---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM
10  Q

QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OFTHE
SECURITIES EXCHANGE ACT OF 1934.

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

For  the
quarterly period ended September 30, 2006

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)                  |           
|                                |           

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

(303)
421-4063 (Registrants telephone number, including area code)

Not
Applicable(Former
Name or Former Address, 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 is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of
Exchange Act. (Check one):

Large
Accelerated Filer  [     ]  Accelerated Filer  [     ]  Non-Accelerated Filer  [  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
November 1, 2006, the Registrant had 154,359,449 shares outstanding of its
$.0005 par value common stock.

---



---

ARC Wireless
Solutions, Inc.

Quarterly
Report on Form 10-Q For The Period Ended September 30, 2006

Table of
Contents

PART
I. FINANCIAL INFORMATION

|             |  |                                                                           
|------------ |  | --------------------------------------------------------------------------
|Item 1.      |  | Financial Statements                                                      
|             |  | Condensed Consolidated Balance Sheets as of September 30, 2006 (unaudited)
|             |  | and December 31, 2005                                                     
|             |  | Condensed Consolidated Statements of Operations for the Three Months      
|             |  | and Nine Months Ended September 30, 2006 and 2005 (unaudited)             
|             |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended 
|             |  | September 30, 2006 and 2005 (unaudited)                                   
|             |  | Notes to Consolidated Financial Statements                                
|Item 2.      |  | Managements Discussion and Analysis of Financial                         
|             |  | Condition and Results of Operations                                       
|Item 3.      |  | Quantitative and Qualitative Disclosures About Market Risk                
|Item 4.      |  | Controls and Procedures                                                   
|             |  | PART II. OTHER INFORMATION                                                
|Item 1.      |  | Legal Proceedings                                                         
|Item 1A.     |  | Risk Factors                                                              
|Item 2.      |  | Unregistered Sales of Equity Securities and Use of Proceeds               
|Item 4.      |  | Submission of Matters to a Vote of Security Holders                       
|Item 6.      |  | Exhibits                                                                  
|Signatures   |  |                                                                           
|Exhibit 31.1 |  |                                                                           
|Exhibit 31.2 |  |                                                                           
|Exhibit 32.1 |  |                                                                           

3



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---

Part I. FINANCIAL
INFORMATION

Item 1.   
Financial Statements

ARC
Wireless Solutions, Inc.Condensed Consolidated Balance Sheets

|                                                   | September 30,2006 | December 31,2005
|-------------------------------------------------- | ----------------- | ----------------
|
|Assets                                             |                   |                 
|Current assets:                                    |                   |                 
|Cash and equivalents                               |                   | $        41,000 
|Accounts receivable  trade, net                   |                   | 1,032,000       
|Inventory, net                                     |                   | 835,000         
|Deferred tax assets                                |                   | 748,000         
|Net assets of discontinued operation (Note 2)      |                   | 36,866,000      
|Other current assets                               |                   | 145,000         
|                                                   |                   |                 
|Total current assets                               |                   | 39,667,000      
|                                                   |                   |                 
|                                                   |                   |                 
|Property and equipment, net                        |                   | 342,000         
|                                                   |                   |                 
|                                                   |                   |                 
|Other assets:                                      |                   |                 
|Intangible assets, net                             |                   | 101,000         
|Deposits                                           |                   | 51,000          
|                                                   |                   |                 
|Total assets                                       |                   | $ 40,161,000    
|                                                   |                   |                 
|                                                   |                   |                 
|Liabilities and stockholders equity               |                   |                 
|Current liabilities:                               |                   |                 
|Accounts payable                                   |                   | $   1,050,000   
|Bank debt  current                                |                   | 1,186,000       
|Accrued expenses                                   |                   | 214,000         
|Net liabilities of discontinued operation (Note 2) |                   | 20,902,000      
|Current portion of capital lease obligations       |                   | 32,000          
|                                                   |                   |                 
|Total current liabilities                          |                   | 23,384,000      
|                                                   |                   |                 
|Deferred tax liabilities                           |                   | 26,000          
|Capital lease obligations, less current portion    |                   | 36,000          
|                                                   |                   |                 
|Total liabilities                                  |                   | 23,446,000      
|                                                   |                   |                 
|                                                   |                   |                 
|Commitments                                        |                   |                 
|Stockholders equity:                              |                   |                 
|Common stock                                       |                   | 78,000          
|Preferred stock                                    |                   |                
|Additional paid-in capital                         |                   | 21,775,000      
|Treasury stock                                     |                   | (1,195,000      
|Accumulated deficit                                |                   | (3,943,000      
|                                                   |                   |                 
|Total stockholders equity                         |                   | 16,715,000      
|                                                   |                   |                 
|Total liabilities and stockholders equity         |                   | $ 40,161,000    
|                                                   |                   |                 
|                                                   |                   |                 

*
These numbers were derived from the audited financial statements for the year  ended
December 31, 2005 and adjusted for discontinued operations. See  accompanying notes.

4



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ARC
Wireless Solutions, Inc.Condensed Consolidated Statements of Operations

|                                                    | Three Months EndedSeptember 30, | Nine Months Ended         September 30, |   |                    
|--------------------------------------------------- | ------------------------------- | --------------------------------------- | - | -------------------
|
|
|Sales, net                                          |                                 | $     1,837,000                         |   | $     2,041,000    
|Cost of sales                                       |                                 | 1,369,000                               |   | 1,175,000          
|                                                    |                                 |                                         |   |                    
|Gross profit                                        |                                 | 468,000                                 |   | 866,000            
|                                                    |                                 |                                         |   |                    
|Operating expenses:                                 |                                 |                                         |   |                    
|Selling, general and administrative expenses        |                                 | 813,000                                 |   | 680,000            
|                                                    |                                 |                                         |   |                    
|Income (loss) from operations                       |                                 | (345,000                                | ) | 186,000            
|                                                    |                                 |                                         |   |                    
|Other income (expense):                             |                                 |                                         |   |                    
|Interest expense, net                               |                                 | (36,000                                 | ) | (27,000            
|Other income                                        |                                 | 1,000                                   |   |                   
|                                                    |                                 |                                         |   |                    
|Total other income (expense)                        |                                 | (35,000                                 | ) | (27,000            
|                                                    |                                 |                                         |   |                    
|Income (Loss) from continuing operations before     |                                 |                                         |   |                    
|income taxes                                        |                                 | (380,000                                | ) | 159,000            
|                                                    |                                 |                                         |   |                    
|(Provision) benefit for income taxes                |                                 | 49,000                                  |   | (21,000            
|                                                    |                                 |                                         |   |                    
|Income (loss) from continuing operations            |                                 | (331,000                                | ) | 138,000            
|                                                    |                                 |                                         |   |                    
|Discontinued Operations (Note 2)                    |                                 |                                         |   |                    
|                                                    |                                 |                                         |   |                    
|Income from operations of the discontinued          |                                 |                                         |   |                    
|component                                           |                                 | 80,000                                  |   | 119,000            
|                                                    |                                 |                                         |   |                    
|(Provision) benefit for income taxes, discontinued  |                                 |                                         |   |                    
|component                                           |                                 | 61,000                                  |   | (17,000            
|                                                    |                                 |                                         |   |                    
|Net Income (Loss)                                   |                                 | $      (190,000                         | ) | $        240,000   
|                                                    |                                 |                                         |   |                    
|                                                    |                                 |                                         |   |                    
|Net income (loss) per share  continuing operations |                                 |                                         |   |                    
| Basic and Diluted                                 |                                 | $           (.002                       | ) | $              .001
|                                                    |                                 |                                         |   |                    
|Net income per share  discontinued operations     |                                 |                                         |   |                    
|Basic and Diluted                                   |                                 | $              .001                     |   | $              .001
|                                                    |                                 |                                         |   |                    
|Net income (loss) per share  Basic and Diluted     |                                 |                                         |   |                    
|                                                    |                                 | $           (.001                       | ) | $              .002
|                                                    |                                 |                                         |   |                    
|Weighted average shares  Basic                     |                                 | 154,400,000                             |   | 154,288,000        
|                                                    |                                 |                                         |   |                    
|Weighted average shares  Diluted                   |                                 | 154,400,000                             |   | 154,288,000        
|                                                    |                                 |                                         |   |                    
|                                                    |                                 |                                         |   |                    

See
accompanying notes.

