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 June 30, 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such
files).   Yes  ___   No X
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
  Large
accelerated filer
[  ]                                                      Accelerated
filer
[  ]                                                      Non-accelerated
filer [  ]
  Smaller
reporting company [ X ]
  Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes     No X
 
 As of
August 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
 
 June
30, 2009
 
 TABLE OF
CONTENTS
 
 
 PART
I.  FINANCIAL INFORMATION
 
 Item
      1.
                              Financial
      StatementsCondensed
      Consolidated Balance Sheets as of June 30, 2009
(unaudited)and
      December 31, 2008
                              4Condensed
      Consolidated Statements of Operations for the Three and Six Months
      EndedJune
      30, 2009 and 2008 (unaudited)
                              5Condensed
      Consolidated Statements of Cash Flows for the Six Months
    EndedJune
      30, 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
                              18PART
      II.  OTHER INFORMATIONItem
      1.
                              Legal
      Proceedings
                              18Item
      1A.
                              Risk Factors
                              18Item
      2.
                              Unregistered
      Sales of Equity Securities and Use of Proceeds
                              18Item
      3.
                              Defaults
      Upon Senior Securities
                              19Item
      4.
                              Submission
      of Matters to a Vote of Security Holders
                              19Item
      5.
                              Other
      Information
                              19Item
      6.
                              Exhibits
                              20Signatures
                              21Exhibit
      31.1
                              22Exhibit
    31.2
                              23Exhibit
      32.1
                              24
  3
 Part
I.  FINANCIAL INFORMATION
 Item
1.  Financial Statements
 
 ARC
Wireless Solutions, Inc.
 Condensed
Consolidated Balance Sheets
 (in
thousands, except for share amounts)
 
 June
      30,
                      
                      
                      December
      31,2009
                      
                      
                      2008(unaudited)
                      
                      
                      *AssetsCurrent
      assets:Cash and
    equivalents
                      
                      $
                      11,892
                      
                      
                      $
                      12,943Accounts receivable – trade,
      net
                      
                      
                      692
                      
                      
                      
                      867Inventory, net
                      
                      
                      1,031
                      
                      
                      
                      1,107Net
      assets of discontinued operations (Note 2)
                      
                      
                      1
                      
                      
                      
                      16Other current
    assets
                      
                      
                      74
                      
                      
                      
                      49Total
      current assets
                      
                      
                      13,690
                      
                      
                      
                      14,982Property
      and equipment, net
                      
                      
                      358
                      
                      
                      
                      381Other
      assets:Intangible assets,
    net
                      
                      
                      120
                      
                      
                      
                      124Deposits
                      
                      
                      68
                      
                      
                      
                      33Total
      assets
                      
                      $
                      14,236
                      
                      
                      $
                      15,520Liabilities
      and stockholders’ equityCurrent
      liabilities:Accounts
      payable
                      
                      $
                      512
                      
                      
                      $
                      832Accrued
      severance
                      
                      
                      -
                      
                      
                      
                      451Accrued expenses
                      
                      
                      236
                      
                      
                      
                      450Net
      liabilities of discontinued operations (Note 2)
                      
                      
                      8
                      
                      
                      
                      8Current portion of capital lease
      obligations
                      
                      
                      113
                      
                      
                      
                      86Total
      current liabilities
                      
                      
                      869
                      
                      
                      
                      1,827Capital
      lease obligations, less current portion
                      
                      
                      27
                      
                      
                      
                      77Total
      liabilities
                      
                      
                      896
                      
                      
                      
                      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
                      
                      
                      20,751
                      
                      
                      
                      20,735Accumulated
deficit
                      
                      
                      (7,413
                      )
                      
                      
                      (7,121
                      )Total
      stockholders’ equity
                      
                      
                      13,340
                      
                      
                      
                      13,616Total
      liabilities and stockholders’ equity
                      
                      $
                      14,236
                      
                      
                      $
                      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 June 30,
                  
