UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended July 31, 2010

[   ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________

Commission file number 000-53799

NEXAIRA WIRELESS INC.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (604) 682-5629

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]  No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [   ] No [   ] 
(Not currently applicable to the Registrant)

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Nox

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 59,634,450 common shares issued and outstanding as of September 13, 2010.

INDEX

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PART I - FINANCIAL INFORMATION

Our interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

While the information presented in the accompanying interim financial statements for the quarter ended July 31, 2010 is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period. These interim financial statements follow the same accounting policies and methods of their application as the Company’s October 31, 2009 annual audited financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s October 31, 2009 annual audited financial statements.

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NEXAIRA WIRELESS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

See Accompanying Notes to Condensed Consolidated Financial Statements

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NEXAIRA WIRELESS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

See Accompanying Notes to Condensed Consolidated Financial Statements

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NEXAIRA WIRELESS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

See Accompanying Notes to Condensed Consolidated Financial Statements

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NEXAIRA WIRELESS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders’ Deficit and Comprehensive Loss
(Unaudited)

See Accompanying Notes to Condensed Consolidated Financial Statements

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NEXAIRA WIRELESS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
For the Three and Nine Months Ended July 31, 2010 and 2009
(Unaudited)

Nexaira Wireless Inc. (the “Company”), formerly known as Technology Publishing, Inc. (“TPI”), was incorporated in the State of Nevada on March 19, 2007. The Company is headquartered in Vancouver, British Columbia Canada and its principal operations are located in San Diego, California. The Company develops and distributes 3G/4G wireless broadband routing solutions, as well as communications software to wireless and wireline carriers, managed Service Providers (MSPs), Value Added Resellers (VARs) and distributors. The Company also provides customization services, marketing tools, provisioning and airtime activations based on individual customer needs. The Company is publicly traded on the Over-the-Counter Bulletin Board (OTCBB) under the symbol “NXWI” and can be found on the worldwide web at www.nexaira.com.

Effective February 19, 2010, the Registrar of Companies of the Province of British Columbia approved the continuation of Nexaira Inc. into British Columbia from the jurisdiction of Alberta. British Columbia law required that Nexaira Inc. change its name to a more descriptive one and, effective February 19, 2010 Nexaira Inc. changed its name to Nexaira Wireless (BC) Ltd. Nexaira Wireless (BC) Ltd. is a wholly owned subsidiary of the Company and its offices are located at Suite #1404, 510 West Hastings Street in Vancouver, B.C., Canada.

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management, contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position as of July 31, 2010, the results of operations for the three and nine months ended July 31, 2010 and 2009, and cash flows for the nine months ended July 31, 2010 and 2009. The balance sheet as of October 31, 2009 is derived from the Company’s audited financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto incorporated by reference in the Company's Annual Report on Form 10-K for the year ended October 31, 2009.

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009, as filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates made by management include revenue recognition estimates, the valuation of deferred income tax assets, the valuation of equity instruments, allowance for doubtful accounts, inventory obsolescence, warranty reserve, and warrants issued in connection with debt.

The functional currency of the Company’s Canadian operations is the Canadian dollar. Assets and liabilities of the Company’s Canadian operations are translated into U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average exchange rates in effect for the period. Net currency exchange gains or losses resulting from such translations are excluded from net income and are accumulated in a separate component of shareholders’ equity as accumulated other comprehensive loss. Gains and losses resulting from foreign currency, which are not significant, are included in the consolidated statements of operations.

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The accompanying condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has experienced a decline in revenues, and has negative cash flows from operations, negative working capital and capital deficits, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion.

As discussed in more detail in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2009, the Company has obtained funds from both related and unrelated parties since its inception. Management believes this funding will continue, and is also actively seeking new investors. Management believes the existing shareholders and prospective new investors will provide the additional cash needed to meet the Company's obligations as they become due, and will allow the development of its core business. The Company continues to have plans to raise $5 million within the next three months through equity financing. On November 10, 2009, $1,600,000 of debt was converted into 19,250,000 restricted shares of the Company’s common stock at a conversion price of $0.083117 per share in connection with the Share Exchange Agreement effective September 29, 2009. On February 23, 2010, the remaining $350,000 of the convertible debt was converted into 700,000 shares of common stock at a conversion price of $0.50 per share.

From November 1, 2009 to July 31, 2010, the Company has raised $1,300,000, of which $200,000 was in settlement of short term borrowings advanced in October 2009, through private equity financing. The Company has also converted a promissory note for $211,837 from a related party and $290,425 in promissory notes from third party lenders into equity. The units offered were priced at either $.50 and $1.00 with warrants priced at $1.00 and $1.50 – see Note 10 –Shareholders’ Deficit. The Company borrowed additional $1,212,000 through short term demand loan financing from both related and unrelated parties. On May 17, 2010, the Company entered into debt conversion subscription agreements whereby $21,487 included in accrued expenses and other current liabilities as of April 30, 2010 was converted into 94,001 common shares. However, there is no assurance that the Company will be successful in continuing to secure additional capital.

Fair Value of Financial Instruments

The carrying amounts for the Company’s cash, accounts payable, accrued liabilities and debt approximate fair value due to the short-term maturity of these instruments.

Revenue Recognition

The Company’s revenues comprise of the following:

• distribution of third party mobile wireless broadband, modules and router solution, as well as related accessories;

• the Company’s proprietary wireless router solutions that are integrated with the Company’s internally developed software that is essential to the functionality of the equipment; and

• customization services, marketing tools, provisioning and airtime activations based on individual customer needs.

The Company recognizes revenue, net of sales tax, in accordance with Staff Accounting Bulletin No. 104 (“SAB 104”), when all four basic criteria are met: 1) there is evidence that an arrangement exists; 2) delivery has occurred; 3) the fee is fixed or determinable; and 4) collectability is reasonably assured. In addition, the Company does not recognize revenue until all customers’ acceptance criteria have been met. The criteria are usually met at the time of product shipment, except for shipments to distributors with rights of return. The portion of revenue from shipments to distributors subject to rights of return is deferred until the agreed upon percentage of return or cancellation privileges lapse. The Company currently does not resell its internally developed software separately from its proprietary router solution. The Company considered ASC 985-605 (formerly SOP 97-2 – Software Revenue Recognition and EITF 00-21 - Revenue Arrangements with Multiple Deliverables) applied to the revenue recognition of the Company’s newly developed products sold during the three and nine months ended July 31, 2010. The Company does not currently sell its proprietary router product and internally developed software separately, and no services are provided after the product is shipped. Therefore, normal SAB 104 revenue recognition guidance applies as noted above.

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Revenue recognition relating to customization services and provisioning, while currently not significant, is recognized when services are performed.

In accordance with FASB ASC 605-45 (Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs), the Company includes shipping and handling fees billed to customers in net revenues. Amounts incurred by the Company for freight are included in cost of goods sold.

Computation of Income and Loss per Share

The Company computes income and loss per share in accordance with ASC 260, formerly SFAS No. 128, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statements of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

Concentration of Credit Risk

The Company provides products and services to a variety of customers worldwide. Concentration of credit risk with respect to revenues and trade receivables is limited due to the geographic and industry dispersion of the Company’s customer base. The Company has not experienced significant credit losses on its customer accounts. A small number of customers has typically accounted for a large percentage of the Company’s annual revenues and trade accounts receivable. Five customers accounted for 20%, 17%, 15%, 13% and 11%, respectively, of the Company’s revenues for the three months ended July 31, 2010. For the three months ended July 31, 2009, two customers accounted for 34% and 18%, respectively. For the nine months ended July 31, 2010 two customers accounted for 36% and 12%, respectively, of the Company’s revenues. Three customers accounted for 21%, 21% and 14%, respectively of the Company’s revenues for the nine months ended July 31, 2009.

Five customers accounted for 27%, 18%, 14%, 13% and 10%, respectively, of trade accounts receivable as of July 31, 2010. As of October 31, 2009, two customers accounted for 26% and 17% of outstanding trade accounts receivable.

The Company relied on two suppliers to provide 55% and 30% of total inventory purchases for the three months ended July 31, 2010. For the nine months ended July 31, 2010, the Company relied on three suppliers of 43%, 20% and 13% for inventory purchases, respectively. For the three months ended July 31, 2009, the Company relied on inventory purchases of 36%, 20%, 12%, and 12% from four suppliers, respectively. For the nine months ended July 31, 2009, the Company relied on inventory purchases of 38% and 33% from two suppliers, respectively.

Research and Development Costs

Internal costs relating to research and development costs incurred for new software products and enhancements to existing products, other than certain software development costs that qualify for capitalization, are expensed as incurred.

