UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

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

FOR THE TRANSITION PERIOD FROM                      TO                     

PROXIM WIRELESS CORPORATION

DELAWARE		04-2751645
(State or other jurisdiction		(I.R.S. Employer Identification No.)
of incorporation or organization)

(408) 383-7600
(Registrant’s telephone number, including area code)

     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 þ No o

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 “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o	Non-accelerated filer   o (Do not check if a smaller reporting company)			Smaller reporting company þ

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

     As of October 31, 2008, there were 23,519,069 shares of the registrant’s common stock outstanding.

 

 

PROXIM WIRELESS CORPORATION
INDEX

		PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007			4
Consolidated Statements of Operations for the nine months ended September 30, 2008 and 2007 (unaudited)			5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 4T. Controls and Procedures			22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			23
Item 1A. Risk Factors			24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 6. Exhibits			29
SIGNATURE			30
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

     This Quarterly Report on Form 10-Q contains forward-looking statements as defined by federal securities laws. Forward-looking statements are predictions that relate to future events or our future performance and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results, outcomes, levels of activity, performance, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated, or implied by these forward-looking statements. Forward-looking statements should be read in light of the cautionary statements and important factors described in this Form 10-Q, including Part II, Item 1A — Risk Factors. We undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-Q or to reflect the occurrence of unanticipated or any other subsequent events.

Item 1. Financial Statements.

PROXIM WIRELESS CORPORATION

		September 30,				Dec 31,
		2008				2007
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	7,688			$	6,329
Accounts receivable, net			4,940				9,326
Inventory			4,888				5,753
Prepaid expenses			1,866				1,029
Assets held for sale			—				2,085
Total current assets			19,382				24,522
Property and equipment, net			2,453				2,532
Other Assets:
Restricted cash			77				76
Intangible assets, net			6,959				8,542
Deposits and prepaid expenses			457				239
Total other assets			7,493				8,857
Assets held for sale			0				499
Total assets		$	29,328			$	36,410
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses		$	11,117			$	12,752
Line of credit payable			1,500				—
Deferred revenue			2,079				4,001
License agreement payable — current maturities			1,327				1,065
Total current liabilities			16,023				17,818
License agreement payable, net of current maturities			—				1,023
Notes payable, net of discount			2,569				—
Other long term liabilities			345				—
Liabilities- related to assets held for sale			78				232
Total liabilities			19,015				19,073
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 4,500,000, none issued at Sept 30, 2008 and December 31, 2007			—				—
Common stock, $0.01 par value, 100,000,000 shares authorized, 23,519,069 issued and outstanding at September 30, 2008 and December 31, 2007			235				235
Additional paid-in capital			64,793				63,451
Accumulated deficit			(54,715	)			(46,349	)
Total stockholders’ equity			10,313				17,337
Total liabilities and stockholders’ equity		$	29,328			$	36,410

The accompanying notes are an integral part of the financial statements

PROXIM WIRELESS CORPORATION

		Three Months Ended								Nine Month Ended
		Sept								Sept
		30,								30,
		2008				2007				2008				2007
Revenues		$	12,067			$	15,908			$	37,397			$	48,182
Cost of goods sold			7,685				8,219				21,436				25,787
Gross profit			4,382				7,689				15,961				22,395
Operating expenses:
Selling costs			3,845				5,385				14,009				15,134
Restructuring charges			—				—				—				91
General and administrative			3,101				2,926				9,525				8,728
Research and development			1,019				1,035				3,146				5,187
Total operating expenses			7,965				9,346				26,680				29,140
Operating loss			(3,583	)			(1,657	)			(10,719	)			(6,745	)
Other income (expenses):
Interest income			9				89				29				161
Interest expense			(186	)			(29	)			(300	)			(98	)
Other income (loss)			(211	)			4				395				2,604
Gain on sale of assets			—				—				—				23
Total other income (expenses)			(388	)			64				124				2,690
Loss before income taxes			(3,971	)			(1,593	)			(10,595	)			(4,055	)
Benefit (provision) for income taxes			(39	)			(57	)			(152	)			(125	)
Loss from continuing operations			(4,010	)			(1,650	)			(10,747	)			(4,180	)
Income (loss) from discontinued operations, net of tax		$	2,282			$	(1,086	)		$	2,381			$	(1,880	)
Net income (loss)		$	(1,728	)		$	(2,736	)		$	(8,366	)		$	(6,060	)
Weighted average number of shares-basic and diluted used in computing net earnings (loss) per share			23,519				25,241				23,519				22,703
Basic and diluted net earnings (loss) per share:
Continuing operations		$	(0.17	)		$	(0.07	)		$	(0.46	)		$	(0.19	)
Discontinued operations		$	0.10			$	(0.04	)		$	0.10			$	(0.08	)
Total		$	(0.07	)		$	(0.11	)		$	(0.36	)		$	(0.27	)

The accompanying notes are an integral part of the financial statements

PROXIM WIRELESS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

		Nine Month Ended Sept 30
		2008				2007
Cash flows from operating activities:
Net Income (loss)			(8,366	)			(6,060	)
Less: Gain from discontinued operations			2,381				(1,880	)
Loss from continuing operations			(10,747	)			(4,180	)
Depreciation and amortization			2,369				2,530
Gain on sale of available for sale securities			0				(99	)
(Gain)loss on disposal of equipment & long-term assets			207				—
(Gain)loss on disposal of intangible asset			(752	)			(2,461	)
Bad debt allowance (recovery)			236				174
Employee stock option amortization			917				1,585
Inventory allowance			(4,580	)			(289	)
Debt discount and deferred financing fees, valuation of warrant			14				—
Changes in assets and liabilities affecting operations:
Accounts receivable			4,150				(2,828	)
Inventory			5,445				3,708
Deposits			(217	)			—
Prepaid expenses			(837	)			(412	)
Accounts payable and accrued expenses			(1,634	)			(2,718	)
Other Liabilities			345				—
Deferred revenue			(1,922	)			(278	)
Net cash provided by (used in) operating activities			(7,006	)			(5,268	)
Net Cash provided by (used in) discontinued operating activity			206				(2,108	)
Net cash provided by (used in) operating activities			(6,800	)			(7,376	)
Cash flows from investing activities:
Sale of available for sale securities			0				340
Proceeds from sales of discontinued operations			4,582				200
Purchase of property and equipment			(409	)			(558	)
Proceeds from sale of intangible asset			850				2,461
Investment in capitalized software			(603	)			(652	)
Net cash provided by (used in) investing activities			4,420				1,791
Cash flows from financing activities:
Exercise of stock options and warrants			—				3
Proceeds from bank financing			3,000				0
Proceeds from note issuance			3,000				0

		Nine Month Ended Sept 30
		2008				2007
Principle payments on bank financing			(1,500	)			0
Repayment of license agreement payable			(761	)			(647	)
Sale of common stock			0				7,467
Net cash provided by (used in) financing activities			3,739				6,823
Net increase (decrease) in cash and cash equivalents			1,359				1,238
Cash and cash equivalents, beginning of period			6,329				10,290
Cash and cash equivalents, end of period		$	7,688			$	11,528
Supplemental disclosure of cash flow information:
Cash paid for interest		$	185			$	68
Income taxes paid		$	281			$	125

The accompanying notes are an integral part of the financial statements

PROXIM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

     The consolidated financial statements of Proxim Wireless Corporation (the “Company” or “Proxim”) for the three month and nine month periods ended September 30, 2008 and 2007 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the financial position and results of operations for the periods then ended. All such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

     The Company is a designer, manufacturer, and seller of high-speed wireless communications equipment. Our customers include service providers, enterprises, and governmental organizations worldwide. The company is a leading provider of broadband wireless equipment that deliver data, voice, video and mobility (also known as the “quadruple play”) to organizations of all sizes. Proxim’s portfolio of WLAN, Wi-Fi mesh, WiMAX, and point to point (PTP) products enable a broad range of applications including wireless security and surveillance, enterprise WLANs, last mile connectivity, public safety, cellular backhaul, and more. The Company believes its end to end wireless systems address the growing need of our customers and end-users to rapidly and cost effectively deploy high-speed communication networks.

     Regardless of the application, Proxim’s end-to-end product portfolio enables partners to custom-build the wireless solution that fits customer needs. Proxim serves customers through a global network of distributors, value-added resellers, system integrators, and original equipment manufacturers. Our internal sales force also engages in direct-touch, consultative selling with major customers with the primary fulfillment method through our channel partners. Our experienced system engineering team is available to provide professional services to both our channel partners and end customers.

     Proxim’s broadband equipment is used by enterprises, service providers, carriers, government entities, educational institutions, healthcare organizations, municipalities and other organizations that need high-performance, secure and scalable broadband wireless solutions. To date, Proxim has shipped over 1.8 million units to more than 235,000 customers in over 65 countries worldwide. Proxim is ISO-9001 certified.

     The Company changed its corporate name to “Proxim Wireless Corporation” from “Terabeam, Inc.” effective September 10, 2007. Effective that same date, the Company’s stock ticker symbol was changed to “PRXM” from “TRBM.”

