424B3 1 airspannetworks_424b3.htm 424B3

 

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-256137

 

PROSPECTUS

  

 

 

9,000,000 Shares of Common Stock Underlying 9,000,000 Warrants

 

 

 

This prospectus relates to the issuance by Airspan Networks Holdings Inc. of up to an aggregate of 9,000,000 shares (the “Warrant Shares”) of our common stock, par value $0.0001 per share (“Common Stock”), issuable from time to time upon the exercise of 9,000,000 outstanding Post-Combination Warrants (as defined below), consisting of (i) 3,000,000 Post-Combination $12.50 Warrants (as defined below), (ii) 3,000,000 Post-Combination $15.00 Warrants (as defined below) and (iii) 3,000,000 Post-Combination $17.50 Warrants (as defined below), in each case, that were issued by us on August 13, 2021 (such date the “Closing Date”) as part of the consummation (the “Closing”) of a business combination transaction (which we refer to herein as the “Business Combination”) between Airspan (then known as New Beginnings Acquisition Corp.), Artemis Merger Sub Corp., a wholly-owned direct subsidiary of Airspan (“Merger Sub”), and Airspan Networks Inc. (“Legacy Airspan”). This prospectus also covers an indeterminate number of additional Warrant Shares that may be issuable by reason of the anti-dilution provisions regarding stock dividends, stock splits, or similar transactions contained in the warrant agreement (the “Warrant Agreement”) between Airspan and Continental Stock Transfer & Trust Company, as warrant agent and transfer agent (the “Warrant Agent”) governing the Post-Combination Warrants.

 

On May 14, 2021, we filed a registration statement on Form S-4, relating to the Business Combination, which registered, among other things, the issuance of 9,000,000 Post-Combination Warrants to Legacy Airspan securityholders. On August 13, 2021, in connection with the Closing of the Business Combination, we issued 9,000,000 Post-Combination Warrants to Legacy Airspan securityholders. As of the date of this prospectus, 9,000,000 Post-Combination Warrants issued pursuant to the Business Combination remain outstanding and are exercisable for 9,000,000 Warrant Shares.

 

Each $12.50 Post-Combination Warrant is exercisable at a price of $12.50 per Warrant Share, each $15.00 Post-Combination Warrant is exercisable at a price of $15.00 per Warrant Share and each $17.50 Post-Combination Warrant is exercisable at a price of $17.50 per Warrant Share, in each case, exercisable during the period commencing on the Closing Date and terminating on the earlier of August 13, 2023 and our earlier redemption, as further described below.

 

We will receive proceeds from the exercise of the Post-Combination Warrants to the extent such Post-Combination Warrants are exercised for cash.

 

We have paid all of the registration expenses incurred in connection with the registration of the issuance of the Warrant Shares. We will not pay any commissions, broker fees or other compensation in relation to the exercise of the Post-Combination Warrants or the solicitation of

the exercise of the Post-Combination Warrants.

 

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

 

Our Common Stock, Public Warrants (as defined below), Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants are listed on the NYSE American LLC (“NYSE American”) under the symbols “MIMO”, “MIMO WS”, “MIMO WSA”, “MIMO WSB” and “MIMO WSC”, respectively. On October 26, 2021, the closing price of our Common Stock was $7.37 per share, the closing price of our Public Warrants was $0.82 per warrant, the closing price of our Post-Combination $12.50 Warrants was $32.47 per warrant, the closing price of our Post-Combination $15.00 Warrants was $13.16 per warrant and the closing price of our Post-Combination $17.50 Warrants was $28.73 per warrant.

 

We are an “emerging growth company,” as that term is defined under the federal securities laws and, as such, are subject to certain reduced public company reporting requirements.

 

Investing in the Warrant Shares involves risks that are described in the “Risk Factors” section beginning on page 7 of this prospectus.

 

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

 

 

 

The date of this prospectus is October 27, 2021.

 

 

TABLE OF CONTENTS

 

  Page(s)
FREQUENTLY USED TERMS ii
ABOUT THIS PROSPECTUS v
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS vi
PROSPECTUS SUMMARY 1
RISK FACTORS 7
USE OF PROCEEDS 27
PLAN OF DISTRIBUTION 28
MARKET INFORMATION AND DIVIDEND POLICY 29
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 30
BUSINESS 41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 49
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 77
MANAGEMENT 86
EXECUTIVE COMPENSATION 92
DESCRIPTION OF SECURITIES 99
SHARES ELIGIBLE FOR FUTURE SALE 105
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 107
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 109
LEGAL MATTERS 114
EXPERTS 114
CHANGE IN AUDITOR 115
WHERE YOU CAN FIND MORE INFORMATION 116
INDEX TO FINANCIAL STATEMENTS F-1

 

i

 

FREQUENTLY USED TERMS

 

Unless the context otherwise requires, references in this prospectus to “Airspan”, the “Company”, “us”, “we”, “our” and any related terms prior to the Closing of the Business Combination are intended to mean Legacy Airspan and its consolidated subsidiaries, and after the Closing of the Business Combination, Airspan Networks Holdings Inc. and its consolidated subsidiaries. “New Beginnings” is intended to mean New Beginnings Acquisition Corp. (subsequently renamed Airspan Networks Holdings Inc.) prior to the Closing.

 

In addition, in this document, unless otherwise stated or the context otherwise requires, references to:

 

“2021 Plan” means the Airspan Networks Holdings Inc. 2021 Stock Incentive Plan, as such may have been amended, supplemented or modified from time to time;

 

“4G” means the fourth generation technology standard for broadband cellular networks;

 

“5G” means the fifth generation technology standard for broadband cellular networks;

 

“Board” are to our board of directors;

 

“Convertible Note Purchase Agreement” means the Senior Secured Convertible Note Purchase and Guarantee Agreement, dated as of July 30, 2021, by and among the Company, as issuer, Merger Sub, as guarantor, Fortress, as agent, collateral agent and trustee, and the Convertible Note Purchasers, as amended, restated, amended and restated, supplemented or otherwise modified from time to time, including, without limitation, pursuant to the Joinder Agreement;

 

“Convertible Note Purchasers” means FIP UST LP, Drawbridge Special Opportunities Fund LP, DBDB Funding LLC, Fortress Lending II Holdings L.P., FLF II Holdings Finance L.P., Fortress Lending Fund II MA-CRPTF LP, Fortress Lending I Holdings L.P. and FLF I Holdings Finance L.P.;

 

“Convertible Notes” means the senior secured convertible notes issued to the Convertible Note Purchasers on August 13, 2021, pursuant to the Convertible Note Purchase Agreement;

 

“Customer” means DISH Network Corporation, a Nevada corporation;

 

“Customer Agreement” means the Warrant, dated as of March 5, 2021, by and between Legacy Airspan and the Customer;

 

“Customer Warrants” means warrants issued under the Customer Agreement to purchase one share of our Common Stock per warrant, at an exercise price of $10.00;

 

“Fortress” means DBFIP ANI LLC, a Delaware limited liability company;

 

ii

 

“Fortress Amendment” means the Waiver and Consent, Second Amendment, Restatement, Joinder and Omnibus Amendment to Credit Agreement and Other Loan Documents, dated as of August 13, 2021, among Legacy Airspan, as borrower, the Company, as joining guarantor and as holdings, the subsidiaries of the Company party to the Fortress Credit Agreement, as guarantors, the lenders party thereto and Fortress, as administrative agent and collateral agent;

 

“Fortress Credit Agreement” means the Credit Agreement, dated as of December 30, 2020, among Legacy Airspan, as borrower, certain subsidiaries of Legacy Airspan, as guarantors, the lenders from time to time party thereto and Fortress, as administrative agent and collateral agent, as amended, restated, amended and restated, supplemented or otherwise modified from time to time, including, without limitation, pursuant to the Fortress Amendment;

 

“Founder Shares” means the shares of Common Stock initially purchased by the Sponsor in a private placement in September 2020;

 

“IPO” or “Initial Public Offering” means New Beginnings’ initial public offering of units, consummated on November 3, 2020;

 

“Joinder Agreement” means the Joinder Agreement, dated as of August 13, 2021, by the Company and the guarantors party thereto to Fortress, in its capacities as administrative agent, collateral agent and trustee for the holders of the Convertible Notes;

 

“Key Airspan Stockholders” means Oak Investment Partners XI, Limited Partnership, Oak Investment Partners XIII, Limited Partnership, Qualcomm Incorporated and SoftBank Group Capital Limited;

 

“Legacy Airspan Accelerated Restricted Stock” means all outstanding shares of restricted Legacy Airspan Class B Common Stock immediately prior to the Closing granted under the Legacy Airspan Plan that were held by a person who was not a service provider to Legacy Airspan or any subsidiary of Legacy Airspan as of the date of the Business Combination Agreement;

 

“Legacy Airspan Capital Stock” means Legacy Airspan Common Stock, Legacy Airspan Class B Common Stock, Legacy Airspan Class C Common Stock and Legacy Airspan Preferred Stock;

 

“Legacy Airspan Class B Common Stock” means Legacy Airspan’s Class B Common Stock, with a par value of $0.0003 per share;

 

“Legacy Airspan Class C Common Stock” means Legacy Airspan’s Class C Common Stock, with a par value of $0.0003 per share;

 

“Legacy Airspan Common Stock” means Legacy Airspan’s Common Stock, with a par value of $0.0003 per share;

 

“Legacy Airspan Plan” means Legacy Airspan’s 2009 Omnibus Equity Compensation Plan, as such may have been amended, supplemented or modified from time to time;

 

“Legacy Airspan Preferred Stock” means Legacy Airspan’s Convertible Preferred Stock, with a par value of $0.0001 per share;

 

“Legacy Airspan Restricted Stock” means all outstanding shares of restricted Legacy Airspan Common Stock or Legacy Airspan Class B Common Stock, as applicable, immediately prior to the Closing granted under the Legacy Airspan Plan;

 

“Open RAN” means open radio access network;

 

iii

 

“PIPE” means the sale of the PIPE Shares to the PIPE Investors, for a purchase price of $10.00 per share for an aggregate purchase price of $75 million, in a private placement immediately prior to Closing;

 

“PIPE Shares” means an aggregate of 7,500,000 shares of Common Stock issued to the PIPE Investors in the PIPE, for a purchase price of $10.00 per share;

 

“Private Placement Units” means the New Beginnings units purchased in a private placement in connection with the IPO;

 

  “Private Placement Warrants” means the 545,000 warrants issued in a private placement in connection with the IPO which are exercisable to purchase a share of Common Stock at an exercise price of $11.50 per share;

 

“Post-Combination $12.50 Warrants” means warrants issued under the Post-Combination Warrant Agreement to purchase one share of our Common Stock per warrant, at an exercise price of $12.50;

 

“Post-Combination $15.00 Warrants” means warrants issued under the Post-Combination Warrant Agreement to purchase one share of our Common Stock per warrant, at an exercise price of $15.00;

 

“Post-Combination $17.50 Warrants” means warrants issued under the Post-Combination Warrant Agreement to purchase one share of our Common Stock per warrant, at an exercise price of $17.50;

 

“Post-Combination Warrant Agreement” means the warrant agreement entered into at Closing, in substantially the form attached to the Business Combination Agreement as Exhibit C;

 

“Post-Combination Warrants” means the Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants;

 

  “Public Warrants” means the 11,500,000 warrants issued in connection with the IPO which are exercisable to purchase a share of Common Stock at an exercise price of $11.50 per share;

 

“Securities Act” means the U.S. Securities Act of 1933, as amended;

 

“Sponsor” means New Beginnings Sponsor, LLC, a Delaware limited liability company;

 

“Stockholder Support Agreement” means the Stockholder Support Agreement, dated as of March 8, 2021, by and among New Beginnings and the Key Airspan Stockholders;

 

“Stockholders Agreement” means the Stockholders Agreement entered into in connection with the Closing by New Beginnings, the Sponsor and certain Legacy Airspan stockholders;

 

“Trust Account” means the trust account that prior to the Closing held a portion of the proceeds of the IPO and the concurrent sale of the Private Placement Units; and

 

“Warrants” means the Public Warrants, the Private Placement Warrants, the Customer Warrants and the Post-Combination Warrants.

 

iv

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we filed with the SEC relating to the issuance of up to an aggregate of 9,000,000 shares of our Common Stock that may be issued upon exercise of the Post-Combination Warrants.

 

A prospectus supplement or post-effective amendment may add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement, post-effective amendment or any related free writing prospectus. See “Where You Can Find More Information.

 

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

For investors outside the United States: we have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.

 

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

 

This prospectus contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.  

 

v

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

 

  the expected benefits of the Business Combination;

 

  our expected financial and business performance;

 

  changes in our strategy, future operations, financial position, estimated revenues and losses, forecasts, projected costs, prospects and plans;

 

  the implementation, market acceptance and success of our products;

 

  demand for our products and the drivers of that demand;

 

  our estimated total addressable market and other industry projections, and our projected market share;

 

  competition in our industry, the advantages of our products and technology over competing products and technology existing in the market, and competitive factors including with respect to technological capabilities, cost and scalability;

 

  our ability to scale in a cost-effective manner and maintain and expand our manufacturing relationships;

 

  our ability to enter into production supply agreements with customers, the terms of those agreements, and customers’ utilization of our products and technology;

 

  our expected reliance on tier 1 customers;

 

  developments and projections relating to our competitors and industry, including with respect to investment in 5G networks;

 

  our expectation that we will incur substantial expenses and continuing losses for the foreseeable future and that we will incur increased expenses as a public company;

 

  the impact of health epidemics, including the COVID-19 pandemic, on our business and industry and the actions we may take in response thereto;

 

  our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

 

  expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”);

 

  our future capital requirements and sources and uses of cash;

 

  our ability to obtain funding for our operations;

 

  our business, expansion plans and opportunities;

 

  anticipated financial performance, including gross margin, and the expectation that our future results of operations will fluctuate on a quarterly basis for the foreseeable future;

 

  expected capital expenditures, cost of revenue and other future expenses, and the sources of funds to satisfy our liquidity needs; and

 

  the outcome of any known and unknown litigation and regulatory proceedings.

 

vi

 

These forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: 

 

  the ability to maintain the listing of our securities on the NYSE American or any other exchange;

 

  the price of our securities may be volatile due to a variety of factors, including changes in the industries in which we operate, variations in performance across competitors, changes in laws and regulations affecting our business and changes in our capital structure;

 

  the risk of downturns and the possibility of rapid change in the highly competitive industry in which we operate;

 

  the risk that we and our current and future collaborators are unable to successfully develop and commercialize our products or services, or experience significant delays in doing so;

 

  the risk that we do not achieve or sustain profitability;

 

  the risk that we will need to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all;

 

  the risk that we experience difficulties in managing our growth and expanding operations;

 

  the risk that third-party suppliers and manufacturers are not able to fully and timely meet their obligations;

 

  the risk of product liability or regulatory lawsuits or proceedings relating to our products and services;

 

  the risk that we are unable to secure or protect our intellectual property; and

 

  other risks and uncertainties described in this prospectus, including those under the section entitled “Risk Factors.”

 

vii

 

PROSPECTUS SUMMARY

 

This summary highlights selected information from this prospectus and does not contain all of the information that may be important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included elsewhere in this prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Information” and the financial statements included elsewhere in this prospectus, and any accompanying prospectus supplement.

 

Overview

 

We are a U.S. headquartered, award-winning technical leader, in the 4G and 5G Radio Access Network (“RAN”) and broadband access solutions market. We offer a broad range of software defined radios, broadband access products and network management software to enable cost-effective deployment and efficient management of mobile, fixed and hybrid wireless networks. Our customers include leading mobile communications service providers (“CSPs”), large enterprises, military communications integrators and internet service providers (“ISPs”) working to deliver high-capability broadband access to numerous markets. Our mission is to disrupt and modernize network total cost of ownership (“TCO”) models. We aim to lower costs for customers throughout the product lifecycle, from procurement through commissioning and ongoing operating costs. We have been pioneering wireless technology for over 20 years and are distinguished by our deep customer relationships, innovative product design capabilities and expertise in solving technical challenges at the network edge, where a device or local network interfaces with the Internet or other networks.

 

In 4G mobile networks, we established ourselves as an expert in network densification by focusing on solving the problems associated with physically locating, installing and commissioning networks consisting of hundreds of thousands of small cells as an alternative and supplement to macro cell-based networks. Software-defined and cost-optimized radio platforms, self-organizing/optimization algorithms and minimum power consumption have been critical to our 4G business and are expected to be even more critical to the deployment and expansion of new 5G networks. As an early leader in 5G OPEN-RAN standards, we have worked to unbundle the monolithic network architectures previously dominated by large incumbent suppliers such as Huawei Technologies Co., Ltd. (“Huawei”), Telefonaktiebolaget LM Ericsson (“Ericsson”) and Nokia Corporation (“Nokia”). As a foundational member of the 5G ecosystem, we work closely with wireless operators, chipset suppliers and infrastructure vendors around the world on 5G developments, trials, pilots and initial 5G deployments.

  

We started our business in digital wireless access, primarily voice services, rapidly becoming a leader in high performance wireless data networks. Our acquisition of Mimosa Networks, Inc. (“Mimosa”) in 2018 strengthened our position in today’s rapidly expanding wireless broadband access market. Mimosa’s capabilities and innovation in wireless broadband point-to-point and point-to-multipoint networks strengthened our disruptive position in the mobile 4G/5G network densification space and expanded our existing North American presence with an engineering center in Silicon Valley. Mimosa’s channel-led sales strategy enhances the distribution of our existing products for specific vertical markets, such as private 4G and 5G and applications in citizens broadband radio service (“CBRS”).

 

Implications of Being an Emerging Growth Company

 

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we are eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including, but not limited to, (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

 

 1 

 

We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) when we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common equity held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter; or (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of this extended transition period and, as a result, we may adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies instead of the dates required for other public companies.

 

Summary Risk Factors

 

Our business is subject to numerous material and other risks that you should be aware of before making an investment decision. These risks are described more fully in the section entitled “Risk Factors.” The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operation and future prospects. These risks include, among others:

 

Risks related to our business and industry, including that:

  

 

We have incurred losses and may continue to incur substantial losses and negative operating cash flows and may not succeed in achieving or maintaining profitability in the future. 

     
 

Any reduction in expenditures by communications service providers could have a negative impact on our results of operations. 

     
  The introduction of new products and technology, and in particular 5G products, and managing the transition from legacy products, is key to our success, and if we fail to predict and respond to emerging technological trends and network operators’ changing needs, we may be unable to remain competitive.

 

 

Competition from larger, better-capitalized or emerging competitors could result in price reductions, reduced gross margins and loss of or diminished growth of market share. 

     
 

We currently depend on a few key customers for a substantial percentage of our sales. A loss of one or more of those customers could cause a significant decrease in our net revenue. 

     
 

Many of our customers execute short-term purchase orders or contracts that allow our customers to terminate the agreement without significant penalties.

     
  We are exposed to the credit risk of our channel partners, which could result in material losses.
     
 

Our sales cycle is typically long and unpredictable, making it difficult to accurately predict inventory requirements, forecast revenues and control expenses.

     
 

We make estimates relating to customer demand and errors in our estimates may have negative effects on our inventory levels, revenues and results of operations.

     
  Since we incur most of our operating expenses and a portion of our cost of goods sold in foreign currencies, fluctuations in the values of foreign currencies could have a negative impact on our profitability.

