “may,” “will,” “should,” “intend,”
“expect,” “plan,” “estimate,” “project,” “anticipate,” or “believe” and similar
      language identifies forward-looking statements. Because those forward-looking
      statements involve risks and uncertainties, there are important factors that
      could cause our actual results to differ materially from those in the
      forward-looking statements. These factors include, without limitations, those
      set forth below under the caption “Risk Factors”.





**Risk
      Factors**





**We
      have** **extremely
      limited capital resources and our ability to continue our operations is
      dependent upon our obtaining additional financing.**




Our
      business model is capital intensive, requiring significant expenditures ahead
      of
      projected revenues. We have yet to attain any significant quarter to quarter
      revenue growth. We have to date been dependent on cash provided by debt and/or
      equity financings to operate our business, and, while we expect to fund our
      cash
      requirements over the next quarter and 12 month periods from collection of
      anticipated revenues, the exercise of warrants and/or accounts receivable
      financing and, if necessary, through continued access to public and private
      debt
      and equity markets, there can be no assurance that we will be able to obtain
      any
      such capital, on terms or in amounts sufficient to meet our needs or at all.
      Our
      most likely near term source of cash is to close funding of the remaining
      $500,000 of a $1.0 million bridge loan facility from a group headed by an
      existing investor from as part of a total interim financing that we are seeking
      of up to $4.0 million. If we are unable to obtain additional cash from these
      activities we may be forced to severely curtail or cease our operations in
      2007.
      Our ability to continue operations is dependent on our ability to meet our
      ongoing obligations, to control ongoing operating expenses, to obtain additional
      financings and to reach and maintain profitability and/or positive cash flows.
      In addition, if we raise additional funds by issuing equity securities, our
      then
      existing security holders will likely experience dilution, depending upon terms
      and conditions inherent in such fund raising.




These
      factors raise substantial doubt about our ability to continue as a going
      concern. Our ability to continue as a going concern is dependent upon our
      ability to generate sufficient cash flows to meet our obligations on a timely
      basis, to obtain additional financing as may be required, and ultimately to
      attain profitable operations. However, there is no assurance that profitable
      operations or sufficient cash flows will occur in the future.





We
      have
      supported current operations by: 1) selling our products and related services,
      2) raising additional operating cash through the private sale of our redeemable
      preferred and convertible preferred stock, 3) selling convertible debt in a
      private sale and 4) issuing common stock shares upon conversion of common stock
      warrants issued at the time of our IPO.





26


These
      steps have provided us with the cash flows to continue our business plan, but
      have not resulted in significant improvement in our financial position. The
      following efforts have been undertaken or are in process as part of our efforts
      to secure suitable financings, improve working capital and increase cash flows
      with the objective to improve our long-term financial viability:





-
            On
                January 5, 2007, we reduced our total work force levels from 53 to
                26
                persons.





-
            With
                the agreement of our landlord that we have no further lease payment
                obligations, we closed our Lewisville, Texas location in early January,
                2007 and combined these operations into our Durham, N.C.
                facility.





-
            Vigorous
                collection of accounts receivable balances, and in certain cases,
                we are
                requiring substantial money in advance of shipment of
                links.





-
            Attempting
                to raise capital through additional sales of our common or preferred
                stock
                and/or debt securities, such as the pending bridge loan facility
                noted.





-
            Reducing
                cash operating expenses to levels that are in line with current revenues.
                We may seek reductions in certain operations expenses through the
                issuance
                of additional common shares of our stock in lieu of cash payments
                to key
                vendors. We have no assurance that such arrangements could be worked
                out.







Our
      auditors have issued a going concern qualification in their opinion related
      to
      our financial statements issued with our 2006 10-KSB report. This opinion is
      based upon the Company’s history of operating losses, negative cash flows from
      operations, and our cash position as of December 31, 2006.




**We
      are** **providing
      new technology into commercial markets and have a limited operating history
      cycle upon which to base your investment decision.**




We
      have
      yet to develop any consistent revenue trend quarter to quarter since our initial
      revenue recognition in the quarter ended June 30, 2005. Our ability to generate
      meaningful revenues will continue to depend on our ability to successfully
      market and sell our current and future product lines. We are currently
      completely dependent on sales of our WiFiber G series Gig *E* product
      and plan to introduce our OC-48 product in the second half of 2007.