5



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ARC
Wireless Solutions, Inc.Condensed
Consolidated Statements of Cash Flows

|                                                                            | Nine Months Ended September 30, |                
|--------------------------------------------------------------------------- | ------------------------------- | ---------------
|
|
|Operating activities                                                        |                                 |                
|Loss from continuing operations                                             |                                 | $  (928,000    
|Adjustments to reconcile loss from continuing operations to net cash used   |                                 |                
|in operating activities:                                                    |                                 |                
|Depreciation and amortization                                               |                                 | 110,000        
|Non-cash expense for issuance of stock and options                          |                                 | 15,000         
|Deferred taxes                                                              |                                 | (232,000       
|Changes in operating assets and liabilities:                                |                                 |                
|Accounts receivable, trade                                                  |                                 | (125,000       
|Inventory                                                                   |                                 | 84,000         
|Prepaids and other current assets                                           |                                 | (74,000        
|Other assets                                                                |                                 | (8,000         
|Accounts payable and accrued expenses                                       |                                 | 609,000        
|                                                                            |                                 |                
|Net cash used in continuing operations                                      |                                 | (549,000       
|Net cash provided by discontinued operations                                |                                 | 1,501,000      
|                                                                            |                                 |                
|Net cash provided by operating activities                                   |                                 | 952,000        
|                                                                            |                                 |                
|                                                                            |                                 |                
|Investing activities                                                        |                                 |                
|Patent acquisition costs                                                    |                                 | (10,000        
|Purchase of plant and equipment                                             |                                 | (76,000        
|                                                                            |                                 |                
|Net cash used in investing activities, continuing operations                |                                 | (86,000        
|                                                                            |                                 |                
|Purchase of plant and equipment, discontinued operations                    |                                 | (58,000        
|                                                                            |                                 |                
|Net cash used in investing activities, discontinued operations              |                                 | (58,000        
|                                                                            |                                 |                
|Net cash used in investing activities                                       |                                 | (144,000       
|                                                                            |                                 |                
|                                                                            |                                 |                
|Financing activities                                                        |                                 |                
|Net advances from line of credit                                            |                                 | 632,000        
|Net repayment of line of credit and capital lease obligations               |                                 | (59,000        
|                                                                            |                                 |                
|Net cash provided by financing activities, continuing operations            |                                 | 573,000        
|                                                                            |                                 |                
|Net repayment of line of credit and bank debt, discontinued operations      |                                 | (1,404,000     
|                                                                            |                                 |                
|Net cash used in financing activities, discontinued operations              |                                 | (1,404,000     
|                                                                            |                                 |                
|Net cash used in financing activities                                       |                                 | (831,000       
|                                                                            |                                 |                
|                                                                            |                                 |                
|Net change in cash                                                          |                                 | (23,000        
|Cash, beginning of period                                                   |                                 | 64,000         
|                                                                            |                                 |                
|Cash, end of period                                                         |                                 | $        41,000
|                                                                            |                                 |                
|                                                                            |                                 |                
|Supplemental cash flow information:                                         |                                 |                
|Cash paid for interest, continuing operations                               |                                 | $        96,000
|Cash paid for interest, discontinued operations                             |                                 | 97,000         
|Cash paid for taxes, continuing operations                                  |                                 |               
|Cash paid for taxes, discontinued operations                                |                                 | $      170,000 
|Equipment acquired under capital lease, continuing operations               |                                 | $        22,000
|Issuance of common stock for accrued 401(k) employer matching contribution, |                                 |                
|continuing operations                                                       |                                 |               
|                                                                            |                                 |                

See
accompanying notes.

6



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ARC
Wireless Solutions, Inc.Notes
to Condensed Consolidated Financial StatementsSeptember
30, 2006

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, all adjustments considered necessary for a fair
presentation have been included. 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, 2005.

During
the periods presented in the unaudited condensed consolidated financial
statements, the Company operated in three business segments which are
identified as Distribution, Manufacturing and Cable offering a wide variety of
wireless component and network solutions to service providers, systems
integrators, value added resellers, businesses and consumers, primarily in the
United States. The Distribution segment is classified as a Discontinued
Operation, see Note 2, as it was sold effective November 1, 2006.

Operating
results for the three months and nine months ended September 30, 2006 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2006 or any future period.

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, income
(loss) from operations or net income.

Use of
Estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates and such
differences may be material to the financial statements.

Consolidation
Policy

The
accompanying unaudited condensed consolidated financial statements include the
accounts of ARC Wireless Solutions, Inc. (ARC or the
Company) and its wholly-owned subsidiary corporations, Winncom
Technologies Corp. (Winncom), Starworks Wireless Inc.
(Starworks) and ARC Wireless Hong Kong Limited (ARCHK),
since their respective acquisition dates, after elimination of all material
intercompany accounts, transactions, and profits.

Share Based
Compensation

On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123(R) (SFAS 123(R)) related to accounting for share-based
payments and, accordingly, the Company is now recording compensation expense for
share-based awards based upon an assessment of the grant date fair value for
stock options and restricted stock awards. Prior to 2006, share based
compensation was accounted for in accordance with Accounting Principles Board
Opinion No. 25. We are using the modified prospective method of adoption, which
allows us to apply SFAS 123(R) on a going-forward basis rather than restating
prior periods.

7



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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 general
and administrative expenses during each period presented:

|                                       | Three Months EndedSeptember 30, 2006 | Nine Months EndedSeptember 30, 2006
|-------------------------------------- | ------------------------------------ | -----------------------------------
|Stock options                          |                                      | $                3,000             
|                                       |                                      |                                    
|Total share-based compensation expense |                                      | $                3,000             
|                                       |                                      |                                    
|                                       |                                      |                                    

Prior
to January 1, 2006 the Company followed APB Opinion No. 25 and related
interpretations in accounting for its stock options and grants since the
alternative fair market value accounting provided for under Statement of
Financial Accounting Standards (SFAS) No. 123 (SFAS No.
123) required use of grant valuation models that were not developed for
use in valuing employee stock options and grants. Under APB Opinion No. 25,
if the exercise price of the Companys stock grants and options equals or
exceeds the fair value of the underlying stock on the date of grant, no
compensation expenses are recognized.

If
compensation cost for the Companys stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, then the Companys
net loss and per share amounts for the three months and nine months ended
September 30, 2005, would have been adjusted to the pro forma amounts indicated
below:

|                                                            | Three MonthsEnded September 30, 2005 | Nine MonthsEndedSeptember 30, 2005
|----------------------------------------------------------- | ------------------------------------ | ----------------------------------
|Net income as reported                                      |                                      | $             240,000             
|Add: stock based compensation included in reported net loss |                                      |                                  
|Deduct: Stock-based compensation cost under SFAS 123        |                                      | (17,000                           
|                                                            |                                      |                                   
|Pro forma net income                                        |                                      | $             223,000             
|                                                            |                                      |                                   
|                                                            |                                      |                                   
|Pro forma basic and diluted net loss per share:             |                                      |                                   
|Pro forma shares used in the  calculation of pro forma      |                                      |                                   
|net income per common share- basic                          |                                      | 154,288,000                       
|Pro forma shares used in the  calculation of pro forma      |                                      |                                   
|net income per common share- diluted                        |                                      | 154,288,000                       
|Reported net income per common share  basic and diluted    |                                      | $                   .001          
|Pro forma net income per common share  basic and diluted   |                                      | $                   .001          
|                                                            |                                      |                                   
|                                                            |                                      |                                   

8



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

Stock
option activity was as follows:

|                              | Number ofShares | Weighted AverageExercise Price ($)
|----------------------------- | --------------- | ----------------------------------
|Balance at January 1, 2006    |                 | 2,600,000                         
|Granted                       |                 | 250,000                           
|Exercised                     |                 |                                  
|Forfeited or expired          |                 | (250,000                          
|                              |                 |                                   
|Balance at September 30, 2006 |                 | 2,600,000                         
|                              |                 |                                   
|                              |                 |                                   

The
following table presents information regarding options outstanding as of
September 30, 2006:

|                                                                  | 
|----------------------------------------------------------------- | 
|Weighted average contractual remaining term - options outstanding | 
|Aggregate intrinsic value - options outstanding                   | 
|Options exercisable                                               | 
|Weighted average exercise price - options exercisable             | 
|Aggregate intrinsic value - options exercisable                   | 
|Weighted average contractual remaining term - options exercisable | 
|                                                                  | 

There
was no intrinsic value for options outstanding or options exercisable since no
options were exercised during the nine months ended September 30, 2006.

