Edgar Filing: ARC WIRELESS SOLUTIONS INC

Filed Pursuant to Rule 424(b)(3)
Registration Number 333-100293

SELLING SHAREHOLDER
PROSPECTUS

ARC WIRELESS SOLUTIONS, INC.
2,184,545 shares of common stock

This prospectus relates to the transfer of 2,184,545 shares of common
stock of ARC Wireless Solutions, Inc. by the selling shareholders identified in
this prospectus. The common stock offered by this prospectus consists of the
following:

o 1,444,545 shares of common stock presently issued and outstanding
which were issued to the selling shareholders in private transactions;
and
o 740,000 shares of common stock that may be issued upon the exercise of
warrants that were issued to the selling shareholders in private
transactions.

We will not receive any of the proceeds for the sale of these shares by the
selling shareholders.

The selling shareholders have not entered into any underwriting
arrangements nor have any of the selling shareholders indicated that they
actually will sell any shares. The sale of the shares by the selling
shareholders may occur in one or more transactions that may take place on the
over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions, and sales to one or more dealers for transfer of the
shares as principals, at market prices prevailing at the time of transfer, or at
negotiated prices. Brokerage fees or commissions may be paid by the selling
shareholders in connection with the sales of the common stock. The selling
shareholders may transfer some or all of the common stock in exchange for
consideration other than cash, or for no consideration, in the selling
shareholders' sole discretion. This prospectus may be used by the selling
shareholders to transfer the common stock to affiliates of the selling
shareholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol
"ARCS". On October 15, 2002, the closing price of the common stock was $.10 per
share.

Investing in the common stock involves certain risks. See the "Risk
Factors" section beginning on page 4.

Neither the Securities And Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is October 22, 2002.

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TABLE OF CONTENTS

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Page
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PROSPECTUS SUMMARY.............................................................3

RISK FACTORS...................................................................4

PRICE RANGE OF COMMON STOCK....................................................5

DIVIDEND POLICY................................................................6

BUSINESS.......................................................................6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................................14

MANAGEMENT....................................................................22

EXECUTIVE COMPENSATION........................................................23

BENEFICIAL OWNERS OF SECURITIES...............................................29

DESCRIPTION OF SECURITIES.....................................................32

INACTIVE TRADING OF THE COMMON STOCK..........................................34

SELLING SECURITY HOLDERS AND PLAN OF DISTRIBUTION.............................34

SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN
INDEMNIFICATION.............................................................36

LEGAL MATTERS.................................................................36

EXPERTS.......................................................................36

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS.......................................................36

WHERE YOU CAN FIND MORE AVAILABLE INFORMATION.................................37

FINANCIAL INFORMATION........................................................F-1

PROSPECTUS SUMMARY

The following summary highlights information contained in this prospectus.
You should carefully read this entire prospectus, including the "Risk Factors"
section, the financial statements and the notes to the financial statements.

ARC Wireless We provide high quality, timely, cost effective wireless
network components and end-to-end wireless network
solutions. Our Wireless Communications Products Division
designs, develops, markets and sells a diversified line of
antennas and related wireless communication systems,
including conformal and phased array antennas. Our Winncom
Technologies Corp. subsidiary specializes in marketing,
distribution and service, as well as selected design,
manufacturing and installation of wireless component and
network solutions in support of both voice and data
applications, primarily through third party distributors
located in the United States. Our Starworks Wireless Inc.
subsidiary specializes in the design, manufacturing,
marketing, distribution and service of cable and related
installation components in the United States, primarily
through original equipment manufacturers, or OEMs, and
third-party distributors, retailers and the Internet.

The Offering Should they elect to do so, the selling shareholders may
sell a total of up to 2,184,545 shares. These shares consist
as follows:

o 1,444,545 shares of common stock issued in private
placements completed in March 2002 and October
2000; and

o 740,000 shares of common stock that may be issued
upon the exercise of warrants that were issued in
the private placement transaction completed in
October 2000.

The shares may be sold at market prices or other negotiated
prices. In addition, the selling shareholders may, in their
sole discretion, transfer the shares in exchange for
consideration other than cash or for no consideration. The
selling shareholders have not entered into any underwriting
arrangements for the sale of the shares.

We will not receive any proceeds from the sale of common
stock by the selling shareholders.

Company Offices Our offices are located at 4860 Robb Street, Suite 101,
Wheat Ridge, Colorado 80033; telephone number (303)
421-4063.

RISK FACTORS

Prospective investors should carefully consider, together with the other
information herein, the following risk factors that affect our business.

We have a history of losses.

From inception in September 1987 through the fiscal year ended December 31,
1992, and again for the years ended December 31, 1998 through the fiscal year
ended December 31, 2001, we incurred losses from operations. We operated
profitably during each of the fiscal years ended December 31, 1993 through 1997.
Profits for some of these years were marginal, and we cannot assure that our
operations in the future will be profitable.

Our industry suffers rapid technological changes.

We do business in the wireless communications industry. This industry is
characterized by rapidly developing technology. Changes in technology could
affect the market for our products and necessitate additional improvements and
developments to our products. We cannot predict that our research and
development activities will lead to the successful introduction of new or
improved products or that we will not encounter delays or problems in these
areas. The cost of completing new technologies to satisfy minimum specification
requirements and/or quality and delivery expectations may exceed original
estimates that could adversely affect operating results during any financial
period.

Protection of product design may be insufficient to protect us against
competitors.

We attempt to protect our product designs by obtaining patents, when
available, and by manufacturing our products in a manner that makes reverse
engineering difficult. These protections may not be sufficient to prevent our
competitors from developing products that perform in a manner that is similar to
or better than our products. Competitors' success may result in decreased
margins and sales of our products.

Our limited financial resources could constrain our business expansion.

We have limited financial resources available, which may restrict our
ability to grow. Additional capital from sources other than our cash flow may be
necessary to develop new products. We cannot predict that this financing will be
available from any source.

We could be adversely impacted by intense competition.

The communications and antenna industries are highly competitive, and we
compete with substantially larger companies. These competitors have larger sales
forces and more highly developed marketing programs as well as larger
administrative staffs and more available service personnel. The larger
competitors also will have greater financial resources available to develop and
market competitive products. The presence of these competitors could
significantly affect any attempts to develop our business. However, we believe
that we will have certain advantages in attempting to develop and market our
products, including a more cost-effective technology, the ability to undertake
smaller projects, and the ability to respond to customer requests more quickly
than some larger competitors. We cannot be certain that these conclusions will
prove correct.

We depend on the availability of efficient labor.

We produce and assemble our antenna and coaxial cable kit products at our
own facilities and are dependent on efficient workers for these functions. We
cannot predict that efficient workers will continue to be available to us at a
cost consistent with our budget.

We depend on key employees.

We are highly dependent on the services of our executive management,
including Randall P. Marx, our Chief Executive Officer. The loss of the services
of any of our executive management could have a material adverse effect on us.

New government regulation could increase our costs.

We are subject to government regulation of our business operations in
general. Certain of our new products are subject to regulation by the Federal
Communications Commission, or FCC, because they are designed to transmit
signals. Because current regulations covering our operations are subject to
change at any time, and despite our belief that we are in substantial compliance
with government laws and regulations, we may incur significant costs for
compliance in the future.

There is an inactive trading of our shares and possible volatile prices.

Historically, there has been an extremely limited public market for our
shares, although most recently there has been significantly more volume. We
cannot predict that the recent trading volume will be sustained. The prices of
our shares are highly volatile. Due to the low price of the shares, many
brokerage firms may not effect transactions and may not deal with low priced
shares as it may not be economical for them to do so. This could have an adverse
effect on sustaining the market for our shares. Further, we believe it is
improbable that any investor will be able to borrow funds using our shares as
collateral in a margin account.

For the foreseeable future, trading in the shares, if any, will occur in
the over-the-counter market and the shares will be quoted on the OTC Bulletin
Board. On October 15, 2002, the low bid price for the common stock was $.09, the
high asked price was $.10 and the closing sale price was $.10. Because of the
matters described above, a holder of our shares may be unable to sell shares
when he or she wishes to do so, if at all.

No dividends with respect to our shares.

We have not paid any cash dividends with respect to our shares, and it is
unlikely that we will pay any dividends on our shares in the foreseeable future.
We currently intend that any earnings that we may realize will be retained in
the business for further development and expansion.

PRICE RANGE OF COMMON STOCK

Trading in our common stock is very limited. Our shares are traded in the
over-the-counter market through the OTC Bulletin Board. Our trading symbol is
"ARCS". Our shares are not quoted on any established stock exchange or on the
Nasdaq Stock Market. Because trading in our shares is so limited, prices are
highly volatile.

The table below represents the range of high and low sales prices for our
common stock during each of the quarters in the past two fiscal years and for
the quarters ended March 31, June 30 and September 30, 2002 as reported by the
OTC Bulletin Board.

Common Stock
------------

Closing Sale Price
------------------
Quarter Ended High Low
------------- ---- ---
March 31, 2000 $3.594 $.130
June 30, 2000 1.469 .740
September 30, 2000 1.290 .750
December 31, 2000 .770 .202
March 31, 2001 .590 .220
June 30, 2001 .400 .190
September 30, 2001 .310 .170
December 31, 2001 .250 .140
March 31, 2002 .220 .160
June 30, 2002 .180 .120
September 30, 2002 .17 .09

On October 15, 2002, the closing sale price for our common stock was $.10
per share.

Number Of Shareholders Of Record

On June 19, 2002, we had 411 shareholders of record.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our shares since our
inception, and we do not anticipate paying any cash dividends on our shares in
the foreseeable future. We currently intend to retain any future earnings to
finance the expansion and continued development of our business.

BUSINESS

We provide high quality, timely, cost effective wireless network
components and end-to-end wireless network solutions. Our Wireless
Communications Products Division designs, develops, markets and sells a
diversified line of antennas and related wireless communication systems,
including conformal and phased array antennas. Our Winncom Technologies Corp.
subsidiary specializes in marketing, distribution and service, as well as
selected design, manufacturing and installation of wireless component and
network solutions in support of both voice and data applications, primarily
through third party distributors located in the United States. Our Starworks
Wireless Inc. subsidiary specializes in the design, manufacturing, marketing,
distribution and service of cable installation components in the United States,
primarily through original equipment manufacturers, or OEMs, and third-party
distributors, retailers and the Internet.

We were organized under the laws of the State of Utah on September 30, 1987
for the purpose of acquiring one or more businesses. Our prior name was Westflag
Corporation, which was formerly Westcliff Corporation. In January 1989, we
completed our initial public offering, resulting in net proceeds of
approximately $363,000. In April 1989, we effected a one-for-four reverse split
so that each four outstanding shares of common stock prior to the reverse split

became one share after the reverse split. Unless otherwise indicated, all
references in this prospectus to the number of shares of our common stock have
been adjusted for the effect of the 1989 one-for-four reverse split.

On April 12, 1989, we merged with Antennas America, Inc., a Colorado
corporation that had been formed in September 1988 and had developed an antenna
design technique that would permit the building of flat (as compared to
parabolic) antenna systems. Pursuant to the merger, Antennas America, Inc. was
merged into us, all the issued and outstanding stock of Antennas America, Inc.
was converted into 41,952,000 of our shares, and our name was changed to
Antennas America, Inc. At the annual shareholders meeting held on October 11,
2000, our shareholders voted to change our name to ARC Wireless Solutions, Inc.
("ARC Wireless" or the "Company") from Antennas America, Inc.

On May 24, 2000, we purchased, through our subsidiary, Winncom Technologies
Corp. ("Winncom"), the outstanding shares of Winncom Technologies, Inc. Winncom
specializes in marketing, distribution and service, as well as selected design,
manufacturing and installation of wireless component and network solutions in
support of both voice and data applications, primarily through third party
distributors located in the United States. The acquisition has been accounted
for as a purchase, and accordingly, the operations for Winncom have been
included in the Company's consolidated statement of operations from May 24, 2000
(the date of acquisition) forward. We paid $12.0 million in aggregate
consideration, consisting of $3 million in cash, a $1.5 million non-interest
bearing promissory note payable 90 days from the closing date, a $1.5 million
non-interest bearing promissory note payable 180 days from the closing date and
$6 million in shares of our restricted common stock (6,946,000 shares). The
notes were paid in full by September 2000, with an $85,000 negotiated early
payment reduction.

On September 29, 2000, we purchased, through our subsidiary, Starworks
Wireless Inc. ("Starworks"), the outstanding shares of Starworks Technology,
Inc. (a/k/a The Kit Company). Starworks specializes in the design,
manufacturing, marketing, distribution and service of direct-to-home satellite
dish installation kits in the United States, primarily through original
equipment manufacturers (OEMs) and third-party distributors, retailers and the
Internet. The acquisition has been accounted for as a purchase. We paid $2.3
million in aggregate consideration in 2000, consisting of $0.8 million in cash
and $1.5 million in shares of our restricted common stock (1,959,499 shares). As
a result of a settlement agreement reached with the former shareholders of
Starworks Technology, Inc. in December 2001, 1,459,499 shares of our common
stock were returned to us and we received an option to purchase the remaining
500,000 shares of common stock at $.15 per share, which we exercised in January
2002.

On August 21, 2001, we purchased certain commercial assets of the wireless
communications product line from Ball Aerospace & Technologies Corp. ("BATC"), a
subsidiary of Ball Corporation, for $925,000. Subsequent to the purchase, a
physical inventory was taken of the assets purchased and in accordance with the
purchase agreement Ball was required to refund approximately $99,000 of the
original purchase price as a result of there being less inventory than that
listed in the purchase agreement. The assets purchased consisted primarily of
raw materials inventory, finished goods inventory, production tooling equipment,
testing equipment and an exclusive license agreement to use patents related to
wireless communications for commercial purposes.

Principal Products Of Our Wireless Communications Products Division

Cellular Base Station Antennas

Included in the acquisition of certain commercial assets from BATC last
year was the right to use BATC's technology in the manufacturing of the line of
base station antennas, which consist of various models used in several frequency
bands for cellular systems. These cellular systems include several protocols and
technologies such as AMPS, GSM, PCS, GPRS, 2.5G and 3G. Our base station

antennas are now being deployed in some of the AT&T Wireless, Cingular and Qwest
mobile phone carrier networks. New base station models are now being designed to
meet other carrier mobile 2.5G and 3G requirements and other companies' fixed
wireless high-speed internet systems as well.

Mobile Antennas

Our mobile antennas are unique yet flexible antenna systems that are used
to increase the antenna gain and product performance for a variety of wireless
devices. Typically, the product can be connected to a cellular phone or can be
installed either directly in or on a computer or other device. We market two
primary mobile antenna designs, the ARC Freedom Antenna(TM) and the "F" antenna.
The ARC Freedom Antenna(TM) is a unique broadband, patent pending antenna
designed to work with cellular phones and other mobile wireless devices in a
frequency range of 800 MHz to 3 GHz. The "F" Antenna is designed mainly to work
with laptop computers in the 800 MHz to 900 MHz frequency range. The main design
parameter of our mobile antennas is flexibility, creating an antenna that will
function in several wireless applications or installations without requiring
modification of the fundamental design of the antenna. We market the mobile
antenna systems along with our existing commercial wireless products to existing
and new OEM customers.

Conformal Antennas

A conformal antenna is one that is constructed so that it conforms
technically and physically to its product environment. We first introduced and
patented the disguised decal conformal antenna. This product, introduced in 1989
originally only for conventional automobile cellular phones, has been expanded
as an alternative to many conventional wire type antenna and has been expanded
to be used for numerous mobile applications, including domestic and
international cellular and law enforcement frequencies, passive repeaters,
vehicle tracking and GPS. The antenna is approximately 3 1/2"x 3 1/2"x 1/10" and
typically installs on the inside of the vehicle so that it is not detectable
from the outside of the vehicle. Several derivative products of this antenna
design have been developed for OEM, and other special applications. We are using
our experience in these applications for the developing antennas for the
Bluetooth(TM) wireless technology, which is setting standards for short-range
connectivity between computers and their accessories.

Global Positioning System (GPS) Antennas

We have developed a proprietary, flat GPS antenna system that
integrates with a GPS receiver. GPS receivers communicate with a constellation
of globe-orbiting satellites that will identify longitude and latitude
coordinates of a location. These satellite systems have been used for years by
the military, civilian and commercial boats, planes, for surveying, recreational
hikers, and more recently in vehicle tracking and asset management. Accurate to
within several feet, there are several types of GPS systems, some of which are
the size of a cellular phone and are very easy to use. We are currently
marketing our GPS antenna products on an OEM basis for the purposes of fleet
management, asset management and vehicle tracking systems.

We have also developed a proprietary, patented, amplified GPS/Cellular
combination antenna that integrates with a GPS receiver. We currently are
selling this product to fleet and asset management companies on a worldwide
basis. Conventional GPS antenna systems are mounted on the exterior of a vehicle
or other asset, however our product can be mounted on the interior of an
automobile or truck, protecting the antenna from weather, theft and vandalism.

Flat Panel Antennas

In 2001, we redesigned our legacy flat panel antenna designs to increase
performance and reliability. Our flat panel antennas are flat antennas that
typically incorporate a group of constituent antennas, all of which are
equidistant from the center point. These types of antennas are used to receive
and/or transmit data, voice and, in some cases, video from microwave
transmitters or satellites. We have developed, patented and sold various
versions of these antennas to private, commercial and governmental entities.

Other Antennas

We are pursuing new business opportunities for our conformal and phased
array antennas by continuing to broaden and adapt existing technologies. We have
designed and currently manufacture antennas varying in frequencies up to 6 GHz.
These antennas use our newly developed antenna designs to provide inconspicuous
installation. All of our antennas are designed to be manufactured using our
proprietary design footprints. This allows us to better utilize our engineering,
technical and production staff, as well as existing tools, dies and radomes for
more than one product.

Principal Products Of Our Winncom Subsidiary

Unlicensed Wireless Products

Unlicensed wireless products use frequencies that require a license to
manufacture but not a license to use. Winncom's primary products are the ISM
(Industrial Scientific and Medical) license free products in the 2.4 GHz to 5.8
GHz frequency range for both 802.11b and 802.11a standards. Any business or
consumer may use these frequencies as long as they do not interfere with other
users. Winncom currently markets products manufactured by Avaya, Agere Systems,
Alvarion (Formerly Breezecom), Intel and Proxim, all of which are leaders in the
unlicensed communications hardware market. These products are used in high-speed
(up to 1G/bps) wireless networking applications, including, among others,
internet access, local and wide area networks (LAN/WAN), and industrial process
automation and data acquisition.

Licensed Wireless Products

Licensed wireless products require a Federal Communications Commission
("FCC") license to operate on a specific frequency in a geographic area. Winncom
distributes point-to-point microwave products. These microwaves are used to
connect Wireless Internet Service Providers cell sites or enterprise multiple
locations.

Voice over Internet Protocol (VoIP)

VoIP allows voice communications to be placed over standard Internet
networks. This is critical for emerging Wireless Internet Service Providers so
they can offer complete voice and data service to generate revenue to compete
with DSL and Cable Modem service. Winncom has signed an agreement with SoftJoys
Labs for exclusive distribution of SoftJoys' voice-over-IP (VoIP) products. The
SoftJoys' VoIP product line provides very economical features for corporate,
service providers and individual customers. SoftJoys' Labs software combined
with wireless environment delivers complete communication solutions for users of
mobile devices such as PDAs, WEB PADs and Tablet PCs.

Antennas

Winncom sells both customer premises and base station antenna solutions as
well as a full range of antennas for point-to-point applications. Winncom offers
panel, a variety of sectorized and omni directional (which include unique
13.5dbi horizontally polarized) and amplified CPE antennas for wireless Internet
access.