In
      making
      your evaluation of our prospects you should consider that we are a “first to
      market” pioneer founded on new technologies, are designing solutions that have
      no long history of market acceptance, and operating in a competitive rapidly
      evolving industry with current competition. As a result, we may encounter many
      expenses, delays, problems and difficulties that we have not anticipated.




**Our
      existing and future debt obligations** **and dividend service costs could impair our liquidity and financial condition.**




As
      of
      March 31, 2007, we had outstanding notes payable of $540,000 ($91,364 net of
      related discount), and we may incur additional debt in the future to fund all
      or
      part of our capital requirements. Additionally, we have added additional debt
      in
      the three months ended March 31, 2007, as follow: (1) $65,000, pursuant to
      a 7%
      promissory note in favor of the Company’s Chairman and Chief Executive Officer,
      payable with accrued interest upon ending December 31, 2007, or upon demand
      by
      the investor. We also have dividend requirements related to our Series B and
      Series C Convertible Preferred stock issues that may, given certain conditions
      as quarterly payment dates, require payment of such dividends in cash. Our
      outstanding debt and future debt obligations could impair our liquidity and
      could:




·
            make
                it more difficult for us to satisfy our other
                obligations;




·
            require
                us to dedicate a substantial portion of any cash flow we may generate
                to
                payments on our debt obligations, which would reduce the availability
                of
                our cash flow to fund working capital, capital expenditures and other
                corporate requirements;




27


·
            impede
                us from obtaining additional financing in the future for working
                capital,
                capital expenditures, acquisitions and general corporate purposes;
                and




·
            make
                us more vulnerable in the event of a downturn in our business prospects
                and limit our flexibility to plan for, or react to, changes in our
                industry.




If
      we
      were to fail in the future to make any required payment under agreements
      governing indebtedness, or equity issues, or fail to comply with the financial
      and operating covenants contained in those agreements, we would be in default
      as
      regards to that financing transaction. A debt default could significantly
      diminish the market value and marketability of our common stock. Our lenders
      would have the ability to require that we immediately pay all outstanding
      indebtedness, and we might not have sufficient assets to satisfy their demands.
      In this event, we would be forced to seek protection under bankruptcy laws,
      which could harm our future operations and overall financial
      condition.




**The
      prices of our publicly traded securities have been volatile and may continue
      to
      be volatile.**




There
      is
      limited trading history and volume for our common stock, our IPO warrants and
      our Z warrants, and therefore, holders of our publicly traded securities may
      find it difficult to sell their securities. In addition, our securities have
      experienced, and are likely to experience in the future, significant price
      and
      volume fluctuations which could adversely affect the market price of our
      securities, without regard to our operating performance. In addition, the
      trading price of our publicly traded securities could be subject to significant
      fluctuations in response to actual or anticipated variations in our quarterly
      operating results, announcements by us or our competitors, factors affecting
      our
      industry generally, changes in national or regional economic conditions or
      general market conditions. The market prices of our publicly traded securities
      could also be affected by general market price declines or market volatility
      in
      the future or future declines or volatility in the prices of stocks for
      companies in our industry.




**A
      significant number of the companies with which we currently compete or will
      compete have substantially greater resources and longer operating histories
      than
      we do, and we may not be able to compete with them effectively, even if our
      products are technically superior.**




Many
      of
      the companies with which we compete or expect to compete offer a variety of
      potentially competitive products and services and some may offer broader
      telecommunications product lines. These companies include, Harris Corporation,
      Stratex Networks, Inc., Loea Corporation, Ceragon Networks Ltd., BridgeWave
      Communications, Inc. and Proxim Wireless Corporation. Additionally, our
      fiber-speed millimeter wave products will have to compete with the existing
      and
      new fiber optic infrastructure and suppliers in the U.S. and elsewhere. Most
      of
      the companies providing competing products and services have greater customer
      recognition, installed bases, financial resources, and sales, production,
      marketing, manufacturing, engineering and other capabilities than we do. Some
      of
      these companies may be able to take away market share from us as a result of
      their greater marketing resources, pricing discounts and product breadth, even
      if our products are technically superior.