                  
                  Six
      Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Sales,
      net
                  
                  $
                  1,226
                  
                  
                  $
                  1,727
                  
                  
                  $
                  2,313
                  
                  
                  $
                  3,608Cost
      of sales
                  
                  
                  707
                  
                  
                  
                  1,056
                  
                  
                  
                  1,357
                  
                  
                  
                  2,216Gross
      profit
                  
                  
                  519
                  
                  
                  
                  671
                  
                  
                  
                  956
                  
                  
                  
                  1,392Operating
      expenses:Selling,
      general and administrative expenses
                  
                  
                  531
                  
                  
                  
                  941
                  
                  
                  
                  1,273
                  
                  
                  
                  1,871Loss
      from continuing operations
                  
                  
                  (12
                  )
                  
                  
                  (270
                  )
                  
                  
                  (317
                  )
                  
                  
                  (479
                  )Other
      income (expense):Interest and other expense,
      net
                  
                  
                  (6
                  )
                  
                  
                  (22
                  )
                  
                  
                  (9
                  )
                  
                  
                  (31
                  )Other income
                  
                  
                  15
                  
                  
                  
                  104
                  
                  
                  
                  48
                  
                  
                  
                  222Total
      other income
                  
                  
                  9
                  
                  
                  
                  82
                  
                  
                  
                  39
                  
                  
                  
                  191Loss
      from continuing operations before income taxes
                  
                  
                  (3
                  )
                  
                  
                  (188
                  )
                  
                  
                  (278
                  )
                  
                  
                  (288
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Loss
      from continuing operations
                  
                  $
                  (3
                  )
                  
                  $
                  (188
                  )
                  
                  $
                  (278
                  )
                  
                  $
                  (288
                  )Loss
      from discontinued operations
                  
                  
                  (2
                  )
                  
                  
                  (8
                  )
                  
                  
                  (14
                  )
                  
                  
                  (15
                  )Net
      loss
                  
                  $
                  (5
                  )
                  
                  $
                  (196
                  )
                  
                  $
                  (292
                  )
                  
                  $
                  (303
                  )Net
      loss per share – continuing operations – basic and diluted
                  
                  $
                  (.00
                  )
                  
                  $
                  (.06
                  )
                  
                  $
                  (.09
                  )
                  
                  $
                  (.09
                  )Net
      loss per share – discontinued operations – basic and
    diluted
                  
                  $
                  (.00
                  )
                  
                  $
                  (.00
                  )
                  
                  $
                  (.00
                  )
                  
                  $
                  (.01
                  )Net
      loss per share – basic and diluted
                  
                  $
                  (.00
                  )
                  
                  $
                  (.06
                  )
                  
                  $
                  (.09
                  )
                  
                  $
                  (.10
                  )Weighted
      average shares – basic and diluted
                  
                  
                  3,091,000
                  
                  
                  
                  3,091,000
                  
                  
                  
                  3,091,000
                  
                  
                  
                  3,091,000
 
 See accompanying
notes.
 
 5
 ARC
Wireless Solutions, Inc.
 Condensed
Consolidated Statements of Cash Flows
 (Unaudited,
in thousands)
 
 
 Six
      Months Ended June 30,2009
                        
                        
                        2008Operating
      activitiesNet
      loss from continuing operations
                        
                        $
                        (278
                        )
                        
                        $
                        (288
                        )Adjustments
      to reconcile net loss from continuing operations to net cash used in
      operating activities:Depreciation and
      amortization
                        
                        
                        114
                        
                        
                        
                        98Non-cash expense for issuance of
      stock and options
                        
                        
                        16
                        
                        
                        
                        18Provision
      for doubtful accounts
                        
                        
                        -
                        
                        
                        
                        36Changes in operating assets and
      liabilities:Accounts receivable,
      trade
                        
                        
                        175
                        
                        
                        