Accessories

Winncom is a full service value-added distributor, specializing in the
design and development of a host of accessories products. These products include
the amplifiers 2.4 GHz-5.8 GHz and 2.4 GHz-3.5 GHz frequency converters,
filters, power supplies, power cords, and environmental enclosures necessary for
the installation and optimum performance of a wireless network. The 2.4 GHz to
5.8 GHz frequency converters designed by Winncom engineers, enhances the
deployment of the readily available low-cost 2.4 GHz wireless WAN/ LAN equipment
sold by Winncom. The main applications for this new solution include wireless
Internet access, campus wireless LANs and wireless spectrum WANs. The frequency
converter will provide additional transmission channels in the unlicensed
spectrum resulting in a considerable increase in bandwidth capacity. It also
promotes usage of the 5.8 GHz spectrum to supplement network performance where
the 2.4 GHz spectrum is saturated. The product is sold both domestically and
internationally.

Network Infrastructure Product

Winncom offers a complete line of high-performance data infrastructure and
security products by AVAYA Inc.. The VPNet(R) virtual private network systems
(VPN) enable organizations of all sizes, from small business to large
enterprises and managed data service providers, to securely connect remote
users, branch offices, business partners, and customers, taking full advantage
of the cost savings and productivity enhancing benefits of virtual private
networks. The AVAYA multi-service Cajun(TM) switches are designed for the new
generation of network architectures that cost-effectively integrate voice,
video, and data on a single infrastructure, while providing reliability,
ubiquity, and security to meet the challenges and dynamic requirements of the
enterprise business environment from converged networks to e-business solutions.

Other Products

Winncom also sells Fujitsu pen based computers and laptops for wireless
network applications such as government, medical, healthcare and education.
Winncom assembles cable products that consist of copper, coaxial and fiber
cables and lightning arrestors that are used in the installation, extension and
protection of wireless end-to-end systems.

Winncom continuously evaluates new products and pursues distribution
alliances with manufacturers whose equipment complements Winncom's product
offerings as well as the development of Winncom's proprietary products that
include amplifiers, frequency converters, antennas, outdoor enclosures and RF
accessories.

Principal Products Of Our Starworks Subsidiary

Home Satellite Dish Self-Installation Kits

The direct -to- home satellite dish industry has since its inception been
characterized as a consumer industry with a plug and play product. Starworks has
provided pre-packaged components to the satellite industry. These kits can
support all of the current satellite dish home products such as Hughes Network
Systems, Sony, Philips Magnavox, DirecTV and The Dish Network.

Home Satellite Dish Professional Installation Kits

To increase sales and customer satisfaction, the satellite programming
industry currently offers professional installation with the purchase of a home
satellite dish. Starworks is currently transforming its business to provide
installers with components for satellite installation with the main marketing
focus on cable related products such as cable jumpers and connectors.

Marketing And Distribution

The Wireless Communications Products Division markets its commercial line
of antennas directly to distributors, installers and retailers of antenna
accessories. Current distribution consists of several domestic and international
distributors, including several hundred active retail dealers. The Wireless
Communications Products Division also markets our diversified proprietary
designs to our existing and potential customers in the commercial, government
and retail market places. Potential customers are identified through trade
advertising, phone contacts, trade shows, and field visits. The Company provides
individual catalog and specification brochures describing existing products. The
same brochures are utilized to demonstrate our capabilities to develop related
products for OEM and other commercial customers. Our web site,
www.arcwireless.net, includes information about our products and background as
well as financial and other shareholder-oriented information. The web site,
among other things, is designed to encourage both existing and potential
customers to view us as a potential source for diversified antenna solutions.
Inquiries through the web site are pursued by our in-house and outside sales
personnel. To help customers get answers quickly about our products, we have
established a toll-free telephone number administered by our customer service
personnel from 8:00 a.m. to 5:00 p.m. MT. All of our antenna products are
currently made in the United States, which we consider to be a marketing
advantage over most of our competitors. Many of our products are also marketed
internationally. We currently have numerous international distributors marketing
our products in several countries.

Winncom is a value added distributor that supports distribution of products
with internal sales, technical support, system design and feasibility studies,
installation and training. Winncom's customer base comprises networking value
added resellers ("VARs"), system integrators, ISPs, competitive local exchange
carriers (CLECs) and incumbent local exchange carriers (ILECs). Winncom promotes
and supports the one-stop-source philosophy for wireless data networking
products and services. Consistent with our one-stop-source approach, Winncom
markets and sells a number of its own products as well as private label products
that fit into our marketing philosophy. We believe we have an advantage over the
competition due to better product availability, in-house technical expertise and
customer support and can assist with the implementation of most wireless network
projects or applications.

Winncom continuously expends marketing and advertising efforts through
print media, trade shows and via the Internet. The main marketing focus is to
expand the reseller base of customers, which are active in medical, healthcare,
enterprise, government, education and industrial market segments. Winncom is
also expanding its marketing efforts to sell service providers and O.E.M.
markets. Additionally, Winncom continually expands its wireless certification
training programs, including vendor-authorized certification for Value Added
Resellers "VARs". Winncom provides wireless awareness seminars for system
integrators and consultant/design firms. We also have alliances with our vendors
that include road shows, authorization/certification programs, trade shows and
advertising. Winncom's web site has complete E-commerce capability, enabling
customers to order and pay for products online.

Production

The Wireless Communications Products Division currently produces most of
the customized items that we use to manufacture our products excluding cable,
connectors and other generic components. We believe that this control over the
production process allows us to be more efficient and more responsive to
customers, lowers the overall cost of production, and allows us to take
advantage of more opportunities in the wireless communications market.

Winncom offers a wide variety of high performance wireless system
accessories including antennas, amplifiers, lightning arrestors, custom cable
assemblies and environmental enclosures, as well as wireless access points,
bridges, routers, client adapters, modems, T1/E1, and licensed microwave systems
from leading manufacturers.

Starworks produces all cable assemblies and installation kits internally.
External purchases include bulk cable, coaxial connectors, and packaging
materials.

Research And Development

Research and development (R&D) costs are charged to operations when
incurred and are included in operating expenses. Except for salaries of
engineering personnel involved in R&D, our R&D costs have not been material in
2001 and 2000. We spent approximately $205,000 and $198,000 on R&D in 2001 and
2000, respectively. Our R&D personnel develop products to meet specific
customer, industry and market needs that we believe compete effectively against
products distributed by other companies. Quality assurance programs are
implemented into each development and manufacturing project, and we enforce
strict quality requirements on components received from other manufacturing
facilities.

Employees

At December 31, 2001, the Company had 92 full time employees including 47
in manufacturing and distribution, 12 in sales and customer support, 7 in
engineering and product development, and 26 in management and administration.
Our employees are not represented by any collective bargaining agreement and we
have never experienced a work slowdown or strike.

Competition

The market for wireless network components is highly competitive, and our
current and proposed products compete with products of larger companies that are
better financed, have established markets, and maintain larger sales
organizations and production capabilities. In marketing our products, we have
encountered competition from other companies, both domestic and international.
At the present time, our market share of the overall wireless network component
market is small. Our products are designed to be unique and in some cases are
patented. Our products normally compete with other products principally in the
areas of price and performance. However, we believe that our products work as
well as or better than competing products and usually sell for the same price or
less. Additionally, we have demonstrated to our customers and potential
customers that we are a more reliable source than some competitors and believe
this is a distinct competitive advantage.

Government Regulations

We are subject to government regulation of our business operations in
general, and the telecommunications industry also is subject to regulation by
federal, state and local regulatory and governmental agencies. Under current

laws and the regulations administered by the FCC, there are no federal
requirements for licensing antennas that only receive (and do not transmit)
signals. We believe that our antennas that are also used to transmit signals are
in compliance with current laws and regulations. Current laws and regulations
are subject to change and our operations may become subject to additional
regulation by governmental authorities. We can be significantly impacted by a
change in either statutes or rules.

Patents

The Company currently holds nine U.S. patents, which will remain valid
until their individual specific expiration dates. Kevin O. Shoemaker, our former
Chief Scientist, is the inventor of a patent valid through the year 2008, for
micro strip antennas and multiple radiator array antennas. Mr. Shoemaker also is
the inventor of a patent for a serpentine planar broadband antenna that expires
in 2012. This is the design that we use for some of our conformal antennas,
including the vehicular disguised decal antennas and related products. In
addition, Mr. Shoemaker and Randall P. Marx, our Chief Executive Officer, are
the inventors of a patent relating to the technique and design of the
FREEDOM(TM) and WALLDO(TM) local TV, VHF/UHF antenna systems, which expires in
2016. Mr. Shoemaker and Mr. Marx are also inventors of a patent covering the
process used to manufacture certain of our flat planar antennas, which expires
in 2016. Mr. Shoemaker is the inventor of a patent, which expires in 2018,
covering creating antennas from coaxial cable, Mr. Shoemaker and Mr. Marx are
also the inventors of a patent for a conformal antenna for a satellite dish,
which expires in 2017. Mr. Shoemaker and Mr. Marx each has agreed to permanently
assign to the Company all rights to these patents.

In addition, Dr. Mohamed Sanad, our former Principal Consulting Engineer,
is the inventor of a patent that was designed for remote wireless monitoring,
which will expire in 2019, and he is the inventor of a patent designed for
remote wireless metering which will expire in 2020. He has agreed to permanently
assign to us all of the rights to the patent and the pending patent.

We have filed a provisional patent application with Steven C. Olson, our
Chief Technology Officer, as the inventor. Mr. Olson has permanently assigned to
the Company all patent and other rights in the products covered by this
provisional patent application and all other products that have been and will be
developed while employed by us.

We have also filed a provisional patent application with Raymond L.
Lovestead, one of our engineers, as the inventor. Mr. Lovestead has permanently
assigned to the Company all patent and other rights in the products covered by
this provisional patent application and all other products that have been and
will be developed while employed by us. This antenna is designed for the new
two-way MMDS technology.

Furthermore, we have filed one provisional patent application with Dr.
Donald A. Huebner, a Director and our former Chief Scientist. Dr. Huebner has
permanently assigned to the Company all patent and other rights in the products
covered by this provisional patent application and all other products that have
been and will be developed while employed by us. We have also filed a
provisional patent with Mr. Lovestead and Dr. Huebner as the inventors of the
technology that we are using for our new ARC Freedom Antenna(TM).

The former President of our subsidiary Starworks Wireless Inc., David E.
McConnell, is the inventor of a patent for a Coaxial Cable Connector, which will
expire in 2017, all rights to which are owned by the Company as a result of the
acquisition of Starworks Technology, Inc. on September 29, 2000.

We seek to protect our proprietary products, information and technology
through reliance on confidentiality provisions, and, when practical, the
application of patent, trademark and copyright laws. We cannot assure that these
applications will result in the issuance of patents, trademarks or copyrights of
our products, information or technology.

Properties

Our principal offices are located in Wheat Ridge, Colorado. We lease
approximately 5,000 square feet of office space and 28,000 square feet of
production space in Wheat Ridge, Colorado where we have our corporate offices
and where we manufacture antennas. These leases expire on various dates from
2002 through 2003.

In addition, we lease approximately 24,000 square feet of office and
warehouse space at our Winncom facility in Solon, Ohio, where we sell and
distribute component solutions for LAN/WAN communications systems. This lease
expires in December 2005.

We also leased approximately 21,000 square feet of office and production
space at our Starworks facility in Atlanta, Georgia where we assembled and
distributed self-installation kits for satellite dish systems. This lease
expired in June 2002 and was not renewed.

The Company believes that its current facility in Wheat Ridge, Colorado may
not be adequate to meet its needs over the next several years and is exploring
other alternatives. We anticipate that we would encounter little difficulty in
locating alternative facilities to meet our planned growth in the next few
years.

Legal Proceedings

ARC Wireless acquired Starworks in September 2000 from David and Karen
McConnell for $1.5 million in cash and 1,959,499 shares of the Company's
restricted stock. In January 2001 in the Federal District Court in the Northern
District of Georgia, the Company commenced litigation against Mr. and Mrs.
McConnell and other parties claiming either for the transaction to be reversed
or for the McConnell's to pay damages for their alleged misrepresentations
regarding the sale of Starworks to us. The McConnell's also filed suit against
the Company claiming damages from the Company for alleged misrepresentations by
the Company. In November 2001, a settlement agreement was reached between the
Company and the McConnell's whereby 1,459,499 shares of the Company's common
stock paid to the McConnell's as part of the consideration was returned to the
Company and the Company received an option to purchase the remaining 500,000
shares of common stock at $.15 per share. The Company exercised its option in
January 2002 and purchased the remaining shares for $75,000. As a result of the
1,459,499 shares being returned to the Company, goodwill has been reduced by
approximately $1.1 million.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition

The net cash used in operating activities decreased from $1,537,000 for the
six months ended June 30, 2001 to $520,000 for the six months ended June 30,
2002 primarily due to an increase in income from operations in 2002 of $502,000
as compared to a loss from operations in 2001 of $792,000. The increase in
inventory in 2002 was largely attributable to increases in Winncom's inventory
from $3.9 million at December 31, 2001 to $4.6 million at June 30, 2002.
Accounts receivable have increased due to increases in receivables from vendors

for special pricing discount and other purchase discounts, which typically are
outstanding for 90 to 105 days. There was only a slight decrease in accounts
payable in 2002 which was primarily due to improved efforts to increase
inventory turns and the depletion of the BATC inventory purchased in August 2001
whose purchase was financed by a bank line of credit rather than trade accounts
payable.

The net cash used in investing activities of $76,000 for the six months
ended June 30, 2002 and $69,000 for the six months ended June 30, 2001 is
primarily the result of increases in patents and purchases of equipment.

The net cash provided by financing activities of $359,000 for the six
months ended June 30, 2002 is primarily the result of increases in net
borrowings under lines of credit of $319,000 and net proceeds from a private
placement of $121,000, offset by the purchase of treasury stock in the amount of
$75,000 in connection with the McConnell litigation settlement. For the six
months ended June 30, 2001 the net cash provided by financing activities of
$1,343,000 is primarily the result of increases in net borrowings under lines of
credit of $484,000 and net proceeds from a private placement of $862,000.

The Company's working capital at June 30, 2002 was $3.7 million compared to
$5.6 million at December 31, 2001. The decrease is the result of the
classification of the bank line of credit in the amount of $2.9 million from
long-term debt to current liabilities as it is due April 2003. Excluding this
reclassification, working capital would have improved to $6.6 million as
compared to $5.6 million at December 31, 2001.

In conjunction with the acquisition of Winncom on May 24, 2000, the Company
assumed a $1,500,000 revolving line of credit from a bank bearing an interest
rate of prime plus 0.5% (5.5% at December 31, 2001 and at June 30, 2002). The
line is collateralized by accounts receivable, inventory and otherwise
unencumbered fixed assets of Winncom. The credit line provides that Winncom is
prohibited from guaranteeing any obligations of, or paying or advancing any
distribution or other amount to ARC Wireless Solutions, Inc. or any of its
subsidiaries. ARC is a general guarantor of this loan. On November 27, 2000 the
line was increased to $3,000,000, of which $2,621,000 was outstanding at
December 31, 2001, and $2,865,000 was outstanding at June 30, 2002. This
agreement expires in April 2003, at which time all borrowings are due in full in
the event the line is not renewed.

In connection with the acquisition of the BATC Assets in August 2001,
Winncom established a new line of credit in the amount of $1 million bearing an
interest rate of prime plus 0.5% (5.5% at December 31, 2001 and at June 30,
2002). This line is also collateralized by accounts receivable, inventory and
otherwise unencumbered fixed assets of Winncom. ARC is a general corporate
guarantor of this loan. As of December 31, 2001 and June 30, 2002, $925,000 and
$1,000,000, respectively, were outstanding under this line of credit. This
balance due under this letter of credit was due July 31, 2002. The Company is
currently negotiating with the bank to convert this line of credit, currently
due, to a long-term credit facility.

In conjunction with the acquisition of Starworks Technology, Inc. on
September 29, 2000, the Company assumed a $1.5 million revolving bank loan,
which was secured by accounts receivable and restricted cash maintained in a
non-collection reserve account. The Company ceased assigning Starworks' accounts
receivable to the bank in February 2001. There is no balance outstanding under
the revolving bank loan at June 30, 2002 or December 31, 2001.

The Company has recently been approved for a $500,000 lease line of credit.
Under this agreement $229,000 of capital assets acquired from BATC in August
2001 will be subject to a sale leaseback in which the Company will receive
proceeds of approximately $229,000. The remaining open balance on the lease line
will be used to finance capital expenditures budgeted for the remainder of 2002.

The Company closed the operations of Starworks in the Atlanta location on
July 12, 2002. The expected closure costs were accrued as of December 31, 2001.
With the closure of Starworks in Atlanta the Company expects to reduce monthly
operating costs by approximately $16,000 to $20,000.

Management believes that current working capital, available borrowings on
existing bank lines of credit, proceeds from the sale and leaseback and from
available borrowings on the new lease line of credit, the renegotiation of the
$1 million line of credit that was due July 31, 2002, together with additional
equity infusions that management believes will be available, will be sufficient
to allow the Company to maintain its operations through December 31, 2002 and
into the foreseeable future.

Results Of Operations

Three Months Ended June 30, 2002 Compared To Three Months Ended June 30,
2001

Sales were approximately $8 million for both the three-month periods ended
June 30, 2002 and 2001. Revenues from the Wireless Communications Products
Division, increased from $739,000 for the quarter ended June 30, 2001 to
$1,782,000 for the quarter ended June 30, 2002, primarily from revenues from
base station antennas which were $730,000 for the quarter ended June 30, 2002
and $0 for the quarter ended June 30, 2001. The increase in the Wireless
Communications Products Division revenues were offset by a decrease in Starworks
revenues from $429,000 for the quarter ended June 30, 2001 to $91,000 for the
quarter ended June 30, 2002 and a decrease in Winncom revenues from $6.8 million
for the quarter ended June 30, 2001 to $6.1 million for the quarter ended June
30, 2002.

Gross profit margins were 20.1% and 19.8% for the three-months ended June
30, 2002 and June 30, 2001, respectively. The slight increase in gross margin
for the quarter ended June 30, 2002 vs. the quarter ended June 30, 2001 is
primarily the result of the increase in revenues from the Wireless
Communications Products Division, whose products have a higher margin than those
of Winncom or Starworks. As a result of product mix Winncom's profit margins
decreased from 17.8% for the quarter ended June 30, 2001 to 13.1% for the
quarter ended June 30, 2002. When the Company purchased certain commercial
assets of the wireless communications products line of BATC, which consisted of
raw materials and finished goods inventory among other assets, these assets were
purchased at a substantial discount from their fair market or replacement value.
During the quarter ended June 30, 2002, the Wireless Communications Products
Division benefited from the sale of portions of the inventory purchased from
BATC, and this benefit is reflected in higher gross margins. Depending on the
product mix, the Company may realize additional benefit from the below-market
cost of the BATC inventory in the future, but the benefit will diminish as the
inventory is depleted and replaced with inventory purchased at current market
prices. Based on the Company's estimates of current replacement costs for the
BATC inventory included in cost of goods sold during the second quarter, the
Company estimates that the benefit resulting from inventory purchased at
below-market costs was between $50,000 and $100,000 for the quarter ended June
30, 2002. Because the BATC inventory was not purchased until August 21, 2001, no
such benefit was recognized for the quarter ended June 30, 2001.