 2 

 

  We rely on third-party manufacturers, which subjects us to risks of product delivery delays and reduced control over product costs and quality.
     
 

We must often establish and demonstrate the benefits of new and innovative offerings to customers, which may take time and significant efforts that may not ultimately prove successful.

     
  Our ability to sell our products is highly dependent on the quality of our support and services offerings, and our failure to offer high-quality support and services could have a material adverse effect on our business, operating results and financial condition.
     
  We may not be able to detect errors or defects in our solutions until after full deployment and product liability claims by customers could result in substantial costs.
     
  A material defect in our products that either delays the commencement of services or affects customer networks could seriously harm our credibility and our business, and we may not have sufficient insurance to cover any potential liability.
     
 

A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the outbreak of the novel strain of coronavirus disease, COVID-19, could adversely affect our business.

     
 

We have substantial indebtedness and are highly leveraged, which could adversely affect our business.

     
 

We may need additional capital in future periods and our ability to access capital on acceptable terms could decrease significantly and may adversely affect our results of operations and/or business prospects.

     
  We will have broad discretion over the use of proceeds from the exercise of our Warrants and options to purchase our Common Stock, and we may invest or spend the proceeds in ways with which investors do not agree and in ways that may not yield a return.
     
Risks related to our intellectual property, including that:

  

 

We may not have adequate protection for our intellectual property, which may make it easier for others to misappropriate our technology and enable our competitors to sell competing products at lower prices and harm our business.

     
 

Infringement claims are common in our industry and third parties, including competitors, have and could in the future assert infringement claims against us or our customers that we are obligated to indemnify.

     
  We may be subject to damages resulting from claims that our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former employees or other parties.
     
Risks related to laws and regulations, including that:

 

 

Changes in telecommunications regulation or delays in receiving licenses could adversely affect many of our customers and may lead to lower sales.

     
  If we are not able to satisfy data protection, security, privacy and other government- and industry-specific requirements or regulations, our business, results of operations and financial condition could be harmed.

 3 

 

Risks related to our Common Stock, including that:

 

 

If we do not meet the expectations of investors or securities analysts, the market price of our securities may decline.

     
  We qualify as an “emerging growth company” as well as a “smaller reporting company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.

 

Corporate Information

 

We were incorporated under the laws of the state of Delaware on August 20, 2020 under the name New Beginnings Acquisition Corp. Upon the Closing, we changed our name to Airspan Networks Holdings Inc. Our principal executive offices are located at 777 Yamato Road, Suite 310, Boca Raton, Florida 33431 and our telephone number is (561) 893-8670. Our main operations, manufacturing and product development centers are located in Santa Clara, California, Slough, United Kingdom, Airport City, Israel, Mumbai, India and Tokyo, Japan.  Our website address is www.airspan.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

 

 4 

 

THE OFFERING

 

This prospectus relates to the issuance by us of up to an aggregate of 9,000,000 shares of our Common Stock, consisting of (i) up to an aggregate of 3,000,000 shares of our Common Stock that may be issued upon exercise of the Post-Combination $12.50 Warrants, (ii) up to an aggregate of 3,000,000 shares of our Common Stock that may be issued upon exercise of the Post-Combination $15.00 Warrants and (iii) up to an aggregate of 3,000,000 shares of our Common Stock that may be issued upon exercise of the Post-Combination $17.50 Warrants. 

 

Shares of Common Stock offered by us Up to an aggregate of 9,000,000 shares of Common Stock that may be issued upon exercise of the Post-Combination Warrants.

 

Common Stock outstanding

72,024,437 shares of Common Stock as of October 18, 2021.

 

Use of proceeds We will receive up to $135.0 million from the exercise of the Post-Combination Warrants, assuming the exercise in full of all of the Post-Combination Warrants for cash, but will not receive any proceeds from the sale of the underlying Warrant Shares. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of the Post-Combination Warrants for general corporate and working capital purposes. See “Use of Proceeds.”

 

Market for our Common Stock and Post-Combination Warrants Our Common Stock, Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants are listed on the NYSE American under the symbols “MIMO”, “MIMO WSA”, “MIMO WSB” and “MIMO WSC”, respectively.

 

Risk factors Any investment in the Common Stock offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” elsewhere in this prospectus.

 5 

 

Unless we specifically state otherwise or the context otherwise requires, the information above is as of October 18, 2021, does not give effect to issuances of our Common Stock, warrants, options to purchase shares of common stock or restricted stock units (“RSUs”) covering shares of Common Stock after such date, or the exercise of warrants or options or the settlement of RSUs after such date and excludes:

 

 

5,815,796 shares of our Common Stock issuable upon the exercise of stock options outstanding as of October 18, 2021;

 

 

1,750,000 shares of our Common Stock subject to RSUs as of October 18, 2021; and

 

  Up to 11,500,000 shares of our Common Stock issuable upon exercise of our Public Warrants;

 

  Up to 545,000 shares of our Common Stock issuable upon exercise of our Private Placement Warrants;

 

  Up to 4,680,500 shares of our Common Stock issuable upon conversion of our Convertible Notes; and

 

  4,257,718 shares of our Common Stock reserved for issuance with respect to future grants under the 2021 Plan, as well as any shares of our Common Stock subject to outstanding awards under the Legacy Airspan Plan that are forfeited or reacquired by us due to termination or cancellation of such awards, which upon such forfeiture or reacquisition become available for grants under the 2021 Plan.

 

 6 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our securities. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operations and future prospects, in which event the market price of our securities could decline, and you could lose part or all of your investment. Unless otherwise indicated, reference in this section and elsewhere in this prospectus to our business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and our future prospects. The material and other risks and uncertainties summarized above and described below are not intended to be exhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking Statements.”

 

Risks Related to Our Business and Industry

 

We have incurred losses and may continue to incur substantial losses and negative operating cash flows and may not succeed in achieving or maintaining profitability in the future.

 

We have incurred net losses and negative cash flows since incorporation, and as of June 30, 2021, we had an accumulated deficit of $719.3 million. We anticipate that we will continue to experience negative cash flows and net losses at least through 2021. Our operating losses have been due in part to the commitment of significant resources to our research and development and sales and marketing departments as well as competitive pressures. We expect to continue to devote resources to these areas and, as a result, we will need to increase our quarterly revenues or further decrease our operating expenses to achieve and maintain profitability. We cannot be certain that we will achieve profitability. If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a quarterly or annual basis in the future. Continuous cash outflows can lead to the need for new financing, which may not be available on favorable terms, or at all.

 

Any reduction in expenditures by communications service providers could have a negative impact on our results of operations.

 

Our products are sold to telecommunications carriers, service providers and telecommunications network operators. A decline in our customers’ capital spending may reduce our sales, increase the need for inventory write-offs and increase our losses and our requirements for additional working capital, which may not be readily available to us. This could result in downward pressure on the price of our products, all of which would have a material adverse effect on our results of operations and stock price. Further, the number of carriers and service providers that are our potential customers may not grow or may decline as a result of, among other things, the substantial capital requirements needed to establish networks and the limited number of licenses granted in each country.

 

The introduction of new products and technology, and in particular 5G products, and managing the transition from legacy products, is key to our success, and if we fail to predict and respond to emerging technological trends and network operators’ changing needs, we may be unable to remain competitive.

 

The wireless broadband market is generally characterized by rapidly changing technology, changing needs of network operators, evolving regulations and industry standards and frequent introductions of new products and services. Currently, the race to introduce 5G products and technology is driving rapid changes in our industry. Historically, new product introductions have been a key driver of our revenue growth. To succeed, we must effectively anticipate and adapt in a timely manner to network operator requirements and continue to develop or acquire new products and features that meet market demands, technology trends and evolving regulatory requirements and industry standards. Our ability to keep pace with technological developments, such as 5G and long-term evolution (“LTE”), satisfy increasing network operator requirements, and achieve product acceptance depends upon our ability to enhance our current products and develop and introduce or otherwise acquire the rights to new products on a timely basis and at competitive prices. The process of developing new technology is complex and uncertain, and the development of new products and enhancements typically requires significant upfront investment and commitment of resources, which may not result in material improvements to existing products or result in marketable new products or cost savings or revenues for an extended period of time, if at all. We are currently investing in the development of products and technology for the 5G standard once it is generally adopted in our target markets. There can be no assurance we will successfully address the new 5G standard in a timely manner or that our products will achieve market acceptance. Network operators have delayed, and may in the future delay, purchases of our products while awaiting release of new products or product enhancements. In addition, the introduction of new or enhanced products requires that we carefully manage the transition from older products to minimize disruption in customer ordering practices. If we fail to anticipate industry trends and evolving regulations by developing or acquiring rights to new products or product enhancements and timely and effectively introducing such new products and enhancements, or network operators do not perceive our products to have compelling technological advantages, our business would be materially adversely affected.

 

 7 

 

Competition from larger, better-capitalized or emerging competitors could result in price reductions, reduced gross margins and loss of or diminished growth of market share.

 

We compete in a rapidly evolving, highly competitive and fragmented market. We now compete with companies that are producing both mobile and fixed wireless communications systems, wired Digital Subscriber Loop (“DSL”), cable networks, fiber optic cable, certain satellite technologies and other new entrants to this industry, as well as traditional communications companies. General anticipated increases in capital spending on 5G applications may result in new competitors entering the markets in which we sell our products. Competitors vary in size and resources and in products and services offered. With respect to the wireless solutions for 4G and 5G networks we offer today, we believe we compete directly with Altiostar, Cambium, Casa, Ciena, Ericsson, Huawei, KMW, Mavenir, Nokia, Parallel Wireless, Samsung and Sercom, and with a number of smaller privately-held companies. In addition, some of the entities to which we currently sells our products may develop the capacity to manufacture their own products.

 

Many of our competitors are substantially larger than us and have significantly greater financial, sales and marketing, technical, manufacturing and other resources as well as more established distribution channels and greater name recognition. These competitors may be able to respond more rapidly to new or emerging technologies and changes in customer requirements than we can and can devote greater resources to attempting to influence the composition of future technological standards. They may also be able to devote greater resources to the development, promotion, sale and financing of their products than we can. Furthermore, some of our competitors have made or may make strategic acquisitions or establish cooperative relationships among themselves or with third parties to increase their ability to gain customer market share rapidly. These competitors may enter our existing or future markets with systems that may be less expensive, provide higher performance or contain additional features. In addition, large customers are sometimes reluctant to base an important line of business on equipment purchased from a smaller vendor such as us. In addition, both larger and smaller communications service providers may also decide to wait to see how a new technology develops before committing any significant resources to deploying equipment from a particular supplier. We believe this tendency to “wait and see” with respect to new technology affects the consumer market, resulting in increased customer caution on purchases of new technology.

 

We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that may supplant or provide lower-cost alternatives to our systems. This and other factors could result in lower revenues or a loss of market share, which could cause our stock price to fall.

 

We currently depend on a few key customers for a substantial percentage of our sales. A loss of one or more of those customers could cause a significant decrease in our net revenue.

 

We currently derive, and expect to continue to derive, a majority of our revenues from fewer than five customers.

 

 8 

 

In 2020 and 2019, approximately 69% and 73%, respectively, of our revenues were derived from our top three customers by revenue. We believe that there are certain economies of scale inherent in our business. Accordingly, if we lose one or more significant customers and are unable to replace the revenue previously generated by those customers, our gross profit margins, profitability and efforts to preserve cash resources could be materially negatively affected.

 

The amount of revenue we derive from a specific customer is likely to vary from period to period, and a major customer in one period may not produce significant additional revenue in a subsequent period. We anticipate that our operating results will continue to depend on sales to a relatively small number of key customers in the foreseeable future. In general, our contracts with our larger customers often involve major deployments that require several months to fulfill, so our results may depend on the same major customers for consecutive quarters. We cannot assure you that, once a contract is fulfilled, the customer will purchase new products or services from us. We must, therefore, continually seek new customers in order to increase our revenue, and there can be no assurance that we will be successful in doing so.

 

Many of our customers execute short-term purchase orders or contracts that allow our customers to terminate the agreement without significant penalties.

 

Our contracts and purchase orders are separately negotiated with each of our customers and the terms vary widely. A majority of our customers execute only short-term purchase orders for a single system or a small number of systems at one time instead of long-term contracts for large-scale deployment of our systems. These contracts and purchase orders do not ensure that our customers will purchase any additional products beyond those specifically listed in the order.

 

Moreover, since we often believe that these purchase orders may represent the early portion of longer-term customer programs, we often expend significant financial, personnel and operational resources to fulfill these orders. If our customers fail to purchase additional products to fulfill their programs, we may be unable to recover the costs we incur and our margins could suffer.

 

In addition, our typical contracts are generally non-exclusive and contain provisions allowing our customers to terminate the agreement without significant penalties. Our contracts also may require certain shipment, delivery and installation commitments on our part. If we fail to meet these commitments, our customer contracts typically permit the customer to terminate the contract or impose monetary penalties on us.

 

We are exposed to the credit risk of our channel partners, which could result in material losses.

 

Our Mimosa products generate revenues through sales to our distributors. Distributors may not have the resources required to meet payment obligations, or may delay payments if their end customers are late making payments. Mimosa’s exposure to credit risks of its channel partners and their end customers may increase if such entities are adversely affected by global or regional economic conditions. Given the broad geographic coverage of Mimosa’s distributor relationships, Mimosa has in the past and may in the future experience difficulties surrounding the collection of payments. Any significant delay or default in the collection of Mimosa’s accounts receivable could result in the need for us to obtain working capital from other sources.

 

Our sales cycle is typically long and unpredictable, making it difficult to accurately predict inventory requirements, forecast revenues and control expenses.

 

Our sales cycle can range from three to 18 months and varies by customer. The length of the sales cycle with a particular customer may be influenced by a number of factors, including the commitment of significant cash and other resources associated with the purchase, lengthy testing and evaluations, and regulatory and licensing requirements on the part of the customer. In addition, the emerging and evolving nature of the communication access market may cause prospective customers to delay their purchase decisions as they evaluate new and/or competing technologies, or wait for new products or technologies to come to market. We expect that our sales cycles will continue to be long and unpredictable, and, as the average order size for our products increases, our customers’ processes for approving purchases may become more complex and lead to an even longer sales cycle. Accordingly, it is difficult for us to anticipate the quarter in which particular sales may occur, to determine product shipment schedules and to provide our manufacturers and suppliers with accurate lead-time to ensure that they have sufficient inventory on hand to meet our orders. Therefore, our sales cycle impairs our ability to recognize and forecast revenues and control expenses.

 

 9 

 

We make estimates relating to customer demand and errors in our estimates may have negative effects on our inventory levels, revenues and results of operations.

 

We have historically been required to place firm orders or binding forecasts for products and components with our suppliers to ensure that we are able to meet our customers’ demands. These commitments to our suppliers may be placed up to six months prior to the anticipated delivery date based on our existing customer purchase commitments and our forecasts of future customer demand. Our sales process requires us to make multiple forecast assumptions relating to expected customer demand, each of which may introduce error into our estimates, causing excess inventory to accumulate or a lack of product supply when needed. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect or at all. As a result, we have sometimes had excess inventory, which has increased our net losses. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity were available, we may lose revenue opportunities and market share and may damage our customer relationships.

 

Since we incur most of our operating expenses and a portion of our cost of goods sold in foreign currencies, fluctuations in the values of foreign currencies could have a negative impact on our profitability.

 

Although approximately 61% and 88% of our sales in 2020 and 2019, respectively, were denominated in U.S. dollars, and a significant portion of our cost of goods sold were denominated in U.S. dollars, we incur a large part of our operating expenses and a portion of our cost of goods in New Israeli Shekels and British pounds. In the years ended December 31, 2020 and 2019, approximately 38% and 35%, respectively, of our combined operating expenses and cost of goods sold were denominated in New Israeli Shekels. In the years ended December 31, 2020 and 2019, approximately 17% and 16%, respectively, of our combined operating expenses and cost of goods sold were denominated in British pounds. In addition, in the years ended December 31, 2020 and 2019, approximately 37% and 10%, respectively, of our revenues were denominated in Japanese yen. We expect these percentages to fluctuate over time. Fluctuations in the value of foreign currencies could have a negative impact on the profitability of our global operations and our business and our currency hedging activities may not limit these risks. The value of foreign currency fluctuations against the U.S. dollar may also affect the competitiveness of our pricing compared to local products because we typically bill in U.S. dollars.

 

We rely on third-party manufacturers, which subjects us to risk of product delivery delays and reduced control over product costs and quality.

 

We outsource the manufacturing of our products to third-party manufacturers. Purchases from these third-party manufacturers account for the most significant portion of our cost of revenues. Our reliance on third-party manufacturers reduces our control over the manufacturing process, including reduced control over quality, product costs and product supply and timing. From time to time, we have experienced and may in the future experience delays in shipments or issues concerning product quality from our third-party manufacturers. Such supply chain disruptions and delays have been exacerbated by the COVID-19 pandemic. If any of our third-party manufacturers suffer interruptions, delays or disruptions in supplying our products, including by reason of the COVID-19 pandemic, natural disasters, work stoppages or capacity constraints, our ability to ship products to distributors and network operators would be delayed. Additionally, if any of our third-party manufacturers experience quality control problems in their manufacturing operations and our products do not meet network operators’ requirements, we could be required to cover the repair or replacement of any defective products. These delays or product quality issues could have an immediate and material adverse effect on our ability to fulfill orders and could have a negative impact on our operating results. In addition, such delays or issues with product quality could harm our reputation and our relationship with our channel partners.

 

Our agreements do not typically obligate our third-party manufacturers to supply products to us in specific quantities or for an extended term, which could result in short notice to us of supply shortages and increases in the prices we are charged for manufacturing services. We believe that our orders may not represent a material portion of the total orders of our primary third-party manufacturers, and, as a result, fulfilling our orders may not be prioritized in the event they are constrained in their abilities or resources to fulfill all of their customer obligations in a timely manner. Although we provide demand forecasts to some of our third-party manufacturers, such forecasts are not generally binding and if we overestimate our requirements, some of our third-party manufacturers may assess charges, or we may have liabilities for excess inventory, each of which could negatively affect our gross margins. Conversely, because lead times for required materials and components vary significantly and depend on factors such as the specific supplier, contract terms and the demand for each component at a given time, if we underestimate our requirements, our third-party manufacturer may have inadequate materials and components required to produce our products. This could result in an interruption of the manufacturing of our products, delays in shipments and deferral or loss of revenues. For example, as a result of increased global demand for some components used in our products, particularly chipsets, some of our third-party manufacturers have experienced capacity shortages and have responded by allocating existing supply among their customers, including us. This capacity shortage coupled with an increase in demand for our affected products has resulted in supply shortages that have caused increased lead times for some of our products. We may suffer delays introducing new products to the market and in sales of existing products as a result of parts unavailability or shortages, resulting in loss or delay of revenue.

 

 10 

 

If our third-party manufacturers experience financial, operational, manufacturing capacity or other difficulties, or experience shortages in required components, or if they are otherwise unable or unwilling to continue to manufacture our products in required volumes or at all, our supply may be disrupted, and we may be required to seek alternate manufacturers. It would be time-consuming and costly, and could be impracticable, to begin to use new manufacturers and such changes could cause significant interruptions in supply and could have an adverse impact on our ability to meet our scheduled product deliveries and may subsequently lead to the loss of sales, delayed revenues or an increase in our costs, which could materially and adversely affect our business and operating results.

 

We must often establish and demonstrate the benefits of new and innovative offerings to customers, which may take time and significant efforts that may not ultimately prove successful.

