UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM 10 -
Q











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





For the
quarterly period ended March 31, 2009





OR





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





For the
transition period from ___________________________





000-18122


(Commission
File Number)





ARC
Wireless Solutions, Inc.


(Exact
name of registrant as specified in its charter)






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




10601
West 48th
Avenue


Wheat Ridge, Colorado,
80033-2660


(Address of principal executive
offices including zip code)




(303)
421-4063


(Registrant’s telephone number,
including area code)




Not
Applicable


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







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





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




Large
accelerated filer
[  ]                                           Accelerated
filer
[  ]                                 Non-accelerated
filer [  ]




Smaller
reporting company [  X ]




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





As of May
1, 2009, the Registrant had 3,091,000 shares outstanding of its $.0005 par value
common stock.




2






ARC
Wireless Solutions, Inc.





Quarterly
Report on FORM 10-Q For The Period Ended





March
31, 2009





TABLE OF
CONTENTS








PART
I.  FINANCIAL INFORMATION




Item
      1.
                Financial
      StatementsCondensed
      Consolidated Balance Sheets as of March 31, 2009
    (unaudited)and
      December 31, 2008
                4Condensed
      Consolidated Statements of Operations for the Three Months
      EndedMarch
      31, 2009 and 2008 (unaudited)
                5Condensed
      Consolidated Statements of Cash Flows for the Three Months
      EndedMarch
      31, 2009 and 2008 (unaudited)
                6Notes
      to Condensed Consolidated Financial Statements
                7Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                15Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                17Item
      4.
                Controls
      and Procedures
                17




PART
II.  OTHER INFORMATION




Item
      1.
                          Legal
      Proceedings
                          18Item
      1A.
                          Risk Factors
                          18Item
      2.
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          18Item
      3.
                          Defaults
      Upon Senior Securities
                          18Item
      4.
                          Submission
      of Matters to a Vote of Security Holders
                          18Item
      5.
                          Other
    Information
                          18Item
      6.
                          Exhibits
                          19Signatures
                          20Exhibit
      31.1
                          21Exhibit
    31.2
                          22Exhibit
      32.1
                          23




3


Part
I.  FINANCIAL INFORMATION


Item
1.  Financial Statements





ARC
Wireless Solutions, Inc.


Condensed
Consolidated Balance Sheets


(in
thousands, except for share amounts)





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(unaudited)
                    
                    
                    *AssetsCurrent
      assets:Cash and
    equivalents
                    
                    $
                    12,159
                    
                    
                    $
                    12,943Accounts receivable – trade,
      net
                    
                    
                    592
                    
                    
                    
                    867Inventory, net
                    
                    
                    1,027
                    
                    
                    
                    1,107Net
      assets of discontinued operations (Note 2)
                    
                    
                    11
                    
                    
                    
                    16Other current
    assets
                    
                    
                    116
                    
                    
                    
                    49Total
      current assets
                    
                    
                    13,905
                    
                    
                    
                    14,982Property
      and equipment, net
                    
                    
                    336
                    
                    
                    
                    381Other
      assets:Intangible assets,
    net
                    
                    
                    123
                    
                    
                    
                    124Deposits
                    
                    
                    53
                    
                    
                    
                    33Total
      assets
                    
                    $
                    14,417
                    
                    
                    $
                    15,520Liabilities
      and stockholders’ equityCurrent
      liabilities:Accounts
      payable
                    
                    $
                    455
                    
                    
                    $
                    832Accrued
      severance
                    
                    
                    191
                    
                    
                    
                    451Accrued expenses
                    
                    
                    264
                    
                    
                    
                    450Net
      liabilities of discontinued operations (Note 2)
                    
                    
                    8
                    
                    
                    
                    8Current portion of capital lease
      obligations
                    
                    
                    87
                    
                    
                    
                    86Total
      current liabilities
                    
                    
                    1,005
                    
                    
                    
                    1,827Capital
      lease obligations, less current portion
                    
                    
                    74
                    
                    
                    
                    77Total
      liabilities
                    
                    
                    1,079
                    
                    
                    
                    1,904Stockholders’
      equity:Preferred
      stock, $.001 par value, 2,000,000 authorized, none issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $.0005 par value, 250,000,000
      authorized,   3,091,000 issued in 2009 and 2008,
      respectively.
                    