Selling, general and administrative expenses (SG&A) increased slightly by
$76,000 for the three months ended June 30, 2002 compared to the three months
ended June 30, 2001. This increase in SG&A is primarily the result of the
addition of management and staff as a result of the acquisition of certain
commercial assets from BATC. SG&A as a percent of revenue increased from 17.2%
for the three months ended June 30, 2001 to 18.2% for the three months ended
June 30, 2002.

In accordance with SFAS No. 142, the Company discontinued the amortization
of goodwill effective January 1, 2002. Consequently, there was no amortization
of purchased intangibles for the quarter ended June 30, 2002 as compared to
$248,000 in amortization of purchased intangibles for the quarter ended June 30,
2001. (See Note 7 on page F-8)

Net interest expense was $53,000 for the three months ended June 30, 2002
and $59,000 for the three months ended June 30, 2001. The average balance
outstanding on the lines of credit was higher by $1.6 million for the quarter
ended June 30, 2002 as compared to the quarter ended June 30, 2001 but the
interest rate was 5.25% for 2002 as compared to 9% for 2001. The line of credit
balance was increased by $925,000 in September 2001 as the proceeds were used to
finance the BATC assets acquisition.

Included in other income for the three months ended June 30, 2002 is a gain
from debt settlements of $48,000. There was no gain from debt settlements for
the quarter ended June 30, 2001.

The Company had net income for the three months ended June 30, 2002 of
$141,000 compared to a net loss of $84,000 for the three months ended June 30,
2001 primarily due to three factors, 1) an increase in gross margin percent from
19.8% for the quarter ended June 30, 2001 to 20.1% for the quarter ended June
30, 2002, which resulted partially from the use of inventory at below-market
cost and partially from increased sales of higher margin products, 2) the
termination of amortization of goodwill effective January 1, 2002 which was
$248,000 for the quarter ended June 30, 2001 and $0 for the quarter ended June
30, 2002 and 3) the gain from debt settlements of $48,000 recorded for the
quarter ended June 30, 2002.

Six Months Ended June 30, 2002 Compared To Six Months Ended June 30, 2001

Sales were $15,957,000 and $16,067,000 for the six-month periods ended June
30, 2002 and 2001, respectively. The slight decrease, less than 1%, in revenues
comparing the six months ended June 30, 2002 to the six months ended June 30,
2001 is attributable to a decrease in Starworks revenues from $841,000 for the
six months ended June 30, 2001 to $284,000 for the six months ended June 30,
2002 and a decrease in Winncom revenues from approximately $14 million for the
six months ended June 30, 2001 to approximately $12 million for the six months
ended June 30, 2002, which decreases were substantially offset by the increase
in revenues from the Wireless Communications Products Division, primarily
revenues from base station antennas which were $2 million for the six months
ended June 30, 2002 and $0 for the six months ended June 30, 2001.

Gross profit margins were 21.3% and 18.0% for the six months ended June 30,
2002 and June 30, 2001, respectively. The increase in gross margin for the six
months ended June 30, 2002 vs. the six months ended June 30, 2001 is primarily
the result of the increase in revenues from the Wireless Communications Products
Division, whose products have a higher margin than those of Winncom or
Starworks. When the Company purchased certain commercial assets of the wireless
communications products line of BATC, which consisted of raw materials and
finished goods inventory among other assets, these assets were purchased at a
substantial discount from their fair market or replacement value. During the six
months ended June 30, 2002, the Wireless Communications Products Division
benefited from the sale of portions of the inventory purchased from BATC and
this benefit is reflected in higher gross margins. Depending on the product mix,
the Company may realize additional benefit from the below-market cost of the
BATC inventory in the future, but the benefit will diminish as the inventory is
depleted and replaced with inventory purchased at current market prices. Based
on the Company's estimates of current replacement costs for the BATC inventory
included in cost of goods sold for the six months ended June 30, 2002, the
Company estimates that the benefit resulting from inventory purchased at

below-market costs was between $200,000 and $300,000 for the six months ended
June 30, 2002. Because the BATC inventory was not purchased until August 21,
2001, no such benefit was recognized for the six months ended June 30, 2001.

Selling, general and administrative expenses (SG&A) decreased by $283,000
for the six months ended June 30, 2002 compared to the six months ended June 30,
2001. In addition, SG&A as a percent of revenue decreased from 19.8% for the six
months ended June 30, 2001 to 18.2% for the six months ended June 30, 2002. The
decrease in SG&A comparing 2002 to 2001 is primarily due to legal fees in
connection with the Starworks' litigation and certain employee termination
costs, which were incurred in 2001 but not in 2002. During the six months ended
June 30, 2001, termination agreements were entered into with the former CEO of
the Company and the former CFO of the Company. The former CEO received $63,000
of severance payments plus options to purchase 250,000 shares of the Company's
common stock at an exercise price of $0.325 per share and the former CFO
received $47,000 of severance payments plus options to purchase 350,000 shares
of the Company's common stock at $0.26 per share. The Company recognized
$232,000 of expense related to these termination agreements during the six
months ended June 2001, including $122,000 of non-cash compensation related to
the issuance of the options. This expense was partially offset by the
elimination of $96,000 of accrued bonuses as part of the severance agreements.
In addition, the six months ended June 30, 2001 included $283,000 in expenses
related to impairment of assets, adjustments, litigation and other costs of the
Kit Company acquisition.

In accordance with SFAS No. 142, the Company discontinued the amortization
of goodwill effective January 1, 2002. Consequently, there was no amortization
of purchased intangibles for the six months ended June 30, 2002 as compared to
$498,000 in amortization of purchased intangibles for the six months ended June
30, 2001. (See Note 7 on page F-8)

Net interest expense was $101,000 for the six months ended June 30, 2002
compared to $107,000 for the six months ended June 30, 2001. The average balance
outstanding on the lines of credit was higher by $1.6 million for the quarter
ended June 30, 2002 as compared to the quarter ended June 30, 2001 but the
interest rate was 5.25% for 2002 as compared to 9% for 2001. The line of credit
balance was increased by $925,000 in September 2001 as the proceeds were used to
finance the BATC assets acquisition.

Included in other income for the six months ended June 30, 2002 is a gain
from debt settlements of $226,000. There was no gain from debt settlements for
the six months ended June 30, 2001.

The Company had net income for the six months ended June 30, 2002 of
$605,000 compared to a net loss of $873,000 for the six months ended June 30,
2001 primarily due to four factors, 1) an increase in gross margin percent from
18% for the six months ended June 30, 2001 to 21.3% for the six months ended
June 30, 2002, which resulted partially from the use of inventory at
below-market cost and partially from increased sales of higher margin products,
2) a reduction in SG&A expenses relative to revenues from 19.8% in 2001 to 18.2%
in 2002, 3) the termination of amortization of goodwill effective January 1,
2002 which was $498,000 for the six months ended June 30, 2001 and 4) gain from
debt settlements of $226,000 recorded for the six months ended June 30, 2002.

Fiscal Year Ended December 31, 2001 Compared To Fiscal Year Ended December
31, 2000

The results of operations of the Company include the results of Winncom and
Kit for all of 2001 being reported on, whereas the results of operations of the
Company for 2000 include the results of Winncom for the period May 24, 2000
(date of acquisition) to December 31, 2000 only and the results of operations of
Starworks from September 29, 2000 (date of acquisition) to December 31, 2000.

Sales were $30.9 million and $18.5 million for the years ended December 31,
2001 and 2000, respectively. The primary reason for the increase in revenues
comparing 2001 to 2000 is attributable to 1) the inclusion of the results of
operations of Winncom and Starworks for all of 2001 compared to only part of the
year for 2000, as noted in the previous paragraph, 2) Winncom's revenues were
$15.3 million in 2000 compared to $25.9 million on 2001 and Starworks revenues
were $.6 million in 2000 compared to $1.2 million in 2001, 3) an increase in
revenues from the Wireless Communications Products Division from $2.6 million in
2000 to $3.9 million in 2001. The average monthly sales for Winncom were $2.16
million on both 2001 and 2000. The average monthly sales for Starworks decreased
from $200,000 in 2000 to $100,000 in 2001 primarily due to the increase in free
professional installation of satellite dishes from DirecTV and Dish Network in
the second half of 2001. Sales for the Wireless Communications Products Division
increased by 50% primarily due to the addition of the base station antennas as a
result of the purchase of the wireless communications product line from BATC in
August 2001 and the increase in sales of the Company's redesigned panel antenna
systems. Sales of base station antennas were $1.5 million in 2001.

Gross profit margins were 19.6% in 2001 and 15.4 % in 2000. The increase in
gross margin for 2001 vs. 2000 is primarily the result of the increase in
revenues from the Wireless Communications Products Division. Winncom's profit
margin increased slightly from 16% in 2000 to 17% in 2001. Winncom represented
approximately 83 % of consolidated sales in 2001 and 2000. Starworks sales
represent only 4% of consolidated sales so their impact on the overall margin
was minimal in 2001 and 2000.

Selling, general and administrative (SG&A) expenses increased by $2.2
million or 52% from 2000 to 2001. SG&A as a % of revenues decreased to 20.7% in
2001 compared to 22.8% in 2000. Even though SG&A decreased as a percentage of
revenues comparing 2001 to 2000 there were some expenditures in 2001 that
resulted in a higher than expected SG&A. Included in SG&A in 2001 are $497,000
in legal and other professional fees associated with the McConnell litigation
that was not settled until November 2001. Also during the quarter ended March
31, 2001, termination agreements were entered into with the former CEO and CFO
of the Company. The former CEO received $63,000 of severance payments plus
options to purchase 250,000 shares of the Company's common stock at an exercise
price of $0.325 per share. The former CFO received $47,000 of severance payments
plus options to purchase 350,000 shares of the Company's common stock at $0.26
per share. The Company also recognized $136,000 of expense related to these
termination agreements during the quarter ended March 2001, including $122,000
of non-cash compensation related to the issuance of the options.

In December 2001, the Company recorded a goodwill write-down of $1,257,000,
which eliminated the remaining goodwill associated with the acquisition of
Starworks in 2000. Goodwill was determined to be impaired because of the
uncertainty of the current financial and operating condition of Starworks and
the possibility that Starworks may be unable to generate future operating income
in its legacy business without the transformation of Starworks into a
conventional cable business. The goodwill write-down is included as a component
of operating expenses for 2001.

Amortization of purchased intangibles represents the amortization of
goodwill and other specifically identifiable intangible assets recorded as part
of the acquisition of Winncom and Starworks in 2000. The 2001 amount represents
a full year of amortization of these intangibles whereas 2000 represents only a
partial year amortization.

The loss from operations was $2.6 million in 2001 and $1.9 million in 2000.
If you exclude from the loss from operation in 2001 the goodwill impairment
write-down and the amortization of intangibles, both non-cash expenses, the
result would be an adjusted loss from operations of $334,000. The same exclusion
in 2000 would result in an adjusted loss from operations of $1.4 million. The
significant improvement of this adjusted loss from operations between 2001 and
2000 is the result of higher sales at greater margins and a reduction of other
operating expenses as a % of revenue.

Net interest expense was $241,000 in 2001 and $98,000 in 2000. The increase
in interest expense of $143,000 from 2000 to 2001 is due to the fact that the
results of operations for 2000 include Winncom's results of operations since the
date of acquisition, which was May 24, 2000. Winncom's average line of credit
balance outstanding was $1,028,000 in 2000 and $2,525,000 in 2001. The line of
credit balance was increased by $925,000 in September 2001 as the proceeds were
used to finance the BATC assets acquisition (see Note 4 to the Consolidated
Financial Statements on page F-32). In addition, the average interest rate on
bank borrowings was 7.8% in 2001 and 9.6% in 2000.

The net loss for the year ended December 31, 2001 was $2.8 million compared
to $1.8 million for 2000. The primary reason for the increase in the net loss
from 2000 to 2001 was the non-cash goodwill impairment write-down of
approximately $1.3 million in 2001 and an increase in amortization of purchased
intangibles from $500,000 in 2000 to $1 million in 2001.

Critical Accounting Policies

Management's discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. We review the accounting policies we use in reporting
our financial results on a regular basis. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to accounts receivable, inventories,
intangible assets, income taxes and warranty obligations. We base our estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Results may differ from these estimates due
to actual outcomes being different from those on which we based our assumptions.
These estimates and judgments are reviewed by management on an ongoing basis,
and by the Audit Committee at the end of each quarter prior to the public
release of our financial results. We believe the following critical accounting
policies affect our more significant judgments and estimates used in the
preparation of our consolidated financial statements.

Recent Accounting Pronouncements

least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years. SFAS 142 is effective for fiscal
years beginning after December 15, 2001, with early application permitted in
certain circumstances. The Company believes that the adoption of SFAS 142 will
have a material effect on its financial position, results of operations and cash
flows. At this time, the Company estimates that the effect of the adoption of
Statement SFAS 142 will reduce operating expenses by approximately $836,000 as a
result of reducing amortization of purchased intangibles. The adoption of
Statement SFAS 141 is not expected to have any impact on the Company's financial
position or cash flows.

In June 2001, the FASB also approved for issuance SFAS 143 "Asset
Retirement Obligations"("SFAS"). SFAS 143 establishes accounting requirements
for retirement obligations associated with tangible long-lived assets, including
(1) the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires that an asset retirement cost should be capitalized as part of the cost
of the related long-lived asset and subsequently allocated to expense using a
systematic and rational method. The Company will adopt the statement effective
no later than January 1, 2003, as required. The transition adjustment resulting
from the adoption of SFAS 143 will be reported as a cumulative effect of a
change in accounting principle. The Company does not believe that the adoption
of this statement will have a material effect on its financial position, results
of operations, or cash flows.

In October 2001, the FASB also approved SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 replaces SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. The new accounting model for long-lived assets to be
disposed of by sale applies to all long-lived assets, including discontinued
operations, and replaces the provisions of APB Opinion No. 30, Reporting Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, for
the disposal of segments of a business. SFAS 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFAS
144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. The provisions of SFAS 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001
and, generally, are to be applied prospectively. The Company does not believe
that the adoption of this statement will have a material effect on its financial
position, results of operations, or cash flows.

Statement of Financial Accounting Standards No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections," effective for fiscal years beginning May 15, 2002 or later that
rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment
of Debt", FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements", and FASB Statement No. 44, "Accounting for
Intangible Assets of Motor Carriers". This Statement Amends FASB Statement No. 4
and FASB Statement No. 13, "Accounting for Leases", to eliminate an
inconsistency between the required accounting for sale-leaseback transactions.
This Statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The Company does not expect the implementation of SFAS
No. 145 to have a material impact on its financial condition or results of
operations.

liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan, which is generally before
an actual liability has been incurred. Adoption of SFAS 146 is required with the
beginning of fiscal year 2003. The Company does not anticipate a significant
impact on its results of operations from adopting this Statement.

MANAGEMENT

Our directors and executive officers, their respective positions and ages,
and the year in which each director was first elected, are set forth in the
following table. Each director has been elected to hold office until the next
annual meeting of shareholders and thereafter until his successor is elected and
has qualified. Additional information concerning each of these individuals
follows the table.

Director
Name Age Position with ARC Wireless Since
---- --- -------------------------- --------
Randall P. Marx 50 Chief Executive Officer,
Secretary, Director 1990

Donald A. Huebner 56 Director 1998

Sigmund A. Balaban 60 Director 1994

Gregory E. Raskin 48 President, Director 2001

Monty R. Lamirato 47 Chief Financial Officer --

Steve C. Olson 45 Chief Technology Officer --

Burton J. Calloway 57 Executive Vice President, --
Wireless Communications
Products Division

Randall P. Marx became our Chief Executive Officer in February 2001 and has
served as Director since May 1990. Mr. Marx served as Chief Executive Officer
from November 1991 until July 2000, as Treasurer from December 1994 until June
30, 2000 and as Director of Acquisitions from July 2000 until February 2001.
From 1983 until 1989, Mr. Marx served as President of THT Lloyd's Inc., Lloyd's
Electronics Corp. and Lloyd's Electronics Hong Kong Ltd., international consumer
electronics companies. Lloyd's Electronics had domestic revenues of $100 million
and international revenues of $30 million with over 400 employees worldwide. As
CEO and President of THT Lloyd's Inc., a $10 million electronics holding
company, Mr. Marx supervised the purchase of the Lloyd's Electronics business
from Bacardi Corp. in 1986. As CEO and President of Lloyd's Electronics, Mr.
Marx was directly responsible for all domestic and international operations
including marketing, financing, product design and manufacturing with domestic
offices in New Jersey and Los Angeles and international offices in Hong Kong,
Tokyo and Taiwan.

Sigmund A. Balaban has served as Director since December 1994. Mr. Balaban
had served as Senior Vice President / Corporate Secretary, of Fujitsu General
America, Inc. of Fairfield, New Jersey, from 2000 until July of 2001 when he
retired. Mr. Balaban was Vice President, Credit of Teknika Electronics since
1986 and as Senior Vice President and General Manager of Teknika Electronics
since 1992. In October 1995, Teknika Electronics changed its name to Fujitsu
General America, Inc. Fujitsu General America, Inc. is a subsidiary of Fujitsu
General, Ltd., a Japanese multiline manufacturer. Mr. Balaban currently is a
consultant to Fujitsu General America, Inc.

Gregory E. Raskin, President of the Company and Winncom, founded Winncom in
1995 and joined us coincident with the acquisition of Winncom in May 2000. Mr.
Raskin was elected as a Director of the Company in February 2001. Previous to

Winncom, he was founder and President of a company that introduced (and
certified) Wireless LANs to former Soviet Block Countries. He holds MS degrees
in Electrical Engineering and Control System Engineering.

Monty R. Lamirato, has been Chief Financial Officer and Treasurer since
June 2001. Prior to joining the Company Mr. Lamirato served as the VP Finance
for GS2.Net, Inc, an application service provider, from November 2000 to May
2001 and from June 1999 to October 2000 was VP Finance for an e-commerce
retailer. From November 1993 to June 1999 Mr. Lamirato was President and
Shareholder of Monty R. Lamirato, PC, a business consulting firm. Mr. Lamirato
has been a certified public accountant in the State of Colorado since 1978.

Steven C. Olson, Prior to joining ARC Wireless, Mr. Olson was employed at
Ball Aerospace for 14 years, including the past five years as Director of
Engineering for Ball's Wireless Communications Products Division. In this
capacity Mr. Olson led the development of new technologies, resulting in
industry leading antenna solutions for the wireless communications market.
Before the Ball Wireless Communications unit was formed, Mr. Olson developed
Ball's high performance, low cost AirBASE(TM) antenna technology specifically
for use in its future commercial wireless business. He received his Bachelors
and Masters of Science degrees in Electrical Engineering from the University of
Utah in 1984 and 1985, respectively.

Donald A. Huebner was our Chief Scientist from July 2000 to January 2002
and a consulting engineer from January 2002 and has served as Director beginning
in 1998. Mr. Huebner served as Department Staff Engineer with Lockheed Martin
Astronautics in Denver, Colorado from 1986 to July 2000. In this capacity, Dr.
Huebner served as technical consultant for phased array and spacecraft antennas
as well as other areas concerning antennas and communications. Prior to joining
Lockheed Martin, Dr. Huebner served in various capacities with Ball
Communication Systems and Hughes Aircraft Company. Dr. Huebner also served as a
part-time faculty member in the electrical engineering departments at the
University of Colorado at Boulder, California State University at Northridge,
and University of California, Los Angeles ("UCLA"). Dr. Huebner also served as
consultant to various companies, including as a consultant to the Company from
1990 to the present. Dr. Huebner received his Bachelor of Science in Electrical
Engineering from UCLA in 1966 and his Masters of Science in Electrical
Engineering from UCLA in 1968. Dr. Huebner received his Ph.D. from UCLA in 1972
and a Masters in Telecommunications from the University of Denver in 1996. Dr.
Huebner is a member of a number of professional societies, including the
Antennas And Propagation Society and Microwave Theory And Technique Society of
the Institute of Electrical and Electronic Engineers.

