UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10 - Q








[ x ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2011





OR





[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ___________________________





000-18122


(Commission File Number)





ARC Wireless Solutions, Inc.


(Exact name of registrant as specified in its charter)




Utah
87-0454148( State or other jurisdiction of incorporation)
(IRS Employer Identification Number)




6330 North Washington Street, Suite 13


Denver, Colorado, 80216-1146


(Address of principal executive offices including zip code)




(303) 421-4063


(Registrant’s telephone number, including area code)





Not Applicable


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)




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





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).   Yes  ___   No X





Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer [  ]

Accelerated filer [  ]Non-accelerated filer [  ]

Smaller reporting company [  X ]




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





As of May 1, 2011, the Registrant had 3,091,350 shares outstanding of its $.0005 par value common stock.












ARC Wireless Solutions, Inc.





Quarterly Report on FORM 10-Q For The Period Ended





March 31, 2011





TABLE OF CONTENTS





PART I.  FINANCIAL INFORMATIONItem 1.  Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2011 (unaudited)

and December 31, 2010
3Condensed Consolidated Statements of Operations for the Three Months Ended

March 31, 2011 and 2010 (unaudited)
4Condensed Consolidated Statements of Cash Flows for the Three Months Ended

March 31, 2011 and 2010 (unaudited)
5Notes to Condensed Consolidated Financial Statements
6Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
12Item 4.  Controls and Procedures
14PART II.  OTHER INFORMATIONItem 2.  Unregistered Sales of Equity Securities and Use of Proceeds
14Item 4.  Submission of Matters to a Vote of Security Holders
14Item 6.  Exhibits
15SIGNATURES
16


2





Part I.  FINANCIAL INFORMATION


Item 1.  Financial Statements





ARC Wireless Solutions, Inc.


Condensed Consolidated Balance Sheets


(in thousands, except share and per share amounts)




March 31,


December 31,2011


2010(unaudited)


*AssetsCurrent assets:Cash and equivalents

$
11,314


$
11,643Accounts receivable – trade, net


395



385Inventory, net


427



548Other current assets


52



29Total current assets


12,188



12,605Property and equipment, net


260



272Other assets:Intangible assets, net


117



114Deposits


6



2Total assets

$
12,571


$
12,993Liabilities and stockholders’ equityCurrent liabilities:Accounts payable

$
172


$
212Accrued expenses


127



404Current portion of capital lease obligations


95



95Total current liabilities


394



711Capital lease obligations, less current portion


-



-Total liabilities


394



711Stockholders’ equity:Preferred stock, $.001 par value, 2,000,000 authorized, none issued and outstanding






-Common stock, $.0005 par value, 250,000,000 authorized,  3,091,000 outstanding in 2011 and 2010, respectively.


2



2Additional paid-in capital


20,806



20,798Accumulated deficit


(8,631
)


(8,518
)Total stockholders’ equity


12,177



12,282Total liabilities and stockholders’ equity

$
12,571


$
12,993





* These numbers were derived from the audited financial statements for the year ended December 31, 2010.    See accompanying notes.




3




ARC Wireless Solutions, Inc.


Condensed Consolidated Statements of Operations


(Unaudited, in thousands except share and per share amounts)





Three Month Ended March 31,2011


2010Sales, net

$
823


$
1,142Cost of sales


579



845Gross Profit


244



297Operating expensesSelling, general and administrative


367



572Loss from operations


(123
)


(275
)Other Income (expense)Interest expense


-



(1
)Other income


10



11Total other income


10



10Net loss

$
(113
)

$
(265
)Net loss per share, basic and diluted

$
(.04
)

$
(.09
)Weighted average shares, basic


3,091,000



3,091,000Weighted average shares, diluted


3,091,000



3,091,000





See accompanying notes.




4





ARC Wireless Solutions, Inc.