The
following weighted average assumptions were used:

|                                    | Three and NineMonths EndedSeptember 30, 2006 | Three and NineMonths EndedSeptember 30, 2005
|----------------------------------- | -------------------------------------------- | --------------------------------------------
|Volatility                          |                                              |                                             
|Expected life of options (in years) |                                              |                                             
|Dividend Yield                      |                                              | 0                                           
|Risk free interest rate             |                                              | 6                                           
|Per share value of options granted  |                                              | $                                           
|                                    |                                              |                                             

As of
September 30, 2006, future compensation costs related to nonvested stock options
was $12,000. Management anticipates that this cost will be recognized over a
weighted average period of 1.18 years.

Note 2.   
Discontinued Operations

On
July 28, 2006, ARC Wireless Solutions, Inc (the Company) executed a
Stock Purchase Agreement (Purchase Agreement) with Bluecoral Limited
(Bluecoral), an Irish Company, for the sale of its wholly-owned
subsidiary, Winncom Technologies Corp. (Winncom) to Bluecoral for
$17 million in cash, which was being held in escrow per the terms of the
Purchase Agreement .

On
October 31, 2006, the shareholders of the Company approved the sale of Winncom
and the remaining conditions under the Purchase Agreement were satisfied. The
Company received the $17,000,000 from the escrow agent on November 1, 2006..

This
business segment, Distribution, has been accounted for as a discontinued
operation, as an asset held for sale, and accordingly the net assets and
liabilities have been segregated from continuing operations in the accompanying
consolidated balance sheets for all periods presented and the results of
operations have been excluded from continuing operations in the accompanying
consolidated financial statements of operations and cash flows for all periods
presented.

9



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The
net assets and liabilities of the discontinued operations of the distribution
segment included in the accompanying consolidated balance sheets at September
30, 2006 and December 31, 2005 are as follows:

|                                        | September 30, 2006 | December 31, 2005
|--------------------------------------- | ------------------ | -----------------
|Current assets:                         |                    |                  
|Cash and equivalents                    |                    | $  5,576,000     
|Accounts receivable  trade, net        |                    | 6,412,000        
|Accounts receivable  vendors, net      |                    | 913,000          
|Inventory, net                          |                    | 5,265,000        
|Construction in progress                |                    | 4,337,000        
|Other current assets                    |                    | 3,301,000        
|                                        |                    |                  
|Total current assets                    |                    | 25,804,000       
|                                        |                    |                  
|Property and equipment, net             |                    | 115,000          
|                                        |                    |                  
|Other assets:                           |                    |                  
|Goodwill, net                           |                    | 10,824,000       
|Deposits                                |                    | 123,000          
|                                        |                    |                  
|Total assets                            |                    | $36,866,000      
|                                        |                    |                  
|                                        |                    |                  
|Liabilities and stockholders equity    |                    |                  
|Current liabilities:                    |                    |                  
|Accounts payable                        |                    | $10,071,000      
|Bank debt  current                     |                    | 2,525,000        
|Accrued expenses                        |                    | 528,000          
|Billings in excess of recognized income |                    | 7,778,000        
|                                        |                    |                  
|Total current liabilities               |                    | 20,902,000       
|                                        |                    |                  
|Bank debt, less current portion         |                    |                 
|                                        |                    |                  
|Total liabilities                       |                    | $20,902,000      
|                                        |                    |                  
|                                        |                    |                  
|                                        |                    |                  

10



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Information
related to the discontinued operations for the three months and six months ended
September 30, 2006 and 2005 are as  follows:

|                                             | Three Months Ended September 30, | Nine Months Ended       September 30, |   |               
|-------------------------------------------- | -------------------------------- | ------------------------------------- | - | --------------
|
|Sales, net                                   |                                  | $   9,637,000                         |   | $ 10,449,000  
|Contract revenue                             |                                  | 7,392,000                             |   |              
|                                             |                                  |                                       |   |               
|Total revenue                                |                                  | 17,029,000                            |   | 10,449,000    
|                                             |                                  |                                       |   |               
|                                             |                                  |                                       |   |               
|Cost of sales                                |                                  | 8,578,000                             |   | 9,332,000     
|Cost of contract revenue                     |                                  | 7,008,000                             |   |              
|                                             |                                  |                                       |   |               
|Total cost of goods sold                     |                                  | 15,586,000                            |   | 9,332,000     
|                                             |                                  |                                       |   |               
|                                             |                                  |                                       |   |               
|Gross profit                                 |                                  | 1,443,000                             |   | 1,117,000     
|                                             |                                  |                                       |   |               
|Operating expenses:                          |                                  |                                       |   |               
|Selling, general and administrative expenses |                                  | 1,357,000                             |   | 1,002,000     
|                                             |                                  |                                       |   |               
|Income from operations                       |                                  | 86,000                                |   | 115,000       
|                                             |                                  |                                       |   |               
|Other income (expense):                      |                                  |                                       |   |               
|Interest expense, net                        |                                  | (32,000                               | ) | (25,000       
|Other income                                 |                                  | 26,000                                |   | 29,000        
|                                             |                                  |                                       |   |               
|Total other income (expense)                 |                                  | (6,000                                | ) | 3,000         
|                                             |                                  |                                       |   |               
|Income before income taxes                   |                                  | 80,000                                |   | 119,000       
|                                             |                                  |                                       |   |               
|(Provision) Benefit for income taxes         |                                  | 61,000                                |   | (17,000       
|                                             |                                  |                                       |   |               
|Net Income                                   |                                  | $      141,000                        |   | $      102,000
|                                             |                                  |                                       |   |               
|                                             |                                  |                                       |   |               
|                                             |                                  |                                       |   |               

Approximately
$ 10 million and $24 million, respectively, of the total sales for the three
months and nine months ended September 30, 2006 represented foreign sales in
Eastern Europe which includes Russia, Kazakhstan and Uzbekistan. The increase in
foreign sales is largely due to the long term construction contract in
Kazakhstan.

Approximately
$4 million and $6 million, respectively, of the total sales for the three months
and nine months ended September 30, 2005 represented foreign sales in Eastern
Europe which includes Russia, Kazakhstan and Uzbekistan.

On
October 1, 2003, our subsidiary, Winncom, executed a new $4,000,000
line-of-credit agreement with a bank with interest at prime plus .5% (8.75% at
September 30, 2006) due April 30, 2007 and converted $500,000 of the balance
outstanding under the line of credit at September 30, 2003 into a 36-month term
loan with monthly principal payments of $13,888 plus interest at prime plus .75%
(9% at September 30, 2006). The term loan will become due on October 26, 2006.
Substantially all of the assets of Winncom are collateral on the line of credit
and the term loan.

The
October 1, 2003 line of credit agreement contains several covenants, which,
among other things, require that Winncom maintain certain financial ratios as
defined in the agreement. In addition, the agreement limits the payment of
management fees by Winncom to the Company, and also limits dividends and the
purchase of property and equipment. As of September 30, 2006, Winncom was in
compliance with these covenants.