 

Many of our new and innovative products are complex and are focused on creating new revenue streams and/or new ways to create cost efficiencies. In many cases, it is necessary for us to educate existing and potential customers about the benefits and value of such new and innovative products, with no assurance that the customer will ultimately purchase them. The need to educate our customers increases the difficulty and time necessary to complete transactions, makes it more difficult to efficiently deploy limited resources, and creates risk that we will have invested in an opportunity that ultimately does not result in a sale. If we are unable to establish and demonstrate to customers the benefits and value of our new and innovative products and convert these efforts into sales, our business, results of operations, financial condition, cash flows and prospects will be adversely affected.

 

Our ability to sell our products is highly dependent on the quality of our support and services offerings, and our failure to offer high-quality support and services could have a material adverse effect on our business, operating results and financial condition.

 

Network operators rely on our products for critical applications and, as such, high-quality support is critical for the successful marketing and sale of our products. If we or our channel partners do not provide adequate support to network operators in deploying our products or in resolving post-deployment issues quickly, our reputation may be harmed and our ability to sell our products could be materially and adversely affected.

 

We may not be able to detect errors or defects in our solutions until after full deployment and product liability claims by customers could result in substantial costs.

 

Our solutions are sophisticated and are designed to be deployed in large and complex mobile networks that require a very high degree of reliability. Because of the nature of our solutions, they can only be fully tested when substantially deployed in very large networks with high volumes of subscriber traffic. Some of our customers have only recently begun to commercially deploy our solutions and they may discover errors or defects in the software or hardware, or the solutions may not operate as expected. Because we may not be able to detect these problems until full deployment, any errors or defects in our solutions could affect the functionality of the networks in which they are deployed, given the use of our solutions in business-critical applications. As a result, the time it may take us to rectify errors can be critical to our customers.

 

Because the networks into which wireless service providers deploy our solutions require a very high degree of reliability, the consequences of an adverse effect on their networks, including any type of communications outage, can be very significant and costly. If any network problems were caused, or perceived to be caused, by errors or defects in our solutions, our reputation and the reputation of our solutions could be significantly damaged with respect to that customer and other customers. Such problems could lead to a loss of that customer or other customers.

 

 11 

 

If one of our solutions fails, we could also experience: payment of liquidated damages for performance failures; loss of, or delay in, revenue recognition; increased service, support, warranty, product replacement and product liability insurance costs, as well as a diversion of development resources; and costly and time-consuming legal actions by our customers, which could result in significant damages awards against us. Any of these events could have a material adverse impact on our business, results of operations, financial condition, cash flows and prospects.

 

Our international sales may be difficult and costly as a result of the political, economic and regulatory risks in those regions.

 

Sales to customers based outside the United States have historically accounted for a substantial portion of our revenues. In 2020 and 2019, our international sales (sales to customers located outside the United States which includes a small percentage of United States customers where the final destination of the equipment is outside of the United States) accounted for approximately 75% and 36%, respectively, of our total revenue. In many international markets, long-standing relationships between potential customers and their local suppliers and protective regulations, including local content requirements and type approvals, create barriers to entry. In addition, pursuing international opportunities may require significant investments for an extended period before returns on such investments, if any, are realized and such investments may result in expenses growing at a faster rate than revenues. The following risks inherent in international business could reduce the international demand for our products, decrease the prices at which we can sell our products internationally or disrupt our international operations, which could adversely affect our operations:

  
the imposition of tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by foreign countries;
  
import or export controls, including licensing or product-certification requirements;
  
unexpected changes in government policies or regulatory requirements in the United States or by foreign governments and delays in receiving licenses to operate;
  
political instability and acts of war or terrorism;
  
economic instability, including the impact of economic recessions;
  
difficulty in staffing and managing geographically diverse operations, particularly during the current COVID-19 pandemic, including our reluctance to staff and manage foreign operations as a result of political unrest even though we have business opportunities in a country;
  
any limitation on our ability to enforce intellectual property rights or agreements in regions where the judicial legal systems may be less developed or less protective of intellectual property or contractual rights;
  
capital and exchange control programs;
  
challenges caused by distance, language and cultural differences;
  
fluctuations in currency exchange rates;
  
labor unrest;
  
restrictions on the repatriation of cash;
  
the nationalization of local industry; and
  
potentially adverse tax consequences.

 

 12 

 

Our operations in Israel may be disrupted by political and military tensions in Israel and the Middle East.

 

We conduct various activities in Israel, including research and development; design; raw material procurement; and manufacturing and assembly through subcontractors based in Israel. Our operations could be negatively affected by the political and military tensions in Israel and the Middle East.

 

Israel has been involved in a number of armed conflicts with its neighbors since 1948 and a state of hostility, varying in degree and intensity, has led to security and economic problems in Israel. For more than two decades, a continuous armed conflict with the Palestinian Authority has been taking place. Conditions in Israel could, in the future, disrupt the development, manufacture and/or distribution of our products.

 

If we lose Eric Stonestrom, our President and Chief Executive Officer, or any of our other executive officers, we may encounter difficulty replacing their expertise, which could impair our ability to implement our business plan successfully.

 

We believe that our ability to implement our business strategy and our future success depends on the continued employment of our senior management team, in particular our president and chief executive officer, Eric Stonestrom. Our senior management team, who have extensive experience in our industry and are vital to maintaining some of our major customer relationships, may be difficult to replace. The loss of the technical knowledge and management and industry expertise of these key employees could make it difficult for us to execute our business plan effectively, could result in delays in new products being developed, could result in lost customers and could cause a diversion of resources while we seek replacements.

 

A material defect in our products that either delays the commencement of services or affects customer networks could seriously harm our credibility and our business, and we may not have sufficient insurance to cover any potential liability.

 

Wireless network products are highly complex and frequently contain undetected software or hardware errors when first introduced or as new versions are released. We have detected and are likely to continue to detect errors and product defects in connection with new product releases and product upgrades. In the past, some of our products have contained defects that delayed the commencement of service by our customers.

 

If our hardware or software contains undetected errors, we could experience:

 

delayed or lost revenues and reduced market share due to adverse customer reactions;
   
higher warranty costs and other costs and expenses due to the need to provide additional products and services to a customer at a reduced charge or at no charge;
   
claims for substantial damages against us, regardless of our responsibility for any failure, which may lead to increased insurance costs;
   
diversion of research and development resources to fix errors in the field;
   
negative publicity regarding us and our products, which could adversely affect our ability to attract new customers;
   
increased insurance costs; and
   
diversion of management and development time and resources.

 

Our general liability insurance coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims or our insurer may disclaim coverage as to any future claim. In addition, our products are often integrated with other network components. Incompatibilities between our products and these components could result in material harm to the service provider or its subscribers. These problems could adversely affect our cash position or our reputation and competitive position.

 

 13 

 

A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the outbreak of the novel strain of coronavirus disease, COVID-19, could adversely affect our business.

 

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected. COVID-19 has spread to throughout the world. Numerous government jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. From time to time, beginning in the first quarter of 2020, governmental authorities in the locations where we and our clients operate issued “stay at home” orders limiting non-essential activities, travel and business operations. Such orders or restrictions have resulted in reduced operations at our headquarters, work stoppages, slowdowns and delays, travel restrictions and cancellation of events. In addition, the COVID-19 pandemic had a significant impact on our supply chains, adversely affecting product supply and delivery to our customers, in particular in the second and third quarter of 2020. Future pandemic induced lockdowns continue to be a risk to the supply chain. As a further consequence of the COVID-19 pandemic, component lead times are extending as demand exceeds supply on certain components, including semiconductors. This situation has caused us to extend our forecast horizon with our contract manufacturing partners and has increased the risk of supplier delays. Other disruptions or potential disruptions include the inability of our customers to receive hardware components and parts critical to the deployment of our solutions and to receive the delivery of such hardware on a timely basis, or at all; disruptions in our deployment schedules, diversion of or limitations on employee resources that would otherwise be focused on the operations of our business; delays in our ability to make sales or find new customers, business adjustments or disruptions of certain third parties with whom we conduct business may have a material and adverse effect on our business, operating results and financial condition.

 

The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and spread of COVID-19, particularly in light of new variants, and the actions to contain COVID-19 or treat its impact, among others. While the potential economic impact brought by, and the duration of, any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets and a reduction in our ability to access capital, which could adversely affect our liquidity. In addition, a recession or market correction resulting from the spread of an infectious disease, including COVID-19, could materially affect our business. Any such economic recession could have a material adverse effect on our long-term business. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in these risk factors.

 

The mobile network industry investment levels fluctuate and are affected by many factors, including the economic environment and decisions made by wireless service providers and other customers regarding deployment of technology and their timing of purchases, and a downturn in investment levels could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

The mobile network industry has experienced downturns in which wireless service providers and other customers substantially reduced their capital spending on new equipment. With the advent of 5G and the growth of private networks, we expect this market to grow in the coming years; however, the uncertainty surrounding global economic growth and the geopolitical situation may materially harm actual market conditions. Moreover, market conditions are subject to substantial fluctuation and could vary geographically and across technologies. Even if global conditions improve, conditions in the specific industry segments in which we participate may be weaker than in other segments. In that case, our revenue and operating results may be adversely affected.

 

If capital expenditures by wireless service providers and other customers are weaker than we anticipate, our revenues, operating results and profitability may be adversely affected. The level of demand from operators and other customers who buy our products and services can vary over short periods of time, including from month to month. Due to this uncertainty, accurately forecasting revenues, results, and cash flow remains difficult.

 

 14 

 

Our business and prospects depend on the strength of our brand. Failure to maintain and enhance our brand would harm our ability to increase sales by expanding our network of channel partners as well as the number of network operators who purchase our products.

 

Maintaining and enhancing our brand is critical to expanding our base of channel partners and the number of network operators who purchase our products. Maintaining and enhancing our brand will depend largely on our ability to continue to develop products and solutions that provide the high quality at attractive economics sought by network operators. If we fail to promote, maintain and protect our brand successfully, our ability to sustain and expand our business and enter new markets will suffer. Our brand may be impaired by a number of factors, including product failure and counterfeiting. If we fail to maintain and enhance our brand, or if we need to incur unanticipated expenses to establish the brand in new markets, our operating results would be negatively affected.

 

We may not secure additional liquidity required to meet our obligations on a timely basis, to satisfy our debt covenants or to attain profitable operations.

 

The audit report and the notes that accompany our consolidated financial statements as of and for the year ended December 31, 2020, include an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. See Note 1 to the audited financial statements of Legacy Airspan included in this prospectus for more information. We may need to secure additional liquidity in order to meet our obligations on a timely basis, to satisfy our debt covenants and, ultimately, to attain profitable operations. Such additional liquidity may not be available on terms that are acceptable to us, or at all.

 

We have substantial indebtedness and are highly leveraged, which could adversely affect our business.

 

We are highly leveraged with a significant amount of debt and we may continue to incur additional debt in the future. As of the Closing Date, we had approximately $45.6 million in indebtedness outstanding under the Fortress Credit Agreement at an average annualized interest cost of 10.4% at such date and $$50.0 million in indebtedness outstanding under the Convertible Notes with an interest rate equal to 7.0% per annum. Substantially all of our assets, including the capital stock of our subsidiaries, are pledged to secure our indebtedness under the Fortress Credit Agreement and the Convertible Notes. In addition, we had subordinated indebtedness aggregating $47.1 million as of the Closing Date. As a result of our indebtedness, we are required to make interest and principal payments on our borrowings that are significant in relation to our revenues and cash flows. These payments reduce our earnings and cash available for other potential business purposes. This leverage also exposes us to significant risk by limiting our flexibility in planning for, or reacting to, changes in our business (whether through competitive pressure or otherwise), our industry and the economy at large. Although our cash flows could decrease in these scenarios, our required payments in respect of indebtedness would not decrease. In addition, we are exposed to the risk of increased interest because certain of our borrowings, including borrowings under the Fortress Credit Agreement, are at variable rates of interest.

 

In addition, our ability to make payments on, or repay or refinance, such debt, and to fund our operating and capital expenditures, depends largely upon our future operating performance. Our future operating performance, to a certain extent, is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.

 

We may need additional capital in future periods and our ability to access capital on acceptable terms could decrease significantly and may adversely affect our results of operations and/or business prospects.

 

We recognize that our need for capital in future periods may increase due to a variety of factors, estimates and assumptions. If our projected demand for capital materially increases and our then current and/or projected cash resources have not increased a comparable amount, we may need to modify our existing business plan or seek new capital which may be available only on terms that may not be acceptable to us, especially in light of current adverse economic conditions. We have been and may in the future be compelled to adopt measures to conserve cash resources due to the lack of availability of capital. Such measures may adversely affect our results of operations and the short-term and/or long-term prospects for our business.

 

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We will have broad discretion over the use of proceeds from the exercise of our Warrants and options to purchase our Common Stock, and we may invest or spend the proceeds in ways with which investors do not agree and in ways that may not yield a return.

 

We will have broad discretion over the use of proceeds from exercises of our Warrants and options to purchase our Common Stock. Investors may not agree with our decisions, and our use of the proceeds may not yield a return on investment. We intend to use these net proceeds for general corporate and working capital purposes. Our use of these proceeds may differ substantially from our current plans. Our failure to apply the net proceeds from exercises of Warrants and options to purchase our Common Stock in an effective manner could impair our ability to pursue our growth strategy or require us to raise additional capital.

 

We may not have adequate protection for our intellectual property, which may make it easier for others to misappropriate our technology and enable our competitors to sell competing products at lower prices and harm our business.

 

Our success has historically relied in part on proprietary technology. We have used a combination of patent, copyright, trademark and trade secret laws and contractual restrictions on disclosure to protect our intellectual property rights associated with our products. Despite our efforts to protect our proprietary rights, we cannot be certain that the steps we have taken will prevent misappropriation of our technology, and we may not be able to detect unauthorized use or take appropriate steps to enforce our intellectual property rights. The laws of some foreign countries, particularly in Asia, do not protect our proprietary rights to the same extent as the laws of the United States and the United Kingdom, and we may encounter substantial infringement problems in those countries. In addition, we do not file for patent protection in every country where we conduct business. In some countries where we do file for patent protection, we may choose not to maintain patent protection. In addition, we may not file for or maintain patent protection in a country from which we derive significant revenue. In instances where we have licensed intellectual property from third parties, we may have limited rights to institute actions against third parties for infringement of the licensed intellectual property or to defend any suit that challenges the validity of the licensed intellectual property. If we fail to protect adequately our intellectual property rights, or fail to do so under applicable law, it would be easier for our competitors to copy our products and sell competing products at lower prices, which would harm our business.

 

Infringement claims are common in our industry and third parties, including competitors, have and could in the future assert infringement claims against us or our customers that we are obligated to indemnify.

 

Our industry is highly competitive and our technologies are complex. Companies file patent applications and obtain patents covering these technologies frequently and maintain programs to protect their intellectual property portfolios. In addition, patent holding companies (including “non-practicing entities”) regularly bring claims against telecommunication equipment companies, often attempting to extract royalty, licensing or other settlements.

 

Our solutions are technically complex and compete with the products and solutions of significantly larger companies. Our likelihood of being subject to infringement claims may increase as a result of our real or perceived success, as the number of competitors in our industry grows and as we add functionality to our solutions. We have previously received and may in the future receive communications from third parties alleging that we are or may be infringing their intellectual property rights. The visibility we receive from being a public company may result in a greater number of such allegations.

 

We have also agreed, and expect to continue to agree, to indemnify our customers for certain expenses or liabilities resulting from claimed infringement of intellectual property rights of third parties with respect to our solutions and software. We have received indemnity demands from customers in the past and may receive such other claims in the future. In the case of infringement claims against these customers, we could be required to indemnify them for losses resulting from such claims or to refund license fees they have paid to us. If a customer asserts a claim for indemnification against us, we could incur significant costs and reputational harm disputing it. If we do not succeed in disputing it, we could face substantial liability, particularly as these liabilities do not typically have caps or specific limits and our insurance coverage relating to any such liabilities generally would be very limited.

 

Regardless of the merit of third-party claims that we or our customers infringe their rights, these claims could be time consuming and costly to defend, divert management’s attention and resources, require us to make costly or difficult changes to our designs, cause us to cease producing, licensing or using software or solutions, require us to pay damages for past infringement, potentially including treble damages, or enter into royalty or licensing agreements, which may not be available on reasonable terms or at all, or any combination of, or all of, these actions.

 

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We may be subject to damages resulting from claims that our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former employees or other parties.

 

We could be subject to claims that we, or our employees or contractors, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our competitors or other parties. Litigation may be necessary to defend against these claims. If we fail in defending against such claims, a court could order us to pay substantial damages and prohibit us from using technologies or features that are important to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of these parties. In addition, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market and support potential products or enhancements, which could materially and adversely affect our business. Even if we are successful in defending against these claims, such litigation could result in substantial costs and be a distraction to management.

 

We use open source software in our products that may subject our firmware to general release or require us to re-engineer our products and the firmware contained therein, which may cause harm to our business.

 

We incorporate open source software into our products. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the software code. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. If we combine our proprietary firmware or other software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release our proprietary source code publicly or license such source code on unfavorable terms or at no cost. Open source license terms relating to the disclosure of source code in modifications or derivative works to the open source software are often ambiguous and few if any courts in jurisdictions applicable to us have interpreted such terms. As a result, many of the risks associated with usage of open source software cannot be eliminated, and could, if not properly addressed, negatively affect our business.

 

If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our firmware or other software, discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely increase our expenses and delay our ability to release our products for sale. We could also be subject to similar conditions or restrictions should there be any changes in the licensing terms of the open source software incorporated into our products.

 

Changes in telecommunications regulation or delays in receiving licenses could adversely affect many of our customers and may lead to lower sales.

 

Many of our customers are subject to extensive regulation as communications service providers, including with respect to the availability of radio frequencies for two-way broadband communications. Each country has different regulations and regulatory processes for wireless communications equipment and for the uses of radio frequencies. Some of our products operate in license-exempt bands, while others operate in licensed bands in different jurisdictions. In addition, changes in laws or regulations that adversely affect existing and potential customers could lead them to delay, reduce or cancel expenditures on communications access systems, which actions would harm our business. In the past, anticipated customer orders have been postponed because of regulatory issues in various countries. The resolution of those issues can be lengthy and the outcome can be unpredictable. Some of the orders we receive from customers are contingent upon their receipt of licenses from regulators, the timing of which can often be uncertain. Depending on the jurisdiction, the receipt of licenses by our customers may occur, if at all, a year or more after they initially seek those licenses.

 

At present there are few laws or regulations that specifically address our business of providing communications access equipment. However, future regulation may include access or settlement charges or tariffs that could impose economic burdens on our customers and our company. We are unable to predict the impact, if any, that future legislation, judicial decisions or regulations in the countries in which we do business will have on our business, operating results and financial condition.

 

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If we were not able to satisfy data protection, security, privacy and other government- and industry-specific requirements or regulations, our business, results of operations and financial condition could be harmed.