Condensed Consolidated Statements of Cash Flows


(Unaudited, in thousands)





Three Months Ended March 31,2011


2010Operating activitiesNet loss from operations

$
(113
)

$
(265
)Adjustments to reconcile net loss from operations to net cash provided by (used in) operating activities:Depreciation and amortization


42



48Non-cash stock compensation


8



8Provision for doubtful accountsChanges in operating assets and liabilities:Accounts receivable, trade


(10
)


(51
)Inventory


121



71Prepaids and other current assets


(23
)


(13
)Other assets


(4
)


(74
)Accounts payable and accrued expenses


(317
)


(48
)Net cash used in operating activities


(296
)


(324
)Investing activitiesPatent acquisition costs


(6
)


(2
)Purchase of plant and equipment


(27
)


(53
)Net cash used in investing activities


(33
)


(55
)Financing activitiesNet advances from line of credit


-



-Net repayment of line of credit and capital lease obligations


-



-Net cash used in financing activities






-Net decrease in cash


(329
)


(379
)Cash and cash equivalents, beginning of year


11,643



11,785Cash and cash equivalents, end of quarter

$
11,314


$
11,406





See accompanying notes.




5





ARC Wireless Solutions, Inc.


Notes to Condensed Consolidated Financial Statements


March 31, 2011





Note 1.  Basis of Presentation





The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all of the normal recurring adjustments necessary to present fairly the financial position of the Company as of March 31, 2011, the results of its operation and its cash flows for the three months then ended. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.





During the periods presented in the unaudited consolidated condensed financial statements, the Company operated in one business segment which is identified as Manufacturing which offers a wide variety of wireless components and network solutions to service providers, systems integrators, value added resellers, businesses and consumers, primarily in the United States.





Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year or any future period.





Principles of Consolidation




The accompanying consolidated financial statements include the accounts of ARC Wireless Solutions, Inc. ("ARC"), and its wholly-owned subsidiary corporations, Starworks Wireless Inc. ("Starworks” or “Kit") and ARC Wireless Hong Kong Limited ("ARCHK"). All material intercompany accounts, transactions, and profits have been eliminated in consolidation. In 2010 management determined ARCHK, our wholly-owned subsidiary, was no longer necessary and operations were terminated.  ARCHK primarily managed our own China production operations which was no longer required when we transitioned to RIL during the third quarter of 2010




Basis of Presentation





The Company has experienced recurring losses and has accumulated a deficit of approximately $8.6 million since inception in 1989. There can be no assurance that the Company will achieve the desired result of net income and positive cash flow from operations in future years. Management believes that current working capital will be sufficient to allow the Company to maintain its operations through December 31, 2011 and into the foreseeable future.





Use of Estimates





The preparation of the Company’s consolidated condensed financial statements in accordance with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.





6





Cash and Cash Equivalents





We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. From time to time we have cash balances in excess of federally insured amounts. We maintain our cash balances with several financial institutions.





Fair Value of Financial Instruments





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





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





Accounts Receivable





Trade receivables consist of uncollateralized customer obligations due under normal trade terms which normally require payment within 30 days of the invoice date.  Management reviews trade receivables periodically and reduces the carrying amount by a valuation allowance that reflects management's best estimate of the amount that may not be collectible. No provision for doubtful accounts was deemed necessary at December 31, 2010 and March 31, 2010. There was no bad debt expense for both the three months ended March 31, 2011 and 2010.





Income Taxes





The Company accounts for income taxes pursuant to Accounting Standards Codification (“ASC”) 740, Income Taxes,which utilizes the asset and liability method of computing deferred income taxes. The objective of this method is to establish deferred tax assets and liabilities for any temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The current and deferred tax provision is allocated among the members of the consolidated group on the separate income tax return basis.





ASC 740 also provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized. During the three months ended March 31, 2011 and 2010, the Company recognized no adjustments for uncertain tax positions.





The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were recognized at March 31, 2011 and December 31, 2010. The Company expects no material changes to unrecognized tax positions within the next twelve months.





Reclassifications





Certain balances in the prior year consolidated financial statements have been reclassified in order to conform to the current year presentation. The reclassifications had no effect on financial condition, gross profit, or net loss.