11



---

In
September 2005, Winncom entered into a one-year Line of Credit Agreement with
Kazkommertsbank for $2.3 million with an annual interest rate of 13% for the
purpose of funding a small portion of the Kazakhtelecom project, specifically
project engineering, laying of fiber optic cable and telecommunication equipment
purchases necessary to be completed before winter to avoid project delays. The
Line of Credit Agreement was entered into only after Kazakhtelecom agreed to
fully guarantee the repayment of Winncoms borrowings under the Line of
Credit Agreement. The Line of Credit Agreement is collateralized only by the
guarantee of Kazakhtelecom. Kazakhtelecom intends to repay the Line of Credit
borrowings either from the proceeds of the permanent project financing or from
its own capital. In September 2005, Winncom was advanced $1,334,000 under the
Line of Credit Agreement and a portion of that balance still remains at
September 30, 2006 and December 31, 2005.

|                                      | September 30,2006 | December 31,2005
|------------------------------------- | ----------------- | ----------------
|
|Bank line of credit  Winncom         |                   | $ 1,548,000     
|Foreign bank line of credit  Winncom |                   | 977,000         
|Bank term loan  Winncom              |                   |                
|                                      |                   |                 
|                                      |                   | 2,525,000       
|Less current portion                  |                   | (2,525,000      
|                                      |                   |                 
|Long-term portion                     |                   | $              
|                                      |                   |                 
|                                      |                   |                 

In
October 2004, Winncom entered into a Frame Agreement (Agreement of
Understanding) with Joint Stock Company Kazakhtelecom
(Kazakhtelecom), Kazakhstans national telecommunications
operator for the Republic of Kazakhstan, that gives Winncom the right, subject
to Winncom obtaining 100% financing for the project upon terms and conditions
acceptable to Kazakhtelecom, and subject to a number of other matters, to
undertake, on a turnkey basis, development of a modern telecommunications
infrastructure to be located on the left bank of the City of Astana, Kazakhstan.
With several competing bids, Winncom was awarded the contract after several
months of negotiations. The total cost of the project is approximately
$55,000,000.

The
first phase of the contract is expected to be completed in 2006 and is expected
to generate revenues of approximately $28 million of which $2.6 million has
already been recognized in 2005.

The
Company follows the percentage-of-completion method of accounting for long term
contract revenue. Contracts are considered complete upon completion of all
essential contract work, including support for integrated testing and customer
acceptance.

Under
the percentage-of-completion method, income is recognized on contracts as work
progresses based on the relationship between total contract revenues and total
estimated contract costs. The percentage of work completed is determined by
comparing the accumulated labor costs incurred to date with managements
current estimate of total labor costs to be incurred at contract completion.
Revenue is recognized based on applying the percentage against the total
contract amount. At September 30, 2006, a significant amount of equipment was
purchased and shipped to the contract site. The uninstalled portion of the
equipment was excluded from the calculation of accumulated costs in measuring
contract progress and recognizable contract revenue.

Contract
costs include all direct material and equipment, subcontractor costs, and labor
costs and those indirect costs related to contract performance. Revisions in
profit estimates during the period of a contract are reflected in the accounting
period in which the revised estimates are made on the basis of the stage of
completion at the time. If estimated total costs on a contract indicate a loss,
the entire amount of the estimated loss is provided for currently.

12



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Billings
in excess of costs and estimated earnings on uncompleted contracts represents
billings to customers in excess of earned revenue and advances on contracts.

Total
contract revenue recognized for the three months and nine months ended September
30, 2006 was $7,287,000 and $10,090,000, respectively. No contract revenue was
recorded for the three months and six months ended September 30, 2005.

The
following amounts relate to the aggregate of contracts in progress as of
September 30, 2006 and December 31, 2005.

|                                        | September 30, 2006 | December 31, 2005
|--------------------------------------- | ------------------ | -----------------
|
|Costs incurred to date                  |                    | $ 23,011,000     
|Contract costs recognized in 2005       |                    | (2,296,000       
|Contract costs recognized in 2006       |                    | (16,378,000      
|                                        |                    |                  
|Construction in progress                |                    | $   4,337,000    
|                                        |                    |                  
|                                        |                    |                  
|Amounts billed                          |                    | $ 27,892,000     
|Revenue recognized in 2005              |                    | (2,632,000       
|Revenue recognized in 2006              |                    | (17,482,000      
|                                        |                    |                  
|Billings in excess of recognized income |                    | $   7,778,000    
|                                        |                    |                  
|                                        |                    |                  

13



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Note 3.   
Earnings Per Share

SFAS
128 provides for the calculation of Basic and Dilutive earnings (loss) 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 and stock warrants 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.

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

|                                            | Three Months Ended | Nine Months Ended      |  |                    
|------------------------------------------- | ------------------ | ---------------------- |  | -------------------
|
|Numerator:  Net income (loss) from          |                    |                        |  |                    
|continuing operations                       |                    | $        (331,000)     |  | $        138,000   
|                                            |                    |                        |  |                    
|                                            |                    |                        |  |                    
|Numerator: Net income from discontinued     |                    |                        |  |                    
|operations                                  |                    | $           141,000    |  | $        102,000   
|                                            |                    |                        |  |                    
|                                            |                    |                        |  |                    
|Denominator:                                |                    |                        |  |                    
|Denominator for basic earnings per share    |                    |                        |  |                    
| weighted average shares                   |                    | 154,400,000            |  | 154,288,000        
|Effect of dilutive securities               |                    |                        |  |                    
|Employee stock options (**)                 |                    |                       |  |                   
|                                            |                    |                        |  |                    
|Denominator for diluted earnings per        |                    |                        |  |                    
|share   adjusted weighted average shares   |                    |                        |  |                    
|and assumed conversion                      |                    | 154,400,000            |  | 154,288,000        
|                                            |                    |                        |  |                    
|Basic earnings (loss) per share, continuing |                    |                        |  |                    
|operations                                  |                    | $             (.002)   |  | $             .001 
|                                            |                    |                        |  |                    
|Diluted earnings (loss) per share,          |                    |                        |  |                    
|continuing operations                       |                    | $              (.002)  |  | $              .001
|                                            |                    |                        |  |                    
|Basic earnings per share, discontinued      |                    |                        |  |                    
|operations                                  |                    | $                 .001 |  | $              .001
|                                            |                    |                        |  |                    
|Diluted earnings per share, discontinued    |                    |                        |  |                    
|operations                                  |                    | $                 .001 |  | $              .001
|                                            |                    |                        |  |                    
|                                            |                    |                        |  |                    

| | **
There are no dilutive shares for the three months and six months ended September 30, 2006,
since the Company had net loses for those periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

14



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Note 4.   
Inventory

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

|                  | September 30,2006 | December 31,2005                
|----------------- | ----------------- | --------------------------------
|
|Raw materials     |                   | $                        909,000
|Work in progress  |                   | 141,000                         
|Finished goods    |                   | 480,000                         
|                  |                   |                                 
|                  |                   | 1,530,000                       
|Inventory reserve |                   | (695,000                        
|                  |                   |                                 
|Net inventory     |                   | $                        835,000
|                  |                   |                                 
|                  |                   |                                 

Note 5.   
Revolving Bank Loan Agreements

The
Company entered into a financing agreement (the WFBC Facility) with
Wells Fargo Business Credit, Inc. (WFBC), on December 9, 2003. The
financing agreement was for a term of one year and was renewable for additional
one-year terms. The WFBC Facility provided for the sale of accounts receivable
by the Company to WFBC at a 1% discount for the first 15 days and an additional
..055 of 1% per day until the account receivable is paid in full. Sales of
accounts receivable and advances under the WFBC Facility were subject to
conditions and restrictions, including, without limitation, accounts receivable
eligibility restrictions, verification, and approval. Obligations under the WFBC
Facility were collateralized by substantially all of the assets of the Company.
Advances under the WFBC Facility were made at the sole discretion of WFBC, even
if the accounts receivable offered by ARC for sale to WFBC satisfied all
necessary conditions and restrictions. WFBC was under no obligation to purchase
accounts receivable from the Company or to advance any funds or credit to the
Company under the WFBC Facility. This financing agreement was terminated on May
10, 2005.

On May
10, 2005 the Company entered into a new $1.5 million revolving line-of-credit
agreement (the Credit Facility) with Citywide Banks. The new Credit
Facility has an annual maturity, is currently due May 10, 2007, with interest at
1.75% over prime (10% at September 30, 2006), contains covenants to maintain
certain financial statement ratios, and is collateralized by essentially all of
the assets of ARC and its wholly owned subsidiary, Starworks, but excluding
Winncom Technologies Corp. The borrowing base is calculated on a percentage of
trade accounts receivable and inventory for ARC and Starworks combined. As of
September 30, 2006 and December 31, 2005, ARC was in compliance with these
covenants. The balance outstanding on the revolving line of credit at September
30, 2006 and December 31, 2005 was $1,186,000 and $554,000, respectively.