                        339Inventory
                        
                        
                        76
                        
                        
                        
                        52Prepaids and other current
      assets
                        
                        
                        (24
                        )
                        
                        
                        (45
                        )Other
      assets
                        
                        
                        (35
                        )
                        
                        
                        3Accounts payable and accrued
      expenses
                        
                        
                        (985
                        )
                        
                        
                        (221
                        )Net
      cash used in continuing operations
                        
                        
                        (941
                        )
                        
                        
                        (8
                        )Net
      cash provided by (used in) discontinued operations
                        
                        
                        -
                        
                        
                        
                        2Net
      cash used in operating activities
                        
                        
                        (941
                        )
                        
                        
                        (6
                        )Investing
      activitiesPatent
      acquisition costs
                        
                        
                        (3
                        )
                        
                        
                        (12
                        )Purchase
      of plant and equipment
                        
                        
                        (83
                        )
                        
                        
                        (43
                        )Net
      cash used in investing activities, continuing operations
                        
                        
                        (86
                        )
                        
                        
                        (55
                        )Financing
      activitiesNet
      advances from line of credit
                        
                        
                        -
                        
                        
                        
                        2,134Net
      repayment of line of credit and capital lease obligations
                        
                        
                        (24
                        )
                        
                        
                        (2,482
                        )Net
      cash used in financing activities, continuing operations
                        
                        
                        (24
                        )
                        
                        
                        (348
                        )Net
      change in cash
                        
                        
                        (1,051
                        )
                        
                        
                        (409
                        )Cash
      and cash equivalents, beginning of period
                        
                        
                        12,943
                        
                        
                        
                        14,931Cash
      and cash equivalents, end of period
                        
                        $
                        11,892
                        
                        
                        $
                        14,522Supplemental
      cash flow information:Cash
      paid for interest, continuing operations
                        
                        $
                        9
                        
                        
                        $
                        31Issuance
      of stock for accrued fees, continuing operations
                        
                        $
                        -
                        
                        
                        $
                        3Acquisition
      of property and equipment through capital lease
                        
                        $
                        -
                        
                        
                        $
                        103
 
 
 See accompanying
notes.
 6
 ARC
Wireless Solutions, Inc.
 Notes
to Condensed Consolidated Financial Statements
 June
30, 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 June 30, 2009, the results of its operation and its cash flows for the three
and six 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 one business segment which is identified as
Manufacturing 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 and six months ended June 30, 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 June 30,
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 $10.9 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 June 30, 2009 and December 31, 2008. Bad debt
expense was $0 and $29 thousand for the three months ended June 30, 2009 and
2008, respectively and $0 and $36 thousand for the six months ended June 30,
2009 and 2008, respectively.
 
 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.
 
 The
Company also accounts for income taxes under 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
and six months ended June 30, 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 June 30, 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 and six months ended June
30, 2009 and 2008 are as follows (in thousands):
 
 Three
      Months Ended June 30,
                        
                        
                        Six
      Months Ended June 30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Starworks
                        
                        
                        Starworks
                        
                        
                        Starworks
                        
                        
                        StarworksSales,
      net
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        1
                        
                        
                        $
                        14Total
      revenue
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1
                        
                        
                        
                        14Cost
      of sales
                        
                        
                        (5
                        )
                        
                        
                        8
                        
                        
                        
                        8
                        
                        
                        
                        29Total
      cost of goods sold
                        
                        
                        (5
                        )
                        
                        
                        8
                        
                        
                        
                        8
                        
                        
                        
                        29Gross
      income (loss)
                        
                        
                        5
                        
                        
                        
                        (8
                        )
                        
                        
                        (7
                        )
                        
                        
                        (15
                        )Operating
      expenses:Selling,
      general and administrative expenses
                        
                        
                        7
                        
                        
                        
                        -
                        
                        
                        
                        7
                        
                        
                        