     Effective August 29, 2008 the Company sold substantially all assets of the Harmonix Division of its Terabeam Corporation subsidiary to Renaissance Electronics Corporation for approximately $5.3 million gross. As part of the transaction, Proxim and Renaissance entered into an agreement for the continued supply and support of the Gigalink ^® radios developed and manufactured by Harmonix to ensure an uninterrupted supply of these products to our customers.

2. Inventory

     Inventory consisted of the following at the indicated dates (in thousands):

		September 30,				December 31,
		2008				2007
		(unaudited)
Raw materials		$	1,049			$	6,748
Work in process			153				374
Finished goods			6,195				7,531
			7,397				14,653
Allowance for excess and obsolescence			(2,509	)			(7,499	)
Inventory (net)-discontinued operation			—				(1,401	)
Net Inventory		$	4,888			$	5,753

     Gross inventory decreased by $7.3 million from year-end 2007 due to the disposal of $5.0 million in obsolete inventory combined with the sale of $2.3 million in Harmonix inventory as part of the sale of the Harmonix Division to Renaissance Electronics Corporation in August, 2008. The corresponding reduction in inventory reserves was related to these two disposal activities.

3. Intangibles

     Schedule of Non-Amortizable Assets

		Sept 30,				December 31,
		2008				2007
		(in thousands)
Trade names — indefinite useful life			780				780
		$	780			$	780

     Schedule of Amortizable Assets

		Sept 30,				December 31,
		2008				2007
		(in thousands)
Patents, customer relationships and other technologies with identifiable useful lives			10,455				11,308
Less: accumulated amortization			(4,276	)			(3,073	)
Less: Intangible assets net in discontinued operation			—				(473	)
Amortizable intangible assets, net		$	6,179			$	7,762

     Amortization is computed using the straight-line method over the estimated useful life, based on the Company’s assessment of technological obsolescence of the respective assets. Amortization expense for the three months and nine months ended September 30, 2008 totaled approximately $0.5 million and $1.6 million, respectively. The weighted average estimated useful life is 5 years. There is no estimated residual value.

4. Concentrations

     During nine months ended September 30, 2008, there were two customers who accounted for approximately 18%, and 12%, of consolidated sales respectively, and in the corresponding nine months of 2007, two customers accounted for 26%, and 19%, of consolidated sales respectively.

     The Company maintains the majority of its cash, cash equivalent, and restricted cash balances at one major US bank. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 per bank At September 30, 2008 and 2007, the uninsured portion totaled approximately $7.5 million and $12.2 million, respectively

5. Patent License Agreement — License Agreement Payable

     In February 2006, the Company entered into a settlement agreement with Symbol Technologies, Inc. and its subsidiaries (“Symbol”) resolving all outstanding litigation between the companies.

The Company recorded an intangible asset related to the license at December 31, 2005 based on the present value of the scheduled payments, and will amortize the intangible asset over the useful life of the patents through 2014. The pay down expense recorded for the nine months ended Sept 30, 2008 totaled approximately $761,000. The Company also recorded a license payable equal to the present value of the scheduled payments. As of September 30, 2008 the remaining portion of license agreement payable is $1,327,000 which is all current.

6. Allowance for Product Warranty Costs

     Warranty costs significantly increased for the nine months ended September 30, 2008 versus the comparable period ended September 30, 2007. The company booked warranty reserve provisions totaling $516,000 during the nine months of 2008 which included a one-time warranty retrofit reserve for $80,000. During the comparable period in 2007, we booked warranty provisions of $177,000, and a one-time reserve adjustment of $539,000 related to release of warranty reserves that exceeded the corporate warranty policy. This was booked as a change in the estimate of allowance for product warranty costs as an adjustment to cost of goods sold during the quarter ended March 31, 2007

		September 30,				September 30,
		2008				2007
Balance at January 1,		$	697			$	1,102
Settlements			(449	)			(141	)
Adjustment to one year warranty term			—				(539	)
Other provision adjustments			516				177
Balance at Sept 30,		$	764			$	599

7. Long Term Debt- Related Party

     On July 25, 2008, Proxim Wireless Corporation entered into a lending transaction with a related party, as defined in Form 8-K filed on July 29, 2008, Lloyd I. Miller, III and Milfam II L.P., an entity affiliated with Mr. Miller (together, the “Lenders”). The lenders are related parties to the Company as described in more detail in the Form 8-K filed by the Company with the SEC on July 29, 2008. Pursuant to a securities purchase agreement dated as of July 25, 2008, the Lenders loaned Proxim the aggregate sum of $3.0 million. This loan is reflected by promissory notes dated July 25, 2008 from Proxim to each of the Lenders in the initial principal amount of $1.5 million. The notes are unsecured. In connection with this transaction, Proxim paid each Lender a cash fee of $22,500, being 1.5% of the amount lent by each Lender.

     All outstanding amounts are scheduled to be repaid on July 25, 2011. Proxim may prepay any or all outstanding principal amounts at any time by paying to the Lenders 102% of the principal amount being repaid. All outstanding amounts must be prepaid upon a change of control of Proxim (as defined in the securities purchase agreement) by paying 102% of the entire principal amount then outstanding. Amounts may also be required to be repaid earlier upon the occurrence of specified defaults by Proxim.

     The notes accrue interest at 16% per annum. Interest payments are due and payable monthly in arrears on the last day of each calendar month beginning on July 31, 2008. In lieu of paying accrued interest in cash on each interest payment date, Proxim, at its sole discretion, may elect to pay interest in kind at the rate of 19% per annum, compounding monthly, in which case the accrued interest will be added to the outstanding principal amount of the notes and interest will accrue on that aggregate principal amount thereafter.

     In connection with the transactions contemplated by the securities purchase agreement, the Lenders agreed to cancel warrants that had been issued to the Lenders in July 2007. In the aggregate, warrants to purchase 925,000 shares of Proxim’s common stock at an exercise price of $2.45 per share were cancelled effective July 25, 2008.

     In connection with the transactions contemplated by the securities purchase agreement, Proxim issued the two Lenders warrants, dated July 25, 2008, to purchase an aggregate of 1,250,000 shares of Proxim’s common stock (subject to adjustment) at an exercise price of $0.53 per share (subject to adjustment). The warrants may be exercised at any time until July 25, 2018. The warrants may be exercised by paying the exercise price to Proxim or by cashless exercise pursuant to a formula.

     The incremental fair value of the warrants cancelled and regranted in connection with debt issuance was calculated on July 25, 2008 using the Black-Scholes option pricing model and amounted to $0.4M. The fair value of the warrants is initially recorded as debt discount and Additional Paid in Capital and amortized to interest expense over the term of the debt.

8. Discontinued Operations

     In the second quarter 2008, the Company classified the Harmonix Division of its Terabeam Corporation subsidiary (“Terabeam”) as discontinued operations and reflected this change in its comparative historical results. On August 29, 2008, the Company and Terabeam entered into an Asset Purchase Agreement with Renaissance Electronics Corp. (“Renaissance”) and its wholly owned subsidiary HXI, LLC (together, the “Buyer”) relating to that Harmonix Division.

     Pursuant to the APA, Terabeam sold to Buyer generally all of its assets relating to its Harmonix Division in Haverhill, Massachusetts. Among the assets sold were US Patent Number 6,163,231 and US Trademark 2,655,290 — the GigaLink^® trademark. The purchase price for these assets was approximately $5.3 million net of contractually agreed adjustments. Of this amount, $750,000 was retained by the Buyer as a deposit towards product purchases under the OEM Agreement entered into in connection with the sale, and the remaining approximately $4.6 million has been paid in cash to Proxim. Proxim recognized a net gain of $2.4 million from this transaction, which was reported as part of discontinued operation gain/loss.

The reclassification of Harmonix Division from continued operation to discontinued operation would not change net results of operation and cash flow.

Reclassification of Harmonix Division to Discontinued Operations

     In the current quarter we reclassified the prior period activity of our Harmonix Division to conform to the current presentation. This reclassification did not have an overall effect on our previously reported results of operations or cash flows.

		3 months ended Sept 30, 2007												9 months ended Sept 30, 2007
(in thousands)		As Reported				As Reclassed				Change				As Reported				As Reclassed				Change
Revenue		$	16,902			$	15,908				($994	)		$	51,693			$	48,182			$	(3,511	)
Cost of goods sold			8,616				8,219				397				27,524				25,787				1,737
Gross margin			8,286				7,689				(597	)			24,269				22,395				(1,774	)
Operating expenses			9,951				9,346				(605	)			31,034				29,140				(1,894	)
Other income (expense)			7				7				—				2,565				2,565				—
Net Income (continuing operations)			(1,658	)			(1,650	)			8				(4,300	)			(4,180	)			120
Net Income (discontinued operations)			(1,078	)			(1,086	)			(8	)			(1,760	)			(1,880	)			(120	)
Net Income (Total)		$	(2,736	)		$	(2,736	)			—			$	(6,060	)		$	(6,060	)			—

     Terabeam and Proxim generally remain responsible for obligations relating to the Harmonix Division prior to August 29, 2008, while the Buyer generally is responsible for obligations relating to the Harmonix Division after August 29, 2008. All the employees of the Harmonix Division have been terminated by Terabeam, and substantially all of those employees have been hired by the Buyer.