Note 6.   
Equity Transactions

During
the three months and nine months ended September 30, 2006, the Company recorded
the issuance of 29,629 and 59,258 shares of common stock, respectively, to a
director for outstanding obligations for accrued directors fees in the
amount of $4,000 and $8,000, respectively.

For
the quarter ended March 31, 2005, the Company recorded the issuance of 3,332
shares of common stock to directors for outstanding obligations for accrued
directors fees in the amount of $500. In addition, during the quarter
ended March 31, 2005, 20,000 shares of common stock were cancelled in a dispute
regarding shares issued for consulting fees in 2001.

In May 2005 the
Company  contributed 407,488 shares of common stock,  valued at $57,000,  into the ARC
Wireless Solutions,  Inc. 401(k)  Plan as an employer matching contribution for the Plan
year 2004.

15



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Note 7.   Recent
Accounting Pronouncements

In
June 2006, the FASB ratified the consensus reached by the EITF on EITF
Issue No. 05-01,Accounting for the Conversion of an Instrument That
Becomes Convertible Upon the Issuers Exercise of a Call Option
(EITF 05-01). The EITF consensus applies to the issuance of equity
securities to settle a debt instrument that was not otherwise currently
convertible but became convertible upon the issuers exercise of call
option when the issuance of equity securities is pursuant to the
instruments original conversion terms. The adoption of EITF 05-01 is not
expected to have an impact on the Companys results of operations or
financial condition.

In
July 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 than 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, derecognition,
classification, interest and penalties, accounting in interim periods and
disclosure. FIN 48 is effective for our fiscal year commencing May 1, 2007. At
this time, the Company has not completed its review and assessment of the impact
of adoption of FIN 48.

In
September 2006, the FASB issued FASB No. 157, Fair Value
Measurements. FASB No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. FASB No. 157 is
effective for fiscal years beginning after November 15, 2007. While the
Company is currently evaluating the impact of FASB No. 157, the Company
does not believe the impact will be material to its results of operations.

In
September 2006, the FASB issued FASB No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans-an
amendment of FASB No. 87, 88, 106 and 132(R). FASB No. 158 improves
financial reporting by requiring an employer to recognize the over funded or
under funded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. This Statement also improves
financial reporting by requiring an employer to measure the funded status of a
plan as of the date of its year-end statement of financial position, with
limited exceptions. FASB No. 158 is effective as of the fiscal year ending
after December 15, 2006. The Company does not believe the impact of FASB
No. 158 will be material to its results of operations.

In
September 2006, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements, (SAB 108). SAB 108 provides guidance on
the consideration of effects of the prior year misstatements in quantifying
current year misstatements for the purpose of a materiality assessment. The SEC
staff believes registrants must quantify errors using both a balance sheet and
income statement approach and evaluate whether either approach results in
quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. SAB 108 is effective for the first annual
period ending after November 15, 2006 with early application encouraged.
The Company plans to adopt SAB 108 in its fourth fiscal quarter of 2006. The
Company is currently evaluating the impact of SAB 108 on its consolidated
financial statements.

16



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Note 8.   Industry
Segment Information

SFAS
No. 131 Disclosure about Segments of an Enterprise and Related
Information requires that the Company disclose certain information about
its operating segments 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 two reportable segments that are separate business units that offer
different products as follows: antenna manufacturing and cable products. Each
segment consists of a single operating unit and the accounting policies of the
reporting segments are the same as those described in the summary of significant
accounting policies. Intersegment sales and transfers are recorded at cost plus
an agreed upon intercompany profit on intersegment sales and transfers. Due to
the pending sale of Winncom at September 30, 2006, which is the Distribution
segment, distribution is no longer classified as an operating segment but is
classified as discontinued operations in the accompanying consolidated financial
statements.

Financial
information regarding the Companys two continuing operating segments for
the three months ended September 30, 2006 and 2005 are as follows:

|                                    |  | Manufacturing | Cable | Corporate   | Total
|----------------------------------- |  | ------------- | ----- | ----------- | -----
|
|Net Sales                           |  | 2006          |       | $ 1,883,000 |      
|                                    |  | 2005          |       | 1,979,000   |      
|                                    |  |               |       |             |      
|Net earnings (Loss) from continuing |  | 2006          |       | (44,000     | )    
|operations                          |  | 2005          |       | 400,000     |      
|                                    |  |               |       |             |      
|Earnings (Loss) from continuing     |  | 2006          |       | (93,000     | )    
|operations before income taxes      |  | 2005          |       | 421,000     |      
|                                    |  |               |       |             |      
|Identifiable Assets                 |  | 2006          |       | 3,990,000   |      
|                                    |  | 2005          |       | 3,411,000   |      
|                                    |  |               |       |             |      
|                                    |  |               |       |             |      

Financial
information  regarding the Companys two continuing operating segments for the nine
months ended September 30, 2006 and 2005  are as follows:

|                                    |  | Manufacturing | Cable | Corporate   | Total
|----------------------------------- |  | ------------- | ----- | ----------- | -----
|
|Net Sales                           |  | 2006          |       | $ 5,110,000 |      
|                                    |  | 2005          |       | 4,779,000   |      
|                                    |  |               |       |             |      
|Net earnings (Loss) from continuing |  | 2006          |       | (137,000    | )    
|operations                          |  | 2005          |       | 656,000     |      
|                                    |  |               |       |             |      
|Earnings (Loss) from continuing     |  | 2006          |       | (364,000    | )    
|operations before income taxes      |  | 2005          |       | 676,000     |      
|                                    |  |               |       |             |      
|Identifiable Assets                 |  | 2006          |       | 3,990,000   |      
|                                    |  | 2005          |       | 3,411,000   |      
|                                    |  |               |       |             |      

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

17



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Note 9.   
Subsequent Event

As noted in
Note 2, the closing of the sale of Winncom Technologies Corp. was completed on November
1, 2006

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

Results of
Continuing Operations for the Three Months Ended September 30, 2006 and 2005

Total
revenues were $1.84 million and $2.04 million for the three months period ended
September 30, 2006 and September 30, 2005, respectively. The decrease in
revenues during the three months ended September 30, 2006 compared to the three
months ended September 30, 2005 is primarily attributable to 1) a decrease of
approximately $164,000 in revenues from one customer for one product line from our Wireless Communications Solutions
Division; and 2) a decrease of $40,000 in revenues from our subsidiary,
Starworks.

Gross
profit margins were 26% and 42% for the three months ended September 30, 2006
and September 30, 2005, respectively. The decrease in gross margin is primarily
the result of 1) lower margins at the Wireless Communications Solutions Division
due to significant increases in component costs including aluminum, copper and
plastic as well as additional labor costs associated with the introduction and
manufacturing of several new products and product lines. The Company has taken
steps in the third quarter of 2006 to improve its gross margin by shifting
production of certain product lines to China through our new subsidiary, ARC
Wireless Hong Kong Limited.

Selling,
general and administrative expenses (SG&A) increased by $133,000 for the
three months ended September 30, 2006 compared to the three months ended
September 30, 2005. Approximately $41,000 of the increase was due to increased
salaries and wages and $80,000 was due to increased costs (salaries and rent)
associated with the organization of ARC Wireless Hong Kong Limited. Other
increases in SG&A costs are audit fees, directors fees and outside
engineering services. SG&A as a percent of total revenues increased from 33%
for the three months ended September 30, 2005 to 44% for the three months ended
September 30, 2006. Salaries and wages, including commissions, remain the
largest component of SG&A, constituting 55% and 66% of the total SG&A
for the three months ended September 30, 2006 and September 30, 2005,
respectively.

Net
interest expense was $36,000 for the three months ended September 30, 2006
compared to $27,000 for the three months ended September 30, 2005 primarily due
to an increase in the average balance outstanding on the line of credit and
capital lease obligations and an increase in the prime interest rate from 6.25%
for the three months ended September 30, 2005 to 8.25% for the three months
ended September 30, 2006.

The
Company had a net loss from continuing operations of $331,000 for the three
months ended September 30, 2006 as compared to net income from continuing
operations of $138,000 for the three months ended September 30, 2005. The
decrease in net income is due to (i) revenues decreasing by $204,000 from 2005
to 2006 (ii) a decrease in gross margin from 42% in 2005 to 26% in 2006, and
(iii) an increase in SG&A expenses of $133,000. In addition, in 2006, the
benefit for income taxes of $49,000 was due to an increase in deferred income
tax assets.