Software Development Costs

The Company capitalizes software development costs in accordance with ASC 985-20 (SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed). Software development costs consist of labor and overhead costs related to development of the Company’s suite of NexWare™ firmware for the Company’s suite of wireless routers. Software development costs are capitalized when technological feasibility and marketability of the related product has been established. On June 1, 2008, the Company established technological feasibility upon successful completion and testing of the Company’s first working router product pilot firmware program. Capitalized software costs will be amortized on a product-by-product basis, three to five years, beginning when the product is available for general release to customers. During the first quarter ended January 31, 2010, the Company introduced its 10 initial version of Consumer and Business Class brand of its wireless routing solutions to distributors and value added resellers (VARS) for retail sale in big box stores and on the internet. The Company began amortization of these two product classes over 5 years in November 2009. During the third quarter ended July 31, 2010, the Company introduced its second generation of Consumer and Business Class brand wireless routing solutions. The Company began amortization of these products class in July 2010. Total amortization expense included in cost of sales was $32,236 and $73,481 for the three months and nine months ended July 31, 2010, respectively. Software development costs totaling $109,374 included in the balance sheet as of July 31, 2010 relate to the development of NexWare™ Enterprise Pro products expected to be released in December 2010. Accordingly, amortization has not begun on this product to date.

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Intangible Assets

Intangible assets, consisting principally of patents and trademarks, are accounted for in accordance with ASC Subtopic 350-30, formerly known as SFAS No. 142, Goodwill and Other Intangibles. Intangible assets that have finite lives are amortized using the straight-line method over their estimated useful lives of fifteen years. Amortization expense for the three months and nine months ended July 31, 2010 was $5,363 and $14,551, respectively. No amortization expense was recorded for the three months and nine months ended July 31, 2009.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820, Fair Value Measurements to require a number of additional disclosures regarding fair value measurements. This guidance requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The guidance became effective for the Company with the reporting period beginning April 1, 2010, except for the Level 3 reconciliation disclosures that are effective for interim and annual periods beginning after December 15, 2010. Adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-14, Software (Topic 985) Certain Arrangements That Contain Software Elements – a consensus of the FASB Emerging Issues Task Force (“ASU 2009-14”). ASU 2009-14 amends the scope of software revenue guidance in FASB ASC Subtopic 985-605, Software-Revenue Recognition, to exclude tangible products containing software and non-software components that function together to deliver the product’s essential functionality and ASU No. 2009-13, Revenue Recognition (Topic 605) Multiple-Deliverable Revenue Arrangements — a consensus of the FASB EITF (“ASU 2009-13”). ASU 2009-13 eliminates the residual method of allocation and requires the relative selling price method when allocating deliverables of a multiple-deliverable revenue arrangement. ASU 2009-13 specifies the best estimate of a selling price is consistent with that used to determine the price to sell the deliverable on a standalone basis. ASU 2009-14 and ASU 2009-13 are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, and must be adopted in the same period using the same transition method. If adoption is elected in a period other than the beginning of a fiscal year, the amendments in these standards must be applied retrospectively to the beginning of the fiscal year. Full retrospective application of these amendments to prior fiscal years is optional. Companies may elect early adoption of these standards. The Company does not believe the adoption of ASU 2009-14 and ASU 2009-13 will have a material impact on its consolidated results of operations and financial condition.

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Property and equipment

Property and equipment consist of the following:

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

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Basic earnings per share (“EPS”) exclude dilution and are computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Potentially dilutive securities, which currently comprise of options and a convertible debenture, are excluded from the diluted EPS computation in loss periods and when their exercise price is greater than the market price as their effect would be anti-dilutive.

A reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:

As of July 31, 2010, shares reserved for conversion of the convertible debenture, and the exercise of warrants to purchase common stock totaled 0 and 6,617,023, respectively. 1,129,034 shares are reserved for issuance upon the exercise of stock options granted to a lender and 15,000,000 shares are reserved for issuance upon the exercise of options granted under the Company’s Stock Option Plan, of which 10,485,417 are outstanding. 133,336 shares are reserved in connection with a consulting agreement entered into on March 22, 2010. These were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive.

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On November 10, 2009, $1,600,000 in convertible debt held by various lenders was converted into 19,250,000 restricted shares of the Company’s common stock at a conversion price of $0.083117 per share in connection with the Share Exchange Agreement effective September 29, 2009. The Conversion price was determined based on the average conversion price of the Amendment 4 revision price of every $0.20 for the Pre-March advances and $0.10 conversion price for the March advance, or $0.15, and 11,000,000 shares based on total debt of $1,600,000 converted.

On February 23, 2010, a lender converted the remaining $350,000 of convertible debt into 700,000 units at $0.50 per unit. Each unit is comprised of one common share and one common share purchase warrant. Each non-transferable warrant entitles the holder to purchase one additional share of common stock of the Company at a price of $1.00 per share until February 23, 2012. The units were issued pursuant to a debt conversion agreement dated February 23, 2010.

As of July 31, 2010, accrued interest payable outstanding in connection with the convertible debentures totals $145,813 and included in accrued expenses and other current liabilities as interest payable.

On January 6, 2010, the Company converted a promissory note payable agreement and interest payable thereon, from a related party totaling $211,837 into 423,674 units at $0.50 per unit pursuant to a debt conversion agreement. On January 6, 2010, the Company also converted promissory notes payable agreements and interest payable thereon, from two lenders totaling $290,425 into 580,849 units at $0.50 per unit pursuant to debt conversion agreements.

In addition to the above debt conversion, on January 6, 2010, the Company converted a short-term borrowing advanced in October 2009 in connection with a subscription agreement totaling $200,000 into 400,000 units at $0.50 per unit.

These shares were issued in connection with a non-brokered private placement of 1,404,523 units, at $0.50 per unit, Each unit consists of one common share and one non-transferable common share purchase warrant that entitles the holder to purchase one additional share of common stock at a price of $1.00 per share until January 6, 2012. See Note 10 – Shareholders’ Deficit.

On January 31, 2010 and March 24, 2010, the Company entered into short-term promissory note agreements with unrelated parties for $200,000 and $100,000, respectively, for working capital purposes. The promissory note agreements are due on demand and bear interest at 12% per annum. On May 2, 2010, the Company repaid $200,000, plus accrued interest of $6,181, to two lenders in connection with short-term promissory note agreements entered into with unrelated parties for working capital purposes.

In April 2010, a shareholder advanced an additional $174,000 in connection with short-term promissory notes for working capital purposes. The shareholder advanced an additional $140,000 on June 23, 2010 and $48,000 on July 8, 2010. The loans bear interest at 12% per annum. As of July 31, 2010, $412,000 was outstanding under the promissory notes payable agreements to the shareholder. Interest payable in connection with the short-term promissory notes totaled $13,905 as of July 31, 2010.

On May 25, 2010, a shareholder advanced $300,000 in connection with a short-term promissory note for working capital purposes. On July 26, 2010 the shareholder advanced an additional $250,000 in connection with a short-term promissory note for working capital purposes. The loans bear interest at 12% per annum. As of July 31, 2010, $550,000 was outstanding under the promissory notes payable agreements to the shareholder. Interest payable in connection with the short-term promissory notes totaled $7,036 as of July 31, 2010.

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The following table is a summary of the Company’s non-brokered private placement subscriptions, debt conversions, and issuance of common stock in connection with settlement of accounts payable and consulting agreements as of July 31, 2010:

(1) On January 6, 2010 the Company settled a $200,000 short-term note in connection with a subscription agreement received from a third party in October 2009.

Private Placements

From November 1, 2009 to July 31, 2010, pursuant to private placement subscription agreements, the Company closed non-brokered private placements for total cash proceeds of $1,300,000. Each unit is comprised of one common share and one common share purchase warrant. Each non-transferable warrant entitles the holder to purchase one additional share of common stock of the Company at a price of $1.00 and $1.50 per share, expiring January 6, 2012 to April 29, 2012. The Company issued the units to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended (the “Act”).

Conversion of Debt

On November 10, 2009, $1,600,000 in debt held by various lenders was converted into 19,250,000 restricted shares of the Company’s common stock at a conversion price of $0.083117 per share in connection with the Share Exchange Agreement effective September 29, 2009. The Conversion price was determined based on the average conversion price of the Amendment 4 revision price of every $0.20 for the Pre-March advances and $0.10 conversion price for the March advance, or $0.15, and 11,000,000 shares based on total debt of $1,600,000 converted. See Note 8 –Convertible Debenture. The Company issued the units to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended (the “Act”).

On January 6, 2010, the Company also converted a promissory note payable agreement and interest payable thereon, from a related party totaling $211,837 into 423,674 units at $0.50 per unit pursuant to a debt conversion agreement. In addition, the Company also converted promissory notes payable agreements and interest payable thereon, from two lenders totaling $290,425 into 580,849 units at $0.50 per unit pursuant to debt conversion agreements. See Note 9 –Working Capital Loans. Each unit is comprised of one common share and one common share purchase warrant. Each non-transferable warrant entitles the holder to purchase one additional share of common stock of the Company at a price of $1.00 per share, expiring January 6, 2012. The Company issued the units to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended (the “Act”).

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On February 23, 2010, a lender converted the remaining $350,000 of convertible debt into 700,000 units at $0.50 per unit. Each unit is comprised of one common share and one common share purchase warrant. Each non-transferable warrant entitles the holder to purchase one additional share of common stock of the Company at a price of $1.00 per share until February 23, 2012. The units were issued pursuant to a debt conversion agreement dated February 23, 2010. The Company issued the units to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended (the “Act”).