                    
                    2
                    
                    
                    
                    2Additional
      paid-in capital
                    
                    
                    20,743
                    
                    
                    
                    20,735Accumulated
deficit
                    
                    
                    (7,407
                    )
                    
                    
                    (7,121
                    )Total
      stockholders’ equity
                    
                    
                    13,338
                    
                    
                    
                    13,616Total
      liabilities and stockholders’ equity
                    
                    $
                    14,417
                    
                    
                    $
                    15,520





*
These numbers were derived from the audited financial statements for the year
ended December 31, 2008.    See accompanying
notes.


4


ARC
Wireless Solutions, Inc.


Condensed
Consolidated Statements of Operations


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





Three
      Months Ended March 31,2009
                  
                  
                  2008Sales,
      net
                  
                  $
                  1,087
                  
                  
                  $
                  1,881Cost
      of sales
                  
                  
                  650
                  
                  
                  
                  1,158Gross
      profit
                  
                  
                  437
                  
                  
                  
                  723Operating
      expenses:Selling,
      general and administrative expenses
                  
                  
                  741
                  
                  
                  
                  929Loss
      from continuing operations
                  
                  
                  (304
                  )
                  
                  
                  (206
                  )Other
      income (expense):Interest expense,
    net
                  
                  
                  (3
                  )
                  
                  
                  (10
                  )Other income
                  
                  
                  33
                  
                  
                  
                  118Total
      other income (expense)
                  
                  
                  30
                  
                  
                  
                  108Loss
      from continuing operations before income taxes
                  
                  
                  (274
                  )
                  
                  
                  (98
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -Loss
      from continuing operations
                  
                  $
                  (274
                  )
                  
                  $
                  (98
                  )Loss
      from discontinued operations
                  
                  
                  (12
                  )
                  
                  
                  (8
                  )Net
      loss
                  
                  $
                  (286
                  )
                  
                  $
                  (106
                  )Net
      loss per share – continuing operations – basic and diluted
                  
                  $
                  (.08
                  )
                  
                  $
                  (.03
                  )Net
      loss per share – discontinued operations – basic and
    diluted
                  
                  $
                  (.01
                  )
                  
                  $
                  (.00
                  )Net
      loss per share – basic and diluted
                  
                  $
                  (.09
                  )
                  
                  $
                  (.03
                  )Weighted
      average shares – basic and diluted
                  
                  
                  3,091,000
                  
                  
                  
                  3,091,000





See accompanying
notes.





5


ARC
Wireless Solutions, Inc.


Condensed
Consolidated Statements of Cash Flows


(Unaudited,
in thousands)





Three
      Months Ended March 31,2009
                      
                      
                      2008Operating
      activitiesNet
      loss from continuing operations
                      
                      $
                      (274
                      )
                      
                      $
                      (98
                      )Adjustments
      to reconcile net loss from continuing operations to net cash provided by
      (used in) operating activities:Depreciation and
      amortization
                      
                      
                      51
                      
                      
                      
                      48Non-cash expense for issuance of
      stock and options
                      
                      
                      8
                      
                      
                      
                      10Provision
      for doubtful accounts
                      
                      
                      -
                      
                      
                      
                      7Changes in operating assets and
      liabilities:Accounts receivable,
      trade
                      
                      
                      275
                      
                      
                      
                      382Inventory
                      
                      
                      80
                      
                      
                      
                      (122
                      )Prepaids and other current
      assets
                      
                      
                      (67
                      )
                      
                      
                      (21
                      )Other
      assets
                      
                      
                      (20
                      )
                      
                      
                      (3
                      )Accounts payable and accrued
      expenses
                      
                      
                      (822
                      )
                      
                      
                      (34
                      )Net
      cash provided by (used in) continued operations
                      
                      
                      (769
                      )
                      
                      
                      169Net
      cash provided by (used in) discontinued operations
                      
                      
                      (7
                      )
                      
                      
                      8Net
      cash provided by (used in) operating activities
                      
                      
                      (776
                      )
                      
                      
                      177Investing
      activitiesPatent
      acquisition costs
                      
                      
                      (2
                      )
                      
                      
                      (8
                      )Purchase
      of plant and equipment
                      
                      
                      (2
                      )
                      
                      
                      (21
                      )Net
      cash used in investing activities, continuing operations
                      
                      
                      (4
                      )
                      
                      
                      (29
                      )Financing
      activitiesNet
      advances from line of credit
                      
                      
                      -
                      
                      
                      
                      1,010Net
      repayment of line of credit and capital lease obligations
                      
                      
                      (4
                      )
                      