7





Note 2. Share-Based Compensation





The Company accounts for share-based payments pursuant to ASC 718, Stock Compensation and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards.





Stock compensation expense for stock options is recognized on a straight-line basis over the vesting period of the award. The Company accounts for stock options as equity awards.





The following table summarizes share-based compensation expense recorded in selling, general and administrative expenses during each period presented (in thousands):





Three Months EndedMarch 31, 2011


March 31, 2010Stock options

$
8


$
8Total share-based compensation expense

$
8


$
8





Stock option activity was as follows:





Number of

Shares


Weighted Average

Exercise Price ($)Balance at January 1, 2011


40,000


$
5.40Granted


-



-Exercised


-



-Forfeited or expired


-



-Balance at March 31, 2011


40,000


$
5.40





The following table presents information regarding options outstanding and exercisable as of March 31, 2011:





Weighted average contractual remaining term - options outstanding

6.48 yearsAggregate intrinsic value - options outstanding


-Options exercisable


32,000Weighted average exercise price – options exercisable

$
5.40Aggregate intrinsic value - options exercisable


-Weighted average contractual remaining term - options exercisable

6.48 years





There were no options granted or exercised during the three months ended March 31, 2011.





As of March 31, 2011, future compensation costs related to nonvested stock options was $24 thousand.  Management anticipates that this cost will be recognized over a weighted average period of three years.





Note 3. Earnings Per Share





Basic earnings (loss) per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share, reflects the potential dilution of securities that could share in the earnings of the entity. For periods where the Company has incurred a net loss, stock options were not included in the computation of diluted loss per share because their effect was anti-dilutive, therefore, basic and fully diluted loss per share are the same for those periods.




8




The following table represents a reconciliation of the shares used to calculate basic and diluted earnings (loss) per share for the respective periods indicated (in thousands, except per share amounts):





For the Three Months Ended March 31,2011


2010Net Loss Attributed to Common Stock


Weighted Average Shares


Per Share Loss


Net Loss Attributed to Common Stock


Weighted Average Shares


Per Share LossBasic EPS:Net Loss

$
(113
)


3,091


$
(.04
)

$
(265
)


3,091


$
(.09
)Effect of Dilutive SecuritiesEmployee stock options


-



-



-



-



-



-Diluted loss per share

$
(113
)


3,091


$
(.04
)

$
(265
)


3,091


$
(.09
)





Note 4.  Inventory





Commencing January 1, 2011, inventory is valued at the lower of cost or market using first in first out (FIFO) which approximate average cost, due to the rapid turnover of inventory. The Company previously valued its inventory at lower of cost or market using standard cost which approximated average cost, and as such, the change is not considered a change in accounting. Inventories are reviewed periodically and items considered to be slow-moving or obsolete are reduced to estimated net realizable value through an appropriate reserve.  At March 31, 2011 and December 31, 2010, the inventory reserve was $65 and $64 thousand, respectively. Inventory consists of the following amounts (in thousands):





March 31,


December 31,2011


2010Raw materials

$
45


$
58Work in progress


-



-Finished goods


447



554Subtotal


492



612Inventory reserve


(65
)


(64
)Net inventory

$
427


$
548





Note 5. Related Party Transactions





In 2009, the Company entered into a financial advisory engagement (the "Agreement") with Quadrant Management, Inc. (the "Advisor"). Quadrant Management, Inc. is under common control with Brean Murray Carret Group, Inc. ("Brean"), an entity that, together with a current director of the Company, beneficially owns approximately 684,000 shares, or approximately 22%, of the Company's common stock at January 31, 2011. The Company’s current Chief Executive Officer has been a Managing Director at Quadrant Management, Inc. since 2005.