 

Personal privacy, data protection, information security and telecommunications-related laws and regulations have been widely adopted in the United States, Europe and other jurisdictions where we offer our products. The regulatory frameworks for these matters, including privacy, data protection and information security matters, is rapidly evolving and is likely to remain uncertain for the foreseeable future. We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection, information security and telecommunications services in the United States, the European Union and other jurisdictions in which we operate or may operate, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For example, the European Commission adopted the General Data Protection Regulation (the “GDPR”), effective in May 2018, that supersedes prior EU data protection legislation, imposes more stringent EU data protection requirements and imposes greater penalties for noncompliance. Additionally, California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which took effect on January 1, 2020, and broadly defines personal information, gives California residents expanded privacy rights and protections and provides for civil penalties for violations. We understand that additional states as well as other countries around the world are also in the process of enacting or amending data protection, security, and privacy regulations. We also expect that existing laws, regulations and standards may be interpreted in new manners in the future. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could require us to modify our products, restrict our business operations, increase our costs and impair our ability to maintain and grow our channel partner base and increase our revenues. The cost of compliance with, and other burdens imposed by, the GDPR, CCPA and other new privacy laws may limit the use and adoption of our products and services and could have an adverse impact on our business, results of operations and financial condition.

 

Although we work to comply with applicable privacy and data security laws and regulations, industry standards, contractual obligations and other legal obligations, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. As such, we cannot assure ongoing compliance with all such laws, regulations, standards and obligations. Any failure or perceived failure by us to comply with applicable laws, regulations, standards or obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personally identifiable information or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity, and could cause channel partners to lose trust in us, which could have an adverse effect on our reputation and business.

 

Regulations affecting broadband infrastructure could damage demand for our products.

 

Laws and regulations governing the Internet are emerging but remain largely unsettled, even in the areas where there has been some legislative action. Regulations may focus on, among other things, assessing access or settlement charges, or imposing tariffs or regulations based on the characteristics and quality of products, either of which could restrict our business or increase our cost of doing business. Government regulatory policies are likely to continue to have a major impact on the pricing of existing and new network services and, therefore, are expected to affect demand for those services and the communications products, including our products, supporting those services. There will likely be future government regulatory policies relating to migration to the cloud as these technologies become more prevalent in the U.S. and globally.

 

Any changes to existing laws or the adoption of new regulations by federal or state regulatory authorities or any legal challenges to existing laws or regulations affecting Internet Protocol (“IP”) networks could materially adversely affect the market for our products. Moreover, customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to alter our products or address any regulatory changes could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

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We are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in compliance with applicable laws.

 

Our technology and products are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. customs regulations, the economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, and applicable U.K. export and import laws and regulations. Exports, re-exports and transfers of our products and technology must be made in compliance with these laws and regulations. U.S. and U.K. export control laws and economic sanctions include a prohibition on the shipment of certain products and technology to embargoed or sanctioned countries, governments and persons. We take precautions to prevent our products and technology from being shipped to, downloaded by or otherwise transferred to applicable sanctions targets, but our products could be shipped to those targets by our channel partners despite such precautions. If our products are shipped to or downloaded by sanctioned targets in the future in violation of applicable export laws, we could be subject to government investigations, penalties and reputational harm. Certain of our products incorporate encryption technology and may be exported, re-exported or transferred only with the required applicable export license from the U.S. or the U.K. or through an export license exception.

 

If we fail to comply with applicable export and import regulations, customs and trade regulations, and economic sanctions and other laws, we could be subject to substantial civil and criminal penalties, including fines and incarceration for responsible employees and managers, and the possible loss of export or import privileges as well as harm our reputation and indirectly have a material adverse effect on our business, operating results and financial condition. In addition, if our channel partners fail to comply with applicable export and import regulations, customs regulations, and economic and sanctions and other laws in connection with our products and technology, then we may also be adversely affected, through reputational harm and penalties. Obtaining the necessary export license for a particular sale may be time-consuming, may result in the delay or loss of sales opportunities and approval is not guaranteed.

 

Failure to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010 (“Bribery Act”) and similar laws associated with our activities outside the United States could subject us to penalties and other adverse consequences.

 

As a substantial portion of our revenue is, and we expect will continue to be, from jurisdictions outside of the United States, we face significant risks if we fail to comply with the FCPA, the Bribery Act and other laws that prohibit improper payments or offers of payment to governments and their officials and political parties by us and other business entities for the purpose of obtaining or retaining business. In many countries, particularly in countries with developing economies, some of which represent significant markets for us, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA, the Bribery Act or other laws and regulations. Our management may not be effective at preventing all potential FCPA, Bribery Act or other violations. We also cannot guarantee the compliance by our channel partners, resellers, suppliers and agents with applicable U.S. laws, including the FCPA, the Bribery Act or other applicable non-U.S. laws. Therefore, there can be no assurance that none of our employees or agents will take actions in violation of applicable laws, for which we may be ultimately held responsible. As a result of our focus on managing our growth, our development of infrastructure designed to identify FCPA and Bribery Act matters and monitor compliance is at an early stage. Any violation of the FCPA or the Bribery Act could result in severe criminal or civil sanctions, which could have a material and adverse effect on our reputation, business, operating results and financial condition.

 

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

 

As of December 31, 2020, we had $182.5 million of U.S. federal and $98.4 million of state net operating loss carryforwards available to reduce future taxable income. Of the $182.5 million in U.S. federal operating loss carryforwards, $15.4 million will be carried forward indefinitely for U.S. federal tax purposes and $131.1 million will expire between 2021 and 2037. The $98.4 million in state operating loss carryforwards will expire between 2021 and 2039. It is possible that we will not generate taxable income in time to use these net operating loss carryforwards before their expiration or at all. In addition, the federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. To the extent we are not able to offset future taxable income with our net operating losses, our cash flows may be adversely affected.

 

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Risks Related to Being a Public Company

 

Our management team has had limited experience managing and operating a public company since the period when we were previously a public company, which ended in 2009.

 

Most of the members of our management team have had limited experience managing and operating a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies since the period when we were previously a public company, which ended in 2009. Our management team may not successfully or efficiently manage their new responsibilities. Our transition to being a public company subjects us to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company may require costs greater than expected. These factors could adversely affect our business, financial condition, and operating results.

 

Risk Related to Our Securities

 

If we do not meet the expectations of investors or securities analysts, the market price of our securities may decline.

 

If we do not meet the expectations of investors or securities analysts, the market price of our securities may decline. In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

 

Factors affecting the trading price of our securities may include:

 

  actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

  changes in the market’s expectations about our operating results;

 

  the success of competitors;

 

  our operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

  changes in financial estimates and recommendations by securities analysts concerning us or the wireless communications industry in general;

 

  operating and share price performance of other companies that investors deem comparable to us;

 

  our ability to market new and enhanced products and technologies on a timely basis;

 

  changes in laws and regulations affecting our business;

 

  our ability to meet compliance requirements;

 

  commencement of, or involvement in, litigation involving us;

 

  changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

 

  the volume of our shares of Common Stock available for public sale;

 

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  any major change in the Board or management;

 

  sales of substantial amounts of our shares of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

  general economic and political conditions such as recessions, interest rates, international currency fluctuations and acts of war or terrorism.

 

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and the NYSE American in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our share price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

 

Our issuance of additional shares of Common Stock or securities convertible into or exercisable for our Common Stock may dilute your ownership of us and could adversely affect our stock price.

 

From time to time in the future, we may issue additional shares of our Common Stock or securities convertible into or exercisable for our Common Stock pursuant to a variety of transactions, including acquisitions. Additional shares of our Common Stock may also be issued upon exercise of outstanding stock options and warrants to purchase our Common Stock. The issuance by us of additional shares of our Common Stock or securities convertible into or exercisable for our Common Stock would dilute your ownership of us and the sale of a significant amount of such securities in the public market could adversely affect prevailing market prices of our Common Stock. Subject to the satisfaction of vesting conditions and the expiration of lock-up agreements, shares issuable upon exercise of options by persons other than by our affiliates will be available for resale immediately in the public market without restriction.

 

In the future, we may obtain financing or further increase our capital resources by issuing additional shares of our capital stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Issuing additional shares of our capital stock, other equity securities, or securities convertible into equity may dilute the economic and voting rights of our existing stockholders, reduce the market price of Common Stock, or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Common Stock. Our decision to issue securities in any future offering may depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. As a result, holders of our Common Stock bear the risk that our future offerings may reduce the market price of our Common Stock and dilute their percentage ownership.

 

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE American.

 

If the NYSE American delists any of our securities from trading on its exchange for failure to meet the listing standards, we and our securityholders could face significant material adverse consequences including:

 

  a limited availability of market quotations for our securities;

 

  reduced liquidity for our securities;

 

  a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our Common Stock;

 

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  a limited amount of analyst coverage; and

 

  a decreased ability to issue additional securities or obtain additional financing in the future.

 

We qualify as an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.

 

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we are eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Common Stock that is held by non-affiliates exceeds $700.0 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our Common Stock in the IPO. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of such extended transition period and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find our Common Stock less attractive because we will rely on these exemptions, which may result in a less active trading market for the Common Stock and its price may be more volatile.

 

Our directors and officers may have interests that are different from the interests of our stockholders.

 

Our executive officers and directors may have financial or other interests that may be different from, or in addition to, the interests of our stockholders generally.

 

Our Second Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) contains anti-takeover provisions that could adversely affect the rights of our stockholders.

 

Our Certificate of Incorporation contains provisions to limit the ability of others to acquire control of us or cause us to engage in change-of-control transactions, including, among other things: 

 

  provisions that authorize our Board, without action by our stockholders, to issue preferred stock with preferential rights determined by our Board;

 

  provisions that permit, subject to the special rights of preferred stockholders, only a majority of our Board, the chairperson of the Board or the chief executive officer to call stockholder meetings and therefore do not permit stockholders to call special meetings of the stockholders;

 

  provisions limiting stockholders’ ability to act by written consent; and

 

  a staggered Board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.

  

These provisions could have the effect of depriving our stockholders of an opportunity to sell their Common Stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction. With our staggered Board, at least two annual or special meetings of stockholders will generally be required in order to effect a change in a majority of our directors. Our staggered Board can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our Board in a relatively short period of time.

 

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Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

 

Our Certificate of Incorporation requires, to the fullest extent permitted by law, that, unless we consent in writing to the selection of an alternative forum, (i) derivative actions brought in our name, (ii) actions asserting a claim of breach of fiduciary duty owed by any of our directors, officers or stockholders, (iii) actions asserting a claim pursuant to the Delaware General Corporation Law (the “DGCL”), the Certificate of Incorporation or our amended and restated bylaws (the “Bylaws”), or (iv) any actions asserting claims governed by the internal affairs doctrine, may be brought only in the Court of Chancery in the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware). Subject to the preceding sentence, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. However, such forum selection provisions will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.

 

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

 

Additionally, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As noted above, the Certificate of Incorporation will provide that the federal district courts of the United States of America will have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

 

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and consented to the forum provisions in our Certificate of Incorporation.

 

We may be subject to securities litigation, which is expensive and could divert management attention.

 

Our share price may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations. Any adverse determination in litigation could also subject us to significant liabilities.

 

Because we have no current plans to pay cash dividends on Common Stock for the foreseeable future, you may not receive any return on investment unless you sell Common Stock for a price greater than that which you paid for it.

 

We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in Common Stock unless you sell Common Stock for a price greater than that which you paid for it. See the section entitled “Market Information and Dividend Policy — Dividend Policy.”

 

 23 

 

The Warrants are accounted for as liabilities and the changes in value of the Warrants could have a material effect on our financial results.

 

We account for the Warrants as derivative liabilities related to embedded features contained within them. Accounting Standards Codification (“ASC”) 815-40 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on the Warrants each reporting period and that the amount of such gains or losses could be material.

 

General Risk Factors

 

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, global pandemics and interruptions by man-made problems, such as terrorism. Material disruptions of our business or information systems resulting from these events could adversely affect our operating results.

 

A significant natural disaster, such as an earthquake, fire, flood, hurricane or significant power outage or other similar events, such as infectious disease outbreaks or pandemic events, including the ongoing COVID-19 pandemic, particularly in light of new variants, could have an adverse effect on our business and operating results. The ongoing COVID-19 pandemic may have the effect of heightening many of the other risks described in this “Risk Factors” section, such as the demand for our products, our ability to achieve or maintain profitability and our ability to raise additional capital in the future. Natural disasters, acts of terrorism or war could cause disruptions in our operations, our or our customers’ or channel partners’ businesses, our suppliers’ or the economy as a whole. We also rely on information technology systems to communicate among our workforce and with third parties. Any disruption to our communications, whether caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect our business. To the extent that any such disruptions result in delays or cancellations of orders or impede our suppliers’ ability to timely deliver product components, or the deployment of our products, our business, operating results and financial condition would be adversely affected.

 

Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our products and services.

 

We utilize data connectivity to monitor performance and timely capture opportunities to enhance performance and functionality. The availability and effectiveness of our services depend on the continued operation of information technology and communications systems. Our systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm our systems. We utilize reputable third-party service providers or vendors, and these providers could also be vulnerable to harms similar to those that could damage our systems, including sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems with our third-party providers could result in lengthy interruptions in our business. In addition, our services and functionality are highly technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in our business or the failure of our systems.

 

 24 

 

We are subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software in our 4G and 5G products and customer data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business.

 

We are at risk for interruptions, outages and breaches of: operational systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers; facility security systems, owned by us or our third-party vendors or suppliers; in-product technology owned by us or our third-party vendors or suppliers; the integrated software in our products; or customer data that we process or our third-party vendors or suppliers process on our behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, drivers or others; jeopardize the security of our facilities; or affect the performance of in-product technology and the integrated software in our products. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although we maintain information technology measures designed to protect ourselves against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and we cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or produce, sell, deliver and service our products, adequately protect our intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. We cannot be sure that the systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results.

 

Moreover, our proprietary information or intellectual property could be compromised or misappropriated and our reputation may be adversely affected. If these systems do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

 

A significant cyber incident could harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory actions or litigation, any of which could materially affect our business, prospects, financial condition and operating results. In addition, our insurance coverage for cyber-attacks may not be sufficient to cover all the losses we may experience as a result of a cyber-incident.

 

The requirements of being a public company may strain our resources and divert management’s attention.

 

We will incur significant costs associated with our public company corporate governance and reporting requirements. This may divert the attention of our management from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

 

We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

 

As a private company, Legacy Airspan was not required to document and test its internal controls over financial reporting, nor was its management required to certify the effectiveness of its internal controls, and its auditors were not required to opine on the effectiveness of its internal control over financial reporting. Similarly, as a private company, Legacy Airspan was not subject to the SEC’s internal control reporting requirements. However, we are now subject to the requirement for management to certify the effectiveness of our internal controls and, in due course, the requirement with respect to auditor attestation on internal control effectiveness.

 

In connection with the audit of Legacy Airspan consolidated financial statements as of and for the years ended December 31, 2020 and 2019, Legacy Airspan and its independent registered public accounting firm identified a material weakness in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

 25 

 

The material weakness that Legacy Airspan and its independent registered public accounting firm identified occurred because (i) it had inadequate processes and controls to ensure an appropriate level of precision related to its financial statement footnote disclosures, and (ii) it did not have sufficient resources with the adequate technical skills to meet the emerging needs of its financial reporting requirements.

 

Management, with oversight from the Audit Committee and the Board is in the process of implementing a remediation plan for this material weakness, including, among other things, hiring additional accounting personnel and implementing process level and management review controls to ensure financial statement disclosures are complete and accurate and to identify and address emerging risks. We can give no assurance that our efforts will remediate this deficiency in internal control over financial reporting or that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our financial statements, may subject us to litigation and investigations, and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us, cause a decline in the price of our Common Stock and limit our ability to access capital markets.

 

If we fail to maintain effective internal control over financial reporting, the price of our Common Stock may be adversely affected.

 

We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting, or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, or disclosure of management’s assessment of our internal control over financial reporting, may have an adverse impact on the price of our Common Stock.

 

Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business, operating results and financial condition.

 

We are required under Section 404 of the Sarbanes-Oxley Act to provide management’s attestation on internal controls. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable under Section 404 of the Sarbanes-Oxley Act. If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective or may result in a finding that there is a material weakness in our internal controls over financial reporting, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.

 

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, market or competitors. If any of the analysts who may cover us change their recommendation regarding our shares of Common Stock adversely, or provide more favorable relative recommendations about our competitors, the price of our shares of Common Stock would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on it, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

 

 26 

 

USE OF PROCEEDS

 

We will receive the proceeds from the exercise of the Post-Combination Warrants, to the extent such Post-Combination Warrants are exercised for cash, but not from the sale of the underlying Warrant Shares.

 

We would receive up to an aggregate of approximately $135.0 million from the exercise of the Post-Combination Warrants, assuming the exercise in full of all of the Post-Combination Warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such Post-Combination Warrants for general corporate and working capital purposes. We will have broad discretion over the use of proceeds from the exercise of the Post-Combination Warrants. There is no assurance that the holders of the Post-Combination Warrants will elect to exercise any or all of the Post-Combination Warrants. To the extent that the Post-Combination Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Post-Combination Warrants will decrease.

 

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PLAN OF DISTRIBUTION

 

This prospectus relates to up to 9,000,000 Warrant Shares issuable from time to time upon the exercise of 9,000,000 Post-Combination Warrants and such indeterminate number of additional Warrant Shares that may be issuable by reason of the anti-dilution provisions contained in the Warrant Agreement governing the Post-Combination Warrants.

 

Each $12.50 Warrant is exercisable at a price of $12.50 per Warrant Share, each $15.00 Warrant is exercisable at a price of $15.00 per Warrant Share and each $17.50 Warrant is exercisable at a price of $17.50 per Warrant Share, in each case, exercisable during the period commencing on the Closing and terminating on the earlier of August 13, 2023 and our earlier redemption, as further described below. The Warrant Shares offered and sold pursuant to this prospectus will be issued directly to the holders of Post-Combination Warrants upon payment of the exercise price therefore to us. We are required to pay all fees and expenses incident to the registration of the Warrant Shares to be offered and sold pursuant to this prospectus.

 

The Warrant Shares to which this prospectus relates will be sold directly by the Company to holders of Post-Combination Warrants on the exercise of such Post-Combination Warrants. No underwriters, dealers or agents will be involved in these sales. No underwriter, dealer or agent has been involved in the preparation of, or has performed any review of, this prospectus.

 

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MARKET INFORMATION AND DIVIDEND POLICY

 

Market Information

 

Our Common Stock, Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants are listed on the NYSE American under the symbols “MIMO”, “MIMO WSA”, “MIMO WSB” and “MIMO WSC”, respectively.

 

As of October 15, 2021, there were approximately 84 holders of record of our Common Stock, 79 holders of record of our Post-Combination $12.50 Warrants, 79 holders of record of our Post-Combination $15.00 Warrants and 79 holders of record of our Post-Combination $17.50 Warrants.

 

Dividend Policy

 

We currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We have never declared or paid any cash dividends on our capital stock. We do not intend to pay cash dividends to our stockholders in the foreseeable future. Investors should not purchase our Common Stock with the expectation of receiving cash dividends.

 

Any future determination to declare dividends will be made at the discretion of our Board and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board may deem relevant.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

At the Closing, we assumed the Legacy Airspan Plan and the options to purchase Legacy Airspan capital stock granted thereunder that were outstanding immediately prior to the Closing were converted into options to purchase an aggregate of 5,815,796 shares of Common Stock and the shares of Legacy Airspan Restricted Stock granted thereunder that were outstanding immediately prior to the Closing were converted into an aggregate of 345,471 shares of restricted Common Stock.