                        -Loss
      from operations
                        
                        
                        (2
                        )
                        
                        
                        (8
                        )
                        
                        
                        (14
                        )
                        
                        
                        (15
                        )Other
      income (expense):Interest expense,
    net
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Other income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Total
      other income (expense)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Loss
      before income taxes
                        
                        
                        (2
                        )
                        
                        
                        (8
                        )
                        
                        
                        (14
                        )
                        
                        
                        (15
                        )Provision
      for income taxes
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      loss
                        
                        $
                        (2
                        )
                        
                        $
                        (8
                        )
                        
                        $
                        (14
                        )
                        
                        $
                        (15
                        )
 
 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 records compensation expense for share-based awards based upon an
assessment of the grant date fair value for stock options and restricted stock
awards.
 
 Stock
compensation expense for stock options is recognized on a straight-line basis
over the vesting period of the award. The Company accounts for stock options as
equity awards.
  
 9
 The
following table summarizes share-based compensation expense recorded in general
and administrative expenses during each period presented (in
thousands):
 
 Three Months Ended
                  
                  
                  Six Months EndedJune 30, 2009
                  
                  
                  June 30, 2008
                  
                  
                  June 30, 2009
                  
                  
                  June 30, 2008Stock
      options
                  
                  
                  $8
                  
                  
                  
                  $8
                  
                  
                  
                  $16
                  
                  
                  
                  $18Total
      share-based compensation expense
                  
                  
                  $8
                  
                  
                  
                  $8
                  
                  
                  
                  $16
                  
                  
                  
                  $18
 
 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 June 30, 2009
                    
                    
                    40,000
                    
                    
                    
                    $5.40
 
 The
following table presents information regarding options outstanding as of June
30, 2009:
 
 Weighted
      average contractual remaining term - options outstanding
                    8.23Aggregate
      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
                    8.23
 
 There
were no options granted or exercised during the three or six months ended June
30, 2009.
 
 As of
June 30, 2009, future compensation costs related to nonvested stock options was
$80 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.
 
 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):
 
 10
   Three
      Months Ended June 30,
                      
                      
                      Six
      Months Ended June 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Net
      loss from continuing operations
                      
                      $
                      (3
                      )
                      
                      $
                      (188
                      )
                      
                      $
                      (278
                      )
                      
                      $
                      (288
                      )Net
      loss from discontinued operations
                      
                      
                      (2
                      )
                      
                      
                      (8
                      )
                      
                      
                      (14
                      )
                      
                      
                      (15
                      )Net
      loss
                      
                      $
                      (5
                      )
                      
                      $
                      (196
                      )
                      
                      $
                      (292
                      )
                      
                      $
                      (303
                      )Continuing
      Operations:Denominator
      for basic earnings per share - weighted average shares
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Effect
      of dilutive securitiesEmployee
      stock options
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Common
      stock warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Denominator
      for diluted earnings per share - weighted average shares and assumed
      conversion
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Basic
      and diluted loss per share, continuing operations
                      
                      $
                      (.00
                      )
                      
                      $
                      (.06
                      )
                      
                      $
                      (.09
                      )
                      
                      $
                      (.09
                      )Discontinued
      Operations:Denominator
      for basic earnings per share - weighted average shares
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Effect
      of dilutive securitiesEmployee
      stock options
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Common
      stock warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Denominator
      for diluted earnings per share - weighted average shares and assumed
      conversion
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Basic
      and diluted loss per share, discontinued operations
                      
                      $
                      (.00
                      )
                      
                      $
                      (.00
                      )
                      
                      $
                      (.00
                      )
                      
                      $
                      (.01
                      )Net
      Loss:Denominator
      for basic earnings per share - weighted average shares
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Effect
      of dilutive securitiesEmployee
      stock options
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Common
      stock warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Denominator
      for diluted earnings per share - weighted average shares and assumed
      conversion
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091
                      