     The Company’s Services business was discontinued in the third quarter of 2007. That business was acquired with the acquisition of Ricochet Networks, Inc. during the second quarter of 2004 and was conducted through that Ricochet Networks subsidiary. The Company announced the sale on July 31, 2007 of the Ricochet wireless network and operations for greater Denver metropolitan area to Civitas Wireless Solutions, LLC (“Civitas”). RNI received (a) the assumption by Civitas generally of obligations relating to the operation of the Ricochet^® wireless network in the Denver, Colorado metropolitan area, (b) a cash payment of $200,000, (c) 15% equity ownership in Civitas, and (d) potential future payments contingent on certain future potential business of Civitas. Ricochet Networks generally retained the obligations relating to the operation of the Ricochet network in the San Diego, California metropolitan area, the operation of which Ricochet Networks discontinued on July 31, 2007. In addition, substantially all of Ricochet Networks’ employees were terminated effective July 31, 2007 and subsequently re-hired by Civitas.

Total Discontinued Operations

		Three Months Ended								Nine Month Ended
		Sept								Sept
		30,								30,
(in thousands)		2008(1)				2007(2)				2008(1)				2007(2)
Revenue from discontinued operations		$	409			$	1,280			$	2,279			$	5,677
Gain (Loss) on disposal of assets			2,421				(675	)			2,421				(675	)
Loss from discontinued operations			(139	)			(411	)			(40	)			(1,205	)
Net gain/ (loss) from discontinued operations		$	2,282			$	(1,086	)		$	2,381			$	(1,880	)

9. Security Agreement -Line of Credit

     On September 26, 2008, Proxim Wireless Corporation entered into a second amendment to loan and security agreement (the “Amendment”) with Comerica Bank (the “Bank”). The Amendment amends a loan and security agreement entered into between Proxim and the Bank dated as of March 28, 2008 (the “Original Loan Agreement”), which was described in a Form 8-K filed by Proxim with the Securities and Exchange Commission on April 3, 2008, as previously amended by a first amendment to loan and

security agreement dated as of August 13, 2008 (the “First Amendment”), which was described in a Form 8-K filed by Proxim with the SEC on August 14, 2008. The Original Loan Agreement as amended by the First Amendment is referred to as the “Loan Agreement.”

     The Amendment provides for a revolving line of credit not to exceed $1.5 million due on March 27, 2009. The amendment further reinstitued Proxim’s foreign exchange and credit card sublimits in a total amount equal to $300,000.

     The minimum cash financial covenant established in this Amendment requires Proxim to maintain a balance of cash at the Bank (excluding the amount of advances outstanding and the foreign exchange and credit card sublimit) at least equal to $1.5 million plus 50% of Proxim’s quarterly net income and 75% of any cash proceeds of any new equity securities sold by Proxim. As of the date of this filing, Proxim is in compliance with this loan covenant.

10. Recent Accounting Pronouncements

     In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities- an amendment of FASB Statement No. 133. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 25, 2008, with early application encouraged. This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s position, financial performance, and cash flows. The Company is currently evaluating the impact this statement may have on its future financial statements.

     In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142 Goodwill and Other Intangible Assets. For the Company, FSP 142-3 is effective January 1, 2009. The Company is currently evaluating the impact this statement may have on its future financial statements.

     In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Amendments to AU Section 411, the Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). The FASB believes that the GAAP hierarchy should be directed to entities because it is the entity (not its auditor) that is responsible for selecting accounting principles for its financial statements that are presented in conformity with GAAP. The Company believes that is fully in compliance with this pronouncement.

     In May 2008, the FASB issued APB No. 14-1 -Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion (including Partial Cash Settlement). This Financial Staff Position requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. The Company is currently evaluating the impact this statement may have on its future financial statements.

11. Commitments and Contingencies

Purchase Commitments.:

     On August 29, 2008, the Company and Terabeam entered into an Asset Purchase Agreement with Renaissance Electronics Corp. (“Renaissance”) and its wholly owned subsidiary HXI, LLC (together, the “Buyer”) relating to that Harmonix Division. Pursuant to the APA, Terabeam sold to Buyer generally all of its assets relating to its Harmonix Division in Haverhill, Massachusetts. Among the assets sold were US Patent Number 6,163,231 and US Trademark 2,655,290 - the GigaLink^® trademark. The purchase price for these assets was approximately $5.3 million net of contractually agreed adjustments. Of this amount, $750,000 was retained by the Buyer as a deposit towards product purchases under the OEM Agreement entered into in connection with the sale, and the remaining approximately $4.6 million has been paid in cash to Proxim. Per OEM agreement, Proxim agreed to purchase products from the Buyer having an aggregate purchase price of at least $1.5 million during the first twelve month after August 29, 2008.

Linex Settlement:

     On August 22, 2008, we settled the lawsuit that had been brought against us by Linex Technologies. This matter is described below in Part II. Item 1.

IPO Litigation

     In September 2001 we were named as a defendant in four purported class action lawsuits alleging, among other things, violations of the registration and antifraud provisions of the federal securities laws. These matters are described below in Part II, Item 1.

12. Subsequent Events

NASDAQ listing

     On Oct 17, 2008 Proxim Wireless Corporation has received notification from The NASDAQ Stock Market that NASDAQ has suspended, through January 16, 2009, the enforcement of its rules requiring a minimum $1.00 closing bid price and a minimum market value of publicly held shares due to recent extraordinary market conditions. NASDAQ stated that it will not take any action to delist companies for a bid price or market value of publicly held shares deficiency during the suspension.

     As a result of this suspension, the hearing before the NASDAQ Listing Qualifications Panel that had been scheduled for October 23, 2008 to address Proxim’s bid price deficiency has been cancelled. NASDAQ informed Proxim that, if Proxim is still deficient in bid price at the close of business on January 16, 2009, NASDAQ will contact Proxim to reschedule a hearing.

13. Segment Information.

     Our continuing business is conducted in one business segment, broadband wireless equipment.

     Management also assesses the Company’s performance, and operations by geographic areas, and , therefore , revenue related to continuing operations for the nine months ended Sept 30, 2008 and 2007 are summarized in the following table:

		Three Months Ended								Nine Months Ended
(in thousands)		Sept 30, 2008				Sept 30, 2007				Sept 30, 2008				Sept 30, 2007
USA		$	5,174			$	7,397			$	12,880			$	20,999
Europe, Middle East, Africa			3,303				5,049				14,274				15,188
Asia Pacific			2,484				2,262				7,825				7,879
Canada & Latin America			1,106				1,200				2,418				4,116
All Regions		$	12,067			$	15,908			$	37,397			$	48,182

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

Overview

     The Company provides high-speed wireless communications equipment to service providers, enterprises and governmental organizations worldwide. The company is a leading provider of broadband wireless equipment that deliver data, voice, video, and mobility (also known as the “quadruple play”) to organizations of all sizes. Proxim’s portfolio of WLAN, WiFi mesh, WiMAX , and point to point (PTP) products enable a broad range of applications including wireless security and surveillance, enterprise WLANs, last mile connectivity, public safety, cellular backhaul, and more. The Company believes its end to end wireless systems address the growing need of our customers and end-users to rapidly and cost effectively deploy high-speed communication networks.

     The Company offers products in three primary categories: (1) broadband wireless access (BWA), including proprietary point-to-multipoint (PMP), standards-based WiMAX, outdoor Wi-Fi mesh, and MeshMAX™ products; (2) enterprise Wi-Fi products primarily for use indoors, including our access points and Wi-Fi client devices; and (3) PTP products.

     Proxim’s end-to-end product portfolio enables partners to custom-build the wireless solution that fits customer needs. Proxim serves customers through a global network of distributors, value-added resellers, system integrators, and original equipment manufacturers. Our internal sales force also engages in direct-touch, consultative selling with major customers with the primary fulfillment method through our channel partners. Our experienced system engineering team is available to provide professional services to both our channel partners and end customers.

     Proxim’s broadband equipment is used by enterprises, service providers, carriers, government entities, educational institutions, healthcare organizations, municipalities and other organizations that need high-performance, secure and scalable broadband wireless solutions. To date, Proxim has shipped over 1.8 million units to more than 235,000 customers in over 65 countries worldwide. Proxim is ISO-9001 certified.

     The Company changed its corporate name to “Proxim Wireless Corporation” from “Terabeam, Inc.” effective September 10, 2007. Effective that same date, the Company’s stock ticker symbol was changed to “PRXM” from “TRBM.”

     Prior to the third quarter of 2007, Proxim Wireless and its subsidiaries also operated in the services business. This services business (“Services”) was acquired with the acquisition of Ricochet Networks, Inc. during the second quarter of 2004 and was conducted through that Ricochet Networks subsidiary. The Company announced the sale on July 31, 2007 of the Ricochet wireless network and operations for greater Denver metropolitan area to Civitas Wireless Solutions, LLC (“Civitas”). In addition, we announced that Ricochet Networks, Inc. ceased operations of the San Diego network and is no longer in the business of providing wireless internet services. As a result, the Services business was classified as discontinued operations effective in the third quarter of 2007, and the financial results of the Services business has been excluded from the historical financial results of the Company’s continuing business beginning in the third quarter of 2007.