Burton J. Calloway is the Executive Vice President of our Wireless
Communications Products Division. Prior to joining ARC Wireless, Mr. Calloway
was Regional Sales Manager for Ericsson from 1984 to 1992. From 1992 to 1994 he
was Vice President of Sales for Cintech Telemanagement and from 1995 to 1999 he
was Director of Business Development for Ericsson and from August, 1999 to
March, 2000 he was Vice President of Marketing and Sales for Teletron, Inc.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth in summary form the compensation of our
current and past Chief Executive Officer and each other executive officer who
received total salary and bonus exceeding $100,000 during any of the three
successive fiscal years ending December 31, 2001 (the "Named Executive
Officers").

Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- ------ -------

Restricted
Other Annual Stock LTIP All Other
Fiscal Salary Bonus Compensation Awards Options Payouts Compensation
Name and Principal Position Year ($)(1) ($)(2) ($)(3) ($) (#) ($)(4) ($)(5)
------------------------------ -------- --------- ---------- -------------- ------------ ----------- --------- ---------------

Glenn A. Befort 2001 99,000 0 0 0 0 0 0
Former Chief Executive
Officer; Treasurer; and 2000 123,000 76,000 0 0 8,400,000 0 0
Director(6)

Randall P. Marx 2001 175,000 0 0 0 0 0 0
Chief Executive Officer;
Secretary; and Director 2000 115,000 0 0 0 0 0 0

1999 115,000 0 0 0 0 0 0

Gregory E. Raskin 2001 250,000 0 0 0 0 0 0
President of ARC and
J. Winncom; and
Director 2000 148,000 125,000 0 0 250,000 0 0

Burton Calloway 2001 106,000 0 0 0 200,000 0 0
Executive Vice President(7)
2000 55,000 0 0 0 150,000 0 0

(1) The dollar value of base salary (cash and non-cash) earned during the year
indicated.

(2) The dollar value of bonus (cash and non-cash) earned during the year
indicated.

(3) During the period covered by the Summary Compensation Table, we did not pay
any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.

(4) We do not have in effect any plan that is intended to serve as incentive
for performance to occur over a period longer than one fiscal year except
for our 1997 Stock Option And Compensation Plan.

(5) All other compensation received that we could not properly report in any
other column of the Summary Compensation Table including our annual
contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the named executive officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, us.

(6) Mr. Befort served in these capacities from July 2000 until February 2001.

(7) Mr. Calloway is Executive Vice President of the Wireless Communications
Products Division.

Option Grants In Last Fiscal Year

The following table provides certain summary information concerning
individual grants of stock options made to Named Executive Officers during the
fiscal year ended December 31, 2001 under the Company's incentive plans. Except
as set forth in the table below, during fiscal year 2001, the Company did not
grant any stock options under the Company's Incentive Plans to any of the Named
Executive Officers.

Option Grants In Last Fiscal Year

----------------------- -------------- -------------- ----------- --------------- ----------------------------
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise of Stock Price Appreciation
Options Employees in Price Expiration for Option Term
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
----------------------- -------------- -------------- ----------- --------------- -------------- -------------

Randall P. Marx 0 0 N/A N/A N/A N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Gregory E. Raskin 0 0 N/A N/A N/A N/A
----------------------- -------------- -------------- ----------- --------------- -------------- -------------
Burton Calloway 200,000 12.8% $ .33 5/30/03 $73,000 $80,000
----------------------- -------------- -------------- ----------- --------------- -------------- -------------

Aggregated Option Exercises And Fiscal Year-End Option Value Table

The following table provides certain summary information concerning stock
option exercises during the fiscal year ended December 31, 2001 by the Named
Executive Officers and the value of unexercised stock options held by the Named
Executive Officers as of December 31, 2001.

Aggregated Option Exercises
For Fiscal Year Ended December 31, 2001
And Year-End Option Values(1)

--------------------- -------------- ---------------------- --------------------------- ----------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-
Options at Fiscal Year- Money Options at
End (#)(4) Fiscal Year-End ($)(5)
--------------------- -------------- ---------------------- --------------------------- ----------------------------
Shares
Acquired on
Name Exercise(2) Value Realized ($)(3) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------------- ----------- ------------- ----------- -------------
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Randall P. Marx 0 0 0 0 0 0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Gregory E. Raskin 0 0 250,000 0 0 0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

Burton Calloway 0 0 350,000 0 0 0
--------------------- -------------- ---------------------- ------------ -------------- ------------ ---------------

(1) No stock appreciation rights are held by any of the Named Executive
Officers.

(2) The number of shares received upon exercise of options during the year
ended December 31, 2001.

(3) With respect to options exercised during the year ended December 31, 2001,
the dollar value of the difference between the option exercise price and
the market value of the option shares purchased on the date of the exercise
of the options.

(4) The total number of unexercised options held as of December 31, 2001,
separated between those options that were exercisable and those options
that were not exercisable on that date.

(5) For all unexercised options held as of December 31, 2001, the aggregate
dollar value of the excess of the market value of the stock underlying
those options over the exercise price of those unexercised options. These
values are shown separately for those options that were exercisable, and
those options that were not yet exercisable, on December 31, 2001. As
required, the price used to calculate these figures was the closing sale
price of the common stock at year's end, which was $0.18 per share on
December 31, 2001.

Employee Retirement Plans, Long-Term Incentive Plans, And Pension Plans

Other than our stock option and 401(k) plan, we have no employee retirement
plan, pension plan, or long-term incentive plan to serve as incentive for
performance to occur over a period longer than one fiscal year.

1997 Stock Option And Compensation Plan

In November 1997, the Board of Directors approved our 1997 Stock Option And
Compensation Plan (the "Plan"). Pursuant to the Plan, we may grant options to
purchase an aggregate of 5,000,000 shares of our common stock to key employees,
directors, and other persons who have or are contributing to our success. The
options granted pursuant to the Plan may be incentive options qualifying for
beneficial tax treatment for the recipient or they may be non-qualified options.
The Plan is administered by an option committee that determines the terms of the
options subject to the requirements of the Plan, except that the option
committee shall not administer the Plan with respect to automatic grants of
options to our directors who are not our employees. The option committee may be
the entire Board or a committee of the Board.

Through May 24, 2000, directors who were not also our employees ("Outside
Directors") automatically received options to purchase 250,000 shares pursuant
to the Plan at the time of their election as an Outside Director. These options
held by Outside Directors were not exercisable at the time of grant. Options to
purchase 50,000 shares became exercisable for each meeting of the Board of
Directors attended by each Outside Director on or after the date of grant of the
options to that Outside Director, but in no event earlier than six months
following the date of grant. The exercise price for options granted to Outside
Directors was equal to the closing price per share of our common stock on the
date of grant. All options granted to Outside Directors expired five years after
the date of grant. On the date that all of an Outside Director's options became
exercisable, options to purchase an additional 250,000 shares, which were
exercisable no earlier than six months from the date of grant, were
automatically granted to that Outside Director. On May 24, 2000, the Board of
Directors voted to (1) decrease the amount of options automatically granted to
Outside Directors from 250,000 to 25,000 options, and (2) decrease the amount of
exercisable options from 50,000 to 5,000 per meeting. The term of the outside
Director option granted in the future was lowered from five years to two years.
The other terms of the Outside Director options did not change. On July 5, 2002,
the Board of Directors voted to (1) increase the amount of options automatically
granted to Outside Directors from 25,000 to 125,000 options, and (2) increase
the amount of exercisable options from 5,000 to 25,000 per meeting. The other
terms of the Outside Director options did not change.

The Company granted a total of 275,000 options to Outside Directors under
the Plan during 2000, at exercise prices from $0.89 to $1.01 per share, and
25,000 options to outside directors under the Plan during 2001 at an exercise
price of $.35 per share.

As of June 30, 2002, there were 635,000 exercisable options outstanding
related to the grants to Outside Directors. Mr. Donald Huebner's employment
terminated on January 31, 2002 and as such all of his options are disclosed as
Outside Directors options.

In addition to Outside Directors grants, the Board of Directors may grant
incentive options to our key employees pursuant to the Plan. In 2001, the Board
granted a total of 1,560,000 options under the Plan to employees at prices
ranging form $.21 to $.58. In 2000, the Board granted a total of 11,870,000
options to employees, of which 2,001,000 were granted under the Plan, at prices
from $0.63 to $1.7187, and the Board granted 600,000 options to employees under
the Plan in 1999, at $0.06 per share. Subsequent to December 31, 2000, the
Company canceled a total of 9,900,000 options that were granted in 2000,

including 676,000 granted under the Plan, and replaced them with 600,000 new
options outside of the Plan at a price equal to the closing price per share on
the dates of their respective departures, in conjunction with the contract
eliminations of the former CEO and CFO (see below "Employment Contracts And
Termination of Employment And Change-in-Control Arrangements" and the
"Subsequent Events" footnote to the financial statements). As of June 30, 2002,
there were, 1,610,000 exercisable options outstanding related to grants to
employees, all of which were granted under the Plan.

In connection with his separation from the Company, Glenn A. Befort was
granted options to purchase 250,000 shares for $0.325 per share until February
21, 2004. See below, "Employment Contracts And Termination Of Employment And
Change-In-Control Arrangements".

As of June 30, 2002, there were 2,840,555 options to purchase shares of
common stock outstanding under the Plan and 635,084 shares or options to
purchase shares of common stock were available to be granted under the Plan.

Compensation Of Outside Directors

Standard Arrangements. Outside Directors are paid $250 for each meeting of
the Board of Directors that they attend. For meetings in excess of four meetings
per year, Outside Directors receive $50 per meeting. Pursuant to the terms of
the 1997 Stock Option and Compensation Plan, Outside Directors may elect to
receive payment of the meeting fee in the form of our restricted common stock at
a rate per share equal to the fair market value of the common stock on the date
of the meeting by informing our Secretary, Chief Executive Officer or President
of that election on or before the date of the meeting. Directors are also
reimbursed for expenses incurred in attending meetings and for other expenses
incurred on our behalf. In addition, each Outside Director receives options to
purchase shares of common stock (for details see the "1997 Stock Option And
Compensation Plan" section above).

Outside Directors vested 325,000 stock options during fiscal year ended
December 31, 2000, and earned $3,400 in meeting attendance fees. During the
fiscal year ended December 31, 2001, Outside Directors vested 65,000 stock
options and earned $2,250 in meeting attendance fees.

Other Arrangements. During each of the years ended December 31, 2001 and
2000, no compensation was paid to our Outside Directors other than pursuant to
the standard compensation arrangements described in the previous section.

Employment Contracts And Termination Of Employment And Change-In-Control
Arrangements

We entered into a written employment agreement with Randall P. Marx on
October 1, 1998 with an effective date of September 1, 1998. Mr. Marx is the
beneficial owner of 5.5 percent of our stock or 8,381,128 shares. The agreement
was for a period of two years with an annual salary of $115,000. Mr. Marx was
also eligible for a bonus of five percent of the income from our operations per
fiscal year for each fiscal year during the term. No bonus was earned in either
year. As a part of this agreement, Mr. Marx agreed to not compete with us for a
period of two years following his termination as our employee. Effective,
January 8, 2001, Mr. Marx entered into a one-year employment agreement with
total annual compensation of $175,000. Effective February 12, 2001, Mr. Marx
replaced Glenn A. Befort as Chief Executive Officer of the Company. We entered
into a new employment agreement with Mr. Marx effective January 2, 2002, which
terminates on January 2, 2004. Mr. Marx is to receive a salary of $195,000 per
year during the term of the agreement and is eligible to receive a bonus of
$50,000 for the year ending December 31, 2002 if the Company achieves revenues
of at least $23,000,000 and earnings before interest, taxes, depreciation, and
amortization ("EBITDA") of at least $250,000 for that year. Mr. Marx is eligible
to receive another bonus of $50,000 if the Company achieves revenues of at least
$29,000,000 and EBIDTA of at least $500,000 for the year ending December 31,
2003.

We entered into a written employment agreement with Gregory E. Raskin,
President of our Winncom subsidiary, effective May 24, 2000. Mr. Raskin is the
beneficial owner of 2.4 percent of our stock or 4,319,162 shares. That
employment agreement covered the period May 24, 2000 through May 31, 2002, at an
annual base salary of $250,000. Mr. Raskin also was eligible to earn bonuses of
up to $500,000 over the term of the agreement, based on Winncom's periodic
attainment of certain revenues and earnings objectives. Mr. Raskin earned his
maximum bonus of $125,000 in 2000. No bonus was earned in 2001. Mr. Raskin also
received options to purchase 250,000 shares of our common stock at a price of
$0.89 per share from December 19, 2000 through May 24, 2002. We entered into a
new employment agreement with Mr. Raskin effective as of June 1, 2002 with a
term of two and one-half years. Pursuant to the new agreement, Mr. Raskin is to
receive a salary of $300,000 per year. Mr. Raskin is eligible to receive bonuses
for each of the years ending December 31, 2002, 2003 and 2004 of between $50,000
and $300,000 depending upon the Company's revenues and EBIDTA for those periods.

We entered into a written employment agreement with Burton J Calloway,
Executive Vice President of the Wireless Communications Products Division,
effective May 30, 2000. The employment agreement is for the period May 30, 2000
through May 29, 2003, at an annual base salary of $100,000. The base salary was
adjusted to $115,000 effective October 1, 2001. Mr. Calloway also is eligible to
earn bonuses of 3% of net profits over $180,000 of the Wireless Communications
Products Division over the term of the agreement. A nominal bonus was earned for
2001. Mr. Calloway also received options to purchase 150,000 shares of our
common stock at a price of $1.01 on May 30, 2000 and was granted options to
purchase 200,000 on May 30, 2001 at a price of $.33 per share and options to
purchase an additional 200,000 shares on May 30, 2002 at a price of $.145 per
share.

We entered into a written employment agreement with Monty R. Lamirato, our
Chief Financial Officer and Treasurer, effective June 22, 2001. The employment
agreement is for the period June 22, 2001 through June 30, 2004, at an annual
base salary of $111,000. Mr. Lamirato also is eligible to earn bonuses of
$35,000 or 3% of EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization), whichever is greater, over the term of the agreement. No bonus
was earned for 2001. Mr. Lamirato also received options to purchase 175,000
shares of our common stock at a price of $0.33 per share from June 22, 2001
through June 30, 2004.

We entered into a written employment agreement with Steven C. Olson, our
Chief Technology Officer, effective August 13, 2001. The employment agreement is
for the period August 13, 2001 through August 13, 2004 at an annual base salary
of $155,000. Mr. Olson also is eligible to earn bonuses, upon achieving certain
gross margin objectives, over the term of the agreement. No bonus was earned for
2001. Mr. Olson also received options to purchase 500,000 shares of our common
stock at a price of $0.27 per share from August 13, 2001 through August 13,
2004.

We entered into a written employment agreement with Glenn A. Befort, our
former Chief Executive Officer and Treasurer as of July 1, 2000. The agreement
provided for a term of three years with an annual salary rate of $250,000 and a
guaranteed bonus of $75,000 for the year 2000. Mr. Befort was eligible for a
bonus in an amount equal to the greater of $150,000 or five percent of EBIDTA
for each fiscal year ending in the year 2001 and beyond, if our EBIDTA for the
applicable fiscal year is at least $1.00. Mr. Befort was granted options to
purchase not more than 8,400,000 shares of our common stock at an exercise price
equal to the weighted average trading price of the common stock on July 3, 2000
and with all his options expiring on July 3, 2005, and with all the options
subject to the following terms:

o 2,800,000 of the options were to become exercisable on July 3, 2001,
if Mr. Befort remained employed by us on that date;

o 2,800,000 of the options were to become exercisable on July 3, 2002,
if Mr. Befort remained employed by us on that date;

o 2,800,000 of the options were to become exercisable on July 3, 2003,
if Mr. Befort remained employed by us on that date; and

o The options were, to the maximum extent permissible by the Internal
Revenue Code (the "Code"), considered Incentive Stock Options as that
term is interpreted in the Code.

On February 9, 2001, we entered into a separation agreement and release
with Mr. Befort under which it was mutually agreed to terminate Befort's
employment effective February 21, 2001 (the "Termination Date"). Mr. Befort
agreed to resign from his positions as an officer and director of the Company
and, as applicable, from the Company's subsidiaries and affiliates in exchange
for the following compensation, benefits and options, which replaced the
compensation, benefits and options provided in Mr. Befort's employment agreement
described above:

o Payment, for 90 days after the Termination Date, of the same salary
that we have been paying him under the Befort Agreement, with payments
being made on our usual payroll dates. No additional compensation for
vacation and sick days will accrue or be payable to Mr. Befort during
the 90-day period; and

o Issuance of options (the "Severance Options") to purchase 250,000
shares of our restricted common stock for a period of three years
commencing on the Termination Date at an exercise price of $0.325 per
share.

We entered into a written employment agreement with David McConnell, former
President of our subsidiary, Starworks, effective October 1, 2000. The
employment agreement was originally for the period October 1, 2000 through
October 1, 2003, at an annual base salary of $150,000. Mr. McConnell also was
eligible to earn bonuses of up to $100,000 over the term of the agreement, based
on certain sales of the LTVA Antenna System Model 3000/6000. Mr. McConnell's
agreement was terminated as of February 12, 2001 as described above in
"The Company - Legal Proceedings".

We have no compensatory plan or arrangement that results or will result
from the resignation, retirement, or any other termination of an executive
officer's employment with us or from a change-in-control or a change in an
executive officer's responsibilities following a change-in-control, except that
the Plan provides for vesting of all outstanding options in the event of the
occurrence of a change-in-control.

BENEFICIAL OWNERS OF SECURITIES

The following table summarizes certain information as of June 30, 2002 with
respect to the beneficial ownership of our common stock by each director, by all
executive officers and directors as a group, and by each other person known by
us to be the beneficial owner of more than five percent of our common stock:

Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned(1) of Class
------------------- --------------------- --------
Randall P. Marx 8,381,128(2) 5.47%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033

Sigmund A. Balaban 1,552,150(3) 1%
10 Grecian Street
Parsippany, NJ 07054

Donald A. Huebner 576,884(4) *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033

Gregory E. Raskin 4,069,162(5) 2.65%
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033

Monty R. Lamirato 175,000(6) *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033

Burton Calloway 400,000(7) *
ARC Wireless Solutions, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033

Barry Nathanson 11,798,559 7.7%
6 Shore Cliff Place
Great Neck, NY 11023

Hudson River Investments, Inc. 12,718,225 8.3%
C/O Nemazee Capital Corp.
720 Fifth Avenue
New York, NY 10019

Evansville Limited 10,117,860 6.6%
c/o Quadrant Management Inc.
720 Fifth Avenue, 9th Floor
New York, NY 10019

All officers and directors
as a group (six persons) 15,154,324(2)3)(4)(5)(6) 9.9%

------------------

* Less than one percent.

(1) "Beneficial ownership" is defined in the regulations promulgated by
the U.S. Securities and Exchange Commission as having or sharing,
directly or indirectly (1) voting power, which includes the power to
vote or to direct the voting, or (2) investment power, which includes
the power to dispose or to direct the disposition, of shares of the
common stock of an issuer. The definition of beneficial ownership
includes shares underlying options or warrants to purchase common
stock, or other securities convertible into common stock, that
currently are exercisable or convertible or that will become
exercisable or convertible within 60 days. Unless otherwise indicated,
the beneficial owner has sole voting and investment power.