 

On August 11, 2021, at a special meeting in lieu of the 2021 annual meeting of stockholders of New Beginnings, the stockholders of New Beginnings considered and approved the 2021 Plan. The 2021 Plan authorizes the issuance of up to 6,007,718 shares of Common Stock, plus any shares of our Common Stock subject to outstanding awards under the Legacy Airspan Plan that are forfeited or reacquired by us due to termination or cancellation.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Introduction

  

The following unaudited pro forma condensed combined financial information will aid you in your analysis of the financial aspects of Legacy Airspan becoming a wholly-owned subsidiary of New Beginnings as a result of Merger Sub, a wholly-owned subsidiary of New Beginnings, merging with and into Legacy Airspan, and Legacy Airspan surviving the merger as a wholly-owned subsidiary of New Beginnings. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). We have elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.

 

New Beginnings was a blank check company that was incorporated in Delaware on August 20, 2020, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

On November 3, 2020, New Beginnings consummated its IPO of 10,000,000 New Beginnings units at an offering price of $10.00 per unit, with each New Beginnings unit consisting of one share of Common Stock and one Public Warrant, resulting in gross proceeds of $100.0 million (before underwriting discounts and commissions and offering expenses).

 

Prior to the consummation of the IPO, the Sponsor subscribed for 2,156,250 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.012 per share. On October 20, 2020, New Beginnings effected a stock dividend resulting in the Sponsor holding an aggregate of 2,875,000 Founder Shares, representing an adjusted purchase price of approximately $0.009 per share. Simultaneously with the consummation of the IPO, New Beginnings sold 500,000 Private Placement Units in a private placement transaction at a purchase price of $10.00 per unit to the Sponsor. As a result of this transaction and after giving effect to the exercise of the underwriters’ over-allotment option discussed below, New Beginnings sold a total of 545,000 Private Placement Units to the Sponsor, resulting in gross proceeds to New Beginnings of approximately $5,450,000. Each Private Placement Unit sold in the private placement is identical to the New Beginnings units sold in the IPO, except that the Private Placement Warrants included in the Private Placement Units: (i) are not redeemable by us and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees.

  

On November 9, 2020, the underwriters partially exercised the over-allotment option to purchase 1,000,000 additional New Beginnings units, and on November 12, 2020, the underwriters fully exercised the over-allotment option to purchase an additional 500,000 New Beginnings units, generating an aggregate of gross proceeds of $15,000,000.

 

Legacy Airspan is a U.S.-based 5G end-to-end, 4G, Open RAN and fixed wireless access hardware and software provider that held a product portfolio spanning 150 patents granted and 94 patents pending.

  

Legacy Airspan’s predecessor, Airspan Communications Corporation, was incorporated as a Delaware corporation on January 30, 1998. Airspan Networks Inc. was incorporated in 1999 as a Washington corporation and at that time acquired Airspan Communications Corporation by merger. In August 2010, Legacy Airspan reincorporated in Delaware.

  

The following unaudited pro forma condensed combined balance sheet as of June 30, 2021 assumes that the Business Combination occurred on June 30, 2021. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 present pro forma effect to the Business Combination as if it had been completed on January 1, 2020.

 

 30 

 

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what our financial condition or results of operations would have been had the acquisition occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting our future financial condition and results of operations. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The historical financial information of New Beginnings was derived from the unaudited and audited financial statements of New Beginnings as of and for the six months ended June 30, 2021 and for the period from August 20, 2020 (inception) to December 31, 2020 (as restated), included elsewhere in this prospectus. The historical financial information of Legacy Airspan was derived from the unaudited and audited financial statements of Legacy Airspan as of and for the six months ended June 30, 2021 and of the year ended December 31, 2020, which are included elsewhere in this prospectus. This information should be read together with New Beginnings’ and Legacy Airspan’s unaudited and audited financial statements and related notes which are included elsewhere in this prospectus, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus and other financial information included elsewhere in this prospectus.

  

The Business Combination will be accounted for as a reverse recapitalization in accordance with United States generally accepted accounting principles (“GAAP”). Under this method of accounting, although New Beginnings acquired all of the outstanding equity interests of Legacy Airspan in the Business Combination, New Beginnings will be treated as the “acquired” company and Legacy Airspan will be treated as the accounting acquirer for financial statement reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of Legacy Airspan issuing stock for the net assets of New Beginnings, accompanied by a recapitalization. The net assets of New Beginnings will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Legacy Airspan.

  

Legacy Airspan has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

Legacy Airspan’s former stockholders have the greatest voting interest in us;

 

directors designated by Legacy Airspan initially represented seven of the eight Board seats following the Closing;

 

Legacy Airspan’s former stockholders will have the ability to control decisions regarding election and removal of our directors and officers;

 

  Legacy Airspan comprises our ongoing operations;

 

  Legacy Airspan’s relevant measures, such as assets, revenues, cash flows and earnings, are higher than New Beginnings’;

 

  Legacy Airspan’s senior management is our senior management; and

 

  we assumed a substantially similar name to Legacy Airspan and Legacy Airspan’s headquarters.

 

The unaudited pro forma condensed combined financial information has been prepared to give effect to the redemption for cash of 9,997,049 shares of Common Stock for an aggregate redemption payment of $100.97 million.

 

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Description of the Business Combination

 

Consideration

 

The aggregate consideration for the Business Combination was paid in the form of cash, shares of Common Stock, Post-Combination Warrants, restricted shares of Common Stock, restricted stock units underlying Common Stock (“RSUs”) and options to purchase Common Stock (“Options”).

 

The following summarizes the aggregated value of the consideration:

 

Common stock, restricted stock, warrants and stock options at Closing(1)   77,250,000 
Post-Combination Warrants   (9,000,000)
Options   (7,135,353)
RSUs   (1,750,000)
Shares of Common Stock transferred at Closing   59,364,647 
Value per share(2)  $10.00 
Total share consideration  $593,646,470 
Total cash consideration  $17,500,000 

 

 

(1) The number in the table above includes approximately 17,885,353 shares of Common Stock underlying Post-Combination Warrants, RSUs and Options that do not represent legally outstanding shares of Common Stock at Closing.

 

(2) Share consideration is calculated using a $10.00 reference price. Actual total share consideration was dependent on the value of Common Stock at Closing.

 

Ownership

 

The following summarizes the pro forma Common Stock outstanding:

 

   Shares   % 
Legacy Airspan Capital Stock   77,250,000      
Post-Combination Warrants   (9,000,000)     
Options   (7,135,353)     
RSUs   (1,750,000)     
Legacy Airspan – shares of Common Stock transferred at Closing(1)   59,364,647    82.8%
New Beginnings existing shares   1,502,951    2.1%
Shares held by Sponsor   3,295,000    4.6%
PIPE   7,500,000    10.5%
Pro Forma Common Stock outstanding at June 30, 2021   71,662,598    100%

  

 

(1) The number of outstanding shares in the table above excludes approximately 17,885,353 shares of Common Stock underlying Post-Combination Warrants, RSUs and Options that do not represent legally outstanding shares of Common Stock at Closing.

 

The following unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 are based on the historical financial statements of New Beginnings (as restated) and Legacy Airspan. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2021
(in thousands)

 

   As of
June 30, 2021
 
   Legacy Airspan
(Historical)
   New
Beginnings
(Historical)
  

Transaction
Accounting

Adjustments

      Pro
Forma
Combined
 
ASSETS                   
Cash and cash equivalents  $12,208   $68   $75,000   (A)  $99,019 
             $116,182   (B)     
             $(5,626)  (C)     
             $(27,830)  (F)     
             $(18,513)  (G)     
             $(100,970)  (H)     
             $48,500   (J)     
Prepaid assets      $283           $283 
Restricted cash  $187               $187 
Accounts receivable  $40,671               $40,671 
Inventory  $13,048               $13,048 
Prepaid expenses and other current assets  $9,062               $9,062 
Total current assets  $75,176   $351   $86,743      $162,270 
Cash and securities held in Trust Account      $116,182   $(116,182)  (B)    
Property, plant and equipment, net  $6,425               $6,425 
Goodwill  $13,641               $13,641 
Intangible assets, net  $7,031               $7,031 
Right-of-use lease assets, net  $7,750               $7,750 
Other non-current assets  $3,781               $3,781 
TOTAL ASSETS  $113,804   $116,533   $(29,439)     $200,898 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY                       
Accounts payable  $17,890   $1,591   $(1,591)  (C)  $17,890 
Due to related party      $10   $(10)  (C)    
Deferred revenue  $4,729               $4,729 
Other accrued expenses  $26,251               $26,251 
Subordinated debt  $10,316               $10,316 
Current portion of long-term debt  $288               $288 
Total current liabilities  $59,474   $1,601   $(1,601)     $59,474 
Warrant liability      $14,401           $14,401 
Deferred underwriting discount      $4,025   $(4,025)  (C)    
Subordinated term loan, long-term – related party  $36,325               $36,325 
Senior term loan, long-term  $38,895               $38,895 
Other long-term liabilities  $21,285       $(12,292)  (E)  $8,993 
Convertible Notes          $48,500   (J)  $48,500 
Warrant liability          $4,531   (E)  $4,531 
Total liabilities  $155,979    20,027   $35,113      $211,119 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET — Continued
AS OF JUNE 30, 2021
(in thousands)

 

   As of
June 30, 2021
 
   Legacy Airspan
(Historical)
   New
Beginnings
(Historical)
  

Transaction
Accounting

Adjustments

      Pro
Forma
Combined
 
Mezzanine equity                       
Convertible preferred stock  $364,128       $(364,128)  (E)    
                        
Common stock subject to possible redemption      $91,506   $(91,506)  (D)    
                        
Stockholders’ equity (deficit)                       
Common stock      $1   $1   (A)  $8 
             $1   (D)     
             $6   (E)     
             $(1)  (H)     
Additional paid-in capital  $312,989   $5,569   $74,999   (A)  $733,412 
             $91,505   (D)     
             $376,415   (E)     
             $(21,994)  (F)     
             $(570)  (I)     
             $(4,532)  (E)     
             $(100,969)  (H)     
Accumulated deficit  $(719,292)  $(570)  $(18,513)  (G)  $(743,641)
             $570   (I)     
             $(5,836)  (F)     
Total stockholders’ equity (deficit)  $(406,303)  $5,000   $391,082      $(10,221)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)  $113,804   $116,533   $(29,439)     $200,898 

 

 

 34 

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 2021
(in thousands, except share and per share data)

 

   For the
Six Months
Ended
June 30,
2021
   Transaction      For the
Six Months
Ended
June 30,
2021
 
   Legacy Airspan
(Historical)
   New
Beginnings
(Historical)
   Accounting
Adjustments
      Pro Forma
Combined
 
Products and software licenses  $74,040   $   $      $74,040 
Maintenance, warranty and services  $13,943              $13,943 
Revenue  $87,983              $87,983 
Products and software licenses  $45,615              $45,615 
Maintenance, warranty and services  $2,196              $2,196 
Total cost of revenue  $47,811              $47,811 
Gross profit  $40,172              $40,172 
Operating expenses:                       
Research and development  $29,898              $29,898 
Sales and marketing  $14,842              $14,842 
General and administrative  $8,900              $8,900 
Amortization of intangibles  $598              $598 
Formation and operating costs      $2,653          $2,653 
Total operation expenses  $54,238   $2,653          $56,891 
Loss from operations  $(14,066)  $(2,653)         $(16,719)
Interest expense, net  $(4,950)  $19   $(19)  (BB)  $(4,950)
Gain on extinguishment of debt  $2,096               $2,096 
Other income (expense), net  $(6,880)  $(2,029)  $4,517   (AA)  $(6,270)
             $(1,878)  (CC)     
Income (Loss) before income taxes  $(23,800)  $(4,663)  $2,620      $(25,843)
Income tax benefit (expense)  $(167)             $(167)
Net (loss) income  $(23,967)  $(4,663)  $2,620      $(26,010)
                        
                  Pro Forma
Combined
 
Weighted average shares outstanding – common stock   669,839    5,246,865            71,662,598 
Net loss per share – basic and diluted  $(35.78)   (0.89)  $     $(0.36)

 

 35 

 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 2020
(in thousands, except share and per share data)

 

   For the Year Ended
December 31,
2020
   Transaction      For the Year
Ended
December 31,
2020
 
   Legacy Airspan
(Historical)
   New
Beginnings
(Historical,
as restated)
   Accounting
Adjustments
      Pro Forma
Combined
 
Products and software licenses  $134,338              $134,338 
Maintenance, warranty and services  $38,617              $38,617 
Revenue  $172,955              $172,955 
Products and software licenses  $84,375              $84,375 
Maintenance, warranty and services  $4,477              $4,477 
Total cost of revenue  $88,852              $88,852 
Gross profit  $84,103              $84,103 
Operating expenses:                       
Research and development  $52,858              $52,858 
Sales and marketing  $28,738              $28,738 
General and administrative  $16,555   $1,188   $37,026    (DD)  $60,605 
             $5,836   (EE)     
Amortization of intangibles  $1,733              $1,733 
Loss on sale of assets  $22              $22 
Total operation expenses  $99,906   $1,188   $42,862      $138,120 
Loss from operations  $(15,803)  $(1,188)  $(42,862)     $(59,853)
Interest expense, net  $(6,422)             $(6,422)
Other income (expense), net  $(4,200)  $12   $(12)  (BB)  $(4,635)
             $3,322   (AA)     
             $(3,757)  (CC)     
Unrealized gain on change in fair value of warrants       5,268           5,268 
Income (Loss) before income taxes   (26,425)   4,092    (43,309)      (65,652)
Income tax benefit (expense)   782               782 
Net (loss) income  $(25,643)  $4,092   $(43,309)     $(64,859)
                        
                  Pro Forma
Combined
 
Weighted average shares outstanding – common stock   669,534    4,646,706            71,662,598 
Net loss per share – basic and diluted  $(38.30)  $0.88       $(0.82)

 

 36 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

1. Basis of Presentation

  

The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP as Legacy Airspan has been determined to be the accounting acquirer, primarily due to the fact that Legacy Airspan stockholders will continue to control the Company. Under this method of accounting, although New Beginnings acquired all of the outstanding equity interests of Legacy Airspan in the Business Combination, New Beginnings will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of Legacy Airspan issuing stock for the net assets of New Beginnings, accompanied by a recapitalization. The net assets of New Beginnings will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Legacy Airspan.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 assumes that the Business Combination and PIPE financing occurred on June 30, 2021. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 presents pro forma effect to the Business Combination and PIPE financing as if it had been completed on January 1, 2020.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 has been prepared using, and should be read in conjunction with, the following:

 

  New Beginnings’ unaudited balance sheet as of June 30, 2021 and the related notes for the period ended June 30, 2021, included elsewhere in this prospectus; and

 

  Airspan’s unaudited balance sheet as of June 30, 2021 and the related notes for the period ended June 30, 2021, included elsewhere in this prospectus.

 

The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 has been prepared using, and should be read in conjunction with, the following:

 

  New Beginnings’ unaudited statement of operations for the six months ended June 30, 2021 and the related notes, included elsewhere in this prospectus; and

 

  Airspan’s unaudited statement of operations for the six months ended June 30, 2021 and the related notes, included elsewhere in this prospectus.

 

The unaudited pro forma condensed combined financial information has been prepared to give effect to the redemption for cash of 9,997,049 shares of Common Stock for an aggregate redemption payment of $100.97 million. 

 

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented. 

 

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. 

 

The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that we believe are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. We believe that our assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information. 

 

 37 

 

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of our future consolidated results of operations or financial position. They should be read in conjunction with the historical financial statements and notes thereto of New Beginnings (as restated) and Legacy Airspan.

  

2. Accounting Policies 

 

Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on our financial statements. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

 

3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information 

 

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are expected to have a continuing impact on our results. 

 

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). We have elected not to present Management’s Adjustments and are only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. 

 

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to transaction accounting adjustments that reflect the accounting for the transaction under GAAP. Legacy Airspan and New Beginnings have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies. 

 

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the Company filed consolidated income tax returns during the periods presented. 

 

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of our shares outstanding, assuming the Business Combination occurred on January 1, 2020. 

 

In addition, New Beginnings raised $50.0 million in additional funds through the issuance of the Convertible Notes issued in a private placement to the Convertible Note Purchasers substantially concurrent with the Closing. The purpose of the sale of the Convertible Notes was to raise additional capital for use in connection with the transactions contemplated by the Business Combination Agreement and to meet the minimum cash requirements provided in the Business Combination Agreement. The Convertible Notes bear interest at a rate equal to 7.0% per annum (the “Base Rate”), payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on September 30, 2021. Under certain circumstances, a default interest is expected to apply following an event of default under the Convertible Notes at a per annum rate equal to the lower of (i) the Base Rate plus 3.75% and (ii) the maximum amount permitted by law. The Convertible Notes mature on December 30, 2024, unless earlier accelerated, converted, redeemed or repurchased. The Company is currently finalizing its accounting analysis of the Convertible Notes, and more specifically the analysis of the potential existence of embedded derivatives that should be bifurcated from the convertible debt. The potential effect of additional impacts, if any, aside from the interest, have currently been excluded from these unaudited pro forma condensed combined financial information. The Company expects to finalize its analysis and the accounting treatment of the Convertible Note by the issuance of the Company’s Quarterly Report on Form 10-Q for the quarterly period ending September 30, 2021.

 

 38 

 

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet 

 

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:

 

  (A) Represents the gross proceeds from the private placement of 7,500,000 shares of Common Stock at $10.00 per share pursuant to the PIPE.

 

  (B) Reflects the reclassification of $116.2 million of cash and cash equivalents held in New Beginnings’ Trust Account at the balance sheet date that becomes available to fund the Business Combination.

 

  (C) Reflects the settlement of New Beginnings’ historical accrued liabilities that will be settled at the Closing of the Business Combination.

 

  (D) Reflects the reclassification of approximately $91.5 million of Common Stock subject to possible redemption to permanent equity.

 

  (E) Reflects the reclassification of Legacy Airspan Preferred Stock, warrants exercisable for Legacy Airspan Preferred Stock that convert into Common Stock, and Post-Combination Warrants exercisable for Common Stock at the Closing of the Business Combination.

 

  (F) Represents preliminary estimated transaction costs incurred as part of the Business Combination totaling $27.8 million, out of which approximately $5.836 million were not capitalized as of June 30, 2021. The $27.8 million preliminary estimated transaction costs consisting of (i) approximately $2.68 million of placement agent fees and related expenses payable to the placement agent upon the closing of the PIPE transaction, (ii) financial and transaction advisory fees of approximately $16.8 million payable upon consummation of the Business Combination and (iii) printing, legal, accounting and other fees of $8.26 million.

 

  (G) Represents the $17,500,000 of aggregate cash consideration to be paid to the participants in the Legacy Airspan management incentive plan upon the Closing of the Business Combination and $1.013 million of related employer costs.

 

  (H) Reflects the actual redemption of 9,997,049 shares of Common Stock for aggregate redemption payments of $100.97 million allocated to Common Stock and additional paid-in capital using the par value $0.0001 per share and a redemption price of $10.10 per share.

 

  (I) Reclassification of New Beginnings retained earnings.

 

  (J) Represent the aggregate cash consideration, net of transaction costs to be paid upon the issuance of the Convertible Notes.

 

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations 

 

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 are as follows:

 

  (AA)  Reflects the adjustments relating to the fair value measurement of warrants exercisable for Legacy Airspan Preferred Stock classified as a liability

 

 39 

 

  (BB)  Reflects elimination of interest income on the Trust Account.