     In the second quarter 2008, the Company classified the Harmonix Division of its Terabeam Corporation subsidiary (“Terabeam”) as discontinued operations and reflected this change in its comparative historical results. Effective August 29, 2008 the Company sold substantially all assets of the Harmonix Division of its Terabeam Corporation subsidiary to Renaissance Electronics Corporation for approximately $5.3 million gross. As part of the transaction, Proxim and Renaissance entered into an agreement for the continued supply and support of the Gigalink® radios developed and manufactured by Harmonix. This way Proxim can ensure an uninterrupted supply of these products to its customers.

     Proxim Wireless operates in the broadband wireless equipment market place. Proxim Wireless is a designer, manufacturer, and seller of wireless telecommunications equipment (“Equipment”) which generated all of the Company’s revenues and expenses during the first nine months of 2008.

Critical Accounting Policies

     The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect: the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting periods. We are required to make judgments and estimates about the effect of matters that are inherently uncertain. Actual results could differ from our estimates. The most significant areas involving our judgments and estimates are described below.

Revenue Recognition

     Product revenue is generally recognized upon shipment in accordance with Staff Accounting Bulletin 104 (“SAB 104”), when persuasive evidence of an arrangement exists, the price is fixed or determinable, and collection is reasonably assured. The Company offers most stocking distributors a stock rotation right pursuant to which they may return products that have been recently purchased provided they place an equal value order for new products from us and the value of the returned products is a small fraction of the value of products purchased from us in the preceding quarter. In general, we also offer most stocking distributors price protection on products in their inventory or recently purchased from us in cases where we reduce prices on these products. In both cases, the distributors would receive a credit which can be used for purchase of additional products from us. In a small number of cases, we have agreed to accept return of discontinued or obsolete products. For other customers, we provide quarterly or annual rebates based on achievement of performance targets, loyalty discounts, and/or sales discounts. We apply SFAS No. 48,“Revenue Recognition When Right if Return Exists,” in determining when to recognize revenue. Under SFAS No. 48 revenue can be recognized if all of the following conditions are met:

	1.		The price is fixed and determinable at the date of sale;
	2.		The buyer’s payment obligation is not contingent on resale;
	3.		The buyer’s payment obligation would not be changed in the event of theft or physical damage of the product;
	4.		The buyer acquiring the product for resale has economic substance apart from that provided by the seller;
	5.		The seller does not have significant obligations for future resale of the product; and
	6.		The amount of future returns can be reasonably estimated.

Based on our application of the SFAS No. 48 principles to our different customers, we currently recognize some revenue on a “sell in” basis and some on a deferred “sell through” basis. Generally factors 1 through 5 are satisfied upon our delivery of the products to our customer. The estimation of future returns depends on contractual terms and our historical experience with the customer.

     Proxim revenue consists of direct shipments to customers or other equipment manufacturers (OEM), and distributors who resell our products to third party customers.

     In the case of direct customers or OEM manufacturers we recognize revenue at point of shipment from either Proxim’s facility or from our contract manufacturer’s facilities when the product is shipped from the respective docks since title and acceptance are passed to the end customer. We meet the conditions of SAB #104, and SFAS No. 48 for revenue recognition at point of shipment for direct customer and OEM sales.

     In the case of Proxim products which are sold to distributors we generally recognize revenue to most distributors on a “sell in” basis at point of shipment since we have met all of the conditions specified in SAB104, and SFAS No. 48 at point of shipment to the distributors.

     As mentioned previously we offer most stocking distributors a stock rotation right pursuant to which they may rotate products for comparable value in their inventory that have been recently purchased from us and the value of the returned product is a relatively small percentage of the product purchased from us in the preceding quarter. In addition, we also offer most stocking distributors price protection on products in their inventory and recently purchased from us in cases where we have reduced prices on those products. These stock rotations and price discounts must be claimed and exercised within a one to two quarter time frame to be valid.

     In the case of our three largest stocking distributors, although they have comparable distribution contracts to the smaller distributors, we have historically deferred revenue for shipments which are either in transit to them, or are included in their period ending inventory reports. This revenue deferral practice for larger distributors has been applied historically by Proxim. These larger distributors have historically returned more product and requested larger stock rotations and price discounts versus the smaller distributors which were the primary reason that we have historically recognized their revenue using the “sell through” methodology. Under the “sell through” methodology we recognize revenue when our products are sold by these three largest stocking distributors.

     For our services business, and prior to discontinuing the service operations on July 31, 2007, we recognized revenue when the customer paid for and then had access to our network for the current fiscal period. Any funds the customer paid for future fiscal periods were treated as deferred revenue and recognized in future fiscal periods for which the customer was granted access to our network. The Company did not have revenue from multiple deliverable arrangements.

Accounts Receivable Valuation

     We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We assess the customer’s ability to pay based on a number of factors, including past transaction history with the customer as well as their creditworthiness. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of any of our customers were to deteriorate in the future, resulting in an impairment of their ability to make payments, or they express unwillingness to pay for whatever reason, additional allowances may be required. We reserve 100% of outstanding receivable balances (a) from insolvent customers and (b) from customers which are delinquent by six months or more. We reserve 50% of outstanding receivable balances that are between 3 months to 6 months delinquent subject to adjustments as considered appropriate for specific situations. We reserve 1% of outstanding receivable balances that are between 1 day to 3 months delinquent.

Inventory Valuation

     Inventories are stated at the lower of standard cost, which approximates actual cost under the first-in, first-out method, or market value. We perform a detailed assessment of inventory at each year-end balance sheet date, which includes, among other factors, a review of component demand requirements, product lifecycle and product development plans. Manufacturing inventory includes raw materials, work-in-process, and finished goods. Inventory valuation provisions are based on an excess obsolete report which captures all obsolete parts and products and all other inventory, which have quantities in excess of one year’s projected demand, or in the case of service inventories demand of up to five years. Individual line item exceptions are identified for either inclusion or exclusion from the inventory valuation provision. As a result of this assessment, we write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. In addition, on an annual basis we conduct a lower of cost or market evaluation which may necessitate additional inventory provisions.

Warranty Provision

     The Company’s standard warranty term is one year on the majority of our products and up to two years on a select group of products. At times we provide longer warranty terms. Proxim provides an estimated cost of product warranties at the time revenue is recognized. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim for repair or replacement. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service labor costs incurred in correcting a product failure. Should actual product failure rates, material usage, service labor or delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

Valuation of Stock-based Awards

     As of December 31, 2007, we have one active stock-based employee compensation plan and four inactive (legacy) plans, which are described more fully in Note 14 in our Annual Report on Form 10-K filed with the SEC on March 28, 2008.

     As of January 1, 2006 we account for stock-based compensation in accordance with the fair value recognition provisions of SFAS 123R. Under SFAS 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period of the individual equity instrument. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. The computation of the expected volatility assumption used in the Black-Scholes calculation for option grants is based on historical volatility as options on our stock are not traded. The Company uses the “simplified” method to determine the expected term for the “plain vanilla” options. We are also required to estimate the expected forfeiture of stock options in recognizing stock-based compensation expense. Further, we have elected to use the straight-line method of amortization for stock-based compensation related to stock options granted after January 1, 2006.

Capitalized Software

     We capitalize certain software development costs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. We begin capitalizing software development costs upon the establishment of technological feasibility, which is established upon the completion of a working model or a detailed program design. Costs incurred prior to technological feasibility are charged to expense as incurred. Capitalization ceases when the product is considered available for general release to customers. Capitalized software development costs are amortized to costs of revenues over the estimated economic lives of the software products based on product life expectancy. Generally, estimated economic lives of the software products do not exceed three years.

Results of Operations

For the three months ended September 30, 2008 and 2007

     The following table provides statement of operations data as a percentage of sales for the periods presented.

		2008				2007
Sales			100	%			100	%
Cost of goods sold			64				52
Gross profit			36				48
Operating expenses
Selling costs			32				34
General and administrative			26				18
Research and development			8				7
Total operating expenses			66				59
Operating (loss) income			(30	)			(11	)
Other income (expenses)			(3)				—
Income /(loss) from continuing operations			(33	)%			(10	)%
Income /(loss) discontinued operations			19	%			(7	)%
Income taxes			—				—
Net loss			(14	)%			(17	)%

     Sales

     Sales for the three months ended September 30, 2008 were $12.1 million as compared to $15.9 million for the same period in 2007 for a decrease of $3.8 million or 24%. The sales decline was primarily in our US region, and included both broadband and more mature WiFi product lines.

     For the quarters ending September 30, 2008 and 2007, international sales, approximated 57% and 53%, respectively, of total sales.

     Cost of goods sold and gross profit

     Cost of goods sold and gross profit for the three months ended September 30, 2008 were $7.7 million and $4.4 million, respectively. For the same period in 2007, cost of goods sold and gross profit were $8.2 million and $7.7 million, respectively. Gross profit margin, as a percentage of sales, for the three months ended September 30, 2008 and 2007 was 36% and 48%, respectively. The decrease in gross margin percentage was due to a combination of lower absorption of fixed manufacturing costs on decreased sales and higher charges to inventory for excess and obsolete, and physical inventory adjustment.

     Sales and Marketing Expenses

     Sales and marketing expenses consist primarily of employee salaries and associated costs for selling, marketing, customer and technical support as well as field support. Sales and marketing expenses for the three months ended September 30, 2008 were $3.8 million, which was a decrease of $1.5 million from $5.4 million for the same period in 2007. The decrease was the result of lower headcount and reduced travel related to management’s objective of rationalizing selling costs by territory.