Settlement of Accounts Payable

On May 17, 2010, the Company entered into debt conversion subscription agreements whereby $21,485 included in accounts payable as of April 30, 2010 was converted into 94,001 common shares. On May 26, 2010, pursuant to board approval, the Company issued the shares to 3 U.S. accredited investors (as that term is defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”)) relying on Regulation S and/or Section 4(2) of the Securities Act.

Consulting Agreements

On March 17, 2010, the Company entered into a consulting agreement with a consultant to assist the Company in its private placement efforts. The fixed fee consulting agreement calls for payment of $85,000 over the four month service period to be paid by the issuance of 200,000 restricted shares of the Company’s common stock as total consideration. The agreement was cancelled effective May 31, 2010. The Company expensed $50,000 in connection with the fair value of the services performed as of that date, which is included in selling, general and administrative expense for the three and nine months ended July 31, 2010. On May 25, 2010, the Company issued 100,000 restricted shares in connection with this agreement.

On March 22, 2010, the Company also entered into a consulting agreement with a consultant to provide investor relation services to the Company and assist in its private placement efforts. The fixed fee consulting agreement is effective as of April 1, 2010, and calls for payment of $61,200 over a 12-month period to be paid by the issuance of 200,000 restricted shares of the Company’s common stock as total consideration. The agreement is cancelable with 30 days notice. As of July 31, 2010, the Company expensed $24,000 in connection with the fair value of the services performed as of that date, which is included in selling, general and administrative expense for the three and nine months ended July 31, 2010. The Company expects to expense the fair value of the services at the end of each milestone service period performed based on the total agreed upon contract price of $61,200 under the agreement through March 31, 2011. As of July 31, 2010, 66,664 restricted shares have been issued by the Company in connection with this agreement.

None of the securities offered or sold have been or will be registered under the Act and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registrations requirements of the Act. Each of the securities issued will be a “restricted security” under the Act and will be subject to a hold period under applicable U.S. and Canadian securities laws

Shares Reserved for Future Issuance

As of July 31, 2010, the Company issued 6,617,023 warrants in connection with non-brokered private placements and conversion of promissory notes and convertible debenture agreements. A total of 1,129,034 shares are reserved for issuance upon the exercise of stock options granted to a lender and 15,000,000 shares are reserved for issuance upon the exercise of options granted under the Company’s Stock Option Plan. As of July 31, 2010, 133,336 shares are reserved in connection with consulting agreements entered into by the Company.

Stock Option Plan

The Company’s 2009 Stock Option Plan provides for the granting of equity awards, including restricted stock and incentive and nonqualified stock options to purchase up to 15,000,000 shares of the Company’s common stock, to employees, directors, officers and independent consultants of the Company. As of July 31, 2010, 10,850,000 stock options have been granted to the Company’s employees, officers and directors of which 364,583 options have been cancelled due to optionees leaving the Company.

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Stock based compensation expense included in selling, general and administrative expense for the three and nine months ended July 31, 2010 totalled $47,379 and $112,921, respectively. No stock based compensation was incurred for the three and nine months ended July 31, 2009. The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2012 related to unvested share-based payment awards at July 31, 2010 is $238,864.

A summary of stock option activity in connection with the 2009 Stock Option Plan as of July 31, 2010 is as follows:

The Company has evaluated subsequent events, as defined by ASC 855, formerly SFAS No. 165, Subsequent Events, through the date that the financial statements were issued.

On August 12, 2010, 65,000 shares were issued to two employees in connection with the exercise of 65,000 stock options at $0.15 per share.

On August 20, 2010 the Company entered into a 10% Convertible Note Agreement with an investor for total proceeds of $400,000. The Convertible Note Agreement bears interest at 10% per annum and matures July 31, 2011. The note holder has the option after six months following the issuance date to convert the outstanding principal amount under the Convertible Note Agreement, together with unpaid interest thereon, into the Company’s common stock at a conversion price equal to the lesser of (i) $0.50 and (ii) 80% of the average of the three lowest daily dollar volume-weighted average sale price (“VWAPS”) for the Company’s common stock on any particular trading day during the twenty (20) consecutive trading days immediately preceding the applicable conversion date on which the Holder elects to convert all or part of the note.

On August 20, 2010, a shareholder advanced $100,000 in connection with a short-term promissory note for working capital purposes, bringing total notes payable outstanding to the shareholder of $650,000. See Note 9 – Working Capital Loans. The loan bears interest at 12% per annum and is due upon demand.

The Board of Directors proposes to amend and restate the articles of incorporation of the Company to authorize 100,000,000 shares of preferred stock of the Company with a par value of $0.001, which may be divided into and issued is series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by the Board (the “Amendment and Restatement”). The Amendment and Restatement requires the approval by the vote of stockholders of the Company holding at least a majority of the voting power of the common stock of the Company. On August 31, 2010, the Company filed a preliminary Schedule 14A – Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of 1934 with the Securities and Exchange Commission.

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Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying condensed consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of our operations. The MD&A is organized as follows:

• Caution concerning forward-looking statements. This section discusses how forward-looking statements made by us in the MD&A and elsewhere in this report are based on management’s present expectations about future events and are inherently susceptible to uncertainty and changes in circumstances.
• Company Overview. This section provides an introductory overview and context for the discussion and analysis that follows in the MD&A.
• Results of operations. This section provides an analysis of our results of operations for the nine months ended July 31, 2010 and 2009. A brief description is provided of transactions and events that impact the comparability of the results being analyzed.
• Outstanding Share Data. This section provides the designation and number or principal amount of (a) each class and series of voting or equity securities for which there are securities outstanding; (b) each class and series of securities for which there are securities outstanding if the securities are convertible into, or exercisable or exchangeable for, voting or equity securities; and (c) subject to subsection (2), each class and series of voting or equity securities that are issuable on the conversion, exercise or exchange of outstanding securities.
• Financial condition and liquidity. This section provides an analysis of our cash position and cash flows, as well as a discussion of our financing arrangements and financial commitments.
• Critical accounting policies. This section discusses those accounting policies that are both considered important to our financial condition and operating results and require significant judgment and estimates on the part of management in their application.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

The MD&A should be read in conjunction with the consolidated financial statements and notes thereto included in this report. This discussion contains forward-looking statements. These forward-looking statements are made as of the date of this report. Any statement that refers to an expectation, projection or other characterization of future events or circumstances, including the underlying assumptions, is a forward-looking statement. We use certain words and their derivatives such as “anticipate”, “believe”, “plan”, “expect”, “estimate”, “predict”, “intend”, “may”, “will”, “should”, “could”, “future”, “potential”, and similar expressions in many of the forward-looking statements. The forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and other assumptions made by us. These statements and the expectations, estimates, projections, beliefs and other assumptions on which they are based are subject to many risks and uncertainties and are inherently subject to change. We describe many of the risks and uncertainties that we face in “Risk Factors” below and elsewhere in this report. Our actual results and actual events could differ materially from those anticipated in any forward-looking statement. Readers should not place undue reliance on any forward-looking statement.

COMPANY OVERVIEW

We design, develop and sell third and fourth generation (3G/4G) wireless routing solutions that provide speed, reliability and security for carriers, managed service providers, mobile virtual network operators (MVNOs) and businesses seeking High Availability Solutions and business continuity. Our devices, including our patent pending I3 GUI (Graphical User Interface), are simple to install yet provide the advanced management and business class features and functionality demanded by the most sophisticated network operators and users. Our routing devices are capable of providing complete device and network redundancy in wan-failover/failback mode by leveraging the high speed wireless networks. Our routing solutions with our I3 GUI can also act as the primary router for DSL or cable networks and, when equipped with a data card and cellular plan, protect the business owner from service interruption caused by wireline failure providing up to five nines (99.999%) of availability.

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We have what we believe is an exceptional team that has developed highly functional wireless firmware and software technologies and have multiple potential patents in the process of being filed. Our development staff have engineered a family of proprietary next generation wireless 3G/4G routers that we believe will outperform our competition at a lower price while maintaining significant gross margins. We have approximately twenty five employees working out of our operations center headquartered in San Diego, CA, and our sales office in Kansas City, MO. The company’s corporate office is located in Vancouver, BC. Our common shares are publicly traded on the Over-the-Counter Bulletin Board (OTCBB) under the symbol “NXWI” and our website address is: www.nexaira.com.

Corporate and Operational History

We were incorporated in the State of Nevada on March 19, 2007 under the name of Technology Publishing, Inc. On June 1, 2007, we entered into a share purchase agreement with Slawek Kajko, our then president, secretary, treasurer and a director of our company, whereby we acquired all of the issued and outstanding shares of Westside Publishing Ltd. in consideration for the issuance of a promissory note in the amount of $28,047. Westside Publishing Ltd. became our wholly-owned subsidiary and we commenced the business of publishing and selling advertising for a consumer electronics magazine entitled Canada HiFi.

Effective September 29, 2009, we entered into a share exchange agreement with our wholly-owned subsidiary, Westside Publishing Ltd., an Ontario corporation, Nexaira Wireless (BC) Inc, a British Columbia corporation (“Nexaira”) (formerly Nexaira Inc, an Alberta corporation), and Nexaira’s wholly-owned subsidiary, Nexaira, Inc., a California corporation, whereby we agreed to acquire all of the issued and outstanding common shares in the capital of Nexaira from the shareholders of Nexaira in consideration for the issuance, by us, of 15,489,262 restricted common shares in the capital of our company on the basis of 1.75 shares of our common stock for every one Nexaira share.