Results
of Discontinued Operations for the Three Months Ended September 30, 2006 and
September 30, 2005 (See Note 2, Discontinued Operations for the detailed
operating results of the discontinued operations)

Winncom
had a 63% increase in revenues comparing the three months ended September 30,
2006 to the three months ended September 30, 2005. The increase of nearly $6.6
million is the result of a decrease in its distribution business revenues of
approximately $800,000 offset by a $7.4 million increase in its long term
contract revenue associated with the Kazakhstan project for which there was no
corresponding revenue for the same period in 2005. The margin recognized on the
long term construction contract was approximately 6% for the three months ended
September 30, 2006. Because the gross margin on the long term contract is lower
then the gross margin for normal distribution revenues, the increase in gross
margin was only 29% even though revenues increased 63% comparing 2006 to 2005.

18



---

Operating
expenses increased $355,000 or 35% comparing the three months ended September
30, 2006 to the same period in 2005 due to a $220,000 increase in bad debt
expense and the remainder due to an increase in salaries and wages. Operating
expenses as a percentage of revenue decreased from 9.6% for the three months
ended September 30, 2005 to 8% for the three months ended September 30, 2006.

Interest
expense increased from $25,000 for the three months ended September 30, 2005 to
$32,000 for the three months ended September 30, 2006. Although the average
balance outstanding on revolving lines of credit and other bank debt decreased
in 2006 compared to 2005, the prime interest rate increased from 6.25% to 8.25%
during the period September 30, 2005 to September 30, 2006 and the interest rate
on the foreign bank debt was 13% for the three months ended September 30, 2006,
while no such debt existed for the three months ended September 30, 2005.

Other
income primarily consists of purchase discounts which were less in 2006 than in
2005 due to a cutback in vendor discounts by one of Winncoms largest
vendors.

The
benefit for income taxes for the three months ended September 30, 2006 compared
to September 30, 2005 is primarily the result of the apportionment of corporate
overhead to discontinued operations resulting in lower taxes than previously
recorded. The provision for income taxes from discontinued operations in 2005
includes the apportionment of net operating losses from continuing operations.

The
increase in the net income from discontinued operations from $102,000 for the
three months ended September 30, 2005 to $141,000 for the three months ended
September 30, 2006 is primarily due to the increase in revenues and in
particular, the increase in the contract revenue.

Results
of Continuing Operations for the Nine Months Ended September 30, 2006 and
September 30, 2005

Total
revenues were $5.2 million and $4.8 million for the nine months ended September
30, 2006 and September 30, 2005, respectively. The increase in revenues during
the nine months ended September 30, 2006 compared to the nine months ended
September 30, 2005 is attributable to 1) an increase in revenues from our
Wireless Communications Solutions Division from $4.7 million for the nine months
ended September 30, 2005 to $5 million for the nine months ended September 30,
2006; and 2) an increase in revenues from our subsidiary, Starworks, from
$291,000 for the nine months ended September 30, 2005 to $434,000 for the nine
months ended September 30, 2006. Revenues from the Wireless Communication
Solutions Division in the first and second quarter of 2005 were reduced
primarily as a result of managements decision to withhold shipments and
minimize the Companys risk to a significant customer whose credit
privileges were suspended due to delinquent payments. The customer had a
recapitalization of its company and shipments were reinstated in the third
quarter of 2005.

Gross
profit margin was 25% and 41% for the nine months ended September 30, 2006 and
2005, respectively. The decrease in gross margin for the nine months ended
September 30, 2006 as compared to the nine months ended September 30, 2005 is
primarily the result of 1) lower margins at the Wireless Communications
Solutions Division due to significant increases in component costs including
aluminum, copper and plastic as well as additional labor costs associated with
the introduction and manufacturing of several new products and product lines to
a change in product mix, competitive pricing pressures and the costs associated
with the introduction and manufacturing of several new products. The Company
took steps in the third quarter of 2006 to improve its gross margin by shifting
production of certain product lines to China through our new subsidiary, ARC
Wireless Hong Kong Limited.

19



---

Selling,
general and administrative expenses (SG&A) increased by $343,000 for the
nine months ended September 30, 2006 compared to September 30, 2005.
Approximately $94,000 of the increase is due to increases in salaries and wages,
and the remaining increase is due to costs associated with the organization of
ARC Wireless Hong Kong Limited, as well as increases in audit fees, directors
fees and outside engineering services. SG&A as a percent of total revenues
increased from 42% for the nine months ended September 30, 2005 to 45% for the
nine months ended September 30, 2006. Salaries and wages, including commissions,
remain the largest component of SG&A constituting 57% and 60% of the total
SG&A for the nine months ended September 30, 2006 and 2005, respectively.

Net
interest expense was $96,000 for the nine months ended September 30, 2006
compared to $99,000 for the nine months ended September 30, 2005. While the
average balance outstanding on all lines of credit and capital lease obligations
was $1 million for the nine months ended September 30, 2006 compared to $500,000
for the nine months ended September 30, 2005, the interest rate that we were
charged in 2006 was nearly half of the interest rate charged for the factoring
of trade accounts receivable in 2005, which terminated in May 2005 when we
established a new revolving bank line of credit.

Other
income for the nine months ended September 30, 2005 included a gain on sale of
assets of $61,000. There were no gains in 2006.

The
Company had a net loss from continuing operations of $928,000 for the nine
months ended September 30, 2006 as compared to a net loss from continuing
operations of $76,000 for the nine months ended September 30, 2005. While
overall revenues increased by approximately $400,000 from 2005 to 2006, there
was a decrease in gross margin from 41% in 2005 to 25% in 2006, an increase in
SG&A expenses of $343,000 and a $60,000 decrease in other income. In
addition, in 2006, the benefit for income taxes of $227,000 was due to an
increase in deferred income tax assets.

Results
of Discontinued Operations for the Nine Months Ended September 30, 2006 and
September 30, 2005 (See Note 2, Discontinued Operations for the detailed
operating results of the discontinued operations)

Winncom
had a 81% increase in revenues comparing the nine months ended September 30,
2006 to the nine months ended September 30, 2005. The increase of nearly $19.3
million is the result of an 8% increase in its distribution business at its
historical gross margin of approximately 13% and a $17.5 million increase in its
long term contract revenue associated with the Kazakhstan project for which
there was no corresponding revenue for the same period in 2005. The margin
recognized on the long term construction contract was approximately 7% for the
nine months ended September 30, 2006. Because the gross margin on the long term
contract is lower then the gross margin for normal distribution revenues, the
increase in gross margin was 35%, even though revenues increased 81% from 2005
to 2006.

Operating
expenses increased $559,000, or 20% comparing 2006 to 2005, with an increase of
$297,000 in bad debt expense and the remainder attributable to increases in
salaries and wages. Operating expenses as a percentage of revenue substantially
decreased from 12% for the nine months ended September 30, 2005 to 8% for the
nine months ended September 30, 2006.

Interest
expense increased slightly from $94,000 for the nine months ended September 30,
2005 to $97,000 for the nine months ended September 30, 2006. Although the
average balance outstanding on revolving lines of credit and other bank debt
decreased from 2005 to 2006, the prime interest rate increased from 6.25% to
8.25%. The interest on the foreign bank debt was 13% for the nine months ended
September 30, 2006, and no such debt existed for the nine months ended September
30, 2005.

Other
income primarily consists of purchase discounts which were less in 2006 than in
2005 due to a cutback in vendor discounts by one of Winncoms largest
vendors.

20



---

The
increase in the provision for income taxes for the nine months ended September
30, 2006 compared to September 30, 2005 is primarily the result of an increase
in net income before taxes. The provision for income taxes in 2005 includes an
apportionment of net operating losses from continuing operations for which there
was none in 2006.

The
increase in the net income from discontinued operations from $423,000 for the
nine months ended September 30, 2005 to $818,000 for the nine months ended
September 30, 2006 is primarily due to the increase in revenues and in
particular, the increase in the contract revenue.