(2) Includes 8,312,665 shares directly held by Mr. Marx, 40,000 shares
held by his spouse's IRA and 28,463 shares owned beneficially through
a 50% ownership of an LLC. This does not include 900,000 shares owned
plus warrants to purchase 150,000 shares at $1.00 per share owned by
the Harold and Theora Marx Living Trust, of which Mr. Marx's parents
are trustees, as Mr. Marx disclaims beneficial ownership of these
shares. This also does not include 155,000 shares owned by Warren E.
Spencer Living Trust, of which Mr. Marx's mother-in-law is trustee, as
Mr. Marx disclaims beneficial ownership of these shares.

(3) Includes 1,414,721 shares directly held by Mr. Balaban; and Outside
Director options granted under the 1997 Stock Option and Compensation
Plan to purchase 100,000 shares at $0.15 per share until September 8,
2004, all of which are currently exercisable, and to purchase 25,000
shares at $0.35 per share until May 28, 2003, all of which are
currently exercisable, and to purchase 25,000 shares at $.17 until May
14, 2002, of which 5,000 are currently exercisable.

(4) Includes 69,500 shares directly held by Dr. Huebner; Outside Director
options granted under the 1997 Stock Option and Compensation Plan to
purchase 250,000 shares at $0.085 per share until May 15, 2003,
250,000 shares at $0.06 per share until May 10, 2004, and 25,000
shares at $0.17 per share until May 15, 2004, 5,000 of which are
currently exercisable.

(5) Includes 3,898,389 shares directly held by Mr. Raskin, 170,773 shares
beneficially owned by a partnership in which Mr. Raskin is a partner.

(6) Consists of options to purchase 175,000 shares at $.33 per share until
June 22, 2004, granted under the 1997 Stock Option and Compensation
Plan all of which are currently exercisable.

(7) Consists of options to purchase 400,000 shares at prices ranging from
$ 0.145 to $0.33 per share until May 30, 2004 granted under the 1997
Stock Option and Compensation Plan all of which are currently
exercisable.

DESCRIPTION OF SECURITIES

Common Stock

Our authorized capital consists of 250,000,000 shares of $.0005 par value
common stock. We had 153,552,274 shares of common stock issued and outstanding
as of June 30, 2002, which were held by 411 shareholders of record.

Each share is entitled to share equally with each other shares in dividends
from sources legally available therefore, when, as, and if declared by the Board
Of Directors and, upon our liquidation or dissolution, whether voluntary or
involuntary, to share equally in our assets that are available for distribution
to the holders of shares of our common stock. Each holder of shares of our
common stock is entitled to one vote per share for all purposes, except that in
the election of directors, each holder shall have the right to vote such number
of shares for as many persons as there are directors to be elected. Cumulative
voting shall not be allowed in the election of directors or for any other
purpose, and the holders of our shares have no preemptive rights, redemption
rights or rights of conversion with respect to our shares. All outstanding
shares issued will be fully paid and nonassessable by us. The Board Of Directors
is authorized to issue additional shares within the limits authorized by our
Articles Of Incorporation and without shareholder action.

All shares have equal voting rights and voting rights are not cumulative.
The holders of more than 50 percent of our shares could, therefore, if they
chose to do so, elect all our directors.

Upon our liquidation, dissolution or winding up, our assets, after
satisfaction of all liabilities, will be distributed pro rata to the holders of
the shares.

We have not paid any cash dividends since our inception.

We have reserved a sufficient number of shares for issuance upon the
exercise of options under our Plan.

Warrants And Options

In October 2000, we completed the sale of 15,000,000 units of common stock
and warrants to purchase common stock pursuant to a private placement at a price
of $.50 per unit. The units were sold to a total of 21 investors who were all
accredited investors pursuant to one or more exemptions from registration in
accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the
Securities Act. Each unit consisted of one share of common stock and one
immediately exercisable warrant to purchase one share of common stock at an
exercise price of $1.50 per share of common stock. The warrants expire the
earlier to occur of (i) one year after the date that a registration statement
concerning the transfer of the shares of common stock included in the units and
the shares of common stock issuable upon exercise of the warrants is declared
effective by the Securities And Exchange Commission, and (ii) five years after
the issuance of the warrants. We were obligated to file the registration
statement within 10 business days after filing our Annual Report on Form 10-KSB
for the year ended December 31, 2001 with the SEC. At any time that the
registration statement is effective, we may, upon 30-days' notice to the holders
of the warrants, repurchase the warrants for $.01 per warrant at any time after
the weighted average trading price for the common stock has been at least $1.75
for 20 of the 30 consecutive business days preceding the date of the notice of

repurchase. We received gross cash proceeds of $7.4 million and related offering
expenses were $14,000. There were no fees or commissions paid to brokers or
underwriters or placement agents in conjunction with this placement.

In August 2001, we completed the sale of 5,000,000 shares of common stock
pursuant to a private placement at a price of $.20 per share. The shares were
sold to a total of nine investors who were all accredited investors pursuant to
one or more exemptions from registration in accordance with Rules 505 and/or 506
and/or Sections 3(b) and/or 4(2) of the Securities Act.

In July 2001, the Company offered each Unit Investor the opportunity to
either (1) exchange each three Warrants for one share of Common Stock
("Alternative A"), or (2) reduce the exercise price of each Warrant from $1.50
per share to $1.00 per share upon the Unit Investor's agreement to reduce the
price associated with the Company's 30-day notice of redemption from $1.75 to
$1.50 ("Alternative B"); provided, however, that if the Unit Investor determined
to participate in either Alternative A or B, the Unit Investor was required to
waive the Company's obligation to register the Unit Investor's sale or other
transfer of the Registrable Securities (the "Registration Obligation").

Each Unit Investor electing Alternative A also was required to enter into a
Restricted Sales Agreement (the "Restricted Sales Agreement") that includes the
following restrictions with respect to the sale of all shares of Common Stock
owned by the Unit Investor, except for any shares purchased subsequent to March
31, 2001:

o On any trading day during the one-year period beginning on the day
Alternative A goes into effect (which was August 9, 2001), the Unit
Investor may sell or otherwise dispose of up to the Pro Rata Share, as
defined below, for that Unit Investor, of (i) 15 percent of the
reported trading volume of the Common Stock for the immediately
preceding trading day if the reported trading volume of the Common
Stock for the prior trading day was 400,000 shares or less, or (ii) 20
percent of the reported trading volume of the Common Stock for the
immediately preceding trading day if the reported trading volume of
the Common Stock for the prior trading day was greater than 400,000
shares; and

o On any trading day during the one-year period between the first and
second anniversaries of the effective date of Alternative A, the Unit
Investor may sell or otherwise dispose of up to the Pro Rata Share for
that Unit Investor of (i) 20 percent of the reported trading volume of
the Common Stock for the immediately preceding trading day if the
reported trading volume of the Common Stock for the prior trading day
was 400,000 shares or less, or (ii) 25 percent of the reported trading
volume of the Common Stock for the immediately preceding trading day
if the reported trading volume of the Common Stock for the prior
trading day was greater than 400,000 shares.

The number of shares of Common Stock that the Unit Investor may sell shall
not be increased as a result of any failure by the Unit Investor to sell the
maximum number of Unit Investor Shares permissible at a prior time.

For purposes of Alternative A, the "Pro Rata Share" of any Unit Investor
means the percentage obtained by dividing (1) the number of Units purchased by
the subject Unit Investor in the Year 2000 Placement, by (2) the aggregate total
number of Units purchased by all investors in the Year 2000 Placement who agree
to the sales restrictions described above (the "Contracting Unit Investors").
Notwithstanding the foregoing, if the aggregate number of Units purchased in the
Year 2000 Placement by the Contracting Unit Investors is less than 90 percent of
the total number of Units purchased in the Year 2000 Placement by all investors
in the Year 2000 Placement, then "Pro Rata Share" shall instead mean the

percentage obtained by dividing (X) the number of Units purchased by the subject
Unit Investor in the Year 2000 Placement, by (Z) 90 percent of the aggregate
number of Units purchased by all investors in the Year 2000 Placement.

As of December 31, 2001 holders representing an aggregate of 13,062,000
Units had agreed to participate in Alternative A and were issued 4,354,000
shares of common stock and holders representing an aggregate of 1,148,000 Units
had agreed to participate in Alternative B.

Also, in the private placement completed in January 2000, investors
received 22,000,000 common stock purchase warrants to purchase, at an exercise
price of $.175 per share, one share of common stock. All these warrants
subsequently were exercised.

In addition, effective February 16, 1999, an agreement was entered into
with one of our distributors whereby the distributor advanced us $200,000 at an
interest rate of 12 percent until March 1, 2000, and at 14 percent thereafter
until paid in full, and we granted the distributor options to purchase 500,000
shares of stock at a price of $.03 per share. We repaid the distributor in full
on January 31, 2000. The distributor subsequently exercised all of these
options.

Transfer Agent And Registrar

Our transfer agent and registrar is Computershare Trust Company, Inc., 350
Indiana Street, Suite 800, Golden, Colorado 80401, telephone number (303)
262-0600.

INACTIVE TRADING OF THE COMMON STOCK

Although our shares are publicly held, there currently is not an active
trading market. To the extent that there is trading in our shares, of which
there is no assurance, the shares trade in the over-the-counter market and are
quoted on the OTC Bulletin Board. The shares are not quoted on the Nasdaq system
or any exchange. The closing quotes for the shares on October 15, 2002 were
$.095 bid and $.10 asked. It should be assumed that even with this OTC Bulletin
Board quote, there is an extremely limited trading market - and very little
liquidity - for our shares.

SELLING SECURITY HOLDERS AND PLAN OF DISTRIBUTION

We are registering the transfer by the selling security holders of up to
2,184,545 shares of common stock. These shares consist of the following:

o 1,444,545 shares of common stock; and
o 740,000 shares of common stock that may be issued upon the exercise of
warrants.

The selling security holders may transfer the common stock at those prices
that they are able to obtain in the market or as otherwise negotiated. In
addition, the selling shareholders may transfer the shares in exchange for
consideration other than cash, or for no consideration, as determined by the
selling shareholders in their sole discretion. This prospectus may be used by
the selling shareholders to transfer shares of the common stock to affiliates of
the selling shareholders. Additionally, agents, brokers or dealers or other
lenders may acquire shares or interests in shares as a pledgee and may, from
time to time, effect distributions of the shares or interests in that capacity.
We will receive no proceeds from the sale of common stock by the selling
security holders.

It is anticipated that the selling security holders will offer the shares
in direct sales to private persons and in open market transactions. The selling
security holders may offer the shares to or through registered broker-dealers

who will be paid standard commissions or discounts by the selling security
holders. The selling security holders informed us that they do not have any
arrangements or agreements with any underwriters or broker/dealers to sell the
shares, and intend to contact various broker/dealers to identify prospective
purchasers. Additionally, agents, brokers or dealers may acquire shares or
interests in shares as a pledgee and may, from time to time, effect
distributions of the shares or interests in such capacity.

The following table sets forth the name of the selling security holders,
the number of shares of common stock (including the number of shares of common
stock underlying the warrants and options) owned by the selling security holders
before this offering, the number of shares of common stock to be sold by the
selling security holders, and the number and percentage of shares of common
stock owned after this offering. None of the selling security holders has held
any position or office, or had any marital relationship with our officers or
directors in the past three years except as noted below.

---------------------------------------- ------------------ ------------------- ----------------- ------------------
Number Of Shares Number of Percentage Of
Of Common Stock Number of Shares Owned Shares Owned
Owned Before Shares After After Offering
Name Offering(1) Offered Offering(2)
---------------------------------------- ------------------ ------------------- ----------------- ------------------

Francis B. Barron 300,000(3) 100,000(3) 200,000 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Michael F. Barron 40,000(4) 40,000(4) 0 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Glenn A. Befort 400,000(5) 400,000(5) 0 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Mark and Tanya Blyumin 554,545 454,545 100,000 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Olga Filippova 217,790 40,000(4) 177,790 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Chung Hoon Lee 124,809(6) 50,000(6) 74,809 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Terese and Joseph Perdue 2,159,100(7) 300,000 1,859,100(7) *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Cornelius B. Prior, Jr. 1,484,622(8) 800,000(8) 684,622 *
---------------------------------------- ------------------ ------------------- ----------------- ------------------
Total 5,280,866 2,184,545 3,096,321
---------------------------------------- ------------------ ------------------- ----------------- ------------------

*Less than one percent.

(1) The number of shares of common stock owned before the offering includes
shares of common stock underlying warrants, even if not currently
exercisable.

(2) The number of shares of common stock to be sold assumes that the selling
shareholders sell all the shares of common stock being registered.

(3) Includes 50,000 shares of common stock underlying warrants exercisable for
$1.50 per share until October 22, 2003.

(4) Includes 20,000 shares of common stock underlying warrants exercisable for
$1.50 per share until October 22, 2003.

(5) Includes 200,000 shares of common stock underlying warrants exercisable for
$1.50 per share until October 22, 2003.

(6) Includes 50,000 shares of common stock underlying warrants exercisable at
$1.50 per share until October 22, 2003.

(7) Includes 1,224,000 shares held in trust, 96,400 shares held in custodial
accounts, and 38,700 shares held in individual retirement accounts.

(8) Includes 400,000 shares held by a trust for which Mr. Prior serves as
Trustee and 400,000 shares of common stock underlying warrants exercisable
at $1.50 per share until October 22, 2003 that are held by that trust.

SECURITIES AND EXCHANGE COMMISSION
POSITION ON CERTAIN INDEMNIFICATION

Pursuant to Utah law, our Board Of Directors has the power to indemnify
officers and directors, present and former, for expenses incurred by them in
connection with any proceeding they are involved in by reason of their being or
having been our officer or director. The person being indemnified must have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to our best interests. Our bylaws grant this indemnification to
officers and directors.

Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers or persons controlling ARC Wireless, we
have been advised that, in the opinion of the SEC, this indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

LEGAL MATTERS

Patton Boggs LLP, Denver, Colorado has acted as our counsel in connection
with this offering, including the validity of the issuance of the shares offered
under this prospectus. Attorneys employed by Patton Boggs LLP own approximately
3,120,000 shares of our common stock and warrants to purchase 300,000 shares of
common stock.

EXPERTS

The consolidated financial statements at December 31, 2001 and for the year
then ended appearing in this prospectus and registration statement have been
audited by Hein + Associates LLP and the consolidated financial statements at
December 31, 2000 and for the year then ended, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their respective reports included in this registration
statement. Those financial statements are included in reliance upon these
reports and upon the authority of those firms as experts in auditing and
accounting.

DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS AND CAUTIONARY STATEMENTS

This prospectus includes "forward-looking statements". All statements other
than statements of historical fact included in this prospectus regarding our
financial position, business strategy, plans and objectives of our management
for future operations and capital expenditures, are forward-looking statements.
Although we believe that the expectations reflected in those forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to have been correct.

Additional statements concerning important factors that could cause actual
results to differ materially from our expectations ("Cautionary Statements") are
disclosed in this prospectus, including the "Risk Factors" section. All written
and oral forward-looking statements attributable to us or persons acting on our
behalf subsequent to the date of this prospectus are expressly qualified in
their entirety by the Cautionary Statements.

WHERE YOU CAN FIND MORE AVAILABLE INFORMATION

This prospectus constitutes a part of a registration statement on Form SB-2
filed with the SEC under the Securities Act. The registration statement on Form
SB-2, along with any amendments, is referred to in this prospectus as the
registration statement. This prospectus does not contain all the information set
forth in the registration statement and exhibits to the registration statement,
and statements included in this prospectus as to the content of any contract or
other document referred to are not necessarily complete. For further
information, please review the registration statement and the exhibits and
schedules filed with the registration statement. In each instance where a
statement contained in this prospectus regards the contents of any contract or
other document filed as an exhibit to the registration statement, reference is
made to the copy of that contract or other document filed as an exhibit to the
registration statement, and those statements are qualified in all respects by
this reference.

We are subject to the periodic reporting and other informational
requirements of the Exchange Act. The reports and other information that we file
with the SEC can be inspected and copied at the following public reference
facilities maintained by the SEC:

o 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024
o 500 West Madison Street, Suite 1400, Chicago, Illinois 670661-2511
o 233 Broadway, New York, NY 10279

Copies of these materials also can be obtained at prescribed rates by
writing to the SEC, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Documents filed electronically by us with the SEC are
available at the SEC's world wide web site at http://www.sec.gov. The SEC's
world wide web site contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
Information about the operation of the SEC's public reference facilities may be
obtained by calling the SEC at 1-800-SEC-0330.

FINANCIAL INFORMATION

Index To Financial Statements

Consolidated Balance Sheets as of June 30, 2002 (unaudited) .................F-2

Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 2002 and 2001 (unaudited).....................F-3

Consolidated Statements of Cash Flows for the Three Months
and Six Months Ended June 30, 2002 and 2001 (unaudited).....................F-4

Notes to Consolidated Financial Statements...................................F-5

Reports of Independent Auditors.............................................F-12

Consolidated Balance Sheets at December 31, 2001 and 2000...................F-14

Consolidated Statements of Operations for the Years Ended
December 31, 2001 and 2000.........................................F-15

Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 2001 and 2000.....................F-16

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001 and 2000.........................................F-17

Notes to Consolidated Financial Statements..................................F-18

F-1

ARC Wireless Solutions, Inc.
Consolidated Balance Sheets

June 30, December 31,
2002 2001
Assets (unaudited) *
Current assets:
Cash $ 108,000 $ 345,000
Accounts receivable - customers, net 4,630,000 4,687,000
Accounts receivable - vendors, net 1,663,000 1,214,000
Inventory, net 6,549,000 5,938,000
Other current assets 257,000 117,000
------------ ------------
Total current assets 13,207,000 12,301,000
------------ ------------

Property and equipment, net 630,000 729,000
------------ ------------

Other assets:
Intangible assets including goodwill, net 10,931,000 10,907,000
Deposits 65,000 64,000
------------ ------------
Total assets $ 24,833,000 $ 24,001,000
============ ============

Liabilities and stockholders' equity
Current liabilities:
Bank line of credit $ 3,865,000 $ 925,000
Accounts payable 5,242,000 5,273,000
Current portion of capital lease obligations 9,000 11,000
Accrued expenses 367,000 503,000
------------ ------------
Total current liabilities 9,483,000 6,712,000

Capital lease obligations, less current portion 17,000 21,000
Bank line of credit, less current portion -- 2,621,000
------------ ------------
Total liabilities 9,500,000 9,354,000
------------ ------------

Commitments
Stockholders' equity:
Common stock 78,000 77,000
Preferred stock -- --
Treasury stock (1,192,000) (1,117,000)
Additional paid-in capital 21,677,000 21,522,000
Accumulated deficit (5,230,000) (5,835,000)
------------ ------------
Total stockholders' equity 15,333,000 14,647,000
------------ ------------
Total liabilities and stockholders' equity $ 24,833,000 $ 24,001,000
============ ============

* These numbers are derived from the audited financial statements for the year
ended December 31, 2001.

See accompanying notes.