**It
      could prove costly or impossible for us to effectively compete in the intensely
      competitive telecommunications equipment industry, which could negatively impact
      our financial results.**




Both
      the
      telecommunications equipment industry in general and the wireless communications
      equipment industry in particular are intensely competitive. Companies operating
      in the telecommunications equipment industry are always seeking to develop
      viable wireline and wireless high-speed communications products and services,
      whether it is by:




·
            developing
                technologies that improve the performance of existing copper
                alternatives;




·
            developing
                methods for lowering the cost of fiber optic cable;
                or




·
            innovating
                new and improved point-to-point and wide area wireless
                solutions.




The
      wireless communications industry in which we principally compete has attracted
      substantial media and other attention in recent months in part due to the
      ability of newly developed equipment to provide broadband Internet connectivity
      simply, quickly, and efficiently. These factors have led numerous companies
      to
      develop or commence developing products that compete or could compete with
      ours.
      The large number of companies offering products that may be perceived to be
      similar or even interchangeable with our products could have the effect of
      reducing the prices at which we are able to sell our products. In turn, this
      could reduce our gross margins and negatively impact our general financial
      results.




28


**Future
      sales of our common stock may cause the prevailing market price to decrease
      and
      impair our capital raising abilities.**




We
      have
      issued a substantial number of shares of common stock that are eligible for
      resale under Rule 144 of the Securities Act and that may become freely tradable.
      We also have a substantial number of shares of common stock that are issuable
      upon the exercise of warrants or upon conversion of preferred stock, which
      shares could be available for public sale in the future, subject to applicable
      restrictions under the Securities Act. If holders of warrants or other
      convertible securities choose to exercise their purchase rights and sell shares
      of common stock in the public market, or if holders of currently restricted
      common stock choose to sell such shares of common stock in the public market
      under Rule 144 or otherwise, such activity may have a depressing impact on
      the
      daily market price for our common stock. Future public sales of shares of common
      stock may adversely affect the market price of our common stock or our future
      ability to raise capital by offering equity securities.




**If
      our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
      may experience difficulty in completing customer transactions and trading
      activity in our securities may be severely limited.**




If
      at any
      time our securities are no longer traded on Nasdaq or other securities exchange
      and we have net tangible assets of $5,000,000 or less and our common stock
      has a
      market price per share of less than $5.00, transactions in our securities may
      be
      subject to the “penny stock” rules promulgated under the Securities Exchange Act
      of 1934. Under these rules, broker-dealers who recommend such securities to
      persons other than institutional investors:




·
            must
                make a special written suitability determination for the
                purchaser;




·
            receive
                the purchaser’s written agreement to a transaction prior to
                sale;




·
            provide
                the purchaser with risk disclosure documents which identify risks
                associated with investing in “penny stocks” and which describe the market
                for these “penny stocks” as well as a purchaser’s legal remedies;
                and




·
            obtain
                a signed and dated acknowledgment from the purchaser demonstrating
                that
                the purchaser has actually received the required risk disclosure
                document
                before a transaction in a “penny stock” can be
                completed.




As
      a
      result of these requirements, broker-dealers may find it difficult to effectuate
      customer transactions and trading activity in our securities will be
      significantly limited. Accordingly, the market price of our publicly traded
      securities may be depressed, and you may find it more difficult to sell the
      offered shares.




**The
      rate at which potential customers are willing to adopt our solutions could
      be
      slowed by negative prior experiences they may have had with previously existing
      point-to-point wireless technologies.**




Potential
      customers within our targeted market segments may have had negative prior
      experiences with previously existing wireless point-to-point technologies,
      such
      as inadequate transmission capacity or service outages due to weather
      conditions. Accordingly, it could take significant time to educate the market
      as
      to the unique attributes of our products that enable our products to overcome
      the types of problems that prevented prior wireless technologies from serving
      as
      viable alternatives to fiber.




**The
      loss of the services of our founding executives could negatively affect our
      business, as could our inability to attract and retain qualified management,
      sales and technical personnel as and when needed.**




Our
      success depends largely on the continued efforts of our founders, Louis S.
      Slaughter, the chairman of our board of directors and our chief executive
      officer, and Douglas G. Lockie, our president and chief technology officer.
      Although they have entered into employment contracts with us that do not expire
      until October 2007 either of these individuals may in the future choose to
      discontinue their employment with us. If so, we may not be able to find adequate
      replacements for them. Without their experience, expertise and reputation within
      the millimeter wave segment of the communications industry, our development
      efforts and future prospects would be substantially impaired. Further, as we
      grow, we will need to attract and retain other personnel possessing relevant
      sales, marketing, manufacturing and technical experience in the communications
      industry. Competition for qualified management, sales and technical personnel
      is
      intense, and we may not be successful in attracting or retaining them. Only
      a
      limited number of persons with the requisite skills to serve in these positions
      may exist, and it may be difficult for us to hire the skilled personnel we
      need
      on economically feasible terms.