                      
                      (1,457
                      )Net
      cash used in financing activities, continuing operations
                      
                      
                      (4
                      )
                      
                      
                      (447
                      )Net
      change in cash
                      
                      
                      (784
                      )
                      
                      
                      (299
                      )Cash
      and cash equivalents, beginning of period
                      
                      
                      12,943
                      
                      
                      
                      14,931Cash
      and cash equivalents, end of period
                      
                      $
                      12,159
                      
                      
                      $
                      14,632Supplemental
      cash flow information:Cash paid for interest,
      continuing operations
                      
                      $
                      3
                      
                      
                      $
                      10Issuance
      of stock for accrued fees, continuing operations
                      
                      $
                      -
                      
                      
                      $
                      4








See accompanying
notes.


6


ARC
Wireless Solutions, Inc.


Notes
to Condensed Consolidated Financial Statements


March
31, 2009





Note
1.  Basis of Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission.  Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements.  In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all of the normal recurring
adjustments necessary to present fairly the financial position of the Company as
of March 31, 2009, the results of its operation and its cash flows for the three
months then ended. For further information, refer to the financial statements
and footnotes thereto included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008.





During
the periods presented in the unaudited consolidated condensed financial
statements, the Company operated in two business segments which are identified
as 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.





Operating
results for the three months ended March 31, 2009 are not necessarily indicative
of the results to be expected for the full year or any future
period.





Principles
of Consolidation





The
accompanying consolidated condensed financial statements include the accounts of
ARC Wireless Solutions, Inc. ("ARC"), and its wholly-owned subsidiary
corporations, Starworks Wireless Inc. ("Starworks or Kit") and ARC Wireless Hong
Kong Limited, ("ARCHK"). All material intercompany accounts, transactions, and
profits have been eliminated in consolidation.





Basis
of Presentation





The
Company has experienced recurring losses, and has accumulated a deficit of
approximately $7.4 million since inception in 1989. There can be no assurance
that the Company will achieve the desired result of net income and positive cash
flow from operations in future years. Management believes that current working
capital will be sufficient to allow the Company to maintain its operations
through December 31, 2009.





Use
of Estimates





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





Cash
and Cash Equivalents





The
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. From time to time, the
Company has cash balances in excess of federally insured amounts. The Company
maintains its cash balances with several financial institutions. As of March 31,
2009, the balance exceeded the Federal Deposit Insurance Corporation limitation
for coverage of $250,000, effective October 3, 2008 to December 31, 2009, by
approximately $11.5 million. The Company reduces its exposure to credit risk by
maintaining such balances with financial institutions that have high credit
ratings.





7


Fair
Value of Financial Instruments





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





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





Accounts
Receivable





Trade
receivables consist of uncollateralized customer obligations due under normal
trade terms requiring payment usually within 30 days of the invoice
date.  Management reviews trades receivables periodically and reduces
the carrying amount by a valuation allowance that reflects management's best
estimate of the amount that may not be collectible. The allowance for doubtful
accounts was $460 thousand at both March 31, 2009 and December 31, 2008. Bad
debt expense was $0 for both the three months ended March 31, 2009 and
2008.





Income
Taxes





The
Company accounts for income taxes pursuant to Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109) which utilizes the
asset and liability method of computing deferred income taxes. The objective of
the asset and liability method is to establish deferred tax assets and
liabilities for the temporary differences between the financial reporting basis
and the tax basis of the Company's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or settled. The current
and deferred tax provision is allocated among the members of the consolidated
group on the separate income tax return basis.





In 2007,
we adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, or
"FIN 48". FIN 48 provides detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain tax positions
recognized in the financial statements in accordance with SFAS No. 109. Tax
positions must meet a “more-likely-than-not” recognition threshold at the
effective date to be recognized upon the adoption of FIN 48 and in
subsequent periods. Upon the adoption of FIN 48, we had no unrecognized tax
positions. During the three months ended March 31, 2009 and 2008, we recognized
no adjustments for uncertain tax positions.





We
recognize interest and penalties related to uncertain tax positions in income
tax expense. No interest and penalties related to uncertain tax positions were
accrued at March 31, 2009 and December 31, 2008.





The tax
years 2003 through 2007 remain open to examination by the major taxing
jurisdictions in which we operate. We expect no material changes to unrecognized
tax positions within the next twelve months.