F-2

ARC Wireless Solutions, Inc.
Consolidated Statements of Operations

Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
(unaudited) (unaudited)

Sales, net $ 7,951,000 $ 7,968,000 $ 15,957,000 $ 16,067,000
Cost of sales 6,352,000 6,394,000 12,556,000 13,179,000
------------ ------------ ------------ ------------
Gross profit 1,599,000 1,574,000 3,401,000 2,888,000
------------ ------------ ------------ ------------

Operating expenses:
Selling, general and administrative expenses 1,445,000 1,369,000 2,899,000 3,182,000
Amortization of purchased intangibles -- 248,000 -- 498,000
------------ ------------ ------------ ------------
Total operating expenses 1,445,000 1,617,000 2,899,000 3,680,000
------------ ------------ ------------ ------------

Income (loss) from operations 154,000 (43,000) 502,000 (792,000)

Other income (expense):
Interest expense, net (53,000) (59,000) (101,000) (107,000)
Gain from debt cancellation 48,000 226,000
Other income 11,000 22,000 17,000 34,000
------------ ------------ ------------ ------------
Total other income (expense) 6,000 (37,000) 142,000 (73,000)
------------ ------------ ------------ ------------

Income (loss) before income taxes 160,000 (80,000) 644,000 (865,000)
Provision for income taxes (19,000) (4,000) (39,000) (8,000)
------------ ------------ ------------ ------------
Net Income (loss) $ 141,000 $ (84,000) 605,000 $ (873,000)
============ ============ ============ ============
Net loss per share (basic and diluted) -- $ (.001) -- $ (.006)
============ ============ ============ ============
Net income (loss) per share - basic $ .001 -- $ .004 --
============ ============ ============ ============
Net income (loss) per share - diluted $ .001 -- $ .004 --
============ ============ ============ ============

See accompanying notes.

F-3

ARC Wireless Solutions, Inc.
Consolidated Statements of Cash Flows

Six Months Ended June 30,
2002 2001
----------- -----------
(unaudited)
Operating activities

Net income (loss) $ 605,000 $ (873,000)
Adjustments to reconcile net income (loss) to net cash used in
Operating activities:
Depreciation and amortization 151,000 590,000
Debt cancellations (226,000) --
Non-cash expense for issuance of stock and options 36,000 125,000
Changes in operating assets and liabilities:
Restricted cash -- 194,000
Accounts receivable, trade and vendor (392,000) (1,195,000)
Inventory (611,000) 620,000
Prepaids and other current assets (140,000) (327,000)
Deposits (1,000) 22,000
Accounts payable and accrued expenses 58,000 (693,000)
Other -- --
----------- -----------
Net cash used in operating activities (520,000) (1,537,000)
----------- -----------

Investing activities
Patent acquisition costs (29,000) (5,000)
Acquisition of businesses, net of cash acquired -- 27,000
Purchase of plant and equipment (47,000) (91,000)
----------- -----------
Net cash used in investing activities (76,000) (69,000)
----------- -----------

Financing activities
Repayment of notes and capital lease obligations (6,000) (8,000)
Net borrowings under lines of credit 319,000 484,000
Proceeds from private placement, net 121,000 862,000
Proceeds from exercise of common stock options -- 5,000
Acquisition of treasury shares (75,000) --
----------- -----------
Net cash provided by financing activities 359,000 1,343,000
----------- -----------

Net increase (decrease) in cash (237,000) (263,000)
Cash, beginning of period 345,000 1,078,000
----------- -----------
Cash, end of period $ 108,000 $ 815,000
=========== ===========

Supplemental cash flow information:
Cash paid for interest $ 99,000 $ 107,000
=========== ===========

See accompanying notes.

F-4

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2002

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2001.

The Company operates in three business segments, which are identified as
distribution of wireless communications products, antenna design and
manufacturing, and cable products, offering a wide variety of wireless component
and network solutions to service providers, systems integrators, value added
resellers, businesses and consumers, primarily in the United States.

Operating results for the six months ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002 or any future period.

Certain prior-year amounts have been reclassified to conform to the current-year
presentation. These reclassifications had no effect on the results of operations
or shareholders' equity as previously reported.

Note 2. Consolidation Policy

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

Note 3. Earnings Per Share

As of December 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 provides for the
calculation of "Basic" and "Dilutive" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect the potential dilution of
securities that could share in the earnings of the entity. For the three months
and six months ended June 30, 2001, the Company incurred net losses. Stock
options and stock warrants totaling 1,000,000 were not included in the
computation of diluted loss per share because their effect was anti-dilutive;
therefore, basic and fully diluted loss per share are the same for the three
months and six months ended June 30, 2001.

F-5

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

Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001

Numerator: Net Income (Loss) $ 141,000 $ (84,000) $ 605,000 $ (873,000)
============= ============= ============= =============

Denominator:
Denominator for basic earnings per
share - weighted average shares
153,298,000 145,546,000 152,916,000 145,200,000
Effect of dilutive securities
Employee stock options 532,000 -- 401,000 --
Common stock warrants -- -- -- --
------------- ------------- ------------- -------------

Denominator for diluted earnings
share - adjusted weighted
average shares and
assumed conversion 153,830,000 145,546,000 153,317,000 145,200,000
============= ============= ============= =============

Basic earnings per share $ .001 $ (.001) $ .004 $ (.006)
============= ============= ============= =============

Diluted earnings per share $ .001 $ (.001) $ .004 $ (.006)
============= ============= ============= =============

Note 4. Revolving Bank Loan

Winncom Technologies Corp. has two bank lines of credit bearing an interest rate
of prime plus 0.5% (5.25% on June 30, 2002). One line of credit is a revolving
line of credit for $3 million, of which $2.8 million is outstanding at June 30,
2002. It expires in April 2003. The other line of credit is for $1 million, of
which $1,000,000 is outstanding at June 30, 2002 and which was due July 31,
2002. We are currently in negotiations with the Bank to increase our revolving
line of credit facility and combine the two outstanding lines into a single
credit line. The credit lines are collateralized by accounts receivable,
inventory and otherwise unencumbered fixed assets of Winncom. The credit line
provides that Winncom is prohibited from guaranteeing any obligations of, or
paying or advancing any distribution or other amount to, ARC Wireless Solutions,
Inc. or any of its subsidiaries. ARC is a general corporate guarantor of this
loan.

Note 5. Acquisitions

On August 21, 2001 the Company acquired certain commercial assets of the
wireless communications products line of Ball Aerospace & Technologies Corp.
(BATC), a wholly owned subsidiary of Ball Corporation, for $925,389. The assets
acquired consist mainly of raw materials and finished goods inventory, testing
and production equipment, and the purchase price has been allocated to these
specifically identifiable assets. In November 2001 the purchase price was
adjusted in accordance with the Purchase Agreement for variances in actual
assets delivered to the Company by BATC. BATC refunded to the Company $99,271
pursuant to the Agreement.

F-6

Note 6. Equity Transactions

In July 2001, the Company offered each investor who had purchased units ("Unit
Investor") of common stock and common stock purchase warrants ("Warrants") in
the Company's private placement in 2000 the opportunity to either (1) exchange
each three Warrants for one share of Common Stock ("Alternative A"), or (2)
reduce the exercise price of each Warrant from $1.50 per share to $1.00 per
share upon the Unit Investor's agreement to reduce the price associated with the
Company's 30-day notice of redemption from $1.75 to $1.50 ("Alternative B");
provided, however, that if the Unit Investor determined to participate in either
Alternative A or B, the Unit Investor was required to waive the Company's
obligation to register the Unit Investor's sale or other transfer of the
Registrable Securities (the "Registration Obligation").

The number of shares of Common Stock that the Unit Investor may sell shall not
be increased as a result of any failure by the Unit Investor to sell the maximum
number of Unit Investor Shares permissible at a prior time.

For purposes of Alternative A, the "Pro Rata Share" of any Unit Investor means
the percentage obtained by dividing (1) the number of Units purchased by the
subject Unit Investor in the Year 2000 Placement, by (2) the aggregate total
number of Units purchased by all investors in the Year 2000 Placement who agree
to the sales restrictions described above (the "Contracting Unit Investors").
Notwithstanding the foregoing, if the aggregate number of Units purchased in the
Year 2000 Placement by the Contracting Unit Investors is less than 90 percent of
the total number of Units purchased in the Year 2000 Placement by all investors
in the Year 2000 Placement, then "Pro Rata Share" shall instead mean the
percentage obtained by dividing (X) the number of Units purchased by the subject
Unit Investor in the Year 2000 Placement, by (Z) 90 percent of the aggregate
number of Units purchased by all investors in the Year 2000 Placement.

As of September 30, 2001 holders representing an aggregate of 13,062,000 Units
had agreed to participate in Alternative A and were issued 4,354,003 shares of
common stock and holders representing an aggregate of 1,148,000 Units had agreed
to participate in Alternative B.

F-7

The Company sold 5,000,000 shares of restricted common stock at $.20 per share
in a private placement offering through September 2001 from which it received
gross cash proceeds of $1,000,000. Related offering expenses were $22,000.

The Company sold 754,545 shares of restricted common stock at $.165 per share in
a private placement offering through June 30, 2002 from which it received gross
cash proceeds of $124,500. Offering costs associated with this private placement
offering were $4,100. Within 30 days following the filing with the SEC of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2001, the
Company was obligated to file a registration statement covering the resale of
these shares. This registration statement is intended to be filed with the SEC
by August 31, 2002.

In January 2002 the Company exercised its option to repurchase the remaining
500,000 shares from the McConnell litigation settlement for $75,000.

In March 2002, the Company issued 200,000 shares of restricted common stock for
consulting services valued at $34,000.

In the second quarter of 2002 the Company recorded the issuance of 13,945 shares
of common stock to directors for outstanding obligations for accrued directors
fees in the amount of $6,400.

Note 7. Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 also establishes
specific criteria for the recognition of intangible assets separately from
goodwill and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain, rather than deferred and amortized. SFAS
142 changes the accounting for goodwill and other intangible assets after an
acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and
intangible assets with indefinite lives will no longer be amortized; 2) goodwill
and intangible assets with indefinite lives must be tested for impairment at
least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years. SFAS 142 is effective for fiscal
years beginning after December 15, 2001 and as such the Company adopted SFAS 142
effective January 1, 2002. The adoption of Statement SFAS 141 did not have any
impact on the Company's financial position or cash flows.

In accordance with SFAS No. 142, the Company discontinued the amortization of
goodwill effective January 1, 2002. Additionally, under the new accounting
standard, goodwill and other intangible assets will be tested differently than
prior to the adoption of SFAS No. 142. The Company is required to perform these
impairment tests on an annual basis and has performed the transitional
impairment test required upon adoption of SFAS No. 142, using certain valuation
techniques, and has determined that no impairment exists at this time. It is
possible but not predictable that a change in the Company's wireless business,
market capitalization, operating results or other factors could affect the
carrying value of goodwill or other intangible assets and cause an impairment
write-off. As of June 30, 2002 the Company has approximately $10.8 million of
goodwill and other intangible assets subject to SFAS No. 142. Results of
operations prior to the adoption of SFAS No. 142 are not restated.

F-8

The following reconciles the reported net income (loss) and earnings (loss) per
share to that which would have resulted had SFAS No.142 been applied to the
three months and six months ended June 30, 2001.

Three Months Six Months
Ended June 30, Ended June 30,
2001 2001

Reported net loss $( 84,000) $(873,000)
Add: Goodwill amortization, net of tax 248,000 498,000
--------- ---------
Adjusted net income (loss) $ 164,000 $(375,000)
========= =========

Reported basic loss per share $ (.001) $ (.006)
Add: Goodwill amortization, net of tax,
per basic share
.002 .003
--------- ---------
Adjusted basic income (loss) per share $ .001 $ (.003)
========= =========

In June 2001, the FASB also approved for issuance SFAS 143 "Asset Retirement
Obligations." SFAS 143 establishes accounting requirements for retirement
obligations associated with tangible long-lived assets, including (1) the timing
of the liability recognition, (2) initial measurement of the liability, (3)
allocation of asset retirement cost to expense, (4) subsequent measurement of
the liability and (5) financial statement disclosures. SFAS 143 requires that an
asset retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method. The Company will adopt the statement effective no later than
January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. The Company does not believe that the adoption of this
statement will have a material effect on its financial position, results of
operations, or cash flows.

In October 2001, the FASB also approved SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
new accounting model for long-lived assets to be disposed of by sale applies to
all long-lived assets, including discontinued operations, and replaces the
provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, for the disposal of segments of
a business. Statement 144 requires that those long-lived assets be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured at net realizable value or include amounts
for operating losses that have not yet occurred. Statement 144 also broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. The Company adopted the provisions of Statement 144 effective
January 1, 2002 and the adoption did not have a material effect on its financial
position, results of operations, or cash flows.

F-9

various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The Company does not expect the implementation of SFAS
No. 145 to have a material impact on its financial condition or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003. The Company does not anticipate a significant impact on its
results of operations from adopting this Statement.

Note 8. Industry Segment Information

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," requires that the Company disclose certain information about its
operating segments where operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and deciding how to allocate resources to
segments.

The Company has three reportable segments that are separate business units that
offer different products as follows: distribution of wireless communication
products, antenna design and manufacturing, and cable products. Each segment
consists of a single operating unit and the accounting policies of the reporting
segments are the same as those described in the summary of significant
accounting policies. Intersegment sales and transfers are recorded at cost plus
an agreed upon intercompany profit on intersegment sales and transfers.

Financial information regarding the Company's three operating segments for the
six months ended June 30, 2002 and 2001 are as follows:

June
30 Distribution Manufacturing Cable Corporate Total
-- ------------ ------------- ----- --------- -----

Net Sales 2002 $11,987,000 $ 3,741,000 $ 285,000 $ (56,000) $15,957,000
2001 $14,000,000 $ 1,305,000 $ 841,000 $ (79,000) $16,067,000

Net Earnings 2002 $ 123,000 $ 515,000 $ (54,000) $ 21,000 $ 605,000
(Loss) 2001 $ 397,000 $ (130,000) $ (243,000) $ (897,000) $ (873,000)

Earnings (Loss)
before Income 2002 $ 162,000 $ 515,000 $ (54,000) $ 21,000 $ 644,000
Taxes 2001 $ 405,000 $ (130,000) $ (243,000) $ (897,000) $ (865,000)

Identifiable 2002 $22,025,000 $ 4,242,000 $ 400,000 $(1,834,000) $24,833,000
Assets 2001 $20,244,000 $ 2,772,000 $3,245,000 $ (684,000) $25,577,000

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

F-10

Note 9. Critical Accounting Policies

The Company's significant accounting policies are summarized in Note 1 of its
consolidated financial statements on Form 10-KSB. The preparation of financial
statements requires management to make estimates and assumptions that affect
amounts reported therein, including estimates about the effects of matters or
future events that are inherently uncertain. Policies determined to be critical
are those that have the most significant impact on the Company's financial
statements and require management to use a greater degree of judgment and/or
estimates. Actual results may differ from these estimates under different
assumptions or conditions.

On an on-going basis, management evaluates its estimates and judgments,
including those related to allowance for doubtful accounts, inventory valuations
and recoverability of intangible assets, including goodwill. Management bases
its estimates and judgments on historical experience and on various other
factors that are also believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent form other sources. Our
major operating assets are trade and vendor accounts receivable, inventory,
property and equipment and intangible assets. Our reserve for doubtful accounts
of $1,084,000 should be adequate for any exposure to loss in our accounts
receivable as of June 30, 2002. We have also established reserves for slow
moving and obsolete inventories and believe the current reserve of $309,000 is
adequate. We depreciate our property and equipment over their estimated useful
lives and we have not identified any items that are impaired.

F-11

Reports of Independent Auditors

The Board of Directors and Stockholders
ARC Wireless Solutions, Inc.

We have audited the accompanying consolidated balance sheet of ARC Wireless
Solutions, Inc. as of December 31, 2001 and the related consolidated statement
of operations, changes in stockholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ARC Wireless
Solutions, Inc. at December 31, 2001 and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ Hein + Associates LLP
-----------------------------
Hein + Associates LLP

Denver, Colorado
February 28, 2002

F-12

The Board of Directors and Stockholders
ARC Wireless Solutions, Inc.

We have audited the accompanying consolidated balance sheet of ARC Wireless
Solutions, Inc. as of December 31, 2000 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ARC Wireless
Solutions, Inc. at December 31, 2000 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ Ernst & Young LLP
-----------------------------
Ernst & Young LLP

Denver, Colorado
March 2, 2001

F-13

ARC Wireless Solutions, Inc.
Consolidated Balance Sheets

(Shares and amounts in thousands except per share amounts)

December 31,
2001 2000
-------- --------
Assets
Current assets:

Cash $ 345 $ 1,078
Restricted cash -- 344
Accounts receivable trade, net of allowance for doubtful accounts
of $999 and $541, respectively 4,687 4,021
Accounts receivable vendors 1,214 214
Inventory, net 5,938 4,733
Other current assets 117 383
-------- --------
Total current assets 12,301 10,773

Property and equipment, net 729 509

Other assets:
Intangible assets, net 10,907 14,357
Other assets 64 50
-------- --------
Total assets $ 24,001 $ 25,689
======== ========

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 5,273 $ 5,904
Bank line of credit - current 925 313
Accrued expenses 503 508
Current portion of capital lease obligations 11 9
-------- --------
Total current liabilities 6,712 6,734

Capital lease obligations, less current portion 21 2
Bank line of credit, less current portion 2,621 1,498
-------- --------
Total liabilities 9,354 8,234
-------- --------

Commitments (Notes 4, 7,8 and 10)
Stockholders' equity: (Note 3)
Common stock, par value $.0005;
250,000 shares authorized; 154,304 and
142,891 shares issued, respectively 77 71
Preferred stock, par value $.001;
2,000 shares authorized; no shares issued and outstanding -- --
Additional paid-in capital 21,522 18,918
Common stock reserved (1,959 shares) -- 1,500
Treasury stock (1,459 shares) (1,117)
Accumulated deficit (5,835) (3,034)
-------- --------
Total stockholders' equity 14,647 17,455
-------- --------
Total liabilities and stockholders' equity $ 24,001 $ 25,689
======== ========

See accompanying notes to consolidated financial statements.

F-14

ARC Wireless Solutions, Inc.
Consolidated Statements of Operations
(Shares and amounts in thousands except per share amounts)

Years Ended December 31,
2001 2000
--------- ---------

Sales, net $ 30,940 $ 18,480
Cost of sales 24,886 15,626
--------- ---------
Gross profit 6,054 2,854

Operating expenses:
Selling, general and administrative expenses 6,388 4,225
Impairment write down 1,257 --
Amortization of intangibles 1,020 534
--------- ---------
Total operating expenses 8,665 4,759
--------- ---------
Loss from operations (2,611) (1,905)

Other income (expense):
Interest expense, net (241) (98)
Other income 169 169
--------- ---------
Total other income (expense) (72) 71
--------- ---------

Loss before income taxes (2,683) (1,834)
Provision for income taxes 118 7
--------- ---------
Net loss $ (2,801) $ (1,841)
========= =========

Basic and diluted loss per share $ (.019) $ (0.015)
========= =========

Weighted average shares outstanding 148,568 125,229
========= =========

See accompanying notes to consolidated financials statements.