29


**Delays
      in obtaining necessary regulatory approvals** **in
      domestic and international markets and desired industry standard certifications
      relating to our equipment could hinder market acceptance of our products, delay
      sales of our products and impair our ability to market those products.**




Our
      products require and will continue to require regulatory approvals or
      certifications before they can be commercially deployed. As a result, customers
      may require that we obtain these approvals before buying or agreeing to buy
      our
      products. In addition, we expect that most customers will require that our
      products meet national industry equipment standards as well. Obtaining these
      approvals and meeting these standards can be a long, expensive process. Any
      significant delay obtaining the approvals or meeting the standards could hinder
      our ability to sell our products and, as a result, reduce our revenues.




**Countries
      outside of the U.S. may not approve for commercial use the frequencies in which
      our products will operate and/or may have different requirements for equipment
      operating in those frequencies than those set by the FCC, either of which events
      could negatively affect our prospects and growth.**




In
      2003,
      the FCC approved service rules for commercial use of the 71-76 GHz and 81-86
      GHz
      bands. In 2006, we received a CE Mark from the EU, signifying that our
      Gig *E* WiFiber
      G products can be sold commercially in the EU, subject to individual EU country
      allocation of frequency bands. These spectrum bands have not yet, however,
      been
      approved for such purpose in many other countries. If widespread authorization
      of these frequencies for wireless communication use by the public has not
      occurred by the time we are ready to expand our operations overseas, the size
      of
      our expected market will be greatly decreased, which would negatively affect
      our
      prospects and growth. In addition, if the requirements and standards set by
      other countries for equipment like ours are different than those set by the
      FCC,
      requiring us to make substantial changes to our product design and/or
      manufacture, our prospects and growth would also be significantly diminished.




**Our
      inability to establish cost-effective sales channels would negatively affect
      our
      revenue potential.**




We
      currently have limited sales, marketing and distribution capabilities. In order
      to fully market our products, we need to continue building our sales and
      marketing infrastructure and/or rely on third parties to perform these
      functions. To market our products directly on a commercial scale, we may need
      to
      hire additional marketing and sales personnel with technical expertise and
      will
      need to develop third party distribution channels, which will require the
      dedication of significant capital, management resources and time. Further,
      any
      agreement to sell our products through a third party, such as an established
      telecommunications provider or network services provider, could hamper our
      ability to sell our products to that third party’s competitors. We may not be
      able to establish the necessary sales force or make adequate third party
      arrangements for product sales. Our failure to do so could limit our ability
      to
      expand sales, as well as negatively affect our operations, financial results
      and
      position.




**We
      expect to face competition from private and start-up companies given the FCC’s
      open licensing rules relating to the radio frequencies on which our products
      will operate, effectively reducing** **important
      barriers to entry for companies such as ours.**




We
      not
      only face actual and potential competition from established companies, but
      also
      from start-up and other small companies that are developing and marketing new
      commercial products and services. Some of these will be seeking, like us, to
      take advantage of the FCC’s open licensing rules to enter the market with
      products capable of harnessing the frequencies between 71-76 GHz and between
      81-86 GHz to provide higher quality service. Moreover, other than the increased
      technical development skills and expertise required, there are no substantial
      manufacturing difficulties, prohibitive intellectual property rights. There
      are
      high business start-up costs creating significant barriers to entry in this
      market. This lack of significant barriers and the perceived attractiveness
      among
      engineers of these licensed frequencies for commercial use or have already
      resulted in other small companies entering the commercial markets with equipment
      utilizing these frequencies. These companies include Loea Corporation,
      BridgeWave Communications, Inc. and, perhaps, E-Band Communications Corp.,
      ElvaLink LLC and Rayawave.