 

  (CC)  Reflects the adjustments relating to interest expenses with respect to the Convertible Notes

 

(DD)Represents expense related to the $17,500,000 of aggregate cash consideration and RSUs with respect to 1,750,000 shares of Common Stock paid to the participants in Legacy Airspan’s management incentive plan upon the Closing of the Business Combination and total of $2.026 million of related employer costs

 

(EE)Represents preliminary estimated transaction costs recognized as an expense as part of the Business Combination totaling $5.836 million.

 

4. Loss per Share 

 

Represents the net loss per share calculated using the historical weighted average shares outstanding and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2020. As the Business Combination and related proposed equity transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire period presented. As 9,997,049 shares has been redeemed, this calculation is retroactively adjusted to eliminate the 9,997,049 redeemed shares for the entire period. 

 

The unaudited pro forma condensed combined financial information has been prepared to give effect to the redemption for cash of 9,997,049 shares of Common Stock for the six months ended June 30, 2021 and the year ended December 31, 2020:

 

(in thousands, except share and per share data)  For six months ended
June 30, 2021
 
Pro forma net loss   (26,010)
Weighted average shares outstanding of common stock   71,662,598 
Net loss per share (basic and diluted)(1)  $(0.36)

 

(in thousands, except share and per share data)  For the year ended
December 31,
2020
 
Pro forma net loss   (64,859)
Weighted average shares outstanding of common stock   71,662,598 
Net loss per share (basic and diluted)(1)  $(0.91)

 

 

(1) For the purposes of calculating diluted earnings per share, it was assumed that all outstanding Post-Combination Warrants and Warrants sold in the IPO and the private placement are exercised for Common Stock. However, since this results in anti-dilution, the effect of such exercise was not included in calculation of diluted loss per share.

 

 40 

 

BUSINESS

 

Company Overview 

 

We are a U.S. headquartered, award-winning technical leader, in the 4G and 5G Radio Access Network (“RAN”) and broadband access solutions market. We offer a broad range of software defined radios, broadband access products and network management software to enable cost-effective deployment and efficient management of mobile, fixed and hybrid wireless networks. Our customers include leading mobile communications service providers (“CSPs”), large enterprises, military communications integrators and internet service providers (“ISPs”) working to deliver high-capability broadband access to numerous markets. Our mission is to disrupt and modernize network total cost of ownership (“TCO”) models. We aim to lower costs for customers throughout the product lifecycle, from procurement through commissioning and ongoing operating costs. We have been pioneering wireless technology for over 20 years and are distinguished by our deep customer relationships, innovative product design capabilities and expertise in solving technical challenges at the network edge, where a device or local network interfaces with the Internet or other networks. 

 

In 4G mobile networks, we established ourselves as an expert in network densification by focusing on solving the problems associated with physically locating, installing and commissioning networks consisting of hundreds of thousands of small cells as an alternative and supplement to macro cell-based networks. Software-defined and cost-optimized radio platforms, self-organizing/optimization algorithms and minimum power consumption have been critical to our 4G business and are expected to be even more critical to the deployment and expansion of new 5G networks. As an early leader in 5G OPEN-RAN standards, we have worked to unbundle the monolithic network architectures previously dominated by large incumbent suppliers such as Huawei Technologies Co., Ltd. (“Huawei”), Telefonaktiebolaget LM Ericsson (“Ericsson”) and Nokia Corporation (“Nokia”). As a foundational member of the 5G ecosystem, we work closely with wireless operators, chipset suppliers and infrastructure vendors around the world on 5G developments, trials, pilots and initial 5G deployments. 

 

We started our business in digital wireless access, primarily voice services, rapidly becoming a leader in high performance wireless data networks. Our acquisition of Mimosa Networks in 2018 strengthened our position in today’s rapidly expanding wireless broadband access market. Mimosa’s capabilities and innovation in wireless broadband point-to-point and point-to-multipoint networks strengthened our disruptive position in the mobile 4G/5G network densification space and expanded our existing North American presence with an engineering center in Silicon Valley. Mimosa’s channel-led sales strategy enhances the distribution of our existing products for specific vertical markets, such as private 4G and 5G and applications in citizens broadband radio service (“CBRS”). 

 

The Wireless Communications Industry 

 

The wireless industry has evolved from Marconi’s 1897 18-mile communication to a tug boat to high speed mobile broadband. Launched in 2002, third generation (“3G”) cellular technology networks provided connectivity to access the World Wide Web from mobile devices and high-powered smart phones and apps began to change the way we live. Launched in 2010, higher speed 4G networks introduced the concept of mobile broadband, connected enterprise applications to cloud computing and began to modernize the way people communicate, interact and work. Presently, 5G networks, with up to 100 times the speed and as little as 10% of the latency (network edge turnaround time) of 4G networks, are expected to be foundational to the development and expansion of autonomous vehicles, telemedicine, live ultra-high definition video streaming, cloud gaming, edge computing and numerous industrial applications, such as augmented reality and robotics for smart manufacturing, supply chain automation and military and defense applications. 

 

Over the next ten years, we believe that 5G networks will become increasingly common across much of the globe, an expansion that will require substantial investment from stakeholders. Operators will need to invest in spectrum rights, network equipment and deployment well in advance of realization of any increase in revenues from the new capabilities that 5G networks offer. Airspan is working with leading global service providers and enterprises in the mobile and fixed wireless access (“FWA”) ecosystems to develop, commercialize and accelerate the availability of Open Standard 5G solutions that enable cost-efficient initial deployment and then, based on such open standards, allow those networks to efficiently adapt and grow in response to the emerging applications that are expected to generate increased revenue streams to recoup such network investments. 

 

 41 

 

Business Strategy 

 

Our mission is to disrupt and modernize network TCO models, providing innovative solutions that meet specific application requirements at the network edge. In support of this mission, we pursue a strategy focused on customer responsiveness, technology leadership and excellence in execution.

 

Industry Relationships. We have relationships with some of the world’s most innovative Tier-1 CSPs including SoftBank, Reliance Jio and Rakuten. We have helped specialized private network operators like GoGo (in-flight internet) and McLaren (automotive connectivity) to address the challenges associated with high speed cellular networks. We have worked closely with leading edge technology companies such as Qualcomm Incorporated and Quantenna Communications Inc. In partnership with these customers and suppliers, we have helped to address the challenges of next generation RAN deployments at scale, while building a portfolio of solutions to help innovators deploy novel and innovative networks, augmenting our technology portfolio, creating greater visibility into our end markets and informing our product development road map.

 

  Technology Leadership. We have focused on software-defined RAN technology for over 20 years, while developing the skills and discipline needed to respond to near-term customer-driven opportunities without deviating from our long-term product roadmaps. We have learned how to rapidly incorporate the experiential learning represented by over one million deployed cells. That has resulted in a unified software code base and a finely tuned library of low cost and high-performance radio frequency (“RF”) subsystems across our company. Today, we employ over 400 engineers with deep expertise in 5G NR (“New Radio”), LTE, LTE-Advanced, orthogonal frequency division multiple access (“OFDMA”), Wi-Fi and VoIP, and are a leader in OPEN-RAN software with a track record of continuous innovation at the network edge. As of June 30, 2021, we held over 173 issued and 80 pending patents, including US patents and various foreign counterparts.

 

Excellence in Execution.

  

Speed - We develop innovative RAN solutions that address our customers’ specific deployment challenges at the network edge, by anticipating the challenge in our roadmap, rapid prioritization, unified software and hardware project teams and then by accessing a single code base and a proven library of RF subsystems. 

 

Efficiency - Hardware production is 100% outsourced to world class manufacturing partners such as Foxconn in Vietnam and Cape in Malaysia and delivered by a third-party logistics network with worldwide reach. 

 

Experience – Our management and engineering teams have worked together for over 20 years in a challenging international market on the kinds of opportunities and challenges our 5G customers are facing. 

 

 42 

 

Products 

 

We offer a complete range of 4G and 5G network build and network densification products with an expansive portfolio of software and hardware tools for indoor and outdoor, compact femto, pico, micro and macro base stations, as well as an industry leading 802.11ac and 802.11ax fixed wireless access and backhaul solution portfolio for point-to-point and point-to-multipoint applications. Our solutions help network operators monetize the potential of 4G and 5G technologies and use cases and, in addition, allow enterprises to establish their own private networks especially in 5G, where dedicated spectrum has been allocated. The table below summarizes our product categories:

 

5G Product Family   Description
Air5G 5700   Outdoor Sub-6GHz Radio Unit (RU) supporting 32x32 massive MIMO array, Split 7.2x
Air5G 7200   Outdoor mmWave Macro RDU (Radio Unit (RU) and Distributed Unit (DU)) with an integrated 128x128 antenna array, Split 2
AirU / AirDU   Outdoor Sub-6GHz Macro Radio Unit (RU) and Macro RDU (Radio Unit (RU) and Distributed Unit (DU)) consists of 4x4 or 8x8 antennas, each transmit in high power (40W per channel), Split 7.2x or split 2
AirStrand   Outdoor Sub-6GHz dual sector strand-mounted full gNB with DOCSIS backhaul
AirSpeed   Outdoor Pico cell Sub-6GHz dual sector full gNB
AirVelocity 2700   Indoor Sub-6GHz Radio Unit (RU), with integrated or external antenna, Split 7.2x
AirVelocity 6200   Indoor mmWave RDU (Radio Unit (RU) and Distributed Unit (DU)) with an integrated 64x64 antenna array, Split 2
AirStar   Indoor Sub-6GHz dual sector (to cover both indoor and outdoor) full gNB

 

SW Product Family   Description
4G eNb SW   Full SW package including L1, L2 and L3 management and control needed to operate the eNb
5G RU SW   SW to operate the RU. In Split 7.2x consist of the L-PHY
5G DU SW   Includes the H-PHY and L2, running in the gNb or on a server
5G CU SW   Includes the L3, running in the gNb or on a server
5G ACP SW   The management SW controlling the system components (HW and SW)

 

4G Product Family   Description
AirHarmony   Outdoor Mini-Macro, 2x 20W Tx power
AirSpeed   Outdoor dual sector/carrier Pico cell up to 10W Tx power
AirStrand   Outdoor strand-mounted, with DOCSIS backhaul, Pico Cell
AirVelocity   Enterprise/Residential indoor Small Cell
AirUnity   Indoor small cell (dual sector) with integrated LTE relay backhaul
AirDensity   Indoor small cell (single sector) with integrated LTE relay backhaul

 

Point To Point (“PTP”)
Product Family
  Description
B series   High reliability PTP link supporting various bands and with various antenna options.
C series   Affordable integrated PTP and PTMP CPE device with flexible antenna connectivity for unlicensed frequency support.

 

Point to Multi Point
(“PTMP”) Product
Family
  Description
A series   Access Point for urban/suburban MicroPoP PTMP and broadband deployments with flexible antenna connectivity for unlicensed frequency support. Supports C5x and C5c CPEs.

  

PTP/PTMP SW Product
Family
  Description
MMP   Full element management and monitoring software for PTP & PTMP devices, for on-premises hosting, private clouds and virtualization.
Mimosa Cloud   Cloud device monitoring software service for PTP & PTMP devices.
Install App   Android App software to assist with subscriber device and service installation and activation.

 

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Seasonality 

 

We generally have lower sales in the first quarter of the calendar year than the final quarter of the preceding year. 

 

Regulation 

 

In addition to regulations of general application to global business, we are subject to a number of regulatory requirements specific to the wireless communications industry. Our products are subject to rules relating to radio frequency spectrum allocation and authorization of certain radio equipment promulgated by the Federal Communications Commission or the National Telecommunications and Information Administration. 

 

The applicable regulatory agency in each jurisdiction adopts regulations to manage spectrum use, establishes and enforces priorities among competing uses, limits harmful radio frequency interference and promotes policy goals such as broadband deployment. These spectrum regulations regulate allocation, licensing and equipment authorizations. Since our customers purchase devices to operate in specific spectrum bands allocated by the regulatory authorities, our products must meet the technical requirements set forth for such spectrum allocation(s). 

 

In some bands, the operator must seek prior regulatory authority to operate using specified frequencies, and the resulting spectrum license authorizes the licensee, for a limited term, to operate in a spectrum consistent with licensed technical parameters within a specified geographic area. We design and manufacture our products to comply with these technical parameters. 

 

Our products generally are subject to compliance testing prior to approval, and, as a condition of authority in each jurisdiction, we must ensure that our products have the proper labels and documentation specifying such authority. We generally use telecommunications certification bodies to obtain certification for our devices in each jurisdiction in which we intend to market and sell our products. 

 

Competition 

 

We compete in two broad markets: mobile RAN equipment and services and wireless broadband access. We compete with large direct competitors in the RAN market such as Huawei, ZTE Corporation, Ericsson, Nokia and Samsung Group as well as smaller players such as Altiostar USA, Parallel Wireless Inc., Inseego Corp, KMW Co Ltd and Casa Systems, Inc. In the broadband market we have direct competitors as well as competing access technologies. The competing technologies include wireline DSL, fiber, cable and satellite. Direct wireless broadband competition includes Cambium Networks, Proxim Wireless Corporation, Ubiquiti Inc., Ruckus Networks and many other smaller companies. In addition, some of the entities to which we currently sell our products may develop the capacity to manufacture their own products. 

 

When competing with the large incumbents for business in 4G networks, we rely on software centric small cell experience to provide densification solutions that fit under our larger end-to-end competitors’ macro cell architectures. Our 4G market has been limited to customers with severe capacity restrictions such as Sprint and Reliance that are difficult to address without massive densification. As 5G technology becomes more prevalent across the markets in which we operate, software and small cell-centric disaggregation of networks via O-RAN standards, instead of large macro-centric networks, allows us to take advantage of our competitive strengths, with increased access to CSPs utilizing 5G disaggregation to drive network buildout and to lower their overall operating costs. While we have an advantage within the O-RAN disaggregation market with both software modules and radio equipment based on our years of end-to-end RAN experience, we will have to continue innovation in access edge solutions, as software-only competitors such as Altiostar and Mavenir begin integration with commercial off-the-shelf radios and the larger incumbents such as Ericsson and Nokia invest time and resources into network disaggregation solutions. 

 

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Competing Technologies 

 

Today, broadband connections can be provided with or without voice services by a number of competing access technologies. While the communications transport network and Internet backbone are capable of transporting data at extremely high speeds, data can only be delivered from those parts of the network through the access portion to the end-user as fast as the end-user’s connection to the network will permit. Many traditional access connections that use copper wires are inadequate to address the rapidly expanding bandwidth requirements. To address these requirements, a number of alternative solutions have emerged. Below we have identified those solutions that we believe, for a variety of technological and economic reasons, compete most directly with the broadband wireless solutions we offer. Rural areas generally have fewer copper and wired infrastructures in existence. For this reason, we believe we have a particular competitive edge in rural and developing markets. 

 

The performance and coverage area of our wireless systems are dependent on some factors that are outside our control, including features of the environment such as the amount of clutter (natural terrain features and man-made obstructions) and the available radio frequencies. Any inability to overcome these obstacles may make our technology less competitive in comparison with other technologies and make other technologies less expensive or more suitable. Our business may also compete in the future with products and services based on other wireless technologies and other technologies that have yet to be developed. 

 

Wired Digital Subscriber Lines.  Broadband access is provided today by wired technologies using both copper and fiber. Copper is used most often in residential broadband access systems. 

 

DSL technology improves the data transmission rate of existing copper networks. DSL transmission rates and service availability, however, are limited in all networks by both the quality of the available copper, which for many providers is a large percentage of their copper network, and by the maximum transmission distance (approximately five kilometers from the subscriber to the service provider’s switching equipment in many instances) of wired DSL technology. In many instances, a substantial portion of an operator’s copper network is unsuitable for DSL transmission. 

 

Fiber technology allows an operator to deliver video, voice and data capabilities over an optical fiber medium that can deliver very high capacity to end-users. Because of the high costs associated with its deployment, fiber is used primarily for broadband access for businesses. It is most economically deployed in urban and suburban environments where business and residents create very high demand for services over broadband, and end-users can afford the relatively high tariffs charged by operators to provide fiber-based connectivity. 

 

Cable Networks.  Two-way cable modems using coaxial cable enable data services to be delivered over a network originally designed to provide television service to residential subscribers. Coaxial cable has greater transmission capacity than copper wires, but is often costly to upgrade for two-way data services. The data rate available to each subscriber on a cable link decreases as the number of subscribers using the link increases. Cable coverage, which is not available in many countries, may limit the growth of this segment as a broadband access medium. 

 

Satellite Networks.  For a variety of technological and economic reasons, satellite technologies have not presented the most direct competitive challenge to the fixed wireless access systems we offer. We believe that newer Low Earth Orbit (“LEO”) systems will eventually find a role in remote access but will be vulnerable to the spread of terrestrial broadband facilities driven in part by the need for very low latency, high speed backhaul for ubiquitous 5G networks. 

 

Customers 

 

Our customers are principally network operators, who provide their customers with fixed, nomadic and portable broadband solutions, as well as backhaul and bridging solutions and mobile access solutions.  Our customers today can generally be described as follows:

  

Fixed and mobile carriers looking to provide high speed triple-play broadband services to a wide customer base;

 

Energy, utility and enterprise and data centric carriers where high speed connectivity is required between locations with a variety of private networking capabilities;

 

Military, defense and public safety network operators providing wireless connectivity across a broad range of applications; and

 

Wireless ISPs that operate in areas where other carriers choose not to offer broadband access services.

 

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We began shipping our products in 1996. As of September 2021, we had shipped to over 1,000 customers in more than 100 countries.

 

Our contracts with our customers typically provide for delivery of products and services, including training, radio planning and maintenance we provide.  Our contracts sometimes include installation and commissioning, which are generally provided by subcontractors. In addition, we generally also agree to provide warranty for the equipment and software for a limited period of time. 

 

Our contracts are generally non-exclusive and may contain provisions allowing our customers to terminate the agreement without significant penalties. Our contracts also may specify the achievement of shipment, delivery and service commitments. We are generally able to meet these commitments or negotiate extensions with our customers. 

 

Our three largest customers have accounted for a substantial majority of our sales in three years ended December 31, 2020.  In 2018 and 2019 Sprint accounted for a majority of our revenues. In 2020, sales to Sprint declined, while sales to Reliance and Rakuten increased substantially. Our top three customers accounted for 69%, 73% and 91% of revenue in 2020, 2019 and 2018, respectively. See Note 2 of the notes to the audited financial statements of Legacy Airspan included in this prospectus. 

 

Sales and Marketing 

 

We sell our systems and solutions through our direct sales force and through independent agents, resellers and OEM partners. Our direct sales force targets network operators, ISPs and enterprises in both developed and developing markets. In certain markets, including those in which our Mimosa business operates, we also sell through independent agents, resellers, distributors and system integrators who target network operators and other customers. We also sell our products to OEMs who may sell our products under their names. 

 

Our marketing efforts are focused on network operators and ISPs that provide voice and data or data-only communications services to their customers. Through our marketing activities we provide technical and strategic sales support including in-depth product presentations, network design and analysis, bid preparation, contract negotiation and support, technical manuals, sales tools, pricing, marketing communications, marketing research, trademark administration and other support functions. 

 

A high level of ongoing service and support is critical to our objective of developing long-term customer relationships. To facilitate the deployment of our systems, we offer our customers a wide range of implementation and support services, including spectrum planning and optimization, post-sales support, training, a helpline and a variety of other support services.

  

Our subcontractors, who have the expertise and ability to professionally install our products, perform most major installations and commissioning. This enables us to efficiently manage fluctuations in the volume of installation work. 