Reclassifications





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





8





Note
2. Discontinued Operations





In 2008
we determined it was no longer profitable to operate Starworks and operations
were terminated, therefore, Starworks has been accounted for as a discontinued
operation for all periods presented, and the results of operations have been
excluded from continuing operations in the accompanying
consolidated  condensed financial statements of operations and cash
flows for all periods presented.




Information
related to the discontinued operations for the three months ended March 31, 2009
and 2008 are as follows (in thousands):





March
      31,
                      
                      
                      March
      31,2009
                      
                      
                      2008Starworks
                      
                      
                      StarworksSales,
      net
                      
                      
                      1
                      
                      
                      
                      13Total
      revenue
                      
                      
                      1
                      
                      
                      
                      13Cost
      of sales
                      
                      
                      13
                      
                      
                      
                      21Total
      cost of goods sold
                      
                      
                      13
                      
                      
                      
                      21Gross
      loss
                      
                      
                      (12
                      )
                      
                      
                      (8
                      )Operating
      expenses:Selling,
      general and administrative expenses
                      
                      
                      -
                      
                      
                      
                      -Loss
      from operations
                      
                      
                      (12
                      )
                      
                      
                      (8
                      )Other
      income (expense):Interest expense,
    net
                      
                      
                      -
                      
                      
                      
                      -Other income
                      
                      
                      -
                      
                      
                      
                      -Total
      other income (expense)
                      
                      
                      -
                      
                      
                      
                      -Loss
      before income taxes
                      
                      
                      (12
                      )
                      
                      
                      (8
                      )Provision
      for income taxes
                      
                      
                      -
                      
                      
                      
                      -Net
      loss
                      
                      
                      (12
                      )
                      
                      
                      (8
                      )





Note
3: Share-Based Compensation





In 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.





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 (in
thousands):





Three Months EndedMarch 31, 2009
                
                
                March 31, 2008Stock
      options
                
                $
                8
                
                
                $
                10Total
      share-based compensation expense
                
                $
                8
                
                
                $
                10





9


Stock
option activity was as follows:





Number
      of
                    Shares
                  
                  
                  Weighted
      Average
                    Exercise
      Price ($)Balance
      at January 1, 2009
                  
                  
                  47,500
                  
                  
                  $
                  5.38Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -Forfeited
      or expired
                  
                  
                  7,500
                  
                  
                  
                  5.25Balance
      at March 31, 2009
                  
                  
                  40,000
                  
                  
                  $
                  5.40





The
following table presents information regarding options outstanding as of March
31, 2009:





Weighted
      average contractual remaining term - options outstanding
                8.48Aggregate
      intrinsic value - options outstanding
                -Options
      exercisable
                16,000Weighted
      average exercise price – options exercisable
                $5.40Aggregate
      intrinsic value - options exercisable
                -Weighted
      average contractual remaining term - options exercisable
                8.48





There
were no options granted or exercised during the three months ended March 31,
2009.





As of
March 31, 2009, future compensation costs related to nonvested stock options was
$88 thousand.  Management anticipates that this cost will be
recognized over a weighted average period of 3 years.





Note
4. Earnings Per Share





Basic
earnings (loss) per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share, reflects
the potential dilution of securities that could share in the earnings of the
entity. For periods where the Company has incurred a net loss, stock options 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.








10




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





Three
      months Ended March 31,2009
                
                
                2008Net
      loss from continuing operations
                
                $
                (274
                )
                
                $
                (98
                )Net
      loss for discontinued operations
                
                
                (12
                )
                
                
                (8
                )Net
      loss
                
                $
                (286
                )
                
                $
                (106
                )Continuing
      Operations:Denominator
      for basic earnings per share – weightedaverage
      shares
                
                
                3,091
                
                
                
                3,091Effect
      of dilutive securitiesEmployee
      stock options
                
                
                -
                
                
                
                -Common
      stock warrants
                
                
                -
                
                
                
                -Denominator
      for diluted earnings per   share – adjustedweighted
      average shares and assumed conversion
                
                
                3,091
                
                
                
                3,091Basic
      and diluted loss per share, continuing operations
                
                $
                (.08
                )
                
                $
                (.03
                )Discontinued
      Operations:Denominator
      for basic earnings per share – weightedaverage
      shares
                
                
                3,091
                
                
                
                3,091Effect
      of dilutive securitiesEmployee
      stock options
                
                
                -
                
                
                
                -Common
      stock warrants
                
                
                -
                
                
                
                -Denominator
      for diluted earnings per   share – adjustedweighted
      average shares and assumed conversion
                