Financial
Condition

The
net cash used in operating activities from continuing operations was $549,000
for the nine months ended September 30, 2006 compared to $65,000 for the nine
months ended September 30, 2005. The net cash used in operating activities from
continuing operations in 2006 was primarily due to the net loss incurred for the
nine months ended September 30, 2006. The net cash used in continuing operations
during 2005 was primarily due to a decrease in trade accounts receivables and
inventory offset by decreases in trade accounts payable and other accrued
expenses. In addition, in determining net cash from continuing operations, the
net loss in each of 2006 and 2005 is partially offset by noncash deductions of
depreciation and the expense associated with the issuance of common stock and
common stock options. Net cash provided by discontinued operations is the result
of (i) net income from discontinued operations and (ii) an increase in deferred
contract revenue.

The
net cash used in investing activities from continuing operations was $86,000 for
the nine months ended September 30, 2006 compared to $78,000 for the nine months
ended September 30, 2005, primarily the result of expenditures for patents and
equipment. The net cash used in investing activities from discontinued
operations was $58,000 for the nine months ended September 30, 2006 compared to
$26,000 for the nine months ended September 30, 2005, primarily the result of
expenditures for equipment.

For
the nine months ended September 30, 2006, the Company was able to draw upon its
line of credit by nearly $632,000, resulting in the net cash provided by
financing activities from continuing operations. For the nine months ended
September 30, 2005 the Company was able to draw upon its line of credit by
nearly $200,000, resulting in the net cash provided by financing activities from
continuing operations. The draws on the lines of credit in 2006 and 2005 helped
fund operating losses from continuing operations. Net income from discontinued
operations help reduce bank lines of credit of the discontinued operations.

The
Companys working capital at September 30, 2006, excluding net assets and
liabilities from discontinued operations, was $318,000 compared to $1.2 million
at December 31, 2005. The decrease as of September 30, 2006 is primarily due to
the net loss from continuing operations.

The
Company entered into a financing agreement (the WFBC Facility) with
Wells Fargo Business Credit, Inc. (WFBC), on December 9, 2003. The
financing agreement was for a term of one year and was renewable for additional
one-year terms. The WFBC Facility provided for the sale of accounts receivable
by the Company to WFBC at a 1% discount for the first 15 days and an additional
..055 of 1% per day until the account receivable is paid in full. Sales of
accounts receivable and advances under the WFBC Facility were subject to
conditions and restrictions, including, without limitation, accounts receivable
eligibility restrictions, verification, and approval. Obligations under the WFBC
Facility were collateralized by substantially all of the assets of the Company.
Advances under the WFBC Facility were made at the sole discretion of WFBC, even
if the accounts receivable offered by ARC for sale to WFBC satisfied all
necessary conditions and restrictions. WFBC was under no obligation to purchase
accounts receivable from the Company or to advance any funds or credit to the
Company under the WFBC Facility. This financing agreement was terminated on May
10, 2005.

21



---

On May
10, 2005, the Company entered into a new $1.5 million revolving line-of-credit
agreement (the Credit Facility) with Citywide Banks. The new Credit
Facility has an annual maturity, that is currently due May 10, 2007, with
interest at 1.75% over prime (10% at September 30, 2006), contains covenants to
maintain certain financial statement ratios, and is collateralized by
essentially all of the assets of ARC and its wholly owned subsidiary, Starworks,
but excluding Winncom. The borrowing base is calculated on a percentage of trade
accounts receivable and inventory for ARC and Starworks combined. As of
September 30, 2006 and December 31, 2005, we were in compliance with these
covenants. The balance outstanding on the revolving line of credit was
$1,186,000 at September 30, 2006 and at December 31, 2005 it was $554,000.

Effective
October 31, 2006 the Company completed the sale of Winncom.. In connection with
the sale, we received $17,000,000 in cash on November 1, 2006.Management
believes that the proceeds from the sale of Winncom, current working capital and
available borrowings on existing bank lines of credit will be sufficient to
allow the Company to maintain its operations through December 31, 2006 and into
the foreseeable future.

Forward-Looking
Statements

This
Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical fact included in this Quarterly
Report, including Item 2: Managements Discussion and Analysis of
Financial Condition and Results of Operation, regarding our financial
position, business strategy, plans and objectives of our management for future
operations and capital expenditures, and other matters, other than historical
facts, are forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements and the assumptions upon which the
forward-looking statements are based are reasonable, we can give no assurance
that such expectations will prove to have been correct.

Additional
statements concerning important factors that could cause actual results to
differ materially from our expectations were disclosed in Item 1A, Risk
Factors on our Form 10-K for the year ended December 31, 2005. There have
been no material changes to the Companys risk factors from those disclosed
in the Companys 2005 Annual Report on Form 10-K. The words
believe, may, will, when,
estimate, continue, anticipate,
intend, expect and similar expressions, as they relate
to ARC Wireless, our business or our management, are intended to identify
forward-looking statements. All written and oral forward-looking statements
attributable to us or persons acting on our behalf subsequent to the date of
this Quarterly Report are expressly qualified in their entirety by the Risk
Factors set forth in our Form 10-K.

Item 3.   
Quantitative and Qualitative Disclosures About Market Risk

We
have not used derivative financial instruments.

We are
exposed to market risk through variable interest rates related to our notes
payable to the banks, each of which has a variable interest rate equal to the
existing bank prime rate (8.25% as of September 30, 2006) plus 1.75%. The prime
interest rate increased from 7% to 8.25% between December 31, 2005 and September
30, 2006. An increase in the banks prime interest rates on the various
notes payable by 1% would increase our yearly interest expense by approximately
$10,000, assuming borrowed amounts remain outstanding at the average balance for
the nine months ended September 30, 2006. Management believes that fluctuation
in interest rates in the near term will not materially affect our consolidated
operating results, financial position or cash flow.

22



---

Item 4.   
Controls and Procedures

The
Company maintains a set of disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the reports filed by the
Company under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms. As of the end of the quarterly period covered by
this report, the Company carried out an evaluation, under the supervision of the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15 of the Exchange Act. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective.

There
have been no significant changes in the Companys internal controls or
other factors that could significantly affect those controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

PART  II.   
OTHER INFORMATION

Item 1.   
Legal Proceedings

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

Item 1A.   
Risk Factors

Additional
statements concerning important factors that could cause actual results to
differ materially from our expectations were disclosed in Item 1A, Risk
Factors of our Form 10-K for the fiscal year ending December 31, 2005.
There have been no material changes from the risk factors previously disclosed
in our Form 10-K for the fiscal year ended December 31, 2005.

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

On
March 15, 2005, the Company recorded the issuance of 3,332 shares of common
stock to directors for accrued directors fees in the amount of $500. These
shares were issued pursuant to exemptions from registration set forth in Section
4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated
thereunder.

In
each of May and July 2006, the Company recorded the issuance of 29,629 shares of
common stock to a director, resulting in total issuances of 59,258 shares for
outstanding obligations for accrued directors fees in the aggregate amount
of $8,000. These shares were issued pursuant to exemptions from registration set
forth in Section 4(2) of the Securities Act of 1933, as amended, and Regulation
D promulgated thereunder.