We divested Westside Publishing Ltd. effective October 28, 2009. As consideration for this divestment of Westside Publishing Ltd., 40,800,000 restricted shares held by our former president and director were surrendered for cancellation. In addition, 20,000,000 restricted shares were surrendered for cancellation by a former officer and director pursuant to a return to treasury agreement with our company dated October 28, 2009. These share cancellations were effective as of October 30, 2009. With the divestment of Westside Publishing Ltd., on October 28, 2009, our current subsidiaries are Nexaira Wireless (BC) Ltd., a British Columbia corporation, and Nexaira, Inc., a California corporation.

The business combination was accounted for as a reverse acquisition, primarily effected by exchanging equity interests by the issuing of our shares (accounting acquiree) to the owners of Nexaira (accounting acquirer) as explained above and accordingly, reflected as a recapitalization in the consolidated financial statements.

Our Current and Future Business Model

When Nexaira was formed in 2005, the key focus was to build an organization focused on wireless data communications technology and to develop key supplier and customer relationships. This close involvement with suppliers and customers allowed management to develop an innovative plan for the development and delivery of new products and services to satisfy customer needs and to realize the benefits of being in the forefront of an industry poised to grow exponentially over the coming years.

In 2008, management initiated the development of a new wireless routing platform and for the first time in our history began writing our own proprietary firmware and software. In December of 2008, we launched our consumer class router, followed by our highly acclaimed I3 GUI in March 2009. In May 2009, we launched our first “Business Class Router” and signed our first carrier customer. During 2009, management also began exiting the non strategic low margin distribution business. In May 2010, we received certification of three of our second generation routing products and commenced a focused and targeted sales and marketing initiative. We are pleased to report that since our last quarterly report (for the period ended April 30, 2010) we have achieved several operational milestones and made considerable progress in achieving a number of objectives in our business plan most specifically related to winning new customers. In addition our products have been tested against our competition and subsequently selected by a number of very strategic and influential leaders in the wireline and wireless industries.

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To ensure that we positioned our company for the future growth forecasted in the wireless 3G/4G sector and protect our intellectual property, we undertook to design and develop our own routing firmware and hardware. We now design and engineer our own processor boards and like most manufacturers outsource the production of those boards. We develop our own proprietary operating system (similar to a Microsoft operating system on a PC) and develop our own intuitive graphical user interface - the I3 GUI.

After 20 months of testing, field trials, customer driven enhancements and modifications, we not only understand the customer requirements and the market verticals but have better control on the business and the challenges facing it. In May 2010, we achieved a significant milestone when our products, the SOHO (Small Office-Home Office), BCII and HANA (High Availability Network Adapter) received FCC and IC certification and we are now actively selling and marketing those products.

We continue to attract some of the brightest minds in the business and have been successful in assembling an exceptional team of professionals.

We now intend to leverage the foundation built over the years with our existing business and customers and move aggressively to realize significant and profitable growth by clinically and methodically attacking this untapped and unserviced marketplace. With all the essential building blocks in place, and our products being selected by a number of high profile customers, our management team is ready to execute our post development business plan. We anticipate significant month over month growth in router unit sales and revenue starting in the first and second quarters of FY October 31, 2011 if we can raise adequate equity capital to deploy our sales and marketing plans. Our past investment in service tools, quality assurance and processes has formed a foundation that we believe will enable our business to grow with high product quality, acceptance and profitability.

As a result of developing our own software and firmware and engineering our own processor boards we believe Nexaira’s gross margin as a percentage of sales will increase dramatically from the traditional and historical distribution rates of 20% or below to higher gross margin yields more typical of a software/firmware oriented company as we introduce our higher end line of enterprise products and solutions. Over the past 6-8 months, Nexaira has established itself as a progressive and innovative developer and provider of 3G/4G wireless broadband data solutions for business. We believe our suite of products and solutions will enable our customers to expeditiously connect to and manage high speed data connections rivalling traditional landline connectivity, with unmatched functionality, speed and ease of use and at a lower cost.

We believe our proprietary routing solutions are simple to install, yet provide the advanced business grade feature sets demanded by the most sophisticated users. Service providers have selected Nexaira’s broadband data solutions for their high availability and wide area network (WAN) failover applications using the 3G/4G cellular networks to automatically “back up” or “stand in” when service from wireline networks is interrupted. Additionally, we believe that carriers and service providers can dramatically decrease the cost and management of their installed hardware base by using Nexaira’s advanced firmware, extending the shelf life of their customer premise equipment and providing critical device updates through simple downloads. We enable our customers to bring customized wireless broadband solutions to market more quickly and cost effectively than traditional wireline offerings such as DSL, Cable or T-1s.

Nexaira’s hardware-agnostic broadband router firmware and intuitive user interface enables a non-technical user to quickly and effortlessly setup a network and establish a secure Internet connection.

In addition, the superior management tools and reliable operating design supports the needs of the largest customer networks that rival existing wireline deployments but have all the benefits of wireless. With our base of current customers and a diversified expanding market, we believe our new suite of products will create one-time and recurring revenue, yielding higher gross profit margins as compared to the legacy distribution business.

Key Initiatives Underway:

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We believe that we have established a strong foundation of IP (Intellectual Property), industry relationships, quality assurance methodologies and proprietary enabling technology, NexWare^SM, which can be readily adapted to meet the needs of specific partners and markets. Our objectives over the next 12 months are to continue to build value inside the business and move our company to a more profitable stage of growth.

Our company is armed with seasoned senior management and board members with a solid track record of execution, a motivated and talented team of employees, a suite of proprietary and disruptive technologies, state-of-the-art services and a dedicated support organization. We have strong and strategic business relationships built over several decades, with enthusiastic support from prestigious customers and an established business operation that is positioned for growth.

In order to exploit our current technological and market advantage, quickly ramp sales and accelerate our aggressive business plans, management is seeking to raise $5 million USD in equity and establish a credit facility with a bank and/or lender. This $5 million USD in equity will add to the $5.5 million invested to date which has allowed us to successfully restructure and re-focus the company. The proceeds of the $5 million will be used to launch our sales and marketing initiatives, for business development, provisioning and future product releases and filing of intellectual property patents and to achieve profitability from operations.

From management’s perspective, it is clear that “Wireless is Winning” and our Board, management, employees and strategic partners intend to play a significant role in this emerging business sector.

RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED JULY 31, 2010 AND JULY 31, 2009

As outlined in our annual report for the year ended October 31, 2009 and July 31, 2010 quarterly financial statement, we forecasted continued downward pressure on the revenues and gross profits generated by the sale and distribution of other manufacturers’ products while we focused our resources on readying our new proprietary router products for commercialization in the marketplace.

Our planned revenue growth and return to profitability is expected to come as a result of (1) the introduction of our innovative and patent pending proprietary technology, (2) the launch of our new suite of products catering to the growing 3G/4G wireless business segment and (3) building an experienced sales and operations team focused on the wireless marketplace. Our success is also heavily dependent on our ability to raise new capital for inventory and general operating expenses.

The first phase of our sales cycle, being selected by key strategic customers, shows that our products are being accepted and perform as specified. During this quarter, after going through rigorous field trials and testing we announced that our router products were selected as a failover and primary router for several strategic customers including: Premier Wireless Solutions, Rogers Communications, Gemcom, Megapath Inc., Clear Talk, Continuous Touch, TeraNova Consulting Group, 3G Store.com and Telespire. Being selected is a great endorsement and testimonial as to the quality of our products. In addition to opening up new sales channels, the next phase is to work with these named customers and new customers on closing recurring sales.

With our base of current customers and a diversified expanding market, we believe our new suite of products will create onetime and recurring revenue, yielding higher gross profit margins as compared to the legacy distribution business. With the introduction of our new router solutions, we intend to leverage our existing loyal customer base, enhance our fulfillment expertise to provide unique packaging and delivery of the NexWare^SM software, develop new markets, add new customers and increase revenues and margins, strengthen our business relationships with strategic vendors and continue to be innovative in developing software and firmware to meet our customers’ needs.

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Revenues

The decision to exit certain elements of the distribution business and allocate our resources to developing our own line of products resulted in part, in lower sales for the three and nine months ended July 31, 2010, compared to the same period in 2009.

Total revenues for the three months ended July 31, 2010 was $270,305 compared to $845,956 for the three months ended July 31, 2009, a decrease of $575,651. Total revenues for the nine months ended July 31, 2010 amounted to $1,301,696 compared to $4,441,926 for the same period in 2009, a decrease of $3,140,230. As outlined above, a significant component of this $3,140,230 decrease includes $979,712 in relatively low gross margin module sales generated in 2009 which we no longer distribute. The remaining $2,160,518 decrease in revenues is due in part to the economic situation facing the data card sector, increased competition from other distributors added by manufacturers and a general decrease in product demand for certain data products.