                      
                      
                      3,091Basic
      and diluted loss per share
                      
                      $
                      (.00
                      )
                      
                      $
                      (.06
                      )
                      
                      $
                      (.09
                      )
                      
                      $
                      (.10
                      )
  ** There
are no dilutive shares used in the calculation of diluted earnings per share,
continuing operations for the three and six months ended June 30, 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):
  June
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008Raw
      materials
                  
                  $
                  397
                  
                  
                  $
                  267Work
      in progress
                  
                  
                  9
                  
                  
                  
                  32Finished
      goods
                  
                  
                  625
                  
                  
                  
                  8081,031
                  
                  
                  
                  1,107Inventory
      reserve
                  
                  
                  -
                  
                  
                  
                  -Net
      inventory
                  
                  $
                  1,031
                  
                  
                  $
                  1,107
 
 Note
6.  Revolving Bank Loan Agreements
 
 On May 1,
2009, the Company’s $1.5 million revolving line-of-credit agreement (the "Credit
Facility") with Citywide Bank matured.  The Credit Facility was not
renewed by the Company. The Company had no outstanding debt balance at June 30,
2009.
 
 Note
7.  Equity Transactions
 
 There
were no equity transactions during the six months ended June, 2009.
 
 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 941,000 shares, or approximately 30%, 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.  Total expenses accrued for the six months ended June 30, 2009
was $125 thousand.  The Agreement will expire on December 31,
2013.
 
 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 both the recognition and measurement date elements of SFAS 158 did
not have a material impact on our Consolidated Condensed Financial
Statements.
  12
 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 half of 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.
 
 In May
2009, the FASB issued SFAS No. 165 “Subsequent Events”(“SFAS 165”). This
Statement sets forth the period after the balance sheet date during which
management or a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date, and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. It requires disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date, whether that date represents the date the financial
statements were issued or were available to be issued. SFAS 165 is effective for
interim and annual periods ending after June 15, 2009. Our adoption of SFAS 165
on June 30, 2009 did not have a material impact on our consolidated condensed
financial statements. See Note 12 – Subsequent Events for additional
information.
 
 In June
2009, the FASB issued SFAS 166 “Accounting for Transfers of Financial Assets, an
amendment of SFAS 140” (“SFAS 166”). This Statement eliminates the exceptions
for qualifying special-purpose entities from the consolidation guidance and the
exception that permitted sale accounting for certain mortgage securitizations
when a transferor has not surrendered control over the transferred assets. This
Statement also requires enhanced disclosures about the risk that a transferor
continues to be exposed to because of its continuing involvement in transferred
financial assets. SFAS 166 is effective as of the beginning of the reporting
entity’s first annual reporting period that begins after November 15, 2009 and
earlier adoption is not permitted. We are currently evaluating the potential
impact, if any, of the adoption of SFAS 166 on our consolidated condensed
financial statements.
 
 13
 In June
2009, the FASB issued SFAS 167 “Amendment to FASB Interpretation No. 46 (R).”
This Statement amends FIN46R to replace the quantitative-based risks and rewards
calculation for determining which enterprise has a controlling financial
interest in a VIE with a primarily qualitative approach focused on identifying
which enterprise has the power to direct the activities of a VIE that most
significantly impact the entity’s economic performance. It also requires ongoing
assessments of whether an enterprise is the primary beneficiary of a VIE and
requires additional disclosures about an enterprise’s involvement in VIEs. SFAS
167 is effective as of the beginning of the reporting entity’s first annual
reporting period that begins after November 15, 2009 and earlier adoption is not
permitted. We are currently evaluating the potential impact, if any, of the
adoption of SFAS 167 on our consolidated condensed financial
statements.
 