     General and Administrative Expenses

     General and administrative expenses consist primarily of employee salaries, benefits and associated costs for information systems, finance, legal, and administration of a public company. General and administrative expenses were $3.1 million for the three months ended September 30, 2008 compared to $2.9 million for the three months ended September 30, 2007 resulting in an increase of about $0.2 million from the prior year’s reporting period. The increase was primarily due to costs incurred due to the move to the Company’s new corporate headquarters and the intellectual property lawsuit that had been brought against the Company.

     Research and Development Expenses

     Research and development expenses consist primarily of personnel salaries and fringe benefits and related costs associated with our product development efforts. These include costs for development of products and components, test equipment, and related facilities. Research and development expenses stayed flat at $1.0 million for the three months ended September 30, 2008 comparable to the $1.0 million for the three months ended September 30, 2007.

     Other income (expense)

     Other expenses totaled approximately $388,000 in the third quarter 2008 compared to income of $64,000 for the corresponding quarter of 2007. The higher expense during the third quarter 2008 was primarily due to the interest expense associated with the private debt placement as well as our bank line of credit (which was not in place during the third quarter of 2007).

     Discontinued Operations

     The Company received net income of $2.3 million from discontinued operations in the three months ended September 30, 2008 compared to a net loss of $1.1 million for the three months ended September 30, 2007, an approximate increase of $3.4 million or 310%. The gain in the third quarter of 2008 was primarily due to sale of the Harmonix Division for a gain of $2.4 million offset by a $139,000 loss from discontinued operations. The third quarter 2007 discontinued operations loss was primarily due to the cost of shutting down the Ricochet Networks services business.

For the nine months ended September 30, 2008 and 2007

     The following table provides statement of operations data as a percentage of sales for the periods presented.

		Nine Months Ended Sept 30,
		2008				2007
Sales			100	%			100	%
Cost of goods sold			57				54
Gross profit			43				46
Operating expenses
Selling costs			37				31

		Nine Months Ended Sept 30,
		2008				2007
Restructuring charges							—
General and administrative			25				18
Research and development			8				11
Total operating expenses			71				60
Operating (loss) income			(28	)			(14	)
Other income (expenses)			—				5
Income/(loss) from continuing operations			(28	)%			(9	)%
Income /(loss) discontinued operations			6	%			(4	)%
Income taxes			—				—
Net loss			(22	)%			(13	)%

     Sales

     Sales for the nine months ended September 30, 2008 were $37.4 million as compared to $48.2 million for the same period in 2007 for a decrease of $10.8 million or 22%. This decrease was primarily due to lower sales in the US region of both broadband as well as more mature wireless LAN and point to point products.

     For the nine months ending September 30, 2008 and 2007, international sales, approximated 67% and 56%, respectively, of total sales.

     Cost of goods sold and gross profit

     Cost of goods sold and gross profit for the nine months ended September 30, 2008 were $21.4 million and $16.0 million, respectively. For the same period in 2007, cost of goods sold and gross profit were $25.8 million and $22.4 million, respectively. Gross profit margin, as a percentage of sales, for the nine months ended September 30, 2008 and 2007 was 43% and 46%, respectively. The lower margins were due to inventory reserves and adjustments and reduced absorption of manufacturing costs on lower revenue levels than the same nine months in the prior year.

     Sales and Marketing Expenses

     Sales and marketing expenses consist primarily of employee salaries and associated costs for selling, marketing, customer and technical support as well as field support. Sales and marketing expenses for the nine months ended September 30, 2008 were $14.0 million, a decrease of $1.1 million, or 7.4% under the $15.1 million for the same period in 2007. The expense decrease was driven by lower headcount and reduced travel and entertainment costs as management focused on rationalizing Proxim’s selling costs by territory.

     General and Administrative Expenses

     General and administrative expenses consist primarily of employee salaries, benefits and associated costs for information systems, finance, legal, and administration of a public company. General and administrative expenses were $9.5 million for the nine months ended September 30, 2008 compared to $8.7 million for the nine months ended September 30, 2007 resulting in an increase of about 9% or $0.8 million from the prior year’s reporting period. The increase was primarily due to costs incurred due to the move to the Company’s new corporate headquarters and the intellectual property lawsuit that had been brought against the Company.

     Research and Development Expenses

     Research and development expenses consist primarily of personnel salaries and fringe benefits and related costs associated with our product development efforts. These include costs for development of products and components, test equipment and related facilities. Research and development expenses decreased to $3.1 million for the nine months ended September 30, 2008 from $5.2 million for the nine months ended September 30, 2007, an approximate decrease of $2.1 million or 39%. The decrease in research and development expenses was due to reduction in headcount and related expenses at our Silicon Valley, California location as we transitioned to our more cost efficient R&D operations in Hyderabad, India.

     Other income (expenses)

     Other income and expenses totaled approximately $0.1 million in the first nine months of 2008 compared to $2.7 million for the corresponding nine months of 2007. The majority of the $2.6 million decrease in other income was due to the receipt of $2.5 million from the sale of intellectual property in 2007 versus $850,000 in 2009. There were also higher interest charges in 2008 associated with various borrowings that did not exist in 2007.

     Discontinued Operations

     The Company received had net income of $2.4 million from discontinued operations for the nine months ended September 30, 2008 compared to a net loss of $1.9 million for the comparable nine months in 2007. The net income in the nine months of 2008 was primarily due to the sale of the Harmonix Division for gain of $2.4 million offset by a $40,000 loss from discontinued operations. The loss in 2007 related to the Ricochet Networks business which was discontinued in July, 2007.

Liquidity and Capital Resources

     At September 30, 2008, we had cash and cash equivalents of $7.6 million. This excludes restricted cash of $0.1 million. For the nine months ended September 30, 2008, cash used by operations was approximately $6.8 million. We currently are meeting our working capital needs through cash on hand (including cash we have borrowed) as well as internally generated cash from operations and other activities. Net cash provided by investing activities was $4.4 million including $4.5 million gross coming from sale of the Harmonix Division.

     For the nine months ended September 30, 2008, cash provided by financing activities was approximately $3.7 million which was principally due to a $3.0 million credit line with a major bank secured by substantially all our assets (other than intellectual property). We paid down the credit line to $1.5 million during the quarter ended September 30, 2008. Also during the nine months ended September 30, 2008, we borrowed $3.0 million from Lloyd I. Miller, III and Milfam II, L.P., an entity affiliated with Mr. Miller.

     During the nine months ended September 30, 2008, we realized cash proceeds from the sale of patents totaling $850,000. There was an offsetting cost associated with this patent sale of $98,000. This is shown in the Consolidated Statement of Cashflows as cash from investing activities.

     We believe that cash from operations, along with our cash on hand, should be sufficient to meet our operating cash requirements over the next twelve month period as currently contemplated. However, we recognize that we have limited cash on hand and limited margin for error in implementing our desired business plan. Our long-term financing requirements depend upon our growth strategy, which relates primarily to our desire to increase revenue both domestically as well as internationally. We incurred operating losses totaling $10.7 million in the first nine months of 2008, a increase of $4.0 million over the same period of 2007. During the rest of 2008, we must continue our efforts to increase revenues and adjust operating expenses to levels that will produce positive cash flows and return us to operating profitability.

     Since we have historically experienced fluctuations in our level of quarterly revenue, management is closely following revenue trends and operating expenses, and reviewing its long term business strategy to evaluate whether there will be a requirement for external financing to fund our operations. One significant constraint to our equipment business growth is the rate of new product introduction. New products or product lines may be designed and developed internally or acquired from existing suppliers to reduce the time to market and inherent risks of new product development. Our current resources may have to be supplemented through additional bank debt financing, public debt or equity offerings, product line or asset sales, or other means due to a number of factors, including our ability to replace revenues lost through the discontinuation of our services business and our desired rate of future growth. See Item 1A — Risk Factors below and the more detailed discussion of risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

     We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.

     Under the supervision and with the participation of our CEO and CFO, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2008.

Management’s Report on Internal Control over Financial Reporting

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is the process designed by and under the supervision of our CEO and CFO to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management has evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

     Under the supervision and with the participation of our CEO and CFO, our management, in connection with the preparation of our annual report on Form 10-K, assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 and concluded that it is effective.

     This quarterly report does not, and our annual report on Form 10-K that we filed with the Securities and Exchange Commission on March 28, 2008 did not, include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in that annual report.