**Failure
      to obtain satisfactory performance from our strategic partners and other third
      party vendors on whom we are** **,
      and will be, dependent for the components and subassemblies used in our products
      could cause us to lose sales, incur additional costs and lose credibility in
      the
      market place.**




We
      substantially rely on outside vendors to manufacture many of the components
      and
      subassemblies for our products, and we obtain or expect to obtain many of these
      components and subassemblies from either a sole source or a limited group of
      suppliers. Our suppliers’ failure to perform satisfactorily could cause us to
      fail to meet customer requirements, lose sales and expose us to product quality
      issues. In turn, this could damage relationships with customers and harm our
      reputation, business, financial condition, and results of operations. Moreover,
      we expect to quote prices to our customers and accept customer orders for our
      products prior to purchasing components and subassemblies from our suppliers.
      If
      our suppliers increase their prices, we may not have alternative sources of
      supply and may not be able to raise the price of our products to cover all
      or
      part of the increased costs. Our inability to obtain these items at the prices
      we desire could hurt our sales and lower our margins on future sales.




30


**If
      we fail to receive sufficient quantities of components when needed, we could
      be
      required to reconfigure our products, which could reduce our sales, alter
      product performance and prove time consuming, expensive and/or impossible.**




Some
      of
      our suppliers are small companies and possess limited resources, which they
      will
      have to manage in order to meet both our demand and the demand of their other
      customers. If any of our suppliers becomes unable to make adequate and timely
      deliveries of our required components or subassemblies, we may have to:




·
            seek
                alternative sources of supply, which, in the case of limited or single
                source components, may not be
                possible;




·
            manufacture
                these components internally, which we may not have the ability, resources
                or, under our strategic alliance agreements, permission, to do;
                or




·
            reconfigure
                our products to work with different components, which entail substantial
                time and expense and could result in inferior performance as compared
                to
                previous configurations.




Even
      if
      we are successful at reconfiguring our products, a significant amount of time
      could be required to receive an adequate flow of replacement components, which
      could delay our ability to manufacture or ship our systems on a timely basis.
      Such delays would significantly damage our business by causing us to lose sales,
      incur additional costs, delay new product introductions and suffer harm to
      our
      reputation.




**We** **may
      be required to purchase minimum quantities of components from certain suppliers,
      whether or not we need such components, which could create a significant drain
      on our capital resources.**




Under
      the
      terms of our agreements with a limited number of our suppliers, we may be
      required to purchase various components only from them and in specified minimum
      quantities. These purchase requirements may represent a significant financial
      commitment for us. We may be required to purchase these components and make
      the
      corresponding expenditures whether or not we need such components to meet the
      demand of end customers for our products. If we have not generated sufficient
      demand for our products to at least offset the costs associated with our minimum
      required component purchases, our agreements with our suppliers may create
      a
      significant drain on our limited capital resources and could result in
      litigation if we are unable to fulfill such minimum purchase obligations.




**If
      we fail to develop products that keep pace with industry standards and needs
      and
      meet our customers’ technical specifications on a timely basis, our business may
      be harmed.**




The
      existing and potential markets for our products and technology are characterized
      by:




·
            ever
                increasing performance
                requirements,




·
            evolving
                industry standards,




·
            rapid
                technological changes, and




·
            product
                obsolescence.




These
      characteristics, in turn, lead to frequent new products and technology
      introductions and enhancements, shorter product life cycles and changes in
      customer demands. Our ability to succeed in our competitive market will depend
      upon our successful development, introduction and sale of new products and
      enhancements on a timely and cost-effective basis in response to changing
      customer requirements and competitors’ product developments. Due to our limited
      resources, we may not be able to complete the development and marketing of
      any
      of the new products we are currently developing. In addition, we may experience
      difficulties that could delay or prevent the completion, introduction and sale
      of future products, or that, once deployed, these products will adequately
      meet
      the requirements of the marketplace and achieve market acceptance.




31


**We
      may not successfully adapt to regulatory changes in our industry, which could
      significantly impact the operation of our business.**




The
      regulatory environment in which we operate is subject to change. Certifications
      for wireless equipment like that utilized in our products and the licensing
      and
      registrations required to use the radio frequency spectrum in which our products
      will operate, are governed by regulatory bodies like the FCC and the NTIA.
      Regulatory changes, which are affected by political, economic and technical
      factors, could significantly impact our operations by:




·
            restricting
                customers’ use of the millimeter wave bands used by our products or making
                that use more expensive;




·
            making
                the products or systems we develop obsolete;
                or




·
            increasing
                the opportunity for additional
                competition.