F-15

ARC Wireless Solutions, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(Shares and amounts in thousands except per share amounts)

Common Stock Common Additional
------------------- Stock Paid in Treasury Accumulated
Shares Amount Reserved Capital Stock Deficit Total
-------- -------- -------- -------- -------- -------- --------

Balances, January 1, 2000 95,090 $ 47 $ -- $ 1,892 $ -- $ (1,193) $ 746

Issuance of common stock and warrants 36,544 18 -- 10,900 -- -- 10,918
in private placement transactions,
net of expenses of $69
Issuance of common stock in connection 6,946 3 -- 5,997 -- -- 6,000
with Winncom acquisition
Cashless exercise of warrants and stock 3,411 2 -- (2) -- -- --
options
Exercise of stock options for cash 900 1 -- 38 -- -- 39
Common stock reserved in connection
with Starworks acquisition (1,959 -- -- 1,500 -- -- -- 1,500
shares)
Issuance of stock options for services -- -- -- 92 -- -- 92
Issuance of common stock for directors' -- -- -- 1 -- -- 1
fees
Net loss -- -- -- -- -- (1,841) (1,841)
-------- -------- -------- -------- -------- -------- --------
Balances, December 31, 2000 142,891 71 1,500 18,918 -- (3,034) 17,455

Common stock issued in a private 5,000 3 -- 975 -- -- 978
placement transaction, net of expenses
of $22
Common stock issued in connection with 1,959 1 (1,500) 1,499 -- -- _
Starworks acquisition (1,959 shares)
Common stock returned in connection -- -- -- -- (1,117) -- (1,117)
with settlement of Starworks
litigation (1,459 shares)
Common stock issued upon exercise of 100 -- -- 6 -- -- 6
options
Common stock issued for directors' fees -- -- -- 4 -- -- 4
Common stock issued in exchange for 4,354 2 -- (2) -- -- --
warrants
Issuance of common stock options -- -- -- 122 -- -- 122
Net loss -- -- -- -- -- (2,801) (2,801)
-------- -------- -------- -------- -------- -------- --------
Balances, December 31, 2001 154,304 $ 77 -- $ 21,522 $ (1,117) $ (5,835) $ 14,647
======== ======== ======== ======== ======== ======== ========

See accompanying notes to consolidated financial statements.

F-16

ARC Wireless Solutions, Inc.
Consolidated Statements of Cash Flows
(Shares and amounts in thousands except per share amounts)

Year Ended December 31,
2001 2000
-------- --------

Operating activities

Net loss $ (2,801) $ (1,841)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,260 678
Provision for doubtful receivables 459 366
Non-cash expense for issuance of stock and options 126 93
Impairment write-down 1,257 --
Changes in operating assets and liabilities:
Restricted cash 344 (311)
Accounts receivable, trade and vendor (2,125) (1,709)
Inventory (619) (2,311)
Other current assets 266 (368)
Accounts payable and accrued expenses (634) 2,631
Other 74 (36)
-------- --------
Net cash used in operating activities (2,393) (2,808)

Investing activities
Patent acquisition costs (25) (35)
Acquisition of businesses, net of cash acquired -- (7,309)
Acquisition of certain commercial assets (826) --
Purchase of property and equipment (193) (213)
-------- --------
Net cash used in investing activities (1,044) (7,557)

Financing activities
Repayment of notes payable - others and capital lease obligations (15) (276)
Proceeds from private placement, including warrant exercises, net 978 10,918
Proceeds from exercise of options, net 6 39
Repayment of notes payable - officers -- (33)
Net borrowings under line of credit agreements 1,735 617
-------- --------
Net cash provided by financing activities 2,704 11,265
-------- --------

Net increase (decrease) in cash (733) 900
Cash, beginning of period 1,078 178
-------- --------
Cash, end of period $ 345 $ 1,078
======== ========

Supplemental disclosure of cash flow information:
Cash paid for interest $ 241 $ 95
Cash paid for taxes 55 --
Supplemental schedule of non-cash investing and financing
activities:
Acquisition of stock in exercise of warrants and options for
issuance of newly issued shares of common stock $ -- $ 562
Purchase of assets under capital lease financing 36 --

See accompanying notes to consolidated financial statements.

F-17

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies

Organization

The Company was organized under the laws of the State of Utah on September 30,
1987 for the purpose of acquiring one or more businesses, under the name of
Westflag Corporation, which was formerly Westcliff Corporation. In January 1989,
the Company completed its initial public offering.

In 1989, the Company merged with Antennas America, Inc., a Colorado corporation
that had been formed in September 1988. Pursuant to the merger, all the issued
and outstanding stock of Antennas America, Inc. was converted into 41,952
shares, and the Company name was changed to Antennas America, Inc. At the annual
shareholders meeting held on October 11, 2000, the shareholders voted to change
the Company's name to ARC Wireless Solutions, Inc. from Antennas America, Inc.
The Wireless Communications Products Division designs, develops, markets and
sells a diversified line of antennas and related wireless communication systems,
including base station panel antennas, conformal and phased array antennas,
distributed primarily through third party OEMs and distributors located in the
United States.

On May 24, 2000, the Company purchased, through its subsidiary, Winncom
Technologies, Corp. ("Winncom"), the outstanding shares of Winncom Technologies,
Inc. Winncom specializes in marketing, distribution and service, as well as
selected design, manufacturing and installation of wireless component and
network solutions in support of both voice and data applications, primarily
through third party distributors located in the United States. The acquisition
has been accounted for as a purchase, and accordingly, the operations for
Winncom have been included in the Company's consolidated statement of operations
from May 24, 2000 (the date of acquisition) forward. (See Note 4)

On September 29, 2000, the Company purchased, through its subsidiary, Starworks
Wireless Inc. ("Starworks"), the outstanding shares of Starworks Technology,
Inc. (a/k/a The Kit Company). Starworks specializes in the design,
manufacturing, marketing, distribution and service of direct-to-home dish
satellite installation kits in the United States, primarily through OEMs and
third-party distributors, retailers and the Internet. The acquisition has been
accounted for as a purchase and accordingly, the operations for Starworks have
been included in the Company's consolidated statement of operations from
September 29, 2000 (the date of acquisition) forward.

Consolidation

The accompanying consolidated financial statements include the accounts of ARC
Wireless Solutions, Inc. ("ARC"), and its wholly-owned subsidiary corporations,
Winncom Technologies Corp. ("Winncom") and Starworks Wireless Inc. ("Kit"),
since their respective acquisition dates, after elimination of all material
intercompany accounts, transactions, and profits.

F-18

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

Inventory

Inventory is valued at the lower of cost or market using standard costs that
approximate average cost. Inventories are reviewed periodically and items
considered to be slow moving or obsolete are reduced to estimated net realizable
value through an appropriate reserve. Inventory consists of the following at
December 31:

2001 2000
------- -------
Raw materials $ 1,352 $ 763
Work in progress 150 128
Finished goods 4,738 3,974
------- -------
6,240 4,865
Inventory reserve (302) (132)
------- -------
Net inventory $ 5,938 $ 4,733
======= =======

Property and Equipment

Property and equipment are stated at acquired cost. The Company uses the
straight-line method over estimated useful lives of three to seven years to
compute depreciation for financial reporting purposes and accelerated methods
for income tax purposes. Leasehold improvements and leased equipment are
amortized over the lesser of the estimated useful lives or over the term of the
leases. Upon sale or retirement, the cost and related accumulated depreciation
of disposed assets are eliminated from the respective accounts and the resulting
gain or loss is included in the statements of income. Property and equipment
consist of the following at December 31:

2001 2000
------- -------
Machinery and equipment $ 852 $ 522
Computer equipment and software 323 261
Furniture and fixtures 173 138
Leasehold improvements 76 53
------- -------
1424 974
Accumulated depreciation (695) (465)
------- -------
$ 729 $ 509
======= =======

Depreciation expense, which includes amortization of fixed assets acquired
through capital leases, amounted to $234 and $138 during the years ended
December 31, 2001 and 2000, respectively.

Patent Costs

Patent costs are stated at cost and amortized over ten years using the
straight-line method. Patent amortization expense amounted to $11 and $6 for the
years ended December 31, 2001 and 2000, respectively.

F-19

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

Intangible Assets

Intangible assets consist principally of purchased intangible assets and the
excess acquisition cost over the fair value of tangible and identified
intangible net assets of businesses acquired (goodwill). Purchased intangible
assets include developed technology, trademarks and trade names, assembled
workforces and distribution network. The Company continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of
future cash flows expected to result from the use of the assets in comparison
with the assets carrying amount in deciding whether the goodwill is recoverable.
Intangible assets are being amortized using the straight-line method over
estimated useful lives ranging from 5 to 15 years.

2001 2000
---- ----

Patents $ 149 $ 132
Assembled workforce 125 125
Distribution network 150 150
Goodwill 11,888 14,547
------- -------
12,312 14,954
Accumulated amortization (1,405) (597)
------- -------
Intangible assets, net $10,907 $14,357
======= =======

Fourth Quarter Adjustment

During the fourth quarter of 2001, the Company recorded the following year-end
adjustments, which it believes are material to the results of that quarter.
Goodwill was determined to be impaired because of the uncertainty of the current
financial and operating condition of Starworks and the possibility that
Starworks may be unable to generate future operating income in its legacy
business without the transformation of Starworks into a conventional cable
business.

2001
----
Impairment write down of goodwill associated with Starworks acquisition $1,257

Long-lived Assets

The carrying value of long-lived assets are reviewed annually; if at any time
the facts or circumstances at any of the Company's individual subsidiaries
indicate impairment of long-lived asset values, as a result of a continual
decline in performance or as a result of fundamental changes in a subsidiary's
market, a determination is made as to whether the carrying value of the
property's long-lived assets exceeds estimated realizable value.

F-20

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

Research and Development

Research and development costs are charged to expense as incurred. Such expenses
were $205 and $198, respectively, for the years ended December 31, 2001 and
2000.

Revenue

Revenue is recorded when goods are shipped. The Company has established reserves
for anticipated sales returns based on historical return percentages as well as
specific identification and reserve of potential problem accounts. The Company
has several major commercial customers who incorporate the Company's products
into other manufactured goods, and returns from these customers have not been
significant. Additionally, returns related to retail sales have been immaterial
and within management's expectations.

Cash

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash. From time to time the
Company has cash balances in excess of Federally Insured amounts.

Restricted Cash

The Company had established a $300 standby letter of credit that guarantees
payment for coaxial cable imported from China. The letter of credit was
guaranteed by a certificate of deposit in the amount of $300 that matured on
November 7, 2001 and had an annual percentage yield of 6.34%. The Letter of
Credit expired on November 7, 2001 and was not renewed. The Company also had
restricted cash under a revolving bank loan agreement that terminated in
February 2001(Note 2).

Fair Value of Financial Instruments

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

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

Estimates

The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.

F-21

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

Basis of Presentation

The Company has experienced recurring losses, and has accumulated a deficit of
$5.8 million since inception in 1989. During 2001, the Company was able to
increase sales, increase gross margin and decrease SG&A expenses as a percentage
of revenues. There can be no assurance however that the Company will achieve the
desired result of positive cash flow from operations. Management believes that
current working capital and available borrowings on existing bank lines of
credit, together with additional equity infusions that management believes would
be available, will be sufficient to allow the Company to maintain its operations
through December 31, 2002.

Advertising Costs

Advertising costs are charged to operations when the advertising is first shown.
Advertising costs charged to operations were $48 and $145 in 2001 and 2000,
respectively.

Net Income Per Common Share

As of December 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 provides for the
calculation of "Basic" and "Dilutive" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect the potential dilution of
securities that could share in the earnings of the entity. For the years ended
December 31, 2001 and 2000, the Company incurred net losses and stock options
and stock warrants, totaling 6,598 and 12,570, respectively, were not included
in the computation of diluted loss per share because their effect was
anti-dilutive; therefore, basic and fully diluted loss per share are the same
for those years.

Stock Option Plans

The Company applies Accounting Principles Board ("APB") Opinion 25, "Accounting
for Stock Issued to Employees," and the related interpretations in accounting
for all stock option plans. Under APB Opinion 25, no compensation cost has been
recognized for stock options issued to employees as the exercise price of the
Company's stock options granted equals or exceeds the market price of the
underlying common stock on the date of grant. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
requires the Company to provide pro forma information regarding net income as if
compensation cost for the Company's stock options plans had been determined in
accordance with the fair value based method prescribed in SFAS No. 123. To
provide the required pro forma information, the Company estimates the fair value
of each stock option at the grant date by using the Black-Scholes option-pricing
model.

F-22

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

Reclassifications

Certain balances in the prior year consolidated financial statements have been
reclassified in order to conform to the current year presentation. The
reclassifications had no effect on financial condition or results of operations.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 also establishes
specific criteria for the recognition of intangible assets separately from
goodwill and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain, rather than deferred and amortized. SFAS
142 changes the accounting for goodwill and other intangible assets after an
acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and
intangible assets with indefinite lives will no longer be amortized; 2) goodwill
and intangible assets with indefinite lives must be tested for impairment at
least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years. SFAS 142 is effective for fiscal
years beginning after December 15, 2001, with early application permitted in
certain circumstances. The Company believes that the adoption of SFAS 142 will
have a material effect on its financial position, results of operations and cash
flows. At this time, the Company estimates that the effect of the adoption of
Statement SFAS 142 will reduce operating expenses by approximately $836 as a
result of reducing amortization of purchased intangibles. The adoption of
Statement SFAS 141 is not expected to have any impact on the Company's financial
position or cash flows.

In June 2001, the FASB also approved for issuance SFAS 143 "Asset Retirement
Obligations ("SFAS 143")." SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires that an asset retirement cost should be capitalized as part of the cost
of the related long-lived asset and subsequently allocated to expense using a
systematic and rational method. The Company will adopt the statement effective
no later than January 1, 2003, as required. The transition adjustment resulting
from the adoption of SFAS 143 will be reported as a cumulative effect of a
change in accounting principle. The Company does not believe that the adoption
of this statement will have a material effect on its financial position, results
of operations, or cash flows.

F-23

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

1. Organization and Summary of Significant Accounting Policies, continued

and replaces the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, for the
disposal of segments of a business. SFAS 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFAS
144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. The provisions of SFAS 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001
and, generally, are to be applied prospectively. The Company does not believe
that the adoption of this statement will have a material effect on its financial
position, results of operations, or cash flows.

2. Revolving Bank Loan Agreements and Notes Payable

In conjunction with the acquisition of Starworks Technology, Inc. on September
29, 2000, the Company assumed a $1,500 revolving bank loan agreement. The
agreement was collateralized by accounts receivable and restricted cash
maintained in a non-collection reserve account as discussed below. In connection
with the agreement, the Company assigned Starworks' accounts receivable to the
bank for collection by the bank. In February 2001 the revolving bank loan
agreement was terminated by the Company and all balances outstanding under the
bank loan agreement were paid. At December 31, 2001 and 2000, $0 and $308,
respectively were outstanding under this arrangement.

The amounts advanced under the terms of the agreement were equivalent to the
gross amount of the accounts receivable assigned, net of a one-time bank service
charge of 2.65% and a reserve for non-collection of 10%. The service charge was
adjusted on a quarterly basis and may be adjusted to 3.15% based on the average
collection period of the accounts receivable. Total service charges under the
agreement were approximately $22 from the date of acquisition on September 29,
2000 through December 31, 2000 and $14 for 2001.

The amount of the required non-collection reserve was calculated based on the
age of the specific invoices assigned. The non-collection reserve had been
established in the form of an interest-bearing restricted cash account.
Restricted cash in connection with this arrangement totaled $44 at December 31,
2000.

In conjunction with the acquisition of Winncom Technologies, Inc. on May 24,
2000, the Company assumed a $1,500 revolving line of credit from a bank bearing
an interest rate of prime plus 0.5% (5.5% at December 31, 2001 and 10.0% at
December 31, 2000). The line is collateralized by accounts receivable, inventory
and otherwise unencumbered fixed assets of Winncom. ARC is a general corporate
guarantor of this loan. On November 27, 2000 the line was increased to $3,000 of
which, $2,621 was outstanding at December 31, 2001 and $1,498 was outstanding
under the agreement at December 31, 2000. This agreement expires in April 2003,
at which time all borrowings are due in full in the event the line is not
renewed.

F-24

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

2. Revolving Bank Loan Agreements and Notes Payable, continued

In connection with the acquisition of the Ball Assets in August 2001 Winncom
established a new line of credit in the amount of $1 million bearing an interest
rate of prime plus 0.5% (5.5% at December 31, 2001). This line is also
collateralized by accounts receivable, inventory and otherwise unencumbered
fixed assets of Winncom. ARC is a general corporate guarantor of this loan. As
of December 31, 2001 $925 was outstanding under this line of credit. This
balance due under this letter of credit was due July 31, 2002. The Company is
currently negotiating with the bank to convert this line of credit, currently
due, to a long-term credit facility.

Also in conjunction with the acquisition of Winncom Technologies, Inc. on May
24, 2000, the Company assumed a $6 payroll account overdraft protection facility
with a bank, of which $5 was outstanding under the facility at December 31,
2000.

Revolving bank lines of credit and notes payable to others at December 31, 2001
and 2000 consist of:

2001 2000
------- -------
Bank line of credit - Starworks $ -- $ 308
Bank lines of credit - Winncom 3,546 1,503
------- -------
3,546 1,811
Less current portion (925) (313)
------- -------
$ 2,621 $ 1,498
======= =======

3. Stockholders' Equity

In January 2000, we completed a private placement offering of 22,000 units, with
each unit consisting of one share of our restricted common stock and one
redeemable common stock purchase warrant to purchase one share of our common
stock, receiving proceeds of $1,034 in 1999 and $121 in 2000. Each unit entitled
the holder to purchase one share of common stock at an exercise price of $.175
per share and became exercisable on March 14, 2000, the date a registration
statement on Form SB-2 relating to the resale of the common stock sold in the
private placement and of the common stock underlying the warrants was declared
effective by the Securities and Exchange Commission. The holders of 19,235
warrants exercised their warrants in 2000 and the Company received gross
proceeds of approximately $3,400. Total proceeds received in 2000 from the sale
of units and exercise of warrants was approximately $3,400, net of related
offering expenses of approximately $51.

In March 2000, as approved by the Board of Directors, an officer/director, a
former officer/director and one other director, exercised 2,765 warrants,
acquired in a private placement, with an exercise price of $484 by exchanging
219 previously owned shares of the Company's common stock valued at $484. The
value of the 219 shares of common stock received by the Company in this
transaction was based on the average closing price of the Company's common stock
on the five trading days prior to the transaction, which was $2.2062. Also in
March 2000, a director of the Company used previously owned common stock, valued
at $78, to exercise 900 common stock options with an aggregate exercise price of
$78. Based on the same average closing price as used in the warrant exercise
transaction previously noted, a total of 35 shares of previously owned common
stock were exchanged as payment of the exercise price for the 900 common stock
options. The Company received a total of 255 shares of common stock from these
two cashless exercises. The common stock received was recorded as treasury stock
then retired.

F-25

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

3. Stockholders' Equity, continued

The Company also completed a second private placement offering in October 2000.
This transaction provided for the issuance of up to 16,000 units, with each unit
consisting of one share of restricted common stock at a price of $0.50 per share
plus one redeemable common stock purchase warrant to purchase one share of
common stock at an exercise price of $1.50 per share. The warrants are
exercisable immediately and expire upon the earlier of one year from the date of
registration of the underlying securities or five years from the date of
offering. The Company sold 15,000 units in this private placement, from which
the Company received gross cash proceeds of $7,500, all of which occurred during
2000. Related offering expenses were $18 in 2000 and $5 in 2001.

In July 2001, the Company offered each Unit Investor the opportunity to either
(1) exchange each three Warrants for one share of Common Stock ("Alternative
A"), or (2) reduce the exercise price of each Warrant from $1.50 per share to
$1.00 per share upon the Unit Investor's agreement to reduce the price
associated with the Company's 30-day notice of redemption from $1.75 to $1.50
("Alternative B"); provided, however, that if the Unit Investor determined to
participate in either Alternative A or B, the Unit Investor was required to
waive the Company's obligation to register the Unit Investor's sale or other
transfer of the Registrable Securities (the "Registration Obligation").

o On any trading day during the one-year period beginning on the day
Alternative A goes into effect (which was August 9, 2001), the Unit
Investor may sell or otherwise dispose of up to the Pro Rata Share, as
defined below, for that Unit Investor, of (i) 15 percent of the
reported trading volume of the Common Stock for the immediately
preceding trading day if the reported trading volume of the Common
Stock for the prior trading day was 400 shares or less, or (ii) 20
percent of the reported trading volume of the Common Stock for the
immediately preceding trading day if the reported trading volume of
the Common Stock for the prior trading day was greater than 400
shares; and

o On any trading day during the one-year period between the first and
second anniversaries of the effective date of Alternative A, the Unit
Investor may sell or otherwise dispose of up to the Pro Rata Share for
that Unit Investor of (i) 20 percent of the reported trading volume of
the Common Stock for the immediately preceding trading day if the
reported trading volume of the Common Stock for the prior trading day
was 400 shares or less, or (ii) 25 percent of the reported trading
volume of the Common Stock for the immediately preceding trading day
if the reported trading volume of the Common Stock for the prior
trading day was greater than 400 shares.