Changes in Internal Control over Financial Reporting

     Under the supervision and with the participation of our CEO and CFO, our management has evaluated changes in our internal control over financial reporting that occurred during our last fiscal quarter. Based on that evaluation, our CEO and CFO did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Important Considerations

     The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

IPO Litigation

     During the period from June 12 to September 13, 2001, four purported securities class action lawsuits were filed against Telaxis Communications Corporation, a predecessor company to Proxim Wireless Corporation, in the U.S. District Court for the Southern District of New York: Katz v. Telaxis Communications Corporation et al., Kucera v. Telaxis Communications Corporation et al., Paquette v. Telaxis Communications Corporation et al., and Inglis v. Telaxis Communications Corporation et al. The lawsuits also named one or more of the underwriters in the Telaxis initial public offering and certain of its officers and directors. On April 19, 2002, the plaintiffs filed a single consolidated amended complaint which supersedes the individual complaints originally filed. The amended complaint alleges, among other things, violations of the registration and antifraud provisions of the federal securities laws due to alleged statements in and omissions from the Telaxis initial public offering registration statement concerning the underwriters’ alleged activities in connection with the underwriting of Telaxis’ shares to the public. The amended complaint seeks, among other things, unspecified damages and costs associated with the litigation. These lawsuits have been assigned along with, we understand, approximately 1,000 other lawsuits making substantially similar allegations against approximately 300 other publicly-traded companies and their public offering underwriters to a single federal judge in the U.S. District Court for the Southern District of New York for consolidated pre-trial purposes. We believe the claims against us are without merit and have defended the litigation vigorously. The litigation process is inherently uncertain, however, and there can be no assurance that the outcome of these claims will be favorable for us.

     On July 15, 2002, together with the other issuer defendants, Telaxis filed a collective motion to dismiss the consolidated amended complaint against the issuers on various legal grounds common to all or most of the issuer defendants. The underwriters also filed separate motions to dismiss the claims against them. In October 2002, the court approved a stipulation dismissing without prejudice all claims against the Telaxis directors and officers who had been defendants in the litigation. On February 19, 2003, the court issued its ruling on the separate motions to dismiss filed by the issuer defendants and the underwriter defendants. The court granted in part and denied in part the issuer defendants’ motions. The court dismissed, with prejudice, all claims brought against Telaxis under the anti-fraud provisions of the securities laws. The court denied the motion to dismiss the claims brought under the registration provisions of the securities laws (which do not require that intent to defraud be pleaded) as to Telaxis and as to substantially all of the other issuer defendants. The court denied the underwriter defendants’ motion to dismiss in all respects.

     In June 2003, along with virtually all of the other non-bankrupt issuer defendants, we elected to participate in a proposed settlement agreement with the plaintiffs in this litigation. If the proposed settlement had been approved by the court, it would have resulted in the dismissal, with prejudice, of all claims in the litigation against us and against the other issuer defendants who elected to participate in the proposed settlement, together with the current or former officers and directors of participating issuers who were named as individual defendants. This proposed settlement was conditioned on, among other things, a ruling by the court that the claims against us and against the other issuers who had agreed to the settlement would be certified for class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these cases would be bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

     On December 5, 2006, the U.S. Court of Appeals for the Second Circuit issued a decision in re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against us (the so-called “focus cases”) may not be certified as class actions due, in part, to the Appeals Court’s determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes. On January 8, 2007, the plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals’ decision. On April 6, 2007 the Court of Appeals denied the plaintiffs’ petition for rehearing of the Court’s December 5, 2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its December 5, 2006 decision.

     In light of the Court of Appeals’ December 5, 2006 decision regarding certification of the plaintiffs’ claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers, including us. Because it is expected that any possible future settlement with the plaintiffs, if such a settlement were ever to be agreed to, would involve the certification of a class action for settlement purposes, the impact of the Court of Appeals’ class certification-related rulings on the possible future settlement of the claims against us cannot now be predicted.

     On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The issuer defendants and the underwriter defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On March 26, 2008, the District Court issued an order in which it denied in substantial part the motions to dismiss the amended complaints in the six focus cases. In addition, on October 1, 2007, the plaintiffs had submitted their briefing in support of their motions to certify different classes in the six focus cases. The issuer defendants and the underwriter defendants filed separate oppositions to those motions on December 21, 2007. The plaintiffs have voluntarily withdrawn their motions for class certification without prejudice.

     We intend to continue to defend the litigation vigorously while continuing to consider settlement opportunities. The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit. Moreover, we believe that the underwriters may have an obligation to indemnify us for the legal fees and other costs of defending these suits. While there can be no assurance as to the ultimate outcome of these proceedings, we currently believe that the final result of these actions will have no material effect on our consolidated financial condition, results of operations, or cash flows.

Linex Technologies Litigation

     On June 1, 2007, Linex Technologies, Inc. filed suit against Proxim Wireless Corporation for alleged patent infringement in the United States District Court for the Eastern District of Texas, Marshall Division. Other named defendants in this lawsuit were Belair Networks, Inc., Cisco Systems, Inc., Firetide, Inc., and Skypilot Networks, Inc. This lawsuit generally alleged that Proxim’s mesh products infringe two United States patents purportedly owned by Linex. Linex was seeking damages allegedly caused by the alleged infringement of its two patents. On August 22, 2008, Proxim entered into a settlement agreement with Linex for the purpose of resolving the lawsuit. Under the terms of the settlement agreement, Proxim agreed to pay specific amounts over time and a royalty after revenues from specified products of Proxim exceed a threshold in return for a license for the life of the patents at issue and a covenant not to sue from Linex. Consequently, by order dated September 3, 2008, Linex’s lawsuit against Proxim was dismissed with prejudice.

General

     We are subject to potential liability under contractual and other matters and various claims and legal actions which are pending or may be asserted against us or our subsidiaries, including claims arising from the termination of the operations of Ricochet Networks, Inc. in the San Diego metropolitan area and the transfer of the operations of Ricochet Networks, Inc. in the Denver metropolitan area to Civitas Wireless Solutions, LLC. These matters may arise in the ordinary course and conduct of our business. While we cannot predict the outcome of such claims and legal actions with certainty, we currently believe that such matters should not result in any liability which would have a material adverse affect on our business.

Item 1A. Risk Factors.

General Overview

     This Quarterly Report on Form 10-Q contains forward-looking statements as defined by federal securities laws that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions, and other statements, which are other than statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “contemplates,” “believes,” “estimates,” “predicts,” “projects,” and other similar terminology or the negative of these terms. From time to time, we may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this Form 10-Q, including those set forth below, and any other cautionary statements which may accompany the forward-looking statements. In addition, we undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-Q or to reflect the occurrence of unanticipated or any other subsequent events, and we disclaim any such obligation.

     You should read forward-looking statements carefully because they may discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. However, there may be events in the future that we are not able to accurately predict or control. Forward-looking statements are only predictions that relate to future events or our future performance and are subject to substantial known and unknown risks, uncertainties, assumptions, and other

factors that may cause actual results, outcomes, levels of activity, performance, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated, or implied by these forward-looking statements. As a result, we cannot guarantee future results, outcomes, levels of activity,
performance, developments, or achievements, and there can be no assurance that our expectations, intentions, anticipations, beliefs, or projections will result or be achieved or accomplished. In summary, you should not place undue reliance on any forward-looking statements.

Cautionary Statements of General Applicability

     In addition to other factors and matters discussed elsewhere in this Form 10-Q, in our other periodic reports and filings made from time to time with the Securities and Exchange Commission, and in our other public statements from time to time (including, without limitation, our press releases), some of the important factors that, in our view, could cause actual results to differ materially from those expressed, anticipated, or implied in the forward-looking statements include, without limitation, the downturn and continuing uncertainty in the telecommunications industry and global economy; the intense competition in the broadband wireless equipment industry and resulting pressures on our pricing, gross margins, and general financial performance; our limited capital resources and uncertain prospects for obtaining additional financing; the possibility that we may raise additional capital on terms that we or our stockholders find onerous; possible better terms of any equity, debt, or convertible securities we may issue in the future than the terms of our common stock; the possibility that we may sell or otherwise dispose of portions of our business and assets for strategic reasons or to raise capital; possible negative reactions from investors, customers, employees, and others to any business or assets dispositions we may effect; difficulties in differentiating our products from competing broadband wireless products and other competing technologies; the impact, availability, pricing, and success of competing technologies and products; possible delays in our customers making buying decisions due to the actual or potential availability of new broadband connectivity technologies; difficulties in developing products that will address a sufficiently broad market to be commercially viable; our developing products for portions of the broadband connectivity and access markets that do not grow; our inability to keep pace with rapid technological changes and industry standards; expected declining prices for our products over time; our inability to offset expected price declines with cost savings or new product introductions; our inability to recover capital and other investments made in developing and introducing new products; lack of or delay in market acceptance and demand for our current and contemplated products; difficulties or delays in developing, manufacturing, and supplying products with the contemplated or desired features, performance, price, cost, and other characteristics; difficulties in estimating costs of developing and supplying products; difficulties in developing, manufacturing, and supplying products in a timely and cost-effective manner; difficulties or delays in developing improved products when expected or desired and with the additional features contemplated or desired; decisions we may make to delay or discontinue efforts to develop and introduce certain new products; negative reactions to any such decisions; costs and accounting impacts from any such decisions; our fluctuating financial results, which may be caused at times by receipt of large orders from customers; our limited ability to predict our future financial performance; our possible desire to make limited or no public predictions as to our expected future financial performance; the expected fluctuation in customer demand and commitments; difficulties in predicting our future financial performance, in part due to our past and possible future acquisition activity; our inability to achieve the contemplated benefits of any acquisitions we may contemplate or consummate; management distraction due to those acquisitions; the ability of the companies to integrate in a cost-effective, timely manner without material liabilities or loss of desired employees or customers; the risk that the expected synergies and other benefits of the transactions will not be realized at all or to the extent expected; the risk that cost savings from the transactions may not be fully realized or may take longer to realize than expected; reactions, either positive or negative, of investors, competitors, customers, suppliers, employees, and others to the transactions; the risk that those transactions will, or could, expose us to lawsuits or other liabilities; obligations arising from contractual obligations of Proxim Corporation that we assumed; litigation risks, obligations, and expenses arising from contractual obligations of Proxim Corporation that we assumed; management and other employee distraction due to any litigation arising from contractual obligations of Proxim Corporation that we assumed; adverse impacts of purchase accounting treatment and amortization and impairment of intangible assets acquired in any acquisitions; our general lack of receiving long-term purchase commitments from our customers; cancellation of orders without penalties; the ability of our customers to return to us some or all of the products they had previously purchased from us with the resulting adverse financial consequences; costs, administrative burdens, risks, and obligations arising from terms and conditions that we find onerous but that are imposed upon us by certain customers as a condition of buying products from us; our not selling products to certain customers due to our refusal to accept their terms and conditions of sale that we find onerous; difficulties or delays in obtaining raw materials, subassemblies, or other components for our products at the times, in the quantities, and at the prices we desire or expect, particularly those that are sole source or available from a limited number of suppliers; inability to achieve and maintain profitability; purchases of excess inventory that ultimately may not be used; difficulties or delays in developing alternative sources for limited or sole source components; our having to reconfigure our products due to our inability to receive sufficient quantities of limited or sole source components; adverse impact of stock option and other accounting rules; our reliance on third party distributors and resellers in our indirect sales model; our dependence on a limited number of significant distributors; our inability to obtain larger customers;