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

The
Company held its annual meeting of shareholders on October 31, 2006 and
143,629,267 shares were represented at the meeting. The following are the
results of the voting on matters submitted to the shareholders, all of which
were approved:

23



---

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

|Name               | Number of Shares For | Withheld   
|------------------ | -------------------- | -----------
|                   |                      |            
|Sigmund A. Balaban |                      | 142,875,820
|Donald A. Huebner  |                      | 142,149,783
|Randall P. Marx    |                      | 140,662,759
|Robert E. Wade     |                      | 142,865,270
|                   |                      |            

|(2) |  | Proposal
to approve of the sale of the Companys subsidiary Winncom technologies Corp.
|--- |  | --------------------------------------------------------------------------------------

| | Number
of Shares:
| | -----------------

| | 87,461,024
(For)     8,508,413 (Against)     253,685 (Abstain)     47,406,145(Not Voting)
| | -----------------------------------------------------------------------------------------

|(3) |  | Proposal
to ratify the selection of HEIN + Associates, LLP as the Companys independent
registered public accounting firm.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

| | 143,179,604(For)     
175,803(Against)      273,860(Abstain)       0(Not Voting)
| | --------------------------------------------------------------------------------

|(4) |  | Proposed
recommendation  by the Board Of  Directors to  authorize  the Board Of  Directors  to
determine  whether to effect a  reverse  stock  split of our  outstanding  Common  Stock
at the time and at the  ratio  between 1 for 20 and 1 for 50 that the Board of  Directors
deems appropriate.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Number
of Shares:
| | -----------------

| | 128,456,336
(For)      15,102,640 (Against)       70,291 (Abstain)       0(Not Voting)
| | --------------------------------------------------------------------------------------

|(5) |  | In
their discretion, the Proxies as authorized to vote upon such as other business as may
properly come before the meeting.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

| | Number
of Shares:
| | -----------------

| | 134,463,140
(For)      7,733,392 (Against)       1,432,735 (Abstain)       0(Not Voting)
| | ----------------------------------------------------------------------------------------

| | Item
6.    Exhibits
| | -------------------

Exhibit No.Description

|3.1a |  | Articles
of Incorporation of Westcliff Corporation, now known as Antennas America, Inc. (the
Company), are incorporated herein by reference from the Companys Form
S-18 Registration  Statement dated December 1, 1987 (File No. 33-18854-D).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1b |  | Articles
of Amendment of the Company dated January 26, 1988 are incorporated herein by  reference
from the Companys Post-Effective Amendment No. 3 to Form S-18 Registration
Statement  dated December 5, 1989 (File No. 33-18854-D).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1c |  | Articles
and Agreement of Merger between the Company and Antennas America, Inc., a Colorado
corporation, dated March 22, 1989, are incorporated herein by reference from the Companys
Post-Effective Amendment No. 3 to Form S-18 Registration Statement dated December 5, 1989
(File  No. 33-18854-D).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24



---

Exhibit No.      
Description

|3.1d |  | 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).
|--- |  | --------------------------------------------------------------------

|10.1 |  | Stock
Purchase Agreement, dated July 28, 2006, between ARC Wireless Solutions, Inc. and
Blucoral Limited (3).
|---- |  | -------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to Section  302 of
the Sarbanes-Oxley Act of 2002
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------

|31.2 |  | Certification
of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002.
|---- |  | --------------------------------------------------------------------------------------------------------

|32.1 |  | Certifications
of Chief Executive Officer and 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 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 Current Report on Form 8-K on July 28, 2006.
|--- |  | -----------------------------------------------------------------------------------------

SIGNATURE

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

Date:   November
13, 2006

| | ARC
WIRELESS SOLUTIONS, INC.
| | ----------------------------

| | By:   
/s/     Randall P. MarxRandall
P. MarxChief Executive Officer
| | --------------------------------------------------------------------

Date:   November
13, 2006

| | By:   
/s/ Monty R. LamiratoMonty
R. LamiratoChief Financial Officer
| | --------------------------------------------------------------------

25



---

---

EXHIBIT
INDEX

Exhibit No.       Description

|3.1a |  | Articles of Incorporation of Westcliff Corporation, now known as Antennas America, Inc.
(the Company), are incorporated herein by reference from the Companys
Form S-18 Registration Statement dated December 1, 1987 (File No. 33-18854-D).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1b |  | Articles of Amendment of the Company dated January 26, 1988 are incorporated herein by
reference from the Companys Post-Effective Amendment No. 3 to Form S-18 Registration
Statement dated December 5, 1989 (File No. 33-18854-D).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1c |  | Articles and Agreement of Merger between the Company and Antennas America, Inc., a
Colorado corporation, dated March 22, 1989, are incorporated herein by reference from the
Companys Post-Effective Amendment No. 3 to Form S-18 Registration Statement dated
December 5, 1989 (File No. 33-18854-D).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1d |  | Amended and Restated Articles of Incorporation dated October 11, 2000 (1).
|---- |  | --------------------------------------------------------------------------

|3.2 |  | Bylaws of the Company as amended and restated on March 25, 1998 (2).
|--- |  | --------------------------------------------------------------------

|10.1 |  | Stock Purchase Agreement, dated July 28, 2006, between ARC Wireless Solutions, Inc. and
Blucoral Limited (3).
|---- |  | -------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------

|31.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|---- |  | -------------------------------------------------------------------------------------------------------

|32.1 |  | Certifications of Chief Executive Officer and 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 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 Current Report on Form 8-K on
July 28, 2006.
|--- |  | -----------------------------------------------------------------------------------------

26

EXHIBIT 31.1

CERTIFICATIONS

I, Randall P.
Marx, certify that:

|1. |  | I have reviewed this Form 10-Q of ARC Wireless Solutions, Inc.;
|-- |  | ---------------------------------------------------------------

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

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

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

| | (a)
Designed such disclosure controls and procedures, or caused such disclosure  controls and
procedures to be designed under our supervision, to ensure that  material information
relating to the registrant, including its consolidated  subsidiaries, is made known to us
by others within those entities, particularly  during the period in which this report is
being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Evaluated the  effectiveness of the registrants disclosure  controls and procedures
and  presented in this report our conclusions about the  effectiveness of the  disclosure
controls and procedures, as of the end of the period  covered by this  report based on
such evaluation; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
Disclosed in this report any  change in  the registrants internal control over
financial reporting that occurred  during the registrants most recent fiscal
quarter (the registrants  fourth  fiscal quarter in the case of an annual report)
that has materially  affected, or is  reasonably likely to materially affect, the
registrants  internal control over  financial reporting;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants
board of directors (or persons performing the equivalent functions):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a)
All significant deficiencies and material weaknesses in the design or operation  of
internal control over financial reporting which are reasonably likely to  adversely
affect the registrants ability to record, process, summarize and  report financial
information; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Any fraud, whether or not material, that  involves management or other employees who have
a significant role in the  registrants internal control over financial reporting.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date:      November
13, 2006

| | /s/     
Randall P. Marx Randall P. Marx, Chief Executive Officer
| | -----------------------------------------------------------------

EXHIBIT  31.2

CERTIFICATIONS

I, Monty R.
Lamirato, certify that:

|1. |  | I have reviewed this Form 10-Q of ARC Wireless Solutions, Inc.;
|-- |  | ---------------------------------------------------------------

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

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

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

| | (a)
Designed such disclosure controls and procedures, or caused such disclosure  controls and
procedures to be designed under our supervision, to ensure that  material information
relating to the registrant, including its consolidated  subsidiaries, is made known to us
by others within those entities, particularly  during the period in which this report is
being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Evaluated the  effectiveness of the registrants disclosure controls and procedures
and  presented in this report our conclusions about the effectiveness of the  disclosure
controls and procedures, as of the end of the period covered by this  report based on
such evaluation; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
Disclosed in this report any change in  the registrants internal control over
financial reporting that occurred  during the registrants most recent fiscal
quarter (the registrants  fourth fiscal quarter in the case of an annual report)
that has materially  affected, or is reasonably likely to materially affect, the
registrants  internal control over financial reporting;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants
board of directors (or persons performing the equivalent functions):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a)
All significant deficiencies and material weaknesses in the design or operation  of
internal control over financial reporting which are reasonably likely to  adversely
affect the registrants ability to record, process, summarize and  report financial
information; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Any fraud, whether or not material, that  involves management or other employees who have
a significant role in the  registrants internal control over financial reporting.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date:     November
13, 2006

| | /s/     
Monty R. Lamirato Monty R. Lamirato, Chief Financial Officer
| | ---------------------------------------------------------------------

EXHIBIT  32.1

CERTIFICATION
PURSUANT TO18
U.S.C. SECTION 1350,AS ADOPTED
PURSUANT TOSECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the Quarterly Report on Form 10-Q (the Report) of
ARC Wireless Solutions, Inc. (the Company) for the quarter ended
September 30, 2006, each of the undersigned Randall P. Marx, the Chief Executive
Officer of the Company, and Monty R. Lamirato, the Chief Financial Officer of
the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
the undersignedsknowledge and belief:

(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and

(2)
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

Dated:
November 13, 2006

| | /s/     
Randall P. Marx Randall P. MarxChief Executive Officer
| | ---------------------------------------------------------------

Dated:     
November 13, 2006

| | /s/     
Monty R. Lamirato Monty R. Lamirato Chief Financial Officer
| | --------------------------------------------------------------------