                
                3,091
                
                
                
                3,091Basic
      and dilutive earnings (loss) per share, discontinuedOperations
                
                $
                (.01
                )
                
                $
                .00Net
      loss:Denominator
      for basic earnings per share – weightedaverage
      shares
                
                
                3,091
                
                
                
                3,091Effect
      of dilutive securitiesEmployee
      stock options
                
                
                -
                
                
                
                -Common
      stock warrants
                
                
                -
                
                
                
                -Denominator
      for diluted earnings per   share – adjustedweighted
      average shares and assumed conversion
                
                
                3,091
                
                
                
                3,091Basic
      and diluted loss per share
                
                $
                (.09
                )
                
                $
                (.03
                )





** There
are no dilutive shares used in the calculation of diluted earnings per share,
continuing operations for the three months ended March 31, 2009 and 2008, since
the Company had net losses for those periods.





11





Note
5.  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 (in thousands):





March
      31,
                
                
                December
      31,2009
                
                
                2008Raw
      materials
                
                $
                305
                
                
                $
                267Work
      in progress
                
                
                9
                
                
                
                32Finished
      goods
                
                
                713
                
                
                
                8081,027
                
                
                
                1,107Inventory
      reserve
                
                
                -
                
                
                
                -Net
      inventory
                
                $
                1,027
                
                
                $
                1,107





Note
6.  Revolving Bank Loan Agreements





During
the first quarter 2009, the Company held a $1.5 million revolving line-of-credit
agreement (the "Credit Facility") with Citywide Bank.  The Credit
Facility had an annual maturity (maturing May 1, 2009) with interest at 1.5%
over prime (3.25% at March 31, 2009), contained covenants to maintain certain
financial statement ratios, and was collateralized by essentially all of the
assets of the Company. The borrowing base was calculated on a percentage of
trade accounts receivable and inventory for the Company. The Company had no
outstanding debt balance on the Credit Facility at March 31, 2009 and December
31, 2008.  On May 1, 2009, the Credit Facility expired since it was
not renewed by the Company.





Note
7.  Equity Transactions





There
were no equity transactions during the three months ended March 31,
2009.  During the quarter ended March 31, 2008, the Company recorded
the issuance of 707 shares of common stock to a director for outstanding
obligations for accrued directors’ fees in the amount of $3,500.





Note
8. Related Party Transaction





In
January 2009, the Company entered into a financial advisory engagement (the
"Agreement") with Quadrant Management, Inc. (the "Advisor"). Quadrant
Management, Inc. is under common control with Brean Murray Carret Group, Inc.
("Brean"), an entity that, together with a current director of the Company,
beneficially owns approximately 849,000 shares, or approximately 27%, of the
Company's common stock. The Company’s current Chief Executive Officer, has been
a Managing Director at Quadrant Management, Inc. since 2005.





Pursuant
to the Agreement, the Advisor will provide to ARC financial advisory and
business consulting services, including restructuring services.  In
consideration for the restructuring services having been provided by the Advisor
since November 2008 and for the ongoing services to be provided, ARC will pay
the following: 1) an initial cash fee of $250,000 upon signing the Agreement in
January 2009 ; 2) and in 2009, ARC will pay an annual fee of the greater of (i)
$250,000, or (ii) 20% of any increase in reported earnings before interest,
taxes, depreciation and amortization after adjusting for one-time and
non-recurring items ("EBITDA") for the current financial year over preceding
year, or (iii) 20% of reported EBITDA for the current financial year, and; 3)
all reasonable out-of-pocket expenses incurred by Advisor in performing services
under the Agreement. The initial restructuring fee of $250,000 was included in
trade accounts payable at December 31, 2008 and was paid in January
2009.  The Agreement will expire on December 31, 2013.





12


Note
9.  Recent Accounting Pronouncements





In
February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement
No. 157(“FSP FAS 157-2”). FSP FAS 157-2 delays the
effective date of SFAS 157 to fiscal years beginning after
November 15, 2008 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis, at least annually. FSP FAS 157-2 is
effective for our fiscal year beginning January 1, 2009. The adoption of
FSP FAS 157-2 did not have a material impact on our Consolidated Condensed
Financial Statements.