 In June
2009, the FASB issued SFAS 168 “The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB
Statement No. 162” (“SFAS 168”).  This Statement states that the FASB Accounting Standards
Codification (“Codification”) will become the source of authoritative
U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Once
effective, the Codification’s content will carry the same level of authority and
effectively supersede SFAS 162. Thus, the U.S. GAAP hierarchy will be modified
to include only two levels of U.S. GAAP: authoritative and non-authoritative.
SFAS 168 is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. We are currently evaluating the
potential impact, if any, of the adoption of SFAS 168 on our consolidated
condensed financial statements.
 
 Note
10.  Concentration of Credit Risk
 
 One
customer accounted for approximately 17% and 20% of the Company’s net sales for
the six months ended June 30, 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.
 
 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, Manufacturing, which is a separate business
unit that offers different products. Corporate represents the operations of the
parent Company, excluding segment eliminations.
  Note
12.  Subsequent Events
 
 We have
evaluated events after the date of these financial statements, June 30, 2009,
through August 13, 2009, the date that these financial statements were available
to be issued. There
were no material subsequent events as of that
date.
 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 six months of 2009 as compared to the prior
year period.  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 half of 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 $11.9 million at June 30, 2009.
 
 Results
of Continuing Operations for the Three Months Ended June 30, 2009 and
2008
 
 Total
revenues were approximately $1.2 million and $1.7 million for the three month
periods ended June 30, 2009 and June 30, 2008, respectively. The decrease in
revenues during the three months ended June 30, 2009 compared to the three
months ended June 30, 2008 is primarily attributable to decreased sales of our
3.5 GHz and our Global Positioning Systems (GPS) antennas 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 42% and 39% for the three and six months ended June 30, 2009
and June 30, 2008, respectively. The 3% 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 43% to $531 thousand in
the second quarter 2009 as compared to $941 thousand in the prior year
period.  SG&A as a percent of total revenues also decreased from
54% for the three months ended June 30, 2008 to 43% for the three months ended
June 30, 2009. Salaries and wages, including commissions, remains the largest
component of SG&A costs, constituting 35% of the total SG&A costs for
the three months ended June 30, 2009 and 53% for the three months ended June 30,
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.
 
 Net
interest expense decreased from $22 thousand for the three months ended June 30,
2008 to approximately $6 thousand for the current quarterly period primarily
related to decreased amounts outstanding during the period under our Credit
Facility with Citywide Bank.  At June 30, 2009, we had no debt
outstanding.  Our Credit Facility expired on May 1, 2009 and is no
longer outstanding.
 
 15
 Other
income decreased during the second quarter 2009 to approximately $15 thousand as
compared to $104 thousand in the second 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 both the three months ended June 30, 2009 and
2008, due to our net losses for both periods.
 
 Results
of Discontinued Operations for the Three Months Ended June 30, 2009 and 2008
(See Note 2, Discontinued Operations for the detailed operating results of the
discontinued operations)
 
 Discontinued
operations for the three months ended June 30, 2009 and 2008 represent the
operations of our subsidiary, Starworks Wireless. There were no revenues for the
both three months ended June 30, 2009 and 2008 resulting in a loss from
discontinued operations in the second quarter 2009 of $2 thousand compared to a
loss from discontinued operations of $8 thousand for the same period in
2008.
 
 Results
of Continuing Operations for the Six Months Ended June 30, 2009 and
2008
 
 Total
revenues were approximately $2.3 million and $3.6 million for the six month
periods ended June 30, 2009 and June 30, 2008, respectively. The decrease in
revenues during the six months ended June 30, 2009 compared to the six months
ended June 30, 2008 is primarily attributable to decreased sales of our 3.5 GHz
and our Global Positioning Systems (GPS) antennas 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 41% and 38% for the six months ended June 30, 2009 and June
30, 2008, respectively. The 3% 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 31% to $1.3 million in
the first half of 2009 as compared to $1.9 million in the prior year
period.  But, SG&A as a percent of total revenues increased
slightly from 51% for the six months ended June 30, 2008 to 55% for the six
months ended June 30, 2009. Salaries and wages, including commissions, remains
the largest component of SG&A costs, constituting 34% of the total SG&A
costs for the six months ended June 30, 2009 and 52% for the six months ended
June 30, 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.
 