Regulatory
      changes like these could harm our business, financial condition and results
      of
      operations. In addition, it may be necessary or advisable in the future to
      modify our products to operate in compliance with new regulations. These
      modifications could be extremely expensive and time-consuming to complete,
      thus
      negatively affecting our margins. And, even after expending substantial
      additional resources, we may not be able to complete required modifications,
      which would affect our ability to even sell our products.




**Our
      success will likely be highly dependent upon a large number of sales to a
      limited number of customers.**




We
      expect
      to sell a significant portion of our products and services to a limited number
      of customers. Our business would be harmed if we lost a significant customer
      or
      suffered any reduction or delays in orders from any significant customer,
      including reductions or delays due to customer departures from recent buying
      patterns or market, economic or competitive conditions in the telecommunications
      industry. Additionally, the ongoing consolidation of the telecommunications
      industry is further limiting the number of customers. As a result, we will
      be
      more dependent on specific customers and their economic condition than if our
      sales were made to a broader client base.




**Our
      business depends on continued demand for broadband connectivity and access.**




The
      future success of our business is dependent in part upon the continued and
      increasing demand for high-speed, broadband connectivity and access,
      particularly with regard to the Internet, and for high-speed telecommunications
      products. The markets for broadband connectivity and high-speed
      telecommunication products are still relatively unseasoned and characterized
      by
      evolving technological and industry standards. Therefore, the markets for such
      services and products may not grow as expected or at all, which would limit
      the
      demand for our products.




**If
      we are unable to protect our intellectual property rights adequately, we may
      be
      deprived of legal recourse against those who misappropriate our intellectual
      property.**




Our
      intellectual property rights are important assets for us. However, there are
      events that are outside of our control that pose a threat to our intellectual
      property rights. For example, our proprietary rights may not provide the
      competitive advantages that we expect. Despite our efforts and those of our
      strategic partners to protect our intellectual property, our competitors may
      be
      able to legitimately ascertain the non-patented proprietary technology embedded
      in our products. If this occurs, we may not be able to prevent their use of
      this
      technology. Our means of protecting our proprietary rights may not be adequate,
      we may lack the financial resources to protect our proprietary rights, and
      our
      strategic partners’ existing patents may not be sufficiently broad to prevent
      others from using technology that is similar to or the same as the technology
      utilized by our product solutions. In addition, patents issued to our alliance
      partners might be challenged and might be invalidated or circumvented and any
      rights granted under such patents may not provide adequate protection to them
      or
      us. Our competitors may independently develop similar technology, duplicate
      features of our products or design around patents that may be issued to our
      alliance partners or us. As a result of these threats to our proprietary
      technology, we may have to resort to costly litigation to enforce or defend
      our
      intellectual property rights. Such litigation would divert our management’s
      attention and scarce financial resources that could otherwise be used to develop
      our products.




32


**Our
      products, technologies and other intellectual property could infringe on
      intellectual property rights of others, which could harm our business.**




Although
      we believe that our products, technologies and other intellectual property,
      including trademarks, trade names, and service marks, and those of our alliance
      partners do not and will not infringe upon any existing proprietary rights
      of
      others, third parties may assert such claims against us or our alliance partners
      in the future. Such claims or other future claims of infringement could be
      successful. We could also incur substantial costs and diversion of management
      resources with respect to the defense of any claims relating to proprietary
      rights, even if the claim is invalid, which could have negative effects on
      our
      business, financial condition, and results of operations.




Adverse
      determinations in any litigation could:




·
            subject
                us to significant liabilities to third
                parties,




·
            require
                us to seek costly or onerous licenses from third parties, which may
                not be
                available to us,




·
            force
                us to alter our products, which could be costly, time consuming and
                impractical and could detract from the value or quality of our products,
                and




·
            prevent
                us from manufacturing and selling our
                products.




Any
      of
      these determinations could seriously harm our business.




**Our
      products will subject us to product liability exposure and our product liability
      insurance may not be sufficient to cover these claims.**




Use
      of
      our products will expose us to product liability claims in the event they cause
      injury or harm our customers or third parties’ businesses. Due to our limited
      financial resources, we may not be able to satisfy any liability resulting
      from
      these claims, which would negatively affect our financial condition. Although
      we
      have product liability insurance and umbrella insurance coverage as is customary
      in our industry and markets, it is possible that our insurance coverage could
      be
      insufficient to fully cover potential claims.