In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB
Statements No. 87, 88, 106, and 132(R) (“SFAS 158”), which requires the
recognition of the funded status of benefit plans in the balance sheet. SFAS 158
also requires certain gains and losses that are deferred under current pension
accounting rules to be recognized in accumulated other comprehensive income, net
of tax effects. These deferred costs (or income) will continue to be recognized
as a component of net periodic pension cost, consistent with current recognition
rules. For entities with no publicly traded equity securities, the effective
date for the recognition of the funded status is for fiscal years ending after
June 15, 2007. In addition, the ability to measure the plans’ benefit
obligations, assets and net period cost at a date prior to the fiscal year-end
date is eliminated for fiscal years ending after December 15, 2008. The
adoption of the recognition element of SFAS 158 had no effect on the Company’s
financial statements. The adoption of the measurement date element of SFAS 158
did not have a material impact on our Consolidated Condensed Financial
Statements.




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired in
connection with a business combination. The Statement also establishes
disclosure requirements that will enable users to evaluate the nature and
financial effect of the business combination. SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of an entity’s first fiscal year that begins after December 15,
2008. We did not have any business combinations in the first quarter 2009,
therefore the adoption of SFAS 141R did not impact our Consolidated Condensed
Financial Statements during this period.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 requires that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This Statement is
effective as of the beginning of an entity’s first fiscal year beginning after
December 15, 2008. The adoption of SFAS 160 did not have a material impact
on our Consolidated Condensed Financial Statements.





On March
19, 2008, The Financial Accounting Standards Board (FASB) issued FASB Statement
No. 161, Disclosures about
Derivative Instruments and Hedging Activities.The new
standard is intended to improve financial reporting about derivative instruments
and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial
performance, and cash flows.  It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The adoption of SFAS 161 did not have a
material impact of our Consolidated Condensed Financial Statements.





Note
10.  Concentration of Credit Risk





One
customer accounted for approximately 16% and 23% of the Company’s net sales for
the three months ended March 31, 2009 and 2008, respectively.   A
reduction, delay or cancellation of orders from this customer or the loss of
this customer could significantly reduce the Company’s revenues and operating
results. We cannot provide assurance that this customer or any of our current
customers will continue to place orders, that orders by existing customers will
continue at current or historical levels or that we will be able to obtain
orders from new customers.





13


Note
11.  Industry Segment Information





SFAS No.
131 “Disclosure about Segments of an Enterprise and Related Information”
requires that we disclose certain information about our 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 one reportable segment, antenna products, that is a separate
business unit that offers different products. Corporate represents the
operations of the parent Company, excluding segment
eliminations.  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. In 2008 management determined it was no longer
profitable to operate Starworks and operations were terminated and are no longer
classified as an operating segment but are classified as discontinued operations
in the accompanying consolidated condensed financial statements for all periods
presented.





Financial
information regarding our two continuing operating segments (which include
segment eliminations) for the three months ended March 31, 2009 and 2008 are as
follows (in thousands):





Manufacturing
                        
                        
                        Corporate
                        
                        
                        TotalNet
      sales from continuing operations
                        2009
                        
                        $
                        1,087
                        
                        
                        $
                        -
                        
                        
                        $
                        1,0872008
                        
                        
                        1,881
                        
                        
                        
                        -
                        
                        
                        
                        1,881Net
      income (loss) from continuing operations
                        2009
                        
                        
                        (45
                        )
                        
                        
                        (229
                        )
                        
                        
                        (274
                        )2008
                        
                        
                        78
                        
                        
                        
                        (176
                        )
                        
                        
                        (98
                        )Income
      (Loss) before income taxes, continuing operations
                        2009
                        
                        
                        (45
                        )
                        
                        
                        (229
                        )
                        
                        
                        (274
                        )2008
                        
                        
                        78
                        
                        
                        
                        (176
                        )
                        
                        
                        (98
                        )Identifiable
      assets, continuing operations
                        2009
                        
                        
                        2,420
                        
                        
                        
                        11,986
                        
                        
                        
                        14,4062008
                        
                        
                        3,772
                        
                        
                        
                        13,470
                        
                        
                        
                        17,242











14




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





The
following discussion is intended to assist you in understanding our business and
the results of our operations.  It should be read in conjunction with
the Consolidated Condensed Financial Statements and the related notes that
appear elsewhere in this report as well as our Annual Report on Form 10-K for
the year ended December 31, 2008. Certain statements made in our discussion may
be forward looking.  Forward-looking statements involve risks and
uncertainties and a number of factors could cause actual results or outcomes to
differ materially from our expectations. These risks, uncertainties, and other
factors include, among others, the risks described in our Annual Report on Form
10-K for the fiscal year ended December 31, 2008 filed with the Securities and
Exchange Commission, as well as other risks described in this Quarterly
Report.  Unless the context requires otherwise, when we refer to “we,”
“us” and “our,” we are describing ARC Wireless Solutions, Inc. and its
consolidated subsidiaries on a consolidated basis.