Gross profit for the three months ended July 31, 2010 was $117,384 and $196,924, respectively, or 43% and 23%, respectively, of total revenues. The higher gross profit % for the three months ended July 31, 2010 shows the impact of introducing our own router product to the sales mix, as well as liquidation of end of life inventory for which a reserve was established in prior periods. This compares to gross profit of $255,160 and $1,167,604, respectively, or 20% and 26%, respectively, of total revenues for the nine months ended July 31, 2009. The decrease in gross profit for the nine months ended July 31, 2010 is primarily due the liquidation of end of life inventory, primarily module inventory which we no longer distribute for which a reserve was established in prior periods.

Research and Development

Research and development totaled $285,707 and $93,905 for the three months ended July 31, 2010 and 2009, respectively, for a total increase of $191,802. For the nine months ended July 31, 2010, research and development totaled $707,583 and $256,069, respectively, for a total increase of $451,514 reflecting ongoing research and development expenses associated with being a software company. The increase in the three and nine months ended July 31, 2010 is the result of us expensing research and development costs associated with the introduction of wireless routing solutions to distributors and value added resellers (VAR) for retail sales in big box stores and on the internet. During this period, our management determined that its research and development did not meet the criteria for capitalization due to the majority of costs incurred in connection with on-site customer testing, resolution of hardware issues and sales and marketing engineering support. For the three and nine months ended July 31, 2009, we capitalized $183,193 and $909,714, respectively in connection with product development costs. We capitalized software development costs in accordance with ASC 985-20 (formerly SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed). Software development costs consist of labor and overhead costs related to the development of our suite of NexWare™ firmware for our suite of wireless routers. We capitalized software development costs when the technological feasibility and marketability of the related product has been established. On June 1, 2008, we established technological feasibility upon successful completion and testing of our first working router product pilot firmware program.

Selling, General and Administrative

Selling, general and administrative expenses decreased $75,484 to $863,513 for the three months ended July 31, 2010 from $938,997 for the same period in 2009. Selling, general and administrative expenses amounted to $2,746,446 for the nine months ended July 31, 2010 compared to $2,962,860 for the same period in 2009, for total decrease of $216,414. The decrease in selling, general and administrative expenses for the three and nine months ended July 31, 2010 compared to the three and nine months ended July 31, 2009 was primarily due to reduction in travel costs, business development, advertising costs, consulting fees, legal and audit fees and recruiting expenses.

Interest and Other Expense

Interest and other expense decreased $63,189 to $39,424 for the three months ended July 31, 2010 compared to $102,613 for the same period in 2009. Interest and other expense decreased $63,141 to $179,983 for the nine months ended July 31, 2010 compared to $243,124 in the same period in 2009. The decrease for the three and nine months ended July 31, 2010 resulted from our decreased cost of borrowings, primarily in connection with the convertible debenture and working capital loans provided by related parties, due to conversions of the debt into our common stock.

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Net Loss from Operations

For the three months ended July 31, 2010, our net loss from operations was $1,070,097 compared to $922,469 in the same period in 2009. Our loss from operations amounted to $3,376,549 for the nine months July 31, 2010 compared to a loss of $2,277,004 for same period in 2009. The increase in our net loss from operations for the three and nine months ended July 31, 2010 is primarily due to the anticipated reduction in distribution revenues, additional costs associated with being a public company, including audit and legal costs, and the increased research and development expenses as discussed above. Net loss after interest and income taxes amounted to $3,378,494 for the nine months ended July 31, 2010, an increase of $1,100,390 over the same period in 2009. With the sales of our new line of routing products expected to gain traction in fiscal 2010 and a continued demand for broadband data cards, it is anticipated that our losses will decrease year over year, commencing the first quarter of fiscal year 2011.

OUTSTANDING SHARE DATA

Total authorized share capital: 600,000,000 common shares @ U.S. $0.001 par value

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On May 17, 2010, we entered into debt conversion subscription agreements whereby $21,487 included in accrued expense and other current liabilities as of July 31, 2010 was converted into 94,001 common shares. Pursuant to board approval, on May 26, 2010, we issued the shares to 3 U.S. accredited investors (as that term is defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”)) relying on Regulation S and/or Section 4(2) of the Securities Act.

On March 17, 2010, we entered into a fixed fee consulting agreement with a consultant to assist us in our private placement efforts. The agreement calls for payment of fixed fee totaling $85,000 over four months to be paid by the issuance of 200,000 restricted shares of our common stock as total consideration. The agreement is cancelable with 30 days notice. As of July 31, 2010, we expensed $50,000 in connection with the fair value of the services performed as of July 31, 2010, which is included in selling, general and administrative expense for the three and nine months ended July 31, 2010. We expect to expense the fair value of the services at the end of each milestone service period performed based on the total agreed upon contract price under the agreement through July 17, 2010. On May 26, 2010, we issued 100,000 shares for the first two installments in connection with services performed for the period March 18, 2010 through May 18, 2010.

On March 22, 2010, we also entered into a fixed fee consulting agreement with a consultant to provide investor relations services and assist in our private placement efforts. Effective, April 1, 2010, the agreement calls for payment of a fixed fee totaling $61,200 over 12-month period to be paid by the issuance of 200,000 restricted shares of our common stock as total consideration. The agreement is cancelable with 30 days notice. As of July 31, 2010, we expensed $24,000 in connection with the fair value of the services performed as of that date, which is included in selling, general and administrative expense for the three and nine months ended July 31, 2010. We expect to expense the fair value of the services at the end of each milestone service period performed based on the total agreed upon contract price under the agreement. The shares are to be issued in increments of 16,666 shares every 30 days following the effective date. We have issued 66,664 shares in connection with services performed for the four month period from April 1 through July 31, 2010.

On May 17, 2010, Mr. Michael Donnell was appointed a director of our company and was granted 437,500 stock options, with each option exercisable into one share of our common stock at a price of $0.425 per share for a period of five years from the date of grant, on terms and conditions as set out in our 2009 Stock Option Plan and a stock option agreement entered between our company and Mr. Donnell. The options will vest equally over each of 6, 12 and 18 months from May 17, 2010.

On August 12, 2010, we issued a total of 65,000 common shares to two US employees in connection with the exercise of stock options at an exercise price of $0.15 per share.

As disclosed in our Report on Form 8-K (as filed with the Securities and Exchange Commission on August 26, 2010), we entered into a securities purchase agreement, effective August 20, 2010, pursuant to which we agreed to sell to a lender a 10% Convertible Note (the “Note”) due July 30, 2011 with an aggregate original principal amount equal to $400,000, and a 3 year warrant (the “Warrant”) to purchase 333,333 warrant shares (the “Warrant Shares”) at an exercise price equal to $0.50 per Warrant Share for a period of three years. The Note entitles the lender to convert, from time to time, all or any part of the outstanding principal, plus accrued but unpaid interest thereon, into shares of our common stock y (the “Note Shares”) at a conversion price equal to the lesser of (i) $0.50 and (ii) 80% of the average of the three lowest daily VWAPs (as defined in the Note) during the twenty (20) consecutive Trading Days (as defined in the Note) immediately preceding the applicable Conversion Date (as defined in the Note) on which the lender elects to convert all or part of the Note. The issuance of the Note, the Note Shares, the Warrant and the Warrant Shares were and/or will be made pursuant to Section 4(2) and/or Rule 506 of Regulation D of the Securities Act and the lender has represented to us that it is an “accredited investor” as such term is defined in Rule 501 of Regulation D of the Securities Act.

The Board of Directors proposes to amend and restate the articles of incorporation of the Company to authorize 100,000,000 shares of preferred stock of the Company with a par value of $0.001, which may be divided into and issued is series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by the Board (the “Amendment and Restatement”). The Amendment and Restatement requires the approval by the vote of stockholders of the Company holding at least a majority of the voting power of the common stock of the Company. On August 31, 2010, the Company filed a preliminary Schedule 14A – Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of 1934 with the Securities and Exchange Commission.

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FINANCIAL CONDITION AND LIQUIDITY

Working Capital

Our cash on hand as of July 31, 2010 was $53,039. As of July 31, 2010, we had a working capital deficiency of $3,092,735. We have incurred operating losses since 2008, and this is likely to continue for the year ending October 31, 2010.

We anticipate that our cash on hand and the revenue that we anticipate generating from product sales will not be sufficient to satisfy all of our cash requirements for the next twelve months. From November 10, 2009 through July 31, 2010, we have successfully raised cash in the amount of $1,300,000, of which $200,000 was settlement of a short-term note in connection with a subscription agreement received from a third party in October, 2009. We also converted $2,452,262 of our debt into equity in connection with non-brokered private placement transactions. We plan to raise additional capital primarily through the equity financing and further borrowings from our current shareholders and directors if this type of funding continues to be available. We will continue to seek additional funds to fund our day to day operations until equity financing can be pursued but we have no guarantee that our current shareholders and directors will continue provide this funding or that we will be successful in raising capital from external sources.