Pursuant to the Agreement, the Advisor provides to ARC financial advisory and business consulting services, including restructuring services.  In consideration for the restructuring services which have been provided by the Advisor and for the ongoing services to be provided, ARC agreed to pay the following: 1) an initial cash fee of $250 thousand upon signing the Agreement in January 2009; 2) during 2009 and future years, ARC will pay an annual fee of the greater of (i) $250 thousand or (ii) 20% of any increase in reported earnings before interest, taxes, depreciation and amortization after adjusting for one-time and non-recurring items ("EBITDA") for the current financial year over preceding year, or (iii) 20% of reported EBITDA for the current financial year, and; 3) all reasonable out-of-pocket expenses incurred by Advisor in performing services under the Agreement. The 2010 annual fee of $250 thousand is included in accrued liabilities at December 31, 2010. Approximately $62 thousand of the 2011 annual fee was accrued for the three months ended March 31, 2011 and is also included in accrued liabilities at March 31, 2011. The Agreement will expire on December 31, 2013.




9





During the third quarter of 2010, we began utilizing the manufacturing, product sourcing, and outsourcing services of Rainbow Industrial Limited (“RIL”) which is based in China.  RIL is wholly owned by an affiliate of Quadrant Management, Inc., which is affiliated with us and our Chief Executive Officer. We purchase goods and services from RIL valued at approximately $200 thousand per month; however the actual dollar amount can vary significantly with normal fluctuations in business activity





Note 6.  Recent Accounting Pronouncements




In January 2010, the FASB issued an amendment to the accounting standards related to the disclosures about an entity’s use of fair value measurements. Among these amendments, entities are required to provide separate disclosures about purchases, sales, issuances and settlements relating to the tabular reconciliation of beginning and ending balances of the Level 3 (fair value determined based on significant unobservable inputs) classification and provide greater disaggregation for each class of assets and liabilities that use fair value measurements. The requirement to provide the enhanced disclosures for Level 3 fair value measurements is effective for the Company for interim and annual reporting periods beginning after December 31, 2010. The Company does not expect that the adoption of these new disclosure requirements will have a material impact on its consolidated financial statements.




In December 2010, the FASB issued an amendment to the accounting standards related to goodwill which (1) modifies step one of the goodwill impairment test by requiring entities with reporting units that have a zero or negative carrying value to assess, whether it is more likely than not that a goodwill impairment exists and (2) does not prescribe a specific method of calculating the carrying value of a reporting unit in the performance of step one of the goodwill impairment test. Under the requirements of this standard, if the entity concludes that it is more likely than not that a goodwill impairment exists, the entity must perform step two of the goodwill impairment test. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment exists. This standard will become effective for the Company on January 1, 2011 and is not expected to have a material impact on the Company’s consolidated financial statements.




In December 2010, the FASB issued an amendment related to the accounting for business combinations to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This standard will become effective for the Company on January 1, 2011 and is not expected to have a material impact on the Company’s consolidated financial statements.




Note 8.  Concentration of Credit Risk





One customer accounted for approximately 33% and 20% of the Company’s net sales for the three months ended March 31, 2011 and 2010, respectively. A reduction, delay or cancellation of orders from this customer or the loss of this customer could significantly reduce the Company’s revenues and operating results. We cannot provide assurance that this customer or any of our current customers will continue to place orders, that orders by existing customers will continue at current or historical levels or that we will be able to obtain orders from new customers.





Note 9.  Industry Segment Information





ASC 280, Segment Reporting, requires that the Company disclose certain information about its operating segment where operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. The Company has one reportable segment, Manufacturing, which is a separate business unit that offers a variety of wireless components and network solutions to service providers, system integrators, value added resellers, businesses and consumers, primarily in the United States.




10





Note 10.  Subsequent Events





Management has evaluated the impact of events occurring after March 31, 2011 up to the date of the filing of these condensed consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation.





11





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





The following discussion is intended to assist you in understanding our business and the results of our operations.  It should be read in conjunction with the Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2010. Certain statements made in our discussion may be forward looking.  Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations. These risks, uncertainties, and other factors include, among others, the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the Securities and Exchange Commission, as well as other risks described in this Quarterly Report.  Unless the context requires otherwise, when we refer to “we,” “us” and “our,” we are describing ARC Wireless Solutions, Inc. and its consolidated subsidiaries on a consolidated basis.