F-26

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

3. Stockholders' Equity, continued

The number of shares of Common Stock that the Unit Investor may sell shall not
be increased as a result of any failure by the Unit Investor to sell the maximum
number of Unit Investor Shares permissible at a prior time.

For purposes of Alternative A, the "Pro Rata Share" of any Unit Investor means
the percentage obtained by dividing (1) the number of Units purchased by the
subject Unit Investor in the Year 2000 Placement, by (2) the aggregate total
number of Units purchased by all investors in the Year 2000 Placement who agree
to the sales restrictions described above (the "Contracting Unit Investors").
Notwithstanding the foregoing, if the aggregate number of Units purchased in the
Year 2000 Placement by the Contracting Unit Investors is less than 90 percent of
the total number of Units purchased in the Year 2000 Placement by all investors
in the Year 2000 Placement, then "Pro Rata Share" shall instead mean the
percentage obtained by dividing (X) the number of Units purchased by the subject
Unit Investor in the Year 2000 Placement, by (Z) 90 percent of the aggregate
number of Units purchased by all investors in the Year 2000 Placement.

As of December 31, 2001 holders representing an aggregate of 13,062 Units had
agreed to participate in Alternative A and were issued 4,354 shares of common
stock, holders representing an aggregate of 1,148 Units had agreed to
participate in Alternative B and holders representing an aggregate of 790 units
elected not to participate in Alternative A or B.

The Company sold 5,000 shares of restricted common stock at $.20 per share in a
private placement offering through September 2001 from which it received gross
cash proceeds of $1,000. Related offering expenses were $22.

In November 1997, the Board of Directors approved the Company's 1997 Stock
Option and Compensation Plan ("the Plan"). Pursuant to the Plan, the Company may
grant options to purchase an aggregate of 5,000 shares of the Company's common
stock to key employees, directors, and other persons who have or are
contributing to the success of the Company. The options granted pursuant to the
Plan may be incentive options qualifying for beneficial tax treatment for the
recipient or they may be nonqualified options. The options granted are valued at
the stock price on the date of grant and have varying exercise periods. During
2001 and 2000 the Company granted 1,560 and 2,061 options under the plan,
respectively.

Through May 24, 2000, directors who were not also employees ("Outside
Directors") automatically received options to purchase 250 shares pursuant to
the Plan at the time of their election as an Outside Director. These options
held by Outside Directors were not exercisable at the time of grant. Options to
purchase 50 shares became exercisable for each meeting of the Board of Directors
attended by each Outside Director on or after the date of grant of the options
to that Outside Director, but in no event earlier than six months following the
date of grant. The exercise price for options granted to Outside Directors was
equal to the fair market value per share of our common stock on the date of
grant. All options granted to Outside Directors expire five years after the date
of grant. On the date that all of an Outside Director's options became

F-27

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

3. Stockholders' Equity, continued

exercisable, options to purchase an additional 250 shares, which were
exercisable no earlier than six months from the date of grant, were
automatically granted to that Outside Director. On May 24, 2000, the Board of
Directors voted to (1) decrease the amount of options automatically granted to
Outside Directors from 250 to 25 options, and (2) decrease the amount of
exercisable options from 50 to 5 per meeting. The term of the Outside Director
options granted in the future was lowered from five years to two years. The
other terms of the Outside Director options did not change. On July 5, 2002, the
Board of Directors voted to (1) increase the amount of options automatically
granted to Outside Directors from 25 to 125 options, and (2) increase the amount
of exercisable options from 5 to 25 per meeting. The other terms of the Outside
Director options did not change.

The Company granted a total of 275 options to Outside Directors under the Plan
during 2000, at exercise prices from $0.89 to $1.01 per share. Outside Directors
earned $2 in meeting attendance fees (which will be paid through issuance of 27
shares in 2000) and vested 325 stock options during fiscal year ended December
31, 2000. Outside Directors earned $4 in meeting attendance fees. During 2001
and 2000, the Company granted options for 600 and 9,809 shares, respectively, of
the Company's common stock outside of the Plan. These options were granted to
former officers, with an exercise price equal to the average stock price on the
date of grant with varying exercise periods.

The following table summarizes the option activity for 2001 and 2000:

Number of Weighted Average
Shares Exercise Price ($)
------------------- -------------------
2000 Activity:

Outstanding at beginning of year 2,500 0.074
Granted 11,870 0.909
Exercised (1,300) 0.079
Forfeited or expired (500) 0.052
------------------- -------------------
Outstanding at end of year 12,570 0.921
=================== ===================
Exercisable at end of year 1,870 0.629

2001 Activity:
Outstanding at beginning of year 12,570 0.921
Granted 2,160 0.283
Exercised (100) 0.06
Forfeited or expired (9,970) 0.976
------------------- -------------------
Outstanding at end of year 4,660 0.525
=================== ===================
Exercisable at end of year 3,590 0.487
=================== ===================

F-28

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

3. Stockholders' Equity, continued

At December 31, 2001, there are 600 options exercisable from $0.06 to $0.15,
1,660 from $.21 to $.58, 970 at $0.63 to $.90, and 360 at $1.01 to $1.03. These
options expire between 2001 and 2005. The weighted average grant date fair
values of the options granted during 2001 and 2000 were $0.209 and $.868,
respectively. All option exercise prices were granted at market. The weighted
average remaining contractual life of options outstanding at the end of 2001 and
2000 were 2.02 years and 3.75 years, respectively.

In February 2001 the Company's former Chief Executive Officer and Chief
Financial Officer relinquished a combined 9,900 options granted during 2000, of
which 676 were granted under the Plan and 9,224 were granted outside of the
Plan. As part of the termination agreement the Company granted new fully vested
options for 550 shares outside of the Plan to these former employees, with an
exercise price equal to the average stock price on the date of their respective
departures. The Black-Scholes value of these non-qualified options is $122,
which the Company recognized as expense in the first quarter of 2001.

The Company has elected to follow Accounting Principles Board Opinion No., 25,
Accounting for Stock Issued to Employees (APB 25), and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123), requires use of option valuation models that were not developed for use in
valuing employee stock options. Under

APB 25, if the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Pro forma recognition regarding net loss and loss per share is required by SFAS
123, which also requires that the information be determined as if the Company
has accounted for its employee stock options under the fair value method of SFAS
123. The fair value for options was estimated at the date of grant using a
Black-Scholes option valuation model with the following assumptions used for all
options granted in 2001 and 2000: risk-free interest rate ranging from 4% to 6%,
a dividend yield of 0%, volatility factors of the expected market price of the
Company's common stock of between 1.428 to 1.509 and an expected life of one to
five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
sensitive assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

F-29

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

3. Stockholders' Equity, continued

December 31,
2001 2000
------- -------
Net loss:
As reported $(2,801) $(1,841)
Pro forma $(3,264) $(2,692)
Loss per share:
As reported $ (.019) $(0.015)
Pro forma $ (.022) $(0.021)

Additionally, the Company recorded $122 and $92 of expense during 2001 and 2000,
respectively related to non-employee options that were granted and vested.

4. Acquisitions

In May 2000, the Company purchased, through its subsidiary, Winncom Technologies
Corp., the outstanding shares of Winncom Technologies, Inc. The Company paid
$12,000 in aggregate consideration, consisting of $3,000 in cash, a $1,500
non-interest bearing promissory note payable 90 days from the closing date, a
$1,500 non-interest bearing promissory note payable 180 days from the closing
date and $6,000 in shares of the Company's common stock (6,946 shares). The
Company recorded $12,237 of goodwill in connection with the acquisition.

In September 2000, the Company purchased, through its subsidiary, Starworks, the
outstanding shares of Starworks Technology, Inc. The original aggregate
consideration was $3,000, consisting of $1,500 in cash (of which the Company
paid $1,000 at closing) and $1,500 in shares of the Company's common stock
(1,959 shares). The purchase agreement provided for a reduction in the cash
purchase price in the event that the audited net assets of Starworks at closing
were less than $592. Pursuant to this provision, in December 2000 the sellers
forfeited the $500 of the cash portion of the purchase price that was not paid
at closing and returned an additional $194 of cash as a result of the certified
audit of the closing balance sheet. The Company recorded $2,506 of goodwill in
connection with the acquisition.

In January 2001 in the Federal District Court in the Northern District of
Georgia, the Company commenced litigation against Mr. and Mrs. McConnell and
other parties claiming either for the transaction to be reversed or for the
McConnell's to pay damages for their alleged misrepresentations regarding the
sale of Starworks to the Company. The McConnell's also filed suit against the
Company claiming damages from the Company for alleged misrepresentations by the
Company. In December 2001, a settlement agreement was reached between the
Company and the McConnell's whereby 1,459 shares of the Company's common stock
paid to the McConnell's as part of the consideration was returned to the Company
and the Company received an option to purchase the remaining 500 shares of
common stock at $.15 per share. The Company exercised its option in January 2002
and purchased the remaining shares for $75. As a result of the 1,459 shares
being returned to the Company, goodwill has been reduced by approximately $1.1
million.

F-30

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

4. Acquisitions, continued

These acquisitions have been accounted for as purchases; accordingly, the
consolidated financial statements include the operations of the acquired
businesses from the date of each acquisition. Summarized unaudited pro forma
results of operations reflecting the acquisitions of Winncom Technologies, Inc.
and Starworks Technology, Inc. assuming acquisition as of January 1, 2000 are as
follows:

For the Year
Ended December
31
-------
2000
-------

Net sales $27,553
=======
Net loss (2,079)
=======
Loss per share $ (0.02)
=======

On August 21, 2001 the Company acquired certain commercial assets of the
wireless communications products line of Ball Aerospace & Technologies Corp.
("BATC"), a wholly owned subsidiary of Ball Corporation, for $925. The assets
acquired consist mainly of raw materials and finished goods inventory, testing
and production equipment and the purchase price has been allocated to these
specifically identifiable assets. In November 2001 the purchase price was
adjusted in accordance with the Purchase Agreement for variances in actual
assets delivered to the Company by BATC. BATC has agreed to refund to the
Company $99 pursuant to the Agreement and such refund was received subsequent to
December 31, 2001.

In accordance with the Purchase Agreement with BATC, the Company may be
obligated to purchase materials under a long-term supply contract. The contract
is for deliveries over a one-year period and is for approximately $233.

5. Income Taxes

The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Income tax credits are used to
reduce the provision for income taxes in the year in which such credits are
allowed for tax purposes. Deferred taxes are provided to reflect the income tax
effects of amounts included for financial purposes in different periods than for
tax purposes, principally accelerated depreciation for income tax purposes. Such
amounts have not been significant. Income tax expense for the years ended
December 31, 2001 and 2000 is as follows:

2001 2000
---------- ----------
Current $ 118 $ 7
Deferred - -
---------- ----------
Total $ 118 $ 7
========== ==========

F-31

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

5. Income Taxes, continued

The Company has not recorded a liability for federal income taxes payable
currently, or for deferred taxes to future periods due to the existence of
substantial net operating loss carry-forward amounts available to offset taxable
income. The components of the deferred taxes asset as of December 31 are as
follows:

2001 2000
---------- ----------
Deferred tax assets:
Net operating loss carry-forwards $ 530 $ 864
Stock option compensation 45
Inventory reserve 112 49
Accrued expenses 9 -
Bad debt reserves 371 202
---------- ----------
1,067 1,115
Deferred tax liabilities:
Prepaids (35) -
Property and equipment (54) (57)
---------- ----------
(89) (57)

Deferred tax assets 978 1,058
Valuation allowance (978) (1,058)
---------- ----------
Net deferred tax assets $ - $ -
========== ==========

A reconciliation of federal income taxes computed by multiplying pretax net loss
by the statutory rate of 34% to the provision for income taxes is as follows at
December 31:

2001 2000
--------- ---------

Tax benefit computed at statutory rate $ (912) $ (624)
State income tax 118 (49)
Valuation allowance (38) 613
Effect of permanent differences 950 113
Other - (46)
--------- ---------
Provision for income taxes (benefit) $ 118 $ 7
========= =========

As of December 31, 2001 and 2000, an evaluation of the reserve determined that
it was more likely than not that the net operating loss asset may not be
realized and therefore a valuation allowance for the full amount was recorded.
The valuation allowance for 2001 and 2000 decreased $80 and increased $620,
respectively.

The Company has a net operating loss carry-forward of approximately $1.4
million, which begin to expire from 2004 to 2015. The net operating loss
carry-forwards may be subject to further limitation pursuant to IRS section 382
and may expire unused.

F-32

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

6. Sales to Major Customers

The Company had no sales in excess of 10% of its net sales to any unrelated
parties for the year ended December 31, 2001 and 2000.

7. Significant Suppliers

During 2001, the Company purchased approximately 66% of its product from four
vendors and in 2000 the Company purchased approximately 80% of its product from
two vendors. The loss of any of these vendors could have a material adverse
impact on the operations of the Company.

8. Leases

The Company leases its facilities under operating leases through 2005. Minimum
future rentals payable under the leases are as follows:

2002 $ 395
2003 205
2004 94
2005 98
-------
$ 792
=======

Rent expense was $459 and $292 for the years ended December 31, 2001 and 2000,
respectively.

Property, plant and equipment includes the following amounts for leases that
have been capitalized at December 31, 2001 and December 31, 2000.

December 31, December 31,
2001 2000

Machinery and Equipment $ 39 $ 6
Computers and Software 42 39
Furniture and Fixtures 20 20
---- ----
101 65
Less accumulated amortization 50) (38)
---- ----
$ 51 $ 27
==== ====

The Compamortization expense of $12 on assets recorded under
capitalized leases for 2001 and 2000. Future minimum lease payments under
capital leases are as follows at December 31, 2001:

2002 $ 17
2003 15
2004 5
----
Total minimum lease payments 37
Amount representing interest (5)
----
Present value of lease payments $ 32
====

F-33

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

9. Defined Contribution Plan

In November 1999, the Board of Directors approved the establishment of the
Antennas America, Inc. 401(k) Plan for employee contributions effective January
1, 2000. The name of the Plan was subsequently changed to the ARC Wireless
Solutions, Inc. 401(k) Plan. The Plan allows for discretionary matching in
Company common stock of employee contributions by the Company if the Company has
a profit for the preceding year. The Company made no contributions to the Plan
for fiscal years 2001 or 2000.

10. Commitments

Effective, January 8, 2001, Mr. Marx entered into a one-year employment
agreement with total annual compensation of $175. Effective February 12, 2001,
Mr. Marx replaced Glenn A. Befort as Chief Executive Officer of the Company.

The Company entered into a written employment agreement with Gregory E. Raskin,
President of our Winncom subsidiary, effective May 24, 2000. The employment
agreement is for the period May 24, 2000 through May 31, 2002, at an annual base
salary of $250. Mr. Raskin also is eligible to earn bonuses of up to $500 over
the term of the agreement, based on Winncom's periodic attainment of certain
revenues and earnings objectives. Mr. Raskin earned his maximum bonus of $125 in
2000 and no bonus was earned in 2001.

The Company entered into a written employment agreement with Burton J Calloway,
Executive Vice President of the Wireless Communications Products Division,
effective May 30, 2000. The employment agreement is for the period May 30, 2000
through May 29, 2003, at an annual base salary of $100. The base salary was
adjusted to $115 effective October 1, 2001. Mr. Calloway also is eligible to
earn bonuses of 3% of net profits over $180 of the Wireless Communications
Products Division over the term of the agreement. A nominal bonus was earned for
2001.

The Company entered into a written employment agreement with Monty R. Lamirato,
our Chief Financial Officer and Treasurer, effective June 22, 2001. The
employment agreement is for the period June 22, 2001 through June 30, 2004, at
an annual base salary of $111. Mr. Lamirato also is eligible to earn bonuses of
$35 or 3% of EBITDA, whichever is greater, over the term of the agreement. No
bonus was earned for 2001.

The Company entered into a written employment agreement with Steven C. Olson,
our Chief Technology Officer, effective August 13, 2001. The employment
agreement is for the period August 13, 2001 through August 13, 2004 at an annual
base salary of $155. Mr. Olson also is eligible to earn bonuses, upon achieving
certain gross margin objectives, over the term of the agreement. No bonus was
earned for 2001.

11. Subsequent Events

In January 2002 the Company exercised its option to repurchase the remaining 500
shares from the McConnell litigation settlement for $75.

F-34

ARC Wireless Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
(Shares and Dollars in Thousands, Except Per Share Data)

13. Segment Information

The Company has three reportable segments that are separate business units that
offer different products as follows: distribution of wireless communication
products, antenna manufacturing and cable products. Each segment consists of a
single operating unit and the accounting policies of the reporting segments are
the same as those described in the summary of significant accounting policies.
Intersegment sales and transfers are recorded at cost plus an agreed upon
intercompany profit on intersegment sales and transfers.

Financial information regarding the Company's three operating segments for the
years ended December 31, 2001 and 200 are as follows:

Distribution Manufacturing Cable Corporate Total
----------------- ----------------- -------------- ------------- ------------

Net Sales 2001 $ 25,922 $ 3,917 $ 1,210 $ (109) $30,940
2000 15,343 2,609 572 (44) 18,480

Net Earnings (Loss) 2001 386 369 (1,904) (1,652) (2,801)
2000 350 (507) (99) (1,585) (1,841)

Earnings (Loss) before Income 2001 504 369 (1,904) (1,652) (2,683)
Taxes 2000 357 (507) (99) (1,585) (1,834)

Identifiable Assets 2001 20,675 4,724 531 (1,929) 24,001
2000 19,107 2,807 3,598 177 25,689

Capital Expenditures 2001 71 350 1 422
2000 69 144 213

Depreciation and Amortization 2001 877 201 182 1,260
2000 501 133 44 678

Interest Expense 2001 192 29 14 6 241
2000 70 6 22 98

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

F-35

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.

TABLE OF CONTENTS

PROSPECTUS SUMMARY 3
RISK FACTORS 4
PRICE RANGE OF COMMON STOCK 5
DIVIDEND POLICY 6
BUSINESS 6
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 14
MANAGEMENT 22
EXECUTIVE COMPENSATION 23
BENEFICIAL OWNERS OF SECURITIES 29
DESCRIPTION OF SECURITIES 32
INACTIVE TRADING OF THE COMMON
STOCK 34
SELLING SECURITY HOLDERS AND PLAN
OF DISTRIBUTION 34
SECURITIES AND EXCHANGE COMMISSION
POSITION ON CERTAIN INDEMNIFICATION 36
LEGAL MATTERS 36
EXPERTS 36
DISCLOSURE REGARDING FORWARD-
LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS 36
WHERE YOU CAN FIND MORE AVAILABLE INFORMATION 37
FINANCIAL INFORMATION F-1

ARC WIRELESS SOLUTIONS, INC.

2,184,545 Shares Of Common Stock

...................

SELLING SHAREHOLDER
PROSPECTUS
...................

October 22, 2002