We have been focused on changing our business model to include the development of our own line of software to compliment the distribution side of our business. During this period we have experienced a decline in revenues from the legacy distribution business resulting in negative cash flow from operations. As of July 31, 2010, we have a total shareholders’ deficit of $1,815,958 compared to a shareholders’ deficit of $2,358,789 as of October 31, 2009. As discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements, we have incurred losses from operations and have negative cash flow from operations, a working capital and a net capital deficit that raise substantial doubt about our ability to continue as a going concern. The Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern depends on our success in generating increased revenues and earnings in the immediate and foreseeable future with the introduction of our new line of hardware and software router products and solutions. Furthermore, the continuation of our company as a going concern is dependent upon the continued financial support from our shareholders and lenders and our ability to obtain necessary equity financing to continue operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Future Fundraising

Fundraising will be one of our primary objectives over the next 12 months. We anticipate our cash requirements for the next 12 months to carry out our business plan will be $3-4 million. We do not anticipate generating positive internal operating cash flow until we can generate substantial revenues from the commercial sale of our new line of hardware and software router products and solutions. We intend to raise $5 million of our cash requirements through equity financings by September/October 2010.

As noted above, the financial requirements of our company for the next twelve months will depend on our ability to raise the money we require through debt financing and private placements associated with the issuance of additional equity securities of our company to our current stockholders and/or new stockholders. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current stockholders. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to inventory valuation and warranty liabilities, which affect our cost of sales and gross margin; the valuation of intangibles, including software development costs, and patents and trademarks, which could in the future affect our impairment charges to write down the carrying value of intangibles and the amount of related periodic amortization expense recorded for definite-lived intangibles; and the valuation of deferred income taxes, which affects our income tax expense (benefit). We also have other key accounting policies, such as our policies for stock-based compensation and revenue recognition, including the deferral of a portion of revenues on sales to distributors. The methods, estimates and judgments we use in applying these critical accounting policies have a significant impact on the results we report in our financial statements. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from management’s estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Inventories

Our inventories consist of 3G mobile broadband routers, PC cards, modems and other accessories, and are carried at the lower of average cost, determined on a first-in-first-out (FIFO) basis, or market. The Company reviews inventory for significant average cost variances over market on a quarterly basis. We also write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Software Development Costs

We capitalize software development costs in accordance with ASC 985-20 (formerly SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed). Software development costs consist of labor and overhead costs related to development of the Company’s suite of NexWare™ firmware for the Company’s suite of wireless routers. Software development costs are capitalized when technological feasibility and marketability of the related product has been established. On June 1, 2008, the Company established technological feasibility upon successful completion and testing of the Company’s first working router product pilot firmware program. Capitalized software costs will be amortized on a product-by-product basis, three to five years, beginning when the product is available for general release to customers.

During the nine months ended July 31, 2010, we completed the development of our second generation of Small Office Home Office (SOHO) and Business Class wireless routing solutions and made them available to wireless and wireline carriers, distributors and value added resellers (VARS). We began amortization of these two product classes over 5 years in November 2009, for total amortization expense included in cost of sales of $73,481 for the nine months ended July 31, 2010. Software development costs totaling $109,374 included in the balance sheet as of July 31, 2010 related to NexWare™ Consumer Business Class 2 and Enterprise Pro products expected to be released in December 2010. Thus amortization has not begun on these products to date.

Valuation of Deferred Income Taxes

We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. We consider estimated future taxable income and ongoing prudent and feasible tax planning strategies, including reversals of deferred tax liabilities, in assessing the need for a valuation allowance. If we were to determine that we will not realize all or part of our deferred tax assets in the future, we would make an adjustment to the carrying value of the deferred tax asset, which would be reflected as income tax expense. Conversely, if we were to determine that we will realize a deferred tax asset, which currently has a valuation allowance, we would reverse the valuation allowance which would be reflected as an income tax benefit or as an adjustment to shareholders’ equity. For financial statement reporting purposes, we must make certain estimates and judgments. These estimates and judgments are applied in the calculation of certain tax liabilities and in the determination of the recoverability of deferred tax assets, which arise from temporary differences between the recognition of assets and liabilities for tax and financial statement reporting purposes.

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Revenue Recognition

Our revenues comprise of the following:

• distribution of third party mobile wireless broadband, modules and router solution, as well as related accessories;
  
  
• our proprietary wireless router solutions that are integrated our internally developed software that is essential to the functionality of our equipment; and
  
  
• customization services, marketing tools, provisioning and airtime activations based on our individual customer needs.

We recognize revenue, net of sales tax, in accordance with Staff Accounting Bulletin No. 104 (“SAB 104”), when all four basic criteria are met: 1) there is evidence that an arrangement exists; 2) delivery has occurred; 3) the fee is fixed or determinable; and 4) collectability is reasonably assured. In addition, the Company does not recognize revenue until all customers’ acceptance criteria have been met. The criteria are usually met at the time of product shipment, except for shipments to distributors with rights of return. The portion of revenue from shipments to distributors subject to rights of return is deferred until the agreed upon percentage of return or cancellation privileges lapse. We currently do not resell our internally developed software separately from our proprietary router solution. We considered ASC 985-605 (formerly SOP 97-2 – Software Revenue Recognition and EITF 00-21 - Revenue Arrangements with Multiple Deliverables) applied to the revenue recognition of our newly developed products sold during the quarter-ended July 31, 2010. As we do not currently sell our proprietary router product and internally developed software separately, and no services are provided after the product is shipped. Therefore, normal SAB 104 revenue recognition guidance applies as noted above.

Revenue recognition related to customization services and provisioning, while currently immaterial, is recognized when services are performed.

In accordance with FASB ASC 605-45 (Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs), we include shipping and handling fees billed to customers in net revenues. Amounts incurred by us for freight are included in cost of goods sold.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Not applicable.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our president, to allow timely decisions regarding required disclosure.

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As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, our management, with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, being July 31, 2010. Our president and our chief financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of July 31, 2010.

Based on this evaluation, these officers concluded that, as of July 31, 2010, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and that such information is accumulated and communicated to our company’s management, including our president and chief financial officer, to allow timely decisions regarding required disclosure.

The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control Over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Our company intends to remediate the material weaknesses as set out below under the heading, “Management’s Remediation Initiatives”.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive officer, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Under the supervision of our president, being our principal executive officer, and chief financial officer, being our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of July 31, 2010 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at July 31, 2010.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of July 31, 2010, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as:

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These control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis. As a result of the material weaknesses described above, we concluded that we did not maintain effective internal control over financial reporting as of July 31, 2010 based on criteria established in Internal Control—Integrated Framework issued by COSO. Our management, board of directors and audit committee are currently evaluating remediation plans for the above deficiencies. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the weaknesses described above. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. Our proposed plans are set out below under the heading, “Management’s Remediation Initiatives”.

As discussed above, we conducted an evaluation of the effectiveness of our internal control over financial reporting during our most recent fiscal quarter ending July 31, 2010 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation using the criteria established, our management concluded that our internal controls over financial reporting were not effective as of July 31, 2010.

Management’s Remediation Initiatives

Although our company has been unable to meet the standards under COSO because of the limited funds that have been available to a company of our size and stage of development, we are committed to improving our financial organization.

On October 26, 2009, we established an audit committee consisting of four directors, two of whom are independent directors, who will oversee the establishment and monitoring of required disclosure controls and procedures and internal control over financial reporting. The audit committee is directed to: review the scope, cost and results of the independent audit of our books and records; review the results of the annual audit with management; review the adequacy of our accounting, financial and operating controls; recommend annually to the board of directors the selection of the independent registered accountants; consider proposals made by the independent registered chartered accountants for consulting work; and report to the board of directors, when so requested, on any accounting or financial matters. We will undertake to: (1) create a position to segregate duties consistent with control objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function and (3) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.

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PART II OTHER INFORMATION

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

In addition to other information in this quarterly report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Associated with our Business

If we are unable to obtain financing in the amounts and on terms and dates acceptable to us, we may not be able to expand or continue our operations and development and so may be forced to scale back or cease operations or discontinue our business. You could lose your entire investment.

We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such financing is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our NexWare routing solutions and our business model. Furthermore, there is no assurance that we will not incur additional debt in the future, that we will have sufficient funds to repay our future indebtedness, or that we will not default on our debts, thereby jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to maintain our operations, which might result in the loss of some or all of your investment in our common stock.

We anticipate that the funds that were raised from private placements by way of subscription agreements and funds advanced by our management will not be sufficient to satisfy our cash requirements for the next twelve month period. Also, there is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

The occurrence of any of the aforementioned events could prevent us from executing our business plan, expanding our business operations and ultimately achieving a profitable level of operations.

We depend almost exclusively on outside capital to pay for the continued development of our business and the marketing of our products. Such outside capital may include the sale of additional stock, stockholder and director advances and/or commercial borrowing.

There can be no assurance that capital will continue to be available if necessary to meet our continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand or continue our sales and marketing initiatives and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.

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Because our directors and officers control a large percentage of our common stock, such insiders have the ability to influence matters affecting our stockholders.

Our directors and officers, in the aggregate, beneficially own 34.4% of the issued and outstanding shares of our common stock. As a result, they have the ability to influence matters affecting our stockholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers and directors control such shares, investors will find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Our monthly, quarterly and annual financial results will be subject to fluctuations that could affect the market price of our common shares.

Our revenue, gross margin, operating earnings and net earnings may vary from month to month and quarter to quarter and could be significantly impacted by a number of factors, including:

Because our operating expenses are determined based on anticipated sales, are generally fixed and are incurred throughout each fiscal month and quarter, any of the factors listed above could cause significant variations in our revenues, gross margin and earnings in any given month or quarter. Therefore, our monthly and quarterly results are not necessarily indicative of our overall business, results of operations and financial condition.