BUSINESS
OVERVIEW





Unfavorable
changes in domestic and global economic conditions resulted in an adverse effect
on our sales revenue in the first quarter 2009.  Many of our large
customers experienced surplus inventories from weakened sales of their products
in late 2008, thereby reducing orders for our products in first quarter
2009.  If economic conditions decline again in the future, our revenue
could continue to be adversely affected.  But, we continue to focus on
cutting our operational and general costs in order to improve our gross margins
until demand rebounds.  We have no debt outstanding, and we have a
cash balance of approximately $12.2 million at March 31, 2009.





Results
of Continuing Operations for the Three Months Ended March 31, 2009 and
2008





Total
revenues were approximately $1.1 million and $1.9 million for the three month
periods ended March 31, 2009 and March 31, 2008, respectively. The decrease in
revenues during the three months ended March 31, 2009 compared to the three
months ended March 31, 2008 is primarily attributable to decreased sales of our
3.5 GHz Antennas and our Global Positioning Systems (GPS) in our Wireless
Communications Solutions.   We expect sales of our Broadband and
GPS products to closely trend with future economic global
conditions.





Gross
profit margins were 40% and 38% for the three months ended March 31, 2009 and
March 31, 2008, respectively. The 2% increase in gross margin is primarily due
to lower operating costs resulting from our efforts in successfully
transitioning most of our production to China through our Hong Kong subsidiary,
ARCHK, as well as reducing overhead from our U.S. plant
operations.  We expect gross margins to continue to improve as we
fully complete our manufacturing transition to our ARCHK
facilities.





Selling,
general and administrative expenses (SG&A) decreased 20% to $741 thousand in
the first quarter 2009 as compared to $929 thousand in the prior year
period.  But, SG&A as a percent of total revenues increased from
49% for the three months ended March 31, 2008 to 68% for the three months ended
March 31, 2009. Salaries and wages, including commissions, remains the largest
component of SG&A costs, constituting 32% of the total SG&A costs for
the three months ended March 31, 2009 and 51% for the three months ended March
31, 2008.  The majority of the overall decrease in SG&A is related
to decreased personnel and salary costs as compared to the prior year period,
but we are continuing our efforts to streamline our operations and reduce our
office costs, public company and other administrative expenses.








15




Net
interest expense decreased from $10 thousand for the three months ended March
31, 2008 to approximately $3 thousand for the current quarterly period primarily
related to decreased amounts outstanding during the period under our Credit
Facility with Citywide Bank.  At March 31, 2009, we had no debt
outstanding.  Our Credit Facility expired on May 1, 2009 and is no
longer outstanding.





Other
income decreased during the first quarter 2009 to approximately $33 thousand as
compared to $118 thousand in first quarter 2008. The decline in interest income
is primarily due to a decline in our cash balances along with a decline in
interest rates on money market funds where a significant portion of the funds
are invested.





There is
no provision for income taxes for the three months ended March 31, 2009 and
2008, due to our net losses for both periods.





Results
of Discontinued Operations for the Three Months Ended March 31, 2009 and 2008
(See Note 2, Discontinued Operations for the detailed operating results of the
discontinued operations)





Discontinued
operations for the three months ended March 31, 2009 and 2008 represent the
operations of our subsidiary, Starworks Wireless. In 2008, management decided to
suspend its efforts to sell cable through its Starworks subsidiary so that it
can focus on higher margin products through its Wireless Communications
Solutions Division. Revenues for the three months ended March 31, 2009 were only
$1 thousand compared to revenues of $13 thousand for the three months ended
March 31, 2008 resulting in a loss from discontinued operations in 2009 of $12
thousand compared to a loss from discontinued operations of $8 thousand for
2008.