BUSINESS OVERVIEW





We focus on wireless broadband technology related to propagation and optimization. We design and develop antennas that extend the reach of broadband and other wireless networks and that simplify the implementation of those networks. We supply our products to public and private carriers, wireless infrastructure providers, wireless equipment distributors, value added resellers and other original equipment manufacturers. Our strategy is focused on enhancing value for our stockholders by increasing revenues while at the same time reducing our overhead.





Growth in product revenue is dependent both on gaining further traction with current and new customers for the existing product portfolio as well as further acquisitions to support our wireless initiatives. Revenue growth for antenna products is correlated to overall global wireless market growth and a portion of our growth in this market has slowed due to the increasing use of fully integrated solutions and the current global economic conditions. We continue to focus on keeping our operational and general costs down in order to improve our gross margins until demand rebounds.





Specific growth areas are last mile wireless broadband Internet delivered over standards-based solutions such as Worldwide Interoperability for Microwave Access (“WiMAX”), WiFi or vendor specific proprietary solutions for point-to-point and point-to-multipoint applications, and industrial automation markets; Global Positioning Systems (“GPS”) and Mobile SATCOM solutions for network timing, fleet and asset tracking and monitoring; Machine to machine (“M2M”) communications for controlling or monitoring data from devices; and cellular base station antennas to build out or optimize carrier networks.





During the third quarter of 2010, we began utilizing the manufacturing, product sourcing, and outsourcing services of Rainbow Industrial Limited (“RIL”) which is based in China.  RIL is wholly owned by an affiliate of Quadrant Management, Inc., which is affiliated with us and our Chief Executive Officer. We purchase goods and services from RIL valued at approximately $200 thousand per month; however the actual dollar amount can vary significantly with normal fluctuations in business activity. We use RIL’s services because we believe in doing so it may lower our costs and simplify our internal accounting procedures.





Financial Condition


At March 31, 2011, we had approximately $11.8 million in working capital, which represents a decrease of approximately $100 thousand from working capital at December 31, 2010 of $11.9 million.





We have seen a decline in orders from customers, both domestically and internationally, as a result of the current economic environment and due to the increasing use of fully integrated solutions rather than the component solutions we offer. While we do not expect this trend to reverse in 2011, we continue our efforts to acquire new customers and update our product portfolio.





Management believes that current working capital will be sufficient to allow us to maintain our operations through December 31, 2011 and into the foreseeable future.




12




Results of Continuing Operations for the Three Months Ended March 31, 2011 and 2010





Total revenues were approximately $823 thousand for the three months ended March 31, 2011 and $1.1 million for the three months ended March 31, 2010. The decrease in revenues during the three months ended March 31, 2011 compared to the three months ended March 31, 2010 is primarily attributable to general decrease in broadband wireless sales which was partially offset by an increase in our GPS antenna sales.





Gross profit margins were 29% and 26% for the three months ended March 31, 2011 and 2010, respectively. The increase in gross margin is primarily due to our focus on cutting our operational costs.





Selling, general and administrative expenses (SG&A) decreased 36% to $367 thousand for the quarter ended March 31, 2011 as compared to $572 thousand for the quarter ended March 31, 2010.  SG&A as a percent of total revenues decreased from 50% for the three months ended March 31, 2010 to 44% for the three months ended March 31, 2011. Salaries and wages, remains the largest component of SG&A costs, constituting 29% of the total SG&A costs for the three months ended March 31, 2011 and 2010. The majority of the overall decrease in SG&A is related to a decrease in salary costs and decreases in US facility costs.  We are continuing our efforts to streamline our operations and reduce costs in other areas.





Other income decreased during the first quarter 2011 to approximately $10 thousand as compared to $11 thousand in the first quarter 2010. The decline is primarily due to decreased interest income as a result of the decline in our cash balances in addition to a decline in interest rates on money market funds where a significant portion of the funds are invested.





There is no provision for income taxes for both the three months ended March 31, 2011 and 2010 due to our net losses for both periods.