Monthly, quarterly and annual variations in operating results or any of the other factors listed above, changes in financial estimates by securities analysts, or other events or factors may result in wide fluctuations in the market price of our stock price. In addition, the financial markets have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of many technology companies and that often have been unrelated to the operating performance of these companies or have resulted from the failure of the operating results of such companies to meet market expectations in a particular quarter. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations may adversely affect the market price of our common shares.

Competition from new or established wireless communication companies or from those with greater resources may prevent us from increasing or maintaining our market share and could result in price reductions and/or loss of business with resulting reduced revenues and gross margins.

The wireless communications industry is highly competitive and we expect competition to increase and intensify. More established and larger companies with greater financial, technical and marketing resources sell products that compete with ours and we expect this competition to intensify. We also may introduce new products that will put us in direct competition with major new competitors. Existing or future competitors may be able to respond more quickly to technological developments and changes and introduce new products before we do, or may independently develop and patent technologies and products that are superior to ours or achieve greater acceptance due to factors such as more favorable pricing, more desired or better quality features or more efficient sales channels. If we are unable to compete effectively with our competitors’ pricing strategies, technological advances and other initiatives, we may lose customer orders and market share and we may need to reduce the price of our products, resulting in reduced revenue and reduced gross margins.

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Acquisitions of companies or technologies may result in disruptions to our business or may not achieve the anticipated benefits.

As part of our business strategy, we may acquire additional assets and businesses principally relating to or complementary to our current operations. Any acquisitions and/or mergers by us will be accompanied by the risks commonly encountered in acquisitions of companies.

These risks include, among other things:

As a result of the growth of our company, we may seek to raise additional capital through an offering of common shares, preference shares or debt, which may result in dilution and/or the issuance of securities. As a result, our share price may decline and there may be possible dilution to our shareholders if the purchase price is paid in common shares or securities convertible into common shares.

In addition, geographic distances may make integration of businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions. If realized, these risks could reduce shareholder value.

The loss of any of our significant customers could adversely affect our revenue and profitability, and therefore shareholder value.

We sell our products through carriers, mobile operators, service providers, value added resellers (VARS) and enterprise customers. We are dependent on a limited number of customers for a significant portion of our revenues. Most of these customers also sell products of our competitors. Accordingly, our business and future success depends on our ability to maintain and build on existing relationships and develop new relationships. If any of these customers, for any reason, discontinues their relationship with us or reduces or postpones current or expected purchase orders for products, or suffers from business failure, our revenues and profitability could decline, perhaps materially. We expect that a limited number of customers will account for a significant portion of our revenues for the foreseeable future. In addition, our current customers purchase our products under purchase orders. Our customers have no contractual obligation to continue to purchase our products following our fulfillment of current purchase orders and if they do not continue to make purchases, our revenue and our profitability could decline, perhaps materially.

We depend on single source suppliers for some components used in our products and if these suppliers are unable to meet our demand the availability of our products may be materially adversely affected.

From time to time, certain components used in our products have been, and may be, in short supply worldwide and shortages in allocation of components may result in delay in filling orders from our customers, which may adversely affect our business. In addition our suppliers may experience damage or interruption in their operations, become insolvent or bankrupt, or experience claims of infringement, all of which could delay or stop their shipment of components to us, which may adversely affect our business. Alternate sources of components may not be available. If there is a shortage of any such components and we cannot obtain an appropriate substitute, we may not be able to deliver sufficient quantities of our products, we may lose business or customers and our revenue may be materially adversely affected.

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We depend on a limited number of third parties to manufacture our products. If they do not manufacture our products properly or cannot meet our needs in a timely manner, we may be unable to fulfill our product delivery obligations and our costs may increase, and our revenue and margins could decrease.

We outsource the manufacturing of our products to a limited number of third parties and depend heavily on the ability of these manufacturers to meet our needs in a timely and satisfactory manner at a reasonable cost. We currently rely on two manufacturers, either of whom may terminate the manufacturing contract with us at the end of any contract year. Our reliance on third party manufacturers subjects us to a number of risks, including the following:

If we are unable to successfully manage any of these risks or to locate alternative or additional manufacturers or suppliers in a timely and cost-effective manner, we may not be able to deliver products in a timely manner. In addition, our results of operations could be harmed by increased costs, reduced revenues and reduced margins. Under our manufacturing agreements, in many cases we are required to place binding purchase orders with our manufacturers well in advance of our receipt of binding purchase orders from our customers. In this situation, we consider our customers’ good faith, non-binding forecasts of demand for our products.

As a result, if the number of actual products ordered by our customers is materially different from the number of products we have instructed our manufacturer to build (and purchase components in respect of), then, if too many components have been purchased by our manufacturer, we may be required to purchase such excess component inventory, or, if an insufficient number of components have been purchased by our manufacturer, we may not be in a position to meet all of our customers’ requirements. If we are unable to successfully manage our inventory levels and respond to our customers’ purchase orders based on their forecasted quantities, our business could be adversely affected.

We may have difficulty responding to changing technology, industry standards and customer requirements, which could cause us to be unable to recover our research and development expenses and our revenue could decline.

The wireless communications industry is subject to rapid technological change. Our business and future success will depend, in part, on our ability to accurately predict and anticipate evolving wireless technology standards and develop products that keep pace with the continuing changes in technology, evolving industry standards and changing customer and end-user preferences and requirements. Our products embody complex technology that may not meet those standards, preferences and requirements. Our ability to design, develop and commercially launch new products depends on a number of factors, including, but not limited to the following:

A failure by us, or our suppliers, in any of these areas, or a failure of new products to obtain commercial acceptance, could mean we receive less revenue than we anticipate and we are unable to recover our research and development expenses, and may result in a decrease in the market price for our shares.

We develop products to meet our customers’ requirements. If we are unable or choose not to meet our customers’ future needs, we may not win their future business and our revenue and profitability may decrease. In addition, wireless communications service providers require that wireless data systems deployed on their networks comply with their own standards, which may differ from the standards of other providers. We may be unable to successfully address these developments in a timely basis or at all. Our failure to respond quickly and cost-effectively to new developments through the development of new products or enhancements to existing products could cause us to be unable to recover significant research and development expenses and reduce our revenues.

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We may infringe on the intellectual property rights of others.

The industry in which we operate has many participants that own, or claim to own, proprietary intellectual property. While to date we have not received assertions or claims from third parties alleging that our products violate or infringe on their intellectual property rights we may receive these assertions in the future. Rights to intellectual property can be difficult to verify and litigation may be necessary to establish whether or not we have infringed the intellectual property rights of others. In many cases, these third parties are companies with substantially greater resources than us, and they may be able to, and may choose to, pursue complex litigation to a greater degree than we could. Regardless of whether these infringement claims have merit or not, we may be subject to the following:

In the event of an unfavorable outcome in such a claim and our inability to develop a non-infringing alternative, then our business, operating results and financial condition may be materially adversely affected and we may have to restructure our business.

Misappropriation of our intellectual property could place us at a competitive disadvantage.

Our intellectual property is important to our success. We rely on a combination of patent protection, copyrights, trademarks, trade secrets, licenses, non-disclosure agreements and other contractual agreements to protect our intellectual property. Third parties may attempt to copy aspects of our products and technology or obtain information we regard as proprietary without our authorization. If we are unable to protect our intellectual property against unauthorized use by others it could have an adverse effect on our competitive position. Our strategies to deter misappropriation could be inadequate due to the following risks:

In addition, we could be required to spend significant funds and our managerial resources could be diverted in order to defend our rights, which could disrupt our operations.

Fluctuations in exchange rates between the United States dollar and other currencies, including the Canadian dollar may affect our operating results.

We are exposed to fluctuations in the exchange rate between the United States dollar and the Canadian dollar through our operations in Canada. To reduce our risk because of currency fluctuations, we purchase inventory, other cost of sales items and many of our services in United States dollars, however, some of our operating costs are still incurred in Canadian dollars, primarily those relating to marketing, administration and sales support. Given the fluctuation in the Canadian dollar relative to the United States dollar, our operating results may be negatively impacted. To date, we have not entered into any foreign currency futures contracts as part of a hedging policy. We expect that as our business expands in Europe and the Asia-Pacific region, we will also be exposed to additional foreign currency transactions and to the associated currency risk.

We depend on wireless network carriers to offer acceptable wireless data and voice communications services for our products to operate.

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Our products can operate on wireline networks but because of our 3G/4G Business Class focus we are dependent on wireless data and voice networks operated by third parties. Our business and future growth depends, in part, on the successful deployment by network carriers of next generation wireless data and voice networks and the network carriers’ ability to co-market our products. If these network carriers delay the deployment or expansion of next generation networks or fail to offer our products in conjunction with their data plans, or fail to price and market their services effectively, sales of our products will decline and our revenues will decrease.

We do not have fixed-term employment agreements with our key personnel and the loss of any key personnel may harm our ability to compete effectively.