Financial
Condition






March
      31,
                      
                      
                      December
      31,(Thousands
      of dollars)
                      
                      2009
                      
                      
                      2008Current
      ratio
                      
                      13.83
      to 1
                      
                      
                      8.20
      to 1Working
      capital (1)
                      
                      $
                      12,900
                      
                      
                      $
                      13,155Total
      debt
                      
                      $
                      -
                      
                      
                      $
                      -Total
      cash less debt
                      
                      $
                      12,159
                      
                      
                      $
                      12,943Stockholders'
      equity
                      
                      $
                      13,338
                      
                      
                      $
                      13,616Total
      liabilities to equity
                      
                      0.08
      to 1
                      
                      
                      0.14
      to 1




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





We have a
cash balance of $12.2 million at March 31, 2009 and hold no debt
outstanding.  We believe that we have the ability to provide for our
remaining 2009 operational needs through projected operating cash flow and cash
on hand.





The net
cash used by operating activities from continuing operations was $769 thousand
for the three months ended March 31, 2009 compared to net cash provided by
operating activities from continuing operations of $169 thousand for the three
months ended March 31, 2008. The two primary reasons for the change is a $176
thousand increase in the net loss from 2008 to 2009 and the increase in accounts
payable and accrued expenses of $788 thousand.





The net
cash used in investing activities from continuing operations was $4 thousand for
the three months ended March 31, 2009 compared to $29 thousand for the three
months ended March 31, 2008, primarily the result of expenditures for patents
and equipment.





Net cash
used in financing activities from continuing operations for the three months
ended March 31, 2009 was $4 thousand compared to $447 thousand for the three
months ended March 31, 2008 and the decrease in the net cash used is primarily
the result of a decrease in net repayments on the line of credit of $443
thousand.





16


Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





We have
not used derivative financial instruments.





We are
exposed to market risk through interest rates related to our line of credit
which has variable interest rates equal to the existing bank prime rate (3.25%
as of March 31, 2009) plus one and one-half percent and to a lesser degree our
capitalized lease obligations. The prime interest rate decreased from 5.25% at
March 31, 2008 to 3.25% at March 31, 2009.  A decrease in the bank’s
prime interest rate on our line of credit would not have a material effect as
the line of credit expired in May 2009.





Item
4.  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





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





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





Changes
in Internal Control over Financial Reporting





During
the period ended March 31, 2009, the Company completed the third-party
outsourcing of our accounting and financial reporting processes and
procedures.  During this transition period, the Company added
additional financial reporting variance analysis, review and revisions to the
internal policies.  The outsourcing of the accounting and financial
reporting functions and the internal policy revisions described above represent
changes in the Company’s internal control over its financial reporting during
the three months ended March 31, 2009 that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.











17




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 for 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,
2008.  There have been no material changes from the risk factors
previously disclosed in our Form 10-K for the fiscal year ended December 31,
2008.





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





None





Item
3. Defaults  Upon Senior Securities





None





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





None





Item
5. Other Information





None.





18





Item
6.   Exhibits





EXHIBIT
INDEX




Exhibit
      Number
                      Description3.1
                      Amended
      and Restated Articles of Incorporation dated October 11, 2000
      (1)3.2
                      Bylaws
      of the Company as amended and restated on March 25, 1998
    (2)10.2
                      Stock
      Purchase Agreement, by and among Bluecoral limited, Winncom Technologies
      Corp. and the Company dated as of July 28, 2006 (3)10.3
                      Escrow
      Agreement, dated July 28, 2006, by and among the Company, Bluecoral
      Limited and Consumer Title Services, LLC (3)10.4
                      Employment
      Agreement effective January 31, 2008 between the Company and Randall P.
      Marx (4)10.5
                      Employment
      Agreement effective November 1, 2007 between the Company and Monty R.
      Lamirato (5)10.6
                      Employment
      Agreement effective November 1, 2007 between the Company and Steve C.
      Olson (5)10.7
                      Employment
      Agreement effective November 1, 2007 between the Company and Richard L.
      Anderson (5)31.1
                      Officers’
      Certifications of Periodic Report pursuant to Section 302 of
      Sarbanes-Oxley Act of 200232.1
                      Officers’
      Certifications of Periodic Report pursuant to Section 906 of
      Sarbanes-Oxley Act of 200299.1
                      Nominating
      Policies and
Procedures





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


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


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


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


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








19




SIGNATURE





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




ARC
      WIRELESS SOLUTIONS, INC.Date:    May
      15, 2009
                                  By:
                                  /s/ Jason
      YoungJason
      Young
                                    Chief
      Executive OfficerDate:   May
      15, 2009
                                  By:
                                  /s/
      Steve OlsonSteve
      Olson
                                    Chief
      Technology Officer
                                    (acting
      as Chief Financial Officer)




20