**Our
      business and financial results could be negatively affected by warranty claims.**




Products
      as complex as ours frequently contain undetected errors or defects, especially
      when first introduced or when new versions are released. This is especially
      a
      concern for us given our anticipated continuing introduction of new products.
      The occurrence of errors or defects could result in products being returned
      under warranty for repair or replacement with us having to bear the associated
      expense. Due to the fact that our products are newly-developed and not yet
      commercially manufactured, we are currently unable to anticipate the likelihood
      of errors or defects. Although we intend to maintain appropriate overall
      warranty reserves, an unanticipated high repair occurrence related to a specific
      product or number of products could make our reserves inadequate at any specific
      time and negatively affect our financial results.




**Management’s
      failure to properly ascertain potential risks relating to any future
      acquisitions of businesses, products or technologies from others could place
      our
      operations and/or financial condition in harm.**




Although
      as of May 10, 2007, we had no agreements, understandings or commitments relating
      to any future acquisitions of any business, product or technology, we could
      in
      the future seek to expand our operations by acquiring other businesses, products
      or technologies complementary to ours. Our investors will not, in all
      likelihood, receive or otherwise have the opportunity to evaluate any financial
      or other information that may be made available to us in connection with a
      potential acquisition. You will be dependent upon our management to select,
      structure and consummate any acquisitions in a manner consistent with our
      business objectives. Although our management will endeavor to evaluate the
      risks
      inherent in a particular acquisition, we may fail to properly ascertain or
      assess all significant and pertinent risk factors prior to our consummation
      of
      an acquisition. Our failure to properly ascertain those risks, particularly
      in
      instances where we have made significant capital investments, could result
      in
      significant harm to our operations and/or financial condition. Moreover, to
      the
      extent we do effect an acquisition, we may be unable to successfully integrate
      into our operations any business or opportunity that we acquire.




**Emissions
      from our antennas may be a health risk.**




The
      use
      of wireless equipment, like radio transmitters radiating through antennas,
      has
      been alleged to pose health risks due to radio frequency emissions. Our initial
      product is and our proposed products will be in compliance with all current
      U.S.
      radio emissions standards for continuous exposure, however, those standards
      could change or be insufficient. Any allegations of health risks, if proven,
      could result in liability on our part. In addition, we could be required to
      reduce power in our transmissions or otherwise change the way our systems
      operate in order to reduce emissions to acceptable levels. Any of these results
      could negatively affect our financial condition or results of operations and
      diminish the marketability of our products.




33


**Our
      failure to obtain the access rights necessary to install our equipment would
      adversely affect our ability to expand our business.**




We
      or our
      customers may not be able to obtain, from building owners or managers, access
      rights to buildings and rooftops to successfully install and service our
      equipment as planned. In order to install our equipment, we or our customers
      need access to each building where our antennas will be placed. Our failure
      or
      our customers’ failure to obtain access rights at the pace and locations
      necessary could have an adverse affect on our business and financial condition.
      In addition, we may need to obtain zoning or other governmental approvals in
      order to place our antennas on a particular building or in a particular area.
      We
      may not be able to obtain these approvals in a timely manner, or at all.




**Our
      officers, directors and affiliated entities own a** **significant percentage of the voting stock of our company, and they could make
      business decisions with which you disagree that will affect the value of your
      investment.**




As
      of
      March 31, 2007, our executive officers and directors in the aggregate,
      beneficially owned approximately 36.2% **** of
      our
      outstanding common stock. These stockholders will be able to influence
      significantly all matters requiring approval by our stockholders, including
      the
      election of directors. Thus, actions might be taken even if other stockholders,
      including those who purchase securities pursuant to this prospectus, oppose
      them. This concentration of ownership might also have the effect of delaying
      or
      preventing a change of control of our Company, which could cause our stock
      price
      to decline.




**Provisions
      in our corporate documents and our certificate of incorporation and bylaws,
      as
      well as Delaware General Corporation Law, may hinder a change of control.**




Provisions
      of our certificate of incorporation and bylaws, as well as provisions of the
      Delaware General Corporation Law, could discourage unsolicited proposals to
      acquire us, even though such proposals may be beneficial to you. These
      provisions include:




·
            A
                classified board of directors that cannot be replaced without cause
                by a
                majority vote of our stockholders;
                and




·
            Our
                board of director’s authorization to issue shares of preferred stock, on
                terms as the board of directors may determine, without stockholder
                approval.