None of our executive officers or other key employees has entered into a fixed-term employment agreement. Our success depends in large part on the abilities and experience of our executive officers and other key employees. Competition for highly skilled management, technical, research and development and other key employees is intense in the wireless communications industry. We may not be able to retain our current executive officers or key employees and may not be able to hire and transition in a timely manner experienced and highly qualified additional executive officers and key employees as needed to achieve our business objectives. The loss of executive officers and key employees could disrupt our operations and our ability to compete effectively could be adversely affected.

As our business expands internationally, we will be exposed to additional risks relating to international operations.

If we are unable to further develop distribution channels in Europe and the Asia-Pacific region we may not be able to grow our international operations and our ability to increase our revenue will be negatively impacted.

Government regulation could result in increased costs and inability to sell our products.

Our products are subject to certain mandatory regulatory approvals in the United States, Canada, the European Union and other regions in which we operate. In the United States, the Federal Communications Commission regulates many aspects of communications devices. In Canada, similar regulations are administered by the Ministry of Industry, through Industry Canada. European Union directives provide comparable regulatory guidance in Europe. Although we have obtained all the necessary Federal Communications Commission, Industry Canada and other required approvals for the products we currently sell, we may not obtain approvals for future products on a timely basis, or at all. In addition, regulatory requirements may change or we may not be able to obtain regulatory approvals from countries other than the United States and Canada in which we may desire to sell products in the future.

If our efforts to restore the business to sustained profitability are not successful, we may be required to restructure or take other actions and our share price may decline.

We have incurred losses from operations in 2009 and 2008 as a result of restructuring our business and selling off low margin end of life products associated with the distribution business and we believe that we will continue to incur losses throughout fiscal year ending October 31, 2010 as we continue to develop our business and launch our new portfolio of routing products and services over the next 8-12 months.

Our ability to achieve and maintain profitability in the future will depend on, among other things, the continued sales of our current products and the successful development and commercialization of new products. If we cannot sustain profitability, our total losses will increase and we may be required to restructure our operations or raise additional capital. Additional financing may not be available, and even if available, may not be on acceptable terms. We may seek to raise additional capital through an offering of common shares, preference shares or debt, which may result in dilution, and/or the issuance of securities with rights senior to the rights, of the holders of common shares. As a result, our share price may decline.

Risks Associated with Our Common Stock

We do not intend to pay dividends on any investment in our common stock.

We do not currently anticipate declaring and paying dividends to our stockholders in the near future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. We anticipated the loss for 2009 as a result of realigning our business strategy with a focusing primarily on developing new products. Because we experienced a loss from operations in 2009 and 2008, there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of shares of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, which currently do not intend to pay any dividends on shares of our common stock for the foreseeable future. To the extent that we require additional financing currently not provided for in our financing plan, our financing sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our common stock will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our common stock.

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The price of our common stock is likely to be highly volatile and may decline. If this happens, our stockholders may have difficulty selling their shares and may not be able to sell their shares at all.

We cannot assure you that a trading market will continue to develop for our common stock, or if it does, it may not be sustained, or that any stockholder will be able to liquidate his or her investment without considerable delay, if at all. The market price of our common stock is likely to be highly volatile and may also fluctuate significantly in response to the following factors, most of which are beyond our control:

The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies’ securities and that have often been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

Because we can issue additional shares of our common stock, our stockholders may incur immediate dilution and may experience further dilution.

We are authorized to issue up to 600,000,000 shares of common stock. As of September 13, 2010 there were 59,634,450 shares of our common stock issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our stockholders. Consequently, our stockholders may experience dilution in their ownership of our company in the future.

Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

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The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, which we refer to as FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for shares of our common stock.

The disclosure contained under Part 1 – Item 2 under the heading “Outstanding Share Data” is responsive to this item and is incorporated herein by reference.

None

Promissory notes issued

In April 2010, a shareholder advanced an additional $174,000 in connection with short-term promissory notes for working capital purposes. The shareholder advanced an additional $140,000 on June 23, 2010 and $48,000 on July 8, 2010. The loans bear interest at 12% per annum. As of July 31, 2010, $412,000 was outstanding under the promissory notes payable agreements to the shareholder.

On May 25, 2010, a shareholder advanced $300,000 in connection with a short-term promissory note for working capital purposes. On July 26, 2010, the shareholder advanced an additional $250,000 in connection with a short-term promissory note for working capital purposes. The loans bear interest at 12% per annum. As of July 31, 2010, $550,000 was outstanding under the promissory notes payable agreements to the shareholder. On August 20, 2010, an additional $100,000 was advanced by this shareholder.

Repayment of Promissory Notes

On May 2, 2010, we repaid two promissory notes to two lenders totalling $104,964 and $101,216, respectively, including interest.

Appointment of Director

On May 18, 2010 we announced the appointment of Michael Donnell as a director of our company (as disclosed in our Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 18, 2010) Mr. Donnell has more than 25 years of experience leading public and private telecommunications and software companies ranging in size from startup phase to organizations with 2,500 employees. He has also provided market development, business planning and financing advice to a number of firms in the telecommunications, hardware and software sectors. He graduated from Central Oklahoma University with a Bachelor of Business Administration degree.

In connection with Mr. Donnell’s appointment as a director, we have agreed to provide him with the following: a fee of $1,000 per month, paid quarterly, for his services as a director; reimbursement for normal travel and other expenses related to the carrying out of the duties of the director; a per diem of $1,000 per day when working on business for our company that is not related to his role as a director of our company; and 437,500 stock options, with each option exercisable into one share of our common stock at a price of $0.425 per share for a period of five years from the date of grant, on terms and conditions as set out in our 2009 Stock Option Plan and a stock option agreement to be entered between our company and Mr. Donnell. The options will vest equally over each of 6, 12 and 18 months from May 17, 2010.

Debt Conversion Agreements

On May 17, 2010, we entered into debt conversions subscription agreements whereby $21,485 debt was converted into 94,001 common shares. On May 26, 2010 we issued the shares to 3 US accredited investors (as that term is defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”)) relying on Regulation S and/or Section 4(2) of the Securities Act.

Annual Meeting of Stockholders

On June 22, 2010, we held our annual meeting of stockholders to elect the directors of our company. As disclosed in our Form 8-K filed with the Securities and Exchange Commission on June 24, 2010, our stockholders elected Mark Sampson, Ralph Proceviat, Brad Weinert, James Grey and Michael Donnell as the directors of our company and ratified the appointment of BDO USA LLP as our independent registered public accounting firm. Our stockholders also ratified our 2009 Stock Option Plan. Under the Plan, options to acquire common shares may be granted to directors, officers, consultants and employees of our company. A total of 15,000,000 common shares may be issued under the Plan. The purpose of our 2009 stock option plan is to retain the services of valued key employees, directors, officers and consultants of our company and such other persons as the Plan Administrator shall select, and to encourage such persons with an increased incentive to make contributions to our company.

Form S-8 - Registration Statement Under the Securities Act of 1933

On July 12, 2010 we filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register an aggregate of 15,000,000 shares of our common stock that are issued or issuable pursuant to stock options granted and to be granted under our 2009 stock option plan. Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, the Registration Statement also covers any additional shares of our common stock that become issuable under any of the listed plans by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without receipt of consideration that increases the number of our outstanding shares of common stock.

Exercise of Stock Options

On August 12, 2010 we issued a total of 65,000 common shares to two US employees in connection with the exercise of stock options at an exercise price of $0.15 per share.

Convertible Note

As disclosed in our Report on Form 8-K (as filed with the Securities and Exchange Commission on August 26, 2010), we entered into a securities purchase agreement (the “Agreement”), effective August 20, 2010, pursuant to which we agreed to sell to the lender a 10% Convertible Note (the “Note”) due July 30, 2011 with an aggregate original principal amount equal to $400,000, and a 3 year warrant (the “Warrant”) to purchase 333,333 warrant shares (the “Warrant Shares”) at an exercise price equal to $0.50 per Warrant Share for a period of three years. The Note entitles the Lender to convert, from time to time, all or any part of the outstanding principal, plus accrued but unpaid interest thereon, into shares of common stock of the Company (the “Note Shares”) at a conversion price equal to the lesser of (i) $0.50 and (ii) 80% of the average of the three lowest daily VWAPs (as defined in the Note) during the twenty (20) consecutive Trading Days (as defined in the Note) immediately preceding the applicable Conversion Date (as defined in the Note) on which the Lender elects to convert all or part of the Note. The issuance of the Note, the Note Shares, the Warrant and the Warrant Shares will be made pursuant to Section 4(2) and/or Rule 506 of Regulation D of the United States Securities Act of 1933 (“the Act”) and the Lender has represented to the Company that it is an “accredited investor” as such term is defined in Rule 501 of Regulation D of the Act.

Schedule 14A – Preferred Shares

The Board of Directors proposes to amend and restate the articles of incorporation of the Company to authorize 100,000,000 shares of preferred stock of the Company with a par value of $0.001, which may be divided into and issued is series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by the Board (the “Amendment and Restatement”). The Amendment and Restatement requires the approval by the vote of stockholders of the Company holding at least a majority of the voting power of the common stock of the Company. On August 31, 2010, the Company filed a preliminary Schedule 14A – Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of 1934 with the Securities and Exchange Commission.

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SIGNATURES

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

NEXAIRA WIRELESS INC.

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