 

As of June 30, 2021, we had 222 full-time employees and contractors worldwide dedicated to sales, marketing and customer service. 

 

Intellectual Property 

 

We rely on a combination of patent, trademark, copyright and trade secret law and confidentiality or license agreements to protect our proprietary rights in products, services, know-how and information. Intellectual property laws afford limited protection. Certain rights held by us and our subsidiaries may provide us with competitive advantages, even though not all of these rights are protected under intellectual property laws. It may be possible for a third party to copy our products and services or otherwise obtain and use our proprietary information without our permission. 

 

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Through the development of our products, we have generated a significant patent portfolio. As of June 30, 2021, our development efforts have resulted in over 173 separate patents granted (includes U.S. patents and various foreign counterparts), with a further 80 currently pending (includes U.S. patents and foreign counterparts) applications. To improve system performance and reduce costs, we have developed custom integrated circuits that incorporate much of our intellectual property as well as a large library of AI base software modules which are key elements of our wireless solutions. 

 

United States patents are currently granted for a term of 20 years from the date a patent application is filed. Our U.S. patents have in the past given us competitive advantages in the marketplace, including a number of patents for wireless transmission techniques and antenna technologies with a particular emphasis on high speed mobility and power efficiency. 

 

United States trademark registrations are for a term of ten years and are renewable every ten years as long as the trademarks are used in the regular course of trade. We register our trademarks in a number of other countries where we do business. 

 

Manufacturing 

 

We subcontract all of our manufacturing to third party subcontract manufacturing service providers. These providers offer full service manufacturing solutions, including assembly, integration, test, prototyping and new product introduction. The following is an overview of where our products are manufactured.

 

Our 4G and 5G product families are all currently produced with Foxconn in their Vietnam facilities.

 

Our Mimosa product range is currently produced in Malaysia with Cape Manufacturing (M) Sdn. Bhd. of the Cape Group of Companies.

 

We also contract with smaller contract manufacturers for early life prototyping and engineering samples.

 

Our agreements with our manufacturing subcontractors are non-exclusive and may be terminated by either party generally on six months’ notice without significant penalty. Other than component purchase liability as a consequence of authorized forecasts we provide, we do not have any agreements with our manufacturing subcontractors to purchase any minimum volumes. Our manufacturing support activities consist primarily of prototype development, new product introduction, materials planning and procurement, functional test support and quality control. All products are routed to customers via one of our third-party logistics partners. 

 

Some of the key components of our products are purchased from single vendors for which alternative sources are generally not readily available in the short to medium term. If these vendors fail to supply us with components because they do not have them in stock when we need them, if they reduce or eliminate their manufacturing capacity for these components or if they enter into exclusive relationships with other parties which prevents them from selling to us, we could experience and have experienced significant delays in shipping our products while we seek other sources. The COVID-19 pandemic had a significant impact on our supply chains, adversely affecting product supply and delivery to our customers, in particular in the second and third quarter of 2020. Future pandemic induced lockdowns continue to be a risk to the supply chain. As a further consequence of the COVID-19 pandemic, component lead times are extending as demand exceeds supply on certain components, including semiconductors. This has caused us to extend our forecast horizon with our contract manufacturing partners and has increased the risk of supplier delays. 

 

Human Capital Resources 

 

Employee Overview 

 

Our employees are instrumental in helping inspire us to achieve our goals. They bring a wide range of talents, experience and perspectives to drive our business. We are an equal opportunity employer, and it is our policy to make employment decisions and opportunities based on merit, qualifications, potential and competency. 

 

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As of June 30, 2021, we had 728 full-time equivalent employees based primarily in the United Kingdom, India, Israel, Japan and the United States. We also engage numerous consultants and contractors to supplement our permanent workforce. We believe that we generally have good relationships with our employees. None of our employees are subject to a collective bargaining agreement or represented by a labor union, nor have we experienced any work stoppages. 

 

Talent and Human Capital Management 

 

We believe that human capital management is an important component to our continued growth and success, and is critical to our ability to attract, retain and develop talented and skilled employees. 

 

Our human capital is governed by employment regulations in each country in which we operate. We monitor key employment activities, such as hiring, termination and pay practices to ensure compliance with established regulations across the world. Attracting, developing and retaining the best people globally is critical to our long-term success. 

 

Diversity and Inclusion 

 

We believe in attracting, developing and retaining diverse teams. We embrace diversity and inclusion and strive to provide an environment rich with diverse skills, backgrounds and perspectives. 

 

Incentive Plans 

 

The principal purposes of our incentive plans is to increase stockholder value by attracting, retaining and motivating high value personnel through the granting of equity and non-equity-based compensation awards. The incentive plans are designed to motivate individuals to perform to the best of their abilities to achieve our short and long term objectives. 

 

Facilities 

 

Our corporate headquarters are located in Boca Raton, Florida.  This office consists of approximately 5,400 square feet of space leased pursuant to a lease that will expire in 2024. 

 

Our main operations and product development centers are located in: Slough, United Kingdom; Airport City, Israel; Mumbai, India; and Tokyo, Japan. In Slough, United Kingdom, we lease one facility of approximately 14,330 square feet pursuant to a lease that will expire in 2025. In Airport City, Israel, we lease one facility of approximately 49,213 square feet pursuant to a lease that will expire in 2024. In Mumbai, India, we lease one facility of approximately 5,513 square feet pursuant to a lease that will expire in 2026. In Tokyo, Japan, we lease one facility of approximately 1,940 square feet pursuant to a lease that will expire in 2022. 

 

We believe that our facilities are adequate for our current needs. 

 

Legal Proceedings 

 

From time to time, we become involved in actions, claims, suits and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. See Note 13 of the notes to the audited financial statements of Legacy Airspan included in this prospectus for further information regarding legal proceedings.

  

Corporate Information

  

We were incorporated under the laws of the State of Delaware on August 20, 2020 under the name New Beginnings Acquisition Corp. Upon the Closing, we changed our name to Airspan Networks Holdings Inc. Our principal executive offices are located at 777 Yamato Road, Suite 310, Boca Raton, Florida 33431 and our telephone number is (561) 893-8670. Our main operations, manufacturing and product development centers are located in Santa Clara, California, Slough, United Kingdom, Airport City, Israel, Mumbai, India and Tokyo, Japan.  Our website address is www.airspan.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.  

 

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

 

You should read the following management’s discussion and analysis together with the audited and unaudited financial statements and related notes of New Beginnings and Legacy Airspan included elsewhere in this prospectus. This discussion contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Our future results and financial condition may differ materially from those we currently anticipate as a result of the factors described in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

  

Overview

  

We offer a complete range of 4G and 5G network build and network densification products with an expansive portfolio of software and hardware tools for indoor and outdoor, compact femto, pico, micro and macro base stations, as well as an industry leading 802.11ac and 802.11ax fixed wireless access and backhaul solution portfolio for point-to-point and point-to-multipoint applications. Our solutions help network operators monetize the potential of 4G and 5G technologies and use cases and, in addition, allow enterprises to establish their own private networks especially in 5G, where dedicated spectrum has been allocated. We have developed differentiated RAN software and hardware products to help operators get the maximum capacity and coverage in the following ways:

 

Very high performance wireless network technology for both access and backhaul components of the network.

 

Energy efficient and integrated form factors, enabling cost effective deployment of RAN technology that are able to avoid zoning and site acquisition constraints, which translate into a quicker time-to-market for its customers.

 

Easy to use, affordable and comprehensive core network elements to support 4G, 5G and fixed wireless services.

 

Sophisticated provisioning and orchestration software for both backhaul and RAN for 4G and 5G access and the core network that can also integrate a wide range of access.

 

Fully virtualized cloud native modular software and hardware solutions that adhere to open standards allowing its operator customers to fundamentally shift the dynamics of the value and supply chains of the wireless industry. This decreases vendor lock-in and as a result lowers total cost of ownership typical of traditional incumbent competitors.

 

The market for our wireless systems includes leading mobile CSPs, large enterprises, military communications integrators and ISPs. Our strategy applies the same network technology across all addressable sectors.

  

Our main operations are in: Slough, United Kingdom; Mumbai, India; Tokyo, Japan; Airport City, Israel; and Santa Clara, California, in addition to the corporate headquarters in Boca Raton, Florida.

 

The Business Combination

  

The Business Combination was consummated on August 13, 2021, pursuant to the terms of the Business Combination Agreement. Under the Business Combination Agreement, Merger Sub merged with and into Legacy Airspan and Legacy Airspan survived the Merger and became a wholly-owned subsidiary of New Beginnings. Thereafter, Merger Sub ceased to exist and New Beginnings was renamed Airspan Networks Holdings Inc.

 

In connection with the Business Combination, holders of 9,997,049 shares of Common Stock sold in the Initial Public Offering properly exercised their right to have such shares redeemed for a full pro rata portion of the Trust Account, which was approximately $10.10 per share, or an aggregate redemption payment of $100.97 million.

 

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As a result of the Business Combination, (i) 59,726,486 shares of Common Stock (including 345,471 shares of restricted Common Stock), 3,000,000 Post-Combination $12.50 Warrants, 3,000,000 Post-Combination $15.00 Warrants and 3,000,000 Post-Combination $17.50 Warrants were issued to Legacy Airspan stockholders, (ii) outstanding options to purchase Legacy Airspan Common Stock and Legacy Airspan Class B Common Stock were converted into options to purchase an aggregate of 5,815,796 shares of Common Stock, (iii) $17,500,000 in cash was paid and RSUs with respect to 1,750,000 shares of Common Stock were issued to the participants in Legacy Airspan’s management incentive plan and (iv) 4,257,718 shares of Common Stock were reserved for issuance in connection with future grants under the 2021 Plan.

 

In connection with the Business Combination, we also issued 7,500,000 shares of Common Stock to the PIPE Investors, at a price of $10.00 per share, for aggregate consideration of $75.0 million, and $50.0 million in aggregate principal amount of Convertible Notes to the Convertible Note Purchasers.

 

After giving effect to the transactions and redemptions described above, there were 72,024,437 shares of our Common Stock issued and outstanding immediately following the Closing. Our Common Stock, Public Warrants, Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants commenced trading on the NYSE American under the symbols “MIMO”, “MIMO WS”, “MIMO WSA”, “MIMO WSB” and “MIMO WSC”, respectively, on August 16, 2021.

  

Following the Closing, Legacy Airspan was deemed the accounting acquirer, and the Company is the successor SEC registrant, which means that Legacy Airspan’s financial statements for previous periods will be disclosed in our future periodic reports filed with the SEC.

 

Although the legal acquirer in the Business Combination Agreement was New Beginnings, for financial accounting and reporting purposes under GAAP, the Business Combination is accounted for as a reverse recapitalization. A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy Airspan in many respects. Under this method of accounting, New Beginnings will be treated as the acquired company for financial statement reporting purposes and the Business Combination will be treated as the equivalent of Legacy Airspan issuing stock for the net assets of New Beginnings, accompanied by a recapitalization. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Airspan became the historical financial statements of the Company, and New Beginnings’ assets, liabilities and results of operations were consolidated with Legacy Airspan’s on August 13, 2021. The net assets of New Beginnings will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Legacy Airspan.

 

The most significant change in our future reported financial position and results as a result of the Business Combination is an increase in cash (as compared to Legacy Airspan’s balance sheet at June 30, 2021) of approximately $86.8 million and an increase of indebtedness (as compared to Legacy Airspan’s balance sheet at June 30, 2021) of $50.0 million as a result of the issuance of the Convertible Notes. Total non-recurring transaction costs are approximately $27.8 million. Our unaudited pro forma condensed combined financial information as of and for the six months ended June 30, 2021 is contained elsewhere in this prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information.”

 

As a majority of Legacy Airspan’s current management team and business operations comprise our management and operations, we will need to implement procedures and processes to address public company regulatory requirements and customary practices. We expect we will incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.

 

Convertible Notes

 

On July 30, 2021, we entered into the Convertible Note Purchase Agreement, pursuant to which, on August 13, 2021, we issued $50.0 million in aggregate principal amount of Convertible Notes to the Convertible Note Purchasers. The Convertible Notes bear interest at the Base Rate, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on September 30, 2021. Under certain circumstances, a default interest will apply following an event of default under the Convertible Notes at a per annum rate equal to the lower of (i) the Base Rate plus 3.75% and (ii) the maximum amount permitted by law. The Convertible Notes will mature on December 30, 2024, unless earlier accelerated, converted, redeemed or repurchased.

 

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The Convertible Notes, together with all accrued but unpaid interest thereon, are convertible, in whole or in part, at any time prior to the payment in full of the principal amount thereof (together with all accrued but unpaid interest thereon), into shares of Common Stock at a conversion price equal to $12.50 per share. The conversion price with respect to the Convertible Notes is subject to adjustment to reflect stock splits and subdivisions, stock and other dividends and distributions, recapitalizations, reclassifications, combinations and other similar changes in capital structure. The conversion price with respect to the Convertible Notes is also subject to a broad-based weighted average anti-dilution adjustment in the event we issue, or are deemed to have issued, shares of Common Stock, other than certain excepted issuances, at a price below the conversion price then in effect.

 

COVID-19 Update

 

The spread of COVID-19, a novel strain of coronavirus, has and continues to alter the behavior of business and people in a manner that is having negative effects on local, regional and global economies. The COVID-19 pandemic continues to have an impact with short-term disruptions on our supply chains, as governments take robust actions to minimize the spread of localized COVID-19 outbreaks. For example, one of our key suppliers in Vietnam was forced to stop production for approximately three weeks in May 2021 and continues to operate with a reduced labor force. As a further consequence of the COVID-19 pandemic, component lead times have extended as demand outstrips supply on certain components, including semiconductors. These extended lead times have caused us to extend our forecast horizon with our contract manufacturing partners and has increased the risk of supply delays. We cannot at this time accurately predict what effects, or their extent, the coronavirus outbreak will have on the remainder of our 2021 operating results, due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, the length of voluntary business closures and governmental actions taken in response to the outbreak. More generally, the widespread health crisis could continue to adversely affect the global economy, resulting in a prolonged economic downturn that could affect demand for our products and therefore impact our results.

 

Further quantification of these pandemic effects, to the extent relevant and material, are included in the discussion of results of operations below.

 

Mimosa Acquisition

 

On November 20, 2018, Legacy Airspan acquired 100% of Mimosa in exchange for consideration of approximately $22.7 million, net of $0.4 million cash acquired (“Mimosa Acquisition”). Approximately $16.2 million of the consideration was paid in cash which was primarily financed by Legacy Airspan through its credit facility, $6.7 million was in the form of 466,952 shares of Legacy Airspan Class B Common Stock and $0.2 million was in the form of replacement stock option awards granted to Mimosa employees. Mimosa’s outstanding term loan of $15 million was repaid at the acquisition closing. Legacy Airspan incurred transaction costs of approximately $1.6 million which were expensed during 2018.

 

Legacy Airspan was identified as the acquiring company for GAAP accounting purposes. Under the acquisition method of accounting, the purchase price for Mimosa was allocated to Mimosa’s net tangible and intangible assets based on their estimated fair values as of November 20, 2018, the date of the closing. In order to determine the fair values of certain tangible and intangible assets acquired, Legacy Airspan engaged a third-party independent valuation specialist. For all other assets acquired and liabilities assumed, the recorded fair value was determined by Legacy Airspan’s management and represents an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

 

How We Assess the Performance of Our Business

 

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are revenue, cost of revenue, research and development, sales and marketing, general and administrative, interest expense, income taxes and net income. To further help us assess our performance with these key indicators, we use Adjusted EBITDA as a non-GAAP financial measure. We believe Adjusted EBITDA provides useful information to investors and expanded insight to measure our revenue and cost performance as a supplement to our GAAP consolidated financial statements. See the “Adjusted EBITDA” sections below for a reconciliation to net income, the most directly comparable GAAP measure.

 

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Revenue

 

We derive the majority of our revenue from sales of our networking products, with the remaining revenue generated from software licenses and service fees relating to non-recurring engineering, product maintenance contracts and professional services for our products. We sell our products and services to end customers, distributors and resellers. Products and services may be sold separately or in bundled packages.

 

Our top three customers accounted for 69%, 73% and 91% of revenue in 2020, 2019 and 2018, respectively. For the year ended December 31, 2020, we had two customers whose revenue individually comprised approximately 36% and 24%, respectively, of the year’s total. For the years ended December 31, 2019 and 2018, we had one customer each year whose revenue was approximately 54% and 85%, respectively, of the year’s total.

 

Our sales outside the U.S. and Canada accounted for 75%, 36% and 13% of our total revenue in 2020, 2019 and 2018, respectively. The following table identifies the percentage of our revenue by customer geographic region in the periods identified.

 

   Percentage of Revenue 
   Three Months Ended
June 30,
   Six Months Ended
June 30,
   Year Ended
December 31,
 
Geographic Area  2021   2020   2021   2020   2020   2019   2018 
United States        31%      32%      30%      32%      24%      63%      86%
Other North America and Canada   -%   2%   0%   1%   1%   1%   1%
North America and Canada   31%   34%   30%   33%   25%   64%   87%
India   21%   19%   15%   24%   24%   10%   3%
Japan   31%   37%   39%   28%   37%   10%   2%
Other Asia   3%   1%   3%   1%   1%   3%   3%
Asia   55%   57%   56%   53%   62%   23%   8%
Europe   7%   5%   5%   6%   5%   6%   4%
Africa and the Middle East   5%   4%   4%   5%   4%   4%   1%
Latin America and the Caribbean   2%   1%   5%   3%   4%   3%   0%
Total revenue   100%   100%   100%   100%   100%   100%   100%

 

Cost of Revenue

 

Cost of revenue consists of component and material costs, direct labor costs, warranty costs, royalties, overhead related to manufacture of our products and customer support costs. Our gross margin is affected by changes in our product mix both because our gross margin on software and services is higher than the gross margin on base station related equipment, and because our different product lines generate different margins. In addition, our gross margin is affected by changes in the average selling price of our systems and volume discounts granted to significant customers. We expect the average selling prices of our existing products to continue to decline and we intend to continue to implement product cost reductions and develop and introduce new products or product enhancements in an effort to maintain or increase our gross margins. Further, we may derive an increasing proportion of our revenue from the sale of our integrated systems through distribution channels. Revenue derived from these sales channels typically carries a lower gross margin than direct sales.

 

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Operating Expenses

 

Research and Development

 

Research and development expenses consist primarily of salaries and related costs for personnel and expenses for design, development, testing facilities and equipment depreciation. These expenses also include costs associated with product development efforts, including consulting fees and prototyping costs from initial product concept to manufacture and production as well as sub-contracted development work. We expect to continue to make substantial investments in research and development.

 

Sales and Marketing

 

Sales and marketing expenses consist of salaries and related costs for personnel, sales commissions, consulting and agent’s fees and expenses for advertising, travel, technical assistance, trade shows, and promotional and demonstration materials. We expect to continue to incur substantial expenditures related to sales and marketing activities.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries and related expenses for our personnel, audit, professional and consulting fees and facilities costs.

 

Non-Operating Expenses

 

Interest Expense, Net

 

Interest expense consists primarily of interest associated with our senior secured credit facility, which consisted of a term loan and revolving credit facility, and two subordinated loan facilities. Interest on the term loan was determined based on the highest of the LIBOR Rate, commercial lending rate of the collateral agent and federal funds rate, plus an applicable margin. Interest on the revolving credit facility is based on the LIBOR Rate plus an applicable margin. On December 30, 2020 we amended and restated the terms of our credit facility with Fortress. (See Note 10 of the notes to Legacy Airspan’s consolidated audited financial statements included in this prospectus for further discussion on this agreement.)