**Provisions
      of Delaware General Corporation Law may restrict many business combinations.**




We
      are
      also subject to the provisions of Section 203 of the Delaware General
      Corporation Law, which could prevent us from engaging in a business combination
      with a 15% or greater stockholder for a period of three years from the date
      it
      acquired that status unless appropriate board or stockholder approvals are
      obtained.




**ITEM
      3. CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**




The
      Company’s management, with the participation of its principal executive officer
      and principal financial officer, evaluated the effectiveness of the Company’s
      disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e),
      as of the end of the period covered by this report. Based on this evaluation,
      the principal executive officer and principal financial officer
      concluded that, as of the end of the period covered by this
      report, the Company’s disclosure controls and procedures, as defined in
      Exchange Act Rule 13a-15(e), were effective, at the reasonable assurance level,
      to ensure that (i) information required to be disclosed by the Company in the
      reports that it files or submits under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms and (ii) information required to be
      disclosed by the Company in the reports that it files or submits under the
      Exchange Act is accumulated and communicated to the Company’s management
      including its principal executive and principal financial officers, or persons
      performing similar functions, as appropriate to allow timely decisions regarding
      required disclosure.




34


The
      Company’s management, with the participation of its principal executive officer
      and principal financial officer, also conducted an evaluation of changes
      in the Company's internal control over financial reporting, as defined
      in Exchange Act Rule 13a-15(f). Based on this evaluation, the Company’s
      management determined that no changes were made to the Company’s internal
      control over financial reporting, as defined in Exchange Act Rule 13a-15(f),
      during the quarter ended March 31, 2007 that has materially affected, or is
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.




**Part
      II. Other Information**




**Item
      1. Legal Proceedings**





On
      or
      about April 24, 2007, the landlord of the Company’s Waltham, MA office filed a
      breach of lease claim for non-payment of rent in the State of Massachusetts,
      Superior Court of Suffolk County seeking damages in the amount of approximately
      $174,637 and executed an attachment in the amount of $50,000.





On
      or
      about May 7, 2007, the Company was verbally notified by its customer, the
      Ministry of Interior for the Kingdom of Bahrain (“MOI”) that a Bahraini court
      had ordered the MOI to cease payments to the Company under certain sales orders
      pending resolution of a claim filed by a former reseller for the Company in
      the
      Middle East and African region.





**Item
      2. Issuance of Unregistered Securities**





In
      January 2007, 118,259 shares of common stock and 59,129 common stock warrants
      were issued to all of the holders of the Company’s Series B and Series C
      convertible preferred stock for the January 2, 2007 regular quarterly dividend
      due to these stockholders. The shares and warrants were issued based upon
      waivers requested and received from all such stockholders in lieu of cash
      payment for the dividends. The issuances were made on reliance on exemption
      from
      registration pursuant to Section (2)(a)(3) and 4(2) of the Securities Act of
      1933, as amended.





**Item
      5. Other Information**





As
      of
      March 27, 2007, Louis Slaughter, the Company’s Chairman and Chief Executive
      Officer, loaned the Company $65,000 as required for short term working capital
      needs. The note bears interest at 7% per annum. The maturity date is March
      26,
      2008, with interest accruing to and payable on the maturity date.





**Item
      6. Exhibits**





**EXHIBIT
      INDEX**





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


**Exhibit**


**Number**       **Exhibit
      Title**


10.1
            (1)
            Letter
                agreement dated March 29, 2007 between Registrant and David A.
                Buckel.10.2
            
            Amendment
                No. 4 to Strategic Alliance Agreement executed as of May 18, 2007
                between
                ThinKom Solutions, Inc. and GigaBeam Corporation.31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.







(1)
            Incorporated
                by reference to the applicable exhibit filed with our Current Report
                on
                Form 8-K for the event dated March 29, 2007, filed with the SEC on
                April
                4, 2007.





35




**Signatures**





In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




GigaBeam
                  CorporationDate: May
                21,
                2007
              By:
              /s/ Leighton
                J. StephensonLeighton
                  J. StephensonChief
                  Financial Officer


36