Financial Condition (in thousands of dollars)





March 31, 2011


December 31, 2010Current ratio (1)

30.93 to 1


17.72 to 1Working capital (2)

$
11,794


$
11,894Total debt

$
394


$
711Total cash less debt

$
10,920


$
10,932Stockholders equity

$
12,177


$
12,282Total liabilities to equity

.03 to 1


.05 to 1





(1)Current ratio is calculated as current assets divided by current liabilities.





(2)Working capital is the difference between current assets and current liabilities.





We have a cash balance of $11.3 million at March 31, 2011 and hold no debt outstanding.  We believe that we have the ability to provide for our remaining 2011 operational needs through projected operating cash flow and cash on hand.





The net cash used by operating activities was $296 thousand for the three months ended March 31, 2011 compared to net cash used by operating activities of $324 thousand for the three months ended March 31, 2010. The primary reason for the change is a reduction in the net loss from operations of $152 thousand comparing the quarter ended March 31, 2011 to the quarter ended March 31, 2010.




13


The net cash used in investing activities from continuing operations was $33 thousand for the three months ended March 31, 2011 compared to $55 thousand for the three months ended March 31, 2010, primarily the result of capital expenditures for molds and machinery.





We had no cash flows related to financing activities for the three months ended March 31, 2011 and 2010.


Item 4.  Controls and Procedures





Evaluation of Disclosure Controls and Procedures





We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings with the Securities and Exchange Commission (SEC) are recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our chief executive and acting chief financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).





As of the end of the period covered by this report, and under the supervision and with the participation of our management, including our Chief Executive Officer and the person performing the similar function as Chief Financial Officer, we evaluated the effectiveness of the design and operation of these disclosure controls and procedures.  Based on this evaluation and subject to the foregoing, our Chief Executive Officer and acting Chief Financial Officer concluded that our disclosure controls and procedures were effective.





Changes in Internal Control over Financial Reporting





There have been no significant changes in the Company’s internal control over financial reporting identified in connection with the evaluation discussed above that occurred during the period ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





PART II.  OTHER INFORMATION





Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds





None





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





None





14





Item 6.   Exhibits





EXHIBIT INDEX




Exhibit Number

Description3.1

Amended and Restated Articles of Incorporation dated October 11, 2000 (1)3.2

Bylaws of the Company as amended and restated on March 25, 1998 (2)10.2

Stock Purchase Agreement, by and among Bluecoral limited, Winncom Technologies Corp. and the Company dated as of July 28, 2006 (3)10.3

Escrow Agreement, dated July 28, 2006, by and among the Company, Bluecoral Limited and Consumer Title Services, LLC (3)10.4

Employment Agreement effective January 31, 2008 between the Company and Randall P. Marx (4)10.5

Employment Agreement effective November 1, 2007 between the Company and Monty R. Lamirato (5)10.6

Employment Agreement effective November 1, 2007 between the Company and Steve C. Olson (5)10.7

Employment Agreement effective November 1, 2007 between the Company and Richard L. Anderson (5)31.1 *

Officers’ Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 200231.2 *

Officers’ Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 200232.1 *

Officers’ Certifications of Periodic Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002





(1)
Incorporated by reference from the Company’s Form 10-KSB for December 31, 2000 filed on April 2,2001.


(2)
Incorporated by reference from the Company’s Form 10-KSB for December 31, 1997 filed on March 31, 1998.


(3)
Incorporated by reference from the Company’s Form 8-K/A filed on August 2, 2006.


(4)
Incorporated by reference from the Company’s Form 8-K filed on February 7, 2008.


(5)
Incorporated by reference from the Company’s Form 8-K filed on November 8, 2007.





* filed herewith





15





SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




ARC WIRELESS SOLUTIONS, INC.Date:           May 12, 2011
By:
/s/ Jason YoungJason YoungChief Executive Officer


Date:           May 12, 2011
By:
/s/ Steve OlsonSteve OlsonChief Technology Officer andActing Principal Financial Officer