dependence on continued demand for broadband connectivity and access; difficulties in attracting and retaining qualified personnel; our dependence on key personnel; competition from companies that hire some of our former personnel; lack of key man life insurance on our executives or other employees; lack of a succession plan; inability of our limited internal manufacturing capacity to meet customers’ desires for our products; our substantial reliance on contract manufacturers to obtain raw materials and components for our products and to manufacture, test, and deliver our products; interruptions in our manufacturing operations or the operations of our contract manufacturers or other suppliers; possible adverse impacts on us of the directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (the RoHS directive), including, without limitation, adverse impacts on our ability to supply our products in the quantities desired and adverse impacts on our costs of supplying products; possible adverse impacts on us of the waste electrical and electronic equipment directive (the WEEE directive), including, without limitation, adverse impacts on our ability to supply our products in the quantities desired and adverse impacts on our costs of supplying products; our failing to maintain adequate levels of inventory; costs and accounting impacts associated with purchasing inventory that is later determined to be excess or obsolete; our failure to effectively manage our growth; difficulties in reducing our operating expenses; adverse impacts of the war in Iraq and the war on terrorism generally; the potential for intellectual property infringement, warranty, product liability, and other claims; risks, obligations, and expenses arising from litigating or settling any such intellectual property infringement, warranty, product liability, and other claims; management and other employee distraction due to any such intellectual property infringement, warranty, product liability, and other claims; risks associated with foreign sales such as collection, currency, and political risk; limited ability to enforce our rights against customers in foreign countries; lack of relationships in foreign countries which may limit our ability to expand our international sales and operations; difficulties in complying with existing governmental regulations and developments or changes in governmental regulation; difficulties or delays in obtaining any necessary Federal Communications Commission and other governmental or regulatory certifications, permits, waivers, or approvals; possible adverse consequences resulting from marketing, selling, or supplying products without any necessary Federal Communications Commission or other governmental or regulatory certifications, permits, waivers, or approvals; changes in governmental regulations which could adversely impact our competitive position; our maintaining tight credit limits which could adversely impact our sales; difficulties in our customers or ultimate end users of our products obtaining sufficient funding; difficulties in collecting our accounts receivable; failure or inability to protect our proprietary technology and other intellectual property; possible decreased ability to protect our proprietary technology and other intellectual property in foreign jurisdictions; ability of third parties to develop similar and perhaps superior technology without violating our intellectual property rights; the costs and distraction of engaging in litigation to protect our intellectual property rights, even if we are ultimately successful; adverse impacts resulting from our settlement of litigation initiated by Symbol Technologies, Inc.; time, costs, political considerations, typical multitude of constituencies, and other factors involved in evaluating, equipping, installing, and operating municipal networks; costs of complying with governmental regulations such as Section 404 and other provisions of the Sarbanes-Oxley Act; the expense of defending and settling and the outcome of pending and any future stockholder litigation; the expense of defending and settling and the outcome of pending and any future litigation against us; the expected volatility and possible stagnation or decline in our stock price, particularly due to the relatively low number of shares that trade on a daily basis and public filings regarding sales of our stock by one or more of our significant stockholders; future stock sales by our current stockholders, including our current and former directors and management; future actual or potential sales of our stock that we issue upon exercise of stock options or stock warrants; possible dilution of our existing stockholders if we issue stock to acquire other companies or product lines or to raise additional capital; possible better terms of any equity securities we may issue in the future than the terms of our common stock; investment risk resulting in the decrease in value of our investments; and risks, impacts, and effects associated with any acquisitions, investments, or other strategic transactions we may evaluate or in which we may be involved. Many of these and other risks and uncertainties are described in more detail in our annual report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Specific Cautionary Statements Relating to Revenues

     We have been unable to increase our revenues despite being in what are perceived as expanding markets. This is having an adverse impact on our business, financial condition, and relations with customers, suppliers, employees, investors, and others. We may not be able to increase revenues in the future. Our continued inability to increase our revenues could have a material adverse affect on our ability to continue as a going concern.

Specific Cautionary Statements Relating to Capital Resources

     We currently have limited capital resources, which could adversely impact our operations, ability to grow our business, attractiveness as a supplier to customers, attractiveness to investors, and viability as an ongoing company. We have a recent history of unprofitable operations, and our capital resources have been declining and are limited. These factors could cause potential customers to question our long-term viability as a supplier and thus decide not to purchase products from us. Further, our limited capital resources could inhibit our ability to grow our business because typically we have to pay our suppliers sooner than we receive

payment from our customers. These factors could cause potential investors to question our long-term viability or believe that we will need to raise additional capital on terms more favorable than a typical investor would obtain by simply buying our stock in the public markets and thus decide not to purchase our stock. All these factors could have an adverse impact on our operations, financial results, stock price, and viability as an ongoing company.

     We have limited capital resources and our prospects for obtaining additional financing, if required, are uncertain, especially in these highly-volatile capital markets. Our future capital requirements will depend on numerous factors, including expansion of marketing and sales efforts, development costs of new products, the timing and extent of commercial acceptance for our products, and potential changes in strategic direction. Additional financing may not be available to us in the future on acceptable terms or at all. If funds are not available, we may have to delay, scale back, or terminate business or product lines or our sales and marketing, research and development, acquisition, or manufacturing programs. We may raise additional capital on terms that we or our stockholders find onerous. Any equity, debt, or convertible securities that we may issue in the future may have better terms than the terms of our common stock. We may sell or otherwise dispose of portions of our business and assets for strategic reasons or to raise capital. Investors, customers, employees and others may react negatively to any business or asset dispositions we may effect. These factors could seriously damage our business, operating results, financial condition, ability to retain employees, viability as an ongoing company, and cause our stock price to decline.

Specific Cautionary Statements Relating to Volatile Economy and Capital Markets

     Recently there has been significant uncertainty and volatility in the economy in general and the capital and lending markets in particular. We believe we are being impacted by these uncertainties already, primarily because at least some of our customers are having difficulties in obtaining credit or other financing on the terms and in the amounts they desire. We believe the uncertainty may also be causing other customers to postpone or at least delay decisions to buy our products. Inability of our customers to obtain sufficient credit or decisions by our customers to delay buying our products could have significant adverse impacts to us, particularly as we are trying to increase our revenues. Additionally, this uncertainty and volatility could make it more difficult for us to raise additional capital. An extended period of uncertainty and volatility could have a material adverse impact on our business, financial condition, and viability as an ongoing company.

Specific Cautionary Statements relating to Bank Line of Credit

     The Company recently amended the loan agreement the Company executed with a bank in the first quarter of 2008. If the Company is unable to comply with the financial and other covenants contained in that agreement as amended, the Company may be required to repay the total $1.5 million outstanding loan amount before the contemplated payment date of March 27, 2009. This repayment obligation may have a material adverse impact on the Company, particularly given the limited cash on hand at the Company.

Specific Cautionary Statements relating to Possible Harmonix Division Strategic Transaction

     Effective August 29, 2008, we sold the Harmonix Division of our Terabeam Corporation subsidiary. Risks and uncertainties relating to that transaction include those relating to and arising from the time and costs required to transition the operations of the Harmonix Division to the buyer; management (including management of the Harmonix Division) and board interest in and distraction due to the sale and related transition of operations; liabilities incurred due to the sale and related transition of the Harmonix Division; reactions, either positive or negative, of investors, competitors, customers, employees, and others to our selling the Harmonix Division; and additional supply risks as we now have to obtain certain of the products we sell to our customers from an unaffiliated third party as opposed to from an internal division. These risks could have a material adverse impact on the Company.