 Net
interest expense decreased from $31 thousand for the six months ended June 30,
2008 to approximately $9 thousand for the current year period primarily related
to decreased amounts outstanding during the period under our Credit Facility
with Citywide Bank.  At June 30, 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 half 2009 to approximately $48 thousand as
compared to $222 thousand in first half of 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.
 
 16
 There is
no provision for income taxes for both the six months ended June 30, 2009 and
2008, due to our net losses for both periods.
 
 Results
of Discontinued Operations for the Six Months Ended June 30, 2009 and 2008 (See
Note 2, Discontinued Operations for the detailed operating results of the
discontinued operations)
 
 Discontinued
operations for the six months ended June 30, 2009 and 2008 represent the
operations of our subsidiary, Starworks Wireless. Revenues for the six months
ended June 30, 2009 were only $1 thousand compared to revenues of $14 thousand
for the six months ended June 30, 2008 resulting in a loss from discontinued
operations in 2009 of $14 thousand compared to a loss from discontinued
operations of $15 thousand for 2008.
 
 Financial
Condition
   June
      30,
                          
                          
                          December
      31,(Thousands
      of dollars)
                          
                          2009
                          
                          
                          2008Current
      ratio (1)
                          
                          15.75
      to 1
                          
                          
                          8.20
      to 1Working
      capital (2)
                          
                          $
                          12,821
                          
                          
                          $
                          13,155Total
      debt
                          
                          $
                          -
                          
                          
                          $
                          -Total
      cash less debt
                          
                          $
                          11,892
                          
                          
                          $
                          12,943Stockholders'
      equity
                          
                          $
                          13,340
                          
                          
                          $
                          13,616Total
      liabilities to equity
                          
                          0.06
      to 1
                          
                          
                          0.14
      to 1
  (1)Current ratio is calculated as
current assets divided by current liabilities.
 (2)Working capital is the difference
between current assets and current liabilities.
 
 We have a
cash balance of $11.9 million at June 30, 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 $941 thousand
for the six months ended June 30, 2009 compared to net cash used by operating
activities from continuing operations of $8 thousand for the six months ended
June 30, 2008. The primary reason for the change is the decrease in accounts
payable and accrued expenses of $764 thousand over the prior
period.
 
 The net
cash used in investing activities from continuing operations was $86 thousand
for the six months ended June 30, 2009 compared to $55 thousand for the six
months ended June 30, 2008, primarily the result of expenditures for patents and
equipment.
 
 Net cash
used in financing activities from continuing operations for the six months ended
June 30, 2009 was $24 thousand compared to $348 thousand for the six months
ended June 30, 2008. The decrease in the net cash used is primarily the result
of the expiration of the Company’s line of credit in May 2009.
 
 Item
3.  Quantitative and Qualitative Disclosures About Market
Risk
 
 We have
not used derivative financial instruments.
 
 We are no
longer exposed to market risk through interest rates related to our line of
credit as the line of credit expired in May 2009.
 
 17
 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 June 30, 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 six months ended June 30, 2009 that materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
 
 
 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
 
 18
 Item
3. Defaults Upon Senior Securities
 
 None
 
 Item
4. Submission of Matters to a Vote of Security Holders
 
 None
 
 Item
5. Other Information
 
 None.
 
 
 19
 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.
 
 
 
 20
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
  ARC
      WIRELESS SOLUTIONS, INC.Date:  August
      13, 2009
                              By:
                              /s/ Jason
      YoungJason
      Young
                                Chief
      Executive OfficerDate:  August
      13, 2009
                              By:
                              /s/
      Steve OlsonSteve
      Olson
                                Chief
      Technology Officer
    21