Specific Cautionary Statements relating to July 2008 Lending Transaction

     In July 2008, we borrowed $3.0 million from our largest stockholder Lloyd I. Miller, III and an entity affiliated with Mr. Miller at 16% interest and, in connection with that loan, issued warrants to purchase 1.25 million shares of our common stock at an initial exercise price of $0.53 per share (warrants to purchase 925,000 shares of our common stock at $2.45 per share were cancelled in that transaction). Payment of the interest on this loan as well as repayment of the loaned principal could have a material adverse effect on our business. The documentation relating to this loan creates restrictions on our ability to conduct operations in our normal course, which could have an adverse effect on our business. Our failure to comply with the terms of the loan documentation could result in our being required to repay this loan earlier than originally scheduled, which could have a material adverse effect on the ability of the Company to continue as a going concern, particularly given the limited cash on hand at the Company. The new warrants and their exercise and actual or potential sale of the underlying common stock could cause our stock price to fall or prevent it from increasing for numerous reasons. For example, a substantial amount of our common stock becoming available (or being perceived to become

available) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing, particularly given the relatively low trading volumes of our stock. Because Mr. Miller owns directly or indirectly more than 10% of our outstanding common stock, any exercises, sales or distributions by Mr. Miller are required to be reported publicly shortly after they occur. Also, Mr. Miller has recommended that two people be placed on our current board of directors so sales by Mr. Miller could be viewed as being based on knowledge gained from those directors. Investors, customers, suppliers, employees, and others may react negatively to this lending transaction or specific portions thereof. These matters may have a material adverse impact on our business and company.

Specific Cautionary Statements Relating to Nasdaq Delisting Possibility

     Our common stock may be delisted from the Nasdaq Capital Market, which could adversely affect our business and relations with employees, customers, and others. Our common stock is currently traded on the Nasdaq Capital Market. We have received notice from The Nasdaq Stock Market that our stock price (technically, the closing bid price) has failed to maintain the required minimum $1.00 per share. We had been given until August 20, 2008 to achieve compliance with that rule by having the bid price of our stock close at $1.00 or more for at least ten consecutive business days. On August 21, 2008, we received a Nasdaq Staff Determination indicating that we failed to comply with that minimum bid price requirement and that our stock was therefore subject to delisting from The Nasdaq Capital Market. Proxim requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination, which had the effect of staying the determination of the Nasdaq Staff pending the Panel’s decision. That appeals hearing was scheduled for October 23, 2008. Prior to the hearing, we received notification from The Nasdaq Stock Market that Nasdaq has suspended, through January 16, 2009, the enforcement of its rules requiring a minimum $1.00 closing bid price and a minimum market value of publicly held shares due to recent extraordinary market conditions. Nasdaq stated that it will not take any action to delist companies for a bid price or market value of publicly held shares deficiency during the suspension. As a result of this suspension, the hearing before the Panel that had been scheduled for October 23, 2008 to address our bid price deficiency was cancelled. Nasdaq informed us that, if Proxim is still deficient in bid price at the close of business on January 16, 2009, Nasdaq will contact Proxim to reschedule a hearing.

     This is a very fluid situation. There can be no assurance as to what actions Proxim may take in its efforts to stay listed; how the Nasdaq continued listing rules (as in effect as decided by Nasdaq) will be applied to Proxim; that we would be able to achieve compliance with the minimum bid price rule within the time required by Nasdaq; or the timing of any of these events. While there are many actions that may be taken to attempt to increase the price of our stock, two of the possibilities are a reverse stock split and a stock repurchase. At this time, we have limited capital available for any stock repurchase. Any such actions (even if successful) may have adverse effects on us, such as adverse reaction from employees, investors and financial markets in general, adverse publicity, and adverse reactions from customers. There are other requirements for continued listing on the Nasdaq Capital Market, and there can be no assurance that we will continue to meet these listing requirements. Should our stock be delisted from the Nasdaq Capital Market, we may apply to have our stock traded on the Over-The-Counter Bulletin Board or on the inter-dealer system operated by Pink OTC Markets Inc. commonly known as “Pink Sheets.” There can be no assurance that our common stock would be timely admitted for trading on that market. This alternative may result in a less liquid market available for existing and potential stockholders to buy and sell shares of our stock and could further depress the price of our stock.

Specific Cautionary Statements relating to Intellectual Property Litigation

     In August 2008, we settled the lawsuit that had been brought against us by Linex Technologies, Inc. alleging that Proxim’s mesh products infringe two United States patents purportedly owned by Linex. That settlement may have adverse impacts on us due to the monetary amounts we agreed to pay Linex. Also, it could have the effect of making our products less competitive in the marketplace if we decide to increase the price of our affected products to cover, in whole or in part, the expenses created by the settlement. The settlement could also encourage other patent holders to sue us. These effects could have a material adverse affect on our business and company.

Specific Cautionary Statements relating to Ricochet Actions

     In August 2007, Ricochet Networks, Inc., a subsidiary of Proxim Wireless Corporation, announced that it had discontinued operation of the Ricochet^® network in the San Diego metropolitan area and sold the operations of the Ricochet network in the Denver metropolitan area. There can be no assurance whatsoever that we will realize the expected benefits of these actions at all or to the extent anticipated. Other risks associated with these actions include the risk that cost savings from these actions may not be fully realized or may take longer to realize than expected; the possibilities that these actions could result in increased liabilities and other adverse consequences; reactions, positive or negative, of customers, investors, employees, contract counterparties, competitors, and others to these actions; the uncertain impact of these actions on the trading market, volume, and price of Proxim Wireless Corporation’s stock; the time and costs of discontinuing the operations of the Ricochet network in the San Diego metropolitan area;

exposure to costs and liabilities relating to the Ricochet network in the Denver metropolitan area; legal, financial statement, and accounting ramifications resulting from these actions; and management and board interest in and distraction due to these actions. These risks relating to the Denver Ricochet network may have increased due to the fact that the buyer of the Ricochet network in the Denver metropolitan area discontinued operations earlier in 2008.

Possible Implications of Cautionary Statements

     The items described above, either individually or in some combination, could have a material adverse impact on our reputation, business, need for additional capital, ability to obtain additional debt or equity financing, current and contemplated products gaining market acceptance, development of new products and new areas of business, sales, cash flow, results of operations, financial condition, stock price, viability as an ongoing company, results, outcomes, levels of activity, performance, developments, or achievements. Given these uncertainties, investors are cautioned not to place undue reliance on any forward-looking statements.

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

     On July 25, 2008, Proxim Wireless Corporation issued warrants to purchase an aggregate of 1,250,000 shares of Proxim’s common stock (subject to adjustment) at an exercise price of $0.53 per share (subject to adjustment). The warrants may be exercised at any time until July 25, 2018. The warrants may be exercised by paying the exercise price to Proxim or by cashless exercise pursuant to a formula. These warrants were issued to Lloyd I. Miller, III and Milfam II L.P., an entity affiliated with Mr. Miller (together, the “Lenders”), in connection with a lending transaction in which the Lenders loaned Proxim the aggregate sum of $3.0 million. In connection with this transaction, Proxim paid each Lender a fee of $22,500, being 1.5% of the amount lent by each Lender.

     Also in connection with this lending transaction, the Lenders agreed to cancel warrants that had been issued to the Lenders in July 2007. In the aggregate, warrants to purchase 925,000 shares of Proxim’s common stock at an exercise price of $2.45 per share were cancelled effective July 25, 2008.

     This issuance of the foregoing securities was completed without registration under the Securities Act of 1933, as amended, in reliance upon the exemptions contained in Section 4(2) and/or 4(6) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act for transactions not involving a public offering. This reliance was based in part on representations and warranties made to Proxim by the Lenders in the securities purchase agreement. There was no separate consideration paid by the Lenders for the warrants.

Item 6. Exhibits.

     See Exhibit Index.

SIGNATURE

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

Proxim Wireless Corporation

EXHIBIT INDEX

Exhibit
Number		Description
2.1		Asset Purchase Agreement, dated as of August 29, 2008, among the Registrant, Terabeam Corporation, Renaissance Electronics Corp., and HXI, LLC (1)
10.1		Securities Purchase Agreement dated as of July 25, 2008 between the Registrant and Lloyd I. Miller, III and Milfam II L.P. (2)
10.2		Form of Promissory Note dated July 25, 2008, a substantially similar version of which was issued by the Registrant in favor of each of Lloyd I. Miller, III and Milfam II L.P. (2)
10.3		Form of Warrant dated July 25, 2008, a substantially similar version of which was issued by the Registrant to each of Lloyd I. Miller, III and Milfam II L.P. (2)
10.4		First Amendment to Loan and Security Agreement dated as of August 13, 2008 between Comerica Bank and the Registrant (3)
10.5		Second Amendment to Loan and Security Agreement dated as of September 26, 2008 between Comerica Bank and the Registrant (4)
10.6		Assignment and Assumption of Lease, dated as of August 29, 2008, between Proxim Wireless Corporation and Renaissance Electronics Corp. and HXI, LLC and consented to by Adom Realty Trust (1)
10.7		Letter Employment Agreement dated October 9, 2008 between the Registrant and Thomas S. Twerdahl (5)
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).
32.1		Certification Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code).