 

Income Tax (Expense) Benefit

 

Our provision for income tax (expense) benefit includes the expected benefit of all deferred tax assets, including our net operating loss carryforwards. Our net operating loss carryforwards will begin to expire in 2025 and continue to expire through 2037. Our tax (expense) benefit has been impacted by non-deductible expenses, including equity compensation and research and development amortization.

 

Net Loss

 

Net loss is determined by subtracting operating and non-operating expenses from revenues.

 

Segments

 

Our business is organized around one reportable segment, the development and supply of broadband wireless products and technologies. This is based on the objectives of the business and how our chief operating decision maker, the President and Chief Executive Officer, monitors operating performance and allocates resources.

 

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Results of Operations

 

New Beginnings Acquisition Corp.

 

Prior to the consummation of the Business Combination, New Beginnings had not engaged in any operations or generated any revenues. New Beginnings’ only activities from August 20, 2020 (inception) through June 30, 2021 were organizational activities and those necessary to prepare for its Initial Public Offering, and, after the Initial Public Offering, identifying a target company for an initial business combination. New Beginnings generated non-operating income in the form of interest income on marketable securities held in the Trust Account. New Beginnings incurred expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

 

For the three months ended June 30, 2021, New Beginnings had net loss of $7,705,427, which consisted of operating costs of $2,071,796, unrealized loss on change in fair value of Warrants of $5,638,820, offset by interest income earned on investment held in the Trust Account of $5,189.

 

For the six months ended June 30, 2021, New Beginnings had net loss of $4,662,223, which consisted of operating costs of $2,652,960, unrealized loss on change in fair value of Warrants of $2,028,570, offset by interest income earned on investment held in the Trust Account of $19,307.

 

For the period ended December 31, 2020, New Beginnings had net income of $4,092,424, which consisted of interest income earned on marketable securities held in the Trust Account of $12,473 and unrealized gain of change in fair value of Warrants of $5,268,200, offset by operating costs of $215,159 and warrant issuance costs of $973,090.

 

Airspan Networks Inc.

 

The following table summarizes key components of our results of operations for the periods indicated:

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
   Years ended
December 31,
 
(in thousands)  2021   2020   2021   2020   2020   2019   2018 
Revenue  $42,048   $27,793   $87,983   $55,371   $172,955   $166,031   $210,751 
Cost of revenue   22,820    13,086    47,811    25,932    (88,852)   (95,659)   (143,497)
Gross profit   19,228    14,707    40,172    29,439    84,103    70,372    67,254 
                                    
Operating expenses:                                   
Research and development   15,524    12,497    29,898    25,713    52,858    59,941    45,963 
Sales and marketing   7,482    6,490    14,842    14,413    28,738    37,114    34,456 
General and administrative   4,445    3,915    8,900    7,947    16,555    16,444    13,067 
Amortization of intangibles   299    389    598    778    1,733    1,365    114 
Loss on sale of assets   -    -    -    22    22    1,491    3,314 
Total operating expenses   27,750    23,291    54,238    48,873    99,906    116,355    96,914 
                                    
Loss from operations   (8,522)   (8,584)   (14,066)   (19,434)   (15,803)   (45,983)   (29,660)
Interest expense, net   (2,512)   (1,606)   (4,950)   (3,196)   (6,422)   (5,927)   (3,357)
Gain on extinguishment of debt   2,096    -    2,096    -                
Other (expense) income, net   (1,388)   (770)   (6,880)   (1,240)   (4,200)   403    (2,527)
                                    
Loss before income taxes   (10,326)   (10,960)   (23,800)   (23,870)   (26,425)   (51,507)   (35,544)
Income tax benefit (expense)   (92)   (93)   (167)   (198)   782    (474)   252 
                                    
Net loss  $(10,418)  $(11,053)  $(23,967)  $(24,068)  $(25,643)  $(51,981)  $(35,292)

 

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Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

 

Revenue

 

Revenue for the above periods is presented below:

 

   Year Ended December 31, 
($ in thousands)  2020   % of
Revenue
   2019   % of
Revenue
 
Revenue:                
Products and software licenses  $134,338    78%  $127,624    77%
Maintenance, warranty and services   38,617    22%   38,407    23%
Total revenue  $172,955    100%  $166,031    100%

 

Revenue from products and software licenses of $134.3 million for the year ended December 31, 2020 increased by $6.7 million from $127.6 million for the year ended December 31, 2019. This increase was primarily due to a $70 million increase in sales of products to two customers in Asia, offset by a reduction in sales to North America customers of $63 million due to a decline in sales related to the winding down of an arrangement with Sprint under which they halted certain purchase orders due to merger negotiations between Sprint and T-Mobile.

 

Revenue from maintenance, warranty and services of $38.6 million for the year ended December 31, 2020 increased marginally by $0.2 million from $38.4 million for the year ended December 31, 2019.

 

Cost of Revenue

 

Cost of revenue for the above periods are presented below:

 

   Year Ended December 31, 
($ in thousands)  2020   % of
Revenue
   2019   % of
Revenue
 
Cost of Revenue:                
Products and software licenses  $84,375    49%  $93,362    56%
Maintenance, warranty and services   4,477    3%   2,297    1%
Total cost of revenue  $88,852    51%  $95,659    58%

 

Cost of revenue from products and software licenses of $84.4 million for the year ended December 31, 2020 decreased by $9.0 million from $93.4 million for the year ended December 31, 2019. This decrease was primarily due to product mix, with a lower volume of sales of lower margin products in 2020 to North American customers, offset by the costs of sales to Asia-Pacific customers at higher margins.

 

Cost of revenue from maintenance, warranty and services of $4.5 million for the year ended December 31, 2020 increased by $2.2 million from $2.3 million for the year ended December 31, 2019. This increase was primarily due to increased reliance on outside contractors to provide engineering services.

 

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Operating Expenses

 

Operating expenses for the above periods are presented below:

 

   Year Ended December 31, 
($ in thousands)  2020   % of
Revenue
   2019   % of
Revenue
 
Operating expenses:                    
Research and development  $52,858    31%  $59,941    36%
Sales and marketing   28,738    17%   37,114    22%
General and administrative   16,555    10%   16,444    10%
Amortization of intangibles   1,733    1%   1,365    1%
Loss on sale of assets   22    0%   1,491    1%
Total operating expenses  $99,906    58%  $116,355    70%

 

Research and development — Research and development expenses were $52.9 million for the year ended December 31, 2020, a decrease of $7.0 million from $59.9 million for the year ended December 31, 2019. The decrease was primarily due to non-recurring software fees of approximately $7.0 million incurred in 2019.

 

Sales and marketing — Sales and marketing expenses were $28.7 million for the year ended December 31, 2020, a decrease of $8.4 million from $37.1 million for the year ended December 31, 2019.

 

The decrease was the result of:

 

$5.9 million — decrease attributable to the reduction in employee and contractor headcount costs as a part of a cost reduction strategy;

 

$2.5 million — decrease in employee travel expenses due to the COVID-19 pandemic; and

 

$1.0 million — decrease in marketing and other sales initiatives as a result of the COVID-19 pandemic.

 

These decreases were offset by a $1.0 million increase in agent commissions.

 

General and administrative — General and administrative expenses of $16.6 million for the year ended December 31, 2020 increased by $0.2 million from $16.4 million for the year ended December 31, 2019. The slight increase was primarily due to increased professional fees in 2020 related to legal and accounting fees in connection with a potential corporate transaction and financing and refinancing activities.

 

Amortization of intangibles — Amortization of intangibles of $1.7 million for the year ended December 31, 2020 increased marginally by $0.3 million from $1.4 million for the year ended December 31, 2019.

 

Non-Operating Expenses

 

Interest expense, net — Interest expense, net was $6.4 million for the year ended December 31, 2020, an increase of $0.5 million from $5.9 million for the year ended December 31, 2019. The increase was primarily due to higher interest rates in 2020 under the PWB Facility (as defined below).

 

Income tax benefit (expense) — Income tax benefit was $0.8 million for the year ended December 31, 2020, a change of $1.3 million from an income tax expense of $0.5 million for the year ended December 31, 2019. The increase in the income tax benefit was primarily due to $1.9 million U.K. research and development tax credits, which did not occur in 2019; offset by $0.5 million in income tax expense applicable to subsidiaries in other jurisdictions.

 

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Net Loss

 

We had net loss of $25.6 million for the year ended December 31, 2020, a change of $26.4 million compared to net loss of $52.0 million for the year ended December 31, 2019, primarily due to the increase in gross profit and the reduction in sales and marketing and research and development expenses later in the period.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA is defined as net income before depreciation and amortization, interest expense, income taxes, and also adjusted to add back non-cash compensation costs, as these costs are not considered a part of our core business operations and are not an indicator of ongoing, future company performance. We use Adjusted EBITDA to evaluate our performance, both internally and as compared to our peers, because these measures exclude certain items that may not be indicative of our core operating results, as well as items that can vary widely among companies within our industry. For example, non-cash compensation costs can be subject to volatility from changes in the market price per share of our Common Stock or variations in the value and number of shares granted.

 

Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business because it excludes, among other things, the effects of certain transactions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the jurisdictions in which we operate and capital investments.

 

We present this non-GAAP financial measure because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results by focusing on our core operating results and is useful to evaluate our performance in conjunction with our GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income, net income or earnings per share, as a measure of operating performance, cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to GAAP measures.

 

In particular, Adjusted EBITDA is subject to certain limitations, including the following:

 

Adjusted EBITDA does not reflect interest expense, or the amounts necessary to service interest or principal payments under the Fortress Credit Agreement;
  
Adjusted EBITDA does not reflect income tax provision (benefit), and because the payment of taxes is part of our operations, tax provision is a necessary element of our costs and ability to operate;
  
Although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any costs of such replacements;
  
Adjusted EBITDA does not reflect the noncash component of share-based compensation;
  
Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations; and
  
Other companies in our industry may calculate Adjusted EBITDA or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.

 

We adjust for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information.

 

Adjusted EBITDA

 

Adjusted EBITDA for the year ended December 31, 2020 was a loss of $9.4 million, representing an improvement of $31.4 million from a loss of $40.8 million for the year ended December 31, 2019. The increase in Adjusted EBITDA was primarily due to an increase in gross profit and the reduction in sales and marketing and research and development expenses later in the period.

 

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The following table presents the reconciliation of Net Loss, the most directly comparable GAAP measure, to Adjusted EBITDA:

 

   Year Ended December 31, 
($ in thousands)  2020   2019 
Net Loss  $(25,643)  $(51,981)
           
Adjusted for:          
Interest expense   6,422    5,927 
Income tax (benefit) expense   (782)   474 
Depreciation and amortization   4,640    4,458 
EBITDA   (15,363)   (41,122)
Share-based compensation expense   2,643    1,879 
Change in fair value of warrant liability   3,322    (1,508)
Adjusted EBITDA  $(9,398)  $(40,751)

 

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

 

Revenue

 

Revenues for the above periods are presented below:

 

   Year Ended December 31, 
($ in thousands)  2019   % of
Revenue
   2018   % of
Revenue
 
Revenue:                
Products and software licenses  $127,624    77%  $187,511    89%
Maintenance, warranty and services   38,407    23%   23,240    11%
Total revenue  $166,031    100%  $210,751    100%

 

Revenue from products and software licenses of $127.6 million for the year ended December 31, 2019 decreased by $59.9 million from $187.5 million for the year ended December 31, 2018. This decrease was primarily due to a reduction of $97 million in revenue from Sprint, one of our key customers, which halted certain purchase orders during the merger negotiations between Sprint and T-Mobile. This decrease was offset by growth in revenue to other customers. Sales to Sprint have declined substantially as a percentage of revenues since 2018.

 

Revenue from maintenance, warranty and services of $38.4 million for the year ended December 31, 2019 increased by $15.2 million from $23.2 million for the year ended December 31, 2018. This increase of was primarily due to increased contracted maintenance and service revenue from Sprint and contracted engineering development for a North American private network.

 

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Cost of Revenue

 

Cost of revenue for the above periods are presented below:

 

   Year Ended December 31, 
($ in thousands)  2019   % of
Revenue
   2018   % of
Revenue
 
Cost of Revenue:                
Products and software licenses  $93,362    56%  $141,574    67%
Maintenance, warranty and services   2,297    1%   1,923    1%
Total cost of revenue  $95,659    58%  $143,497    68%

 

Cost of revenue from products and software licenses of $93.4 million for the year ended December 31, 2019 decreased by $48.2 million from $141.6 million for the year ended December 31, 2018. This decrease was directly related to the reduction in revenue from Sprint in 2019 as explained above.

 

Cost of revenue from maintenance, warranty and services of $2.3 million for the year ended December 31, 2019 increased by $0.4 million from $1.9 million for the year ended December 31, 2018. This increase was primarily due to the increase in revenue.

 

Operating Expenses

 

Operating expenses for the above periods are presented below:

 

   Year Ended December 31, 
($ in thousands)  2019   % of
Revenue
   2018   % of
Revenue
 
Operating expenses:                    
Research and development  $59,941    36%  $45,963    22%
Sales and marketing   37,114    22%   34,456    16%
General and administrative   16,444    10%   13,067    6%
Amortization of intangibles   1,365    1%   114    0%
Loss on sale of assets   1,491    1%   3,314    2%
Total operating expenses  $116,355    70%  $96,914    46%

 

Research and development — Research and development expenses were $59.9 million for the year ended December 31, 2019, an increase of $13.9 million from $46.0 million for the year ended December 31, 2018. The increase was due to an increase in software fees of approximately $6.0 million incurred in 2019 and the full year impact of the acquisition of Mimosa in November 2018. The Mimosa Acquisition increased our headcount by 44 full-time equivalents which resulted in $7.1 million of additional employment expense in 2019 and allowed us to focus on wireless broadband point-to-point and point-to-point multipoint network products.

 

Sales and marketing — Sales and marketing expenses were $37.1 million for the year ended December 31, 2019, an increase of $2.6 million from $34.5 million for the year ended December 31, 2018. The increase was due to the full year impact of the Mimosa Acquisition in November 2018. The Mimosa Acquisition increased the headcount on our sales team by 24 full-time equivalents which resulted in $4.8 million of additional employment expense in 2019. In 2019, we reduced contractor expense by $1.1 million, bad debt expense by $0.8 million and travel by $0.6 million compared to 2018.

 

General and administrative — General and administrative expenses of $16.4 million for the year ended December 31, 2019 increased by $3.3 million from $13.1 million for the year ended December 31, 2018. The increase was primarily due to the full year impact of the Mimosa Acquisition in November 2018.

 

Amortization of intangibles — Amortization of intangibles of $1.4 million for the year ended December 31, 2019 increased by $1.3 million from $0.1 million for the year ended December 31, 2018. This increase was due to the acquisition of intangibles amounting to $10.8 million as part of the Mimosa Acquisition in November 2018. The increase is directly attributable to a full year of Mimosa operations in 2019.

 

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Non-Operating Expenses

 

Interest expense, net — Interest expense, net was $5.9 million for the year ended December 31, 2019, an increase of $2.5 million from $3.4 million for the year ended December 31, 2018. The increase was primarily due to higher average debt balances and higher interest rates under our PWB Facility.

 

Income tax (expense) benefit — Income tax expense was $0.5 million for the year ended December 31, 2019, a change of $0.8 million from an income tax benefit of $0.3 million for the year ended December 31, 2018.

 

This increase in the income tax expense was primarily due to:

 

$25.0 million — acquired net losses from the Mimosa Acquisition in 2018 that did not reoccur in 2019;
  
$0.7 million — U.K. research and development tax credits, which did not occur in 2019; and
  
$0.4 million — difference between U.S. rate and rates applicable to subsidiaries in other jurisdictions.
  

These increases were partially offset by:

 

$14.0 million — change in valuation allowance for tax benefits;
  
$5.4 million — non-recurring charge for tax rates changes outside of the United States;
  
$3.7 million — attributable to a larger taxable loss in 2019; and
  
$2.2 million — other items, such as nondeductible expenditures and expiry of foreign taxable losses.

 

Net Loss

 

We had a net loss of $52.0 million for the year ended December 31, 2019 compared to a net loss of $35.3 million for the year ended December 31, 2018, which resulted in a decrease of $16.7 million due primarily to the factors discussed above.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA (previously defined and used as described above) for the year ended December 31, 2019 was a loss of $40.8 million, representing an increase of $14.6 million from a loss of $26.2 million for the year ended December 31, 2018. The decrease in Adjusted EBITDA was primarily due to a decrease in revenues of $44.8 million and an increase in operating expenses of $19.5 million primarily due to costs related to the acquisition of Mimosa.

 

The following table presents the reconciliation of Net Loss, the most directly comparable GAAP measure, to Adjusted EBITDA:

 

   Year Ended December 31, 
($ in thousands)  2019   2018 
Net Loss  $(51,981)  $(35,292)
           
Adjusted for:          
Interest expense   5,927    3,357 
Income tax (benefit) expense   474    (252)
Depreciation and amortization   4,458    2,994 
EBITDA   (41,122)   (29,193)
Share-based compensation expense   1,879    871 
Change in fair value of warrant liability   (1,508)   2,159 
Adjusted EBITDA  $(40,751)  $(26,163)

 

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Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

 

Revenues

 

Revenues for the above periods are presented below:

 

 

   Three Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Revenues:                
Products and software licenses  $35,041    83.3%  $16,565    59.6%
Maintenance, warranty and services   7,007    16.7%   11,228    40.4%
Total revenues  $42,048    100%  $27,793    100%

 

Revenue from products and software licenses of $35.0 million for the three months ended June 30, 2021 increased by $18.4 million from $16.6 million for the three months ended June 30, 2020. This increase was primarily due to an increase in sales of products to one customer in Asia Pacific of $14.0 million and an increase in sales of fixed wireless access and CBRS products of $6.8 million, offset by slightly reduced revenue to other customers of $2.0 million.

 

Revenue from maintenance, warranty and services of $7.0 million for the three months ended June 30, 2021 decreased by $4.2 million from $11.2 million for the three months ended June 30, 2020. This decrease was primarily due to the termination of a maintenance agreement with a North American customer at the end of the first quarter of 2021 which generated revenue of $2.8 million in the three months ended June 30, 2020. Asia Pacific services decreased by $0.7 million and the rest of the world decreased by $0.7 million.

 

Cost of Revenues

 

Cost of revenues for the above periods are presented below:

 

   Three Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Cost of Revenues:                
Products and software licenses  $21,727    51.7%  $11,846    42.6%
Maintenance, warranty and services   1,093    2.6%   1,240    4.5%
Total cost of revenues  $22,820    54.3%  $13,086    47.1%

 

Cost of revenues from products and software licenses of $21.7 million for the three months ended June 30, 2021 increased by $9.9 million from $11.8 million for the three months ended June 30, 2020. This increase was primarily due to revenue growth offset by indirect costs remaining flat for the three months ended June 30, 2021.

 

Cost of revenues from maintenance, warranty and services of $1.1 million for the three months ended June 30, 2021 decreased marginally by $0.1 million from $1.2 million for the three months ended June 30, 2020.

 

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Operating Expenses

 

Operating expenses for the above periods are presented below:

 

   Three Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Operating expenses:                    
Research and development  $15,524    36.9%  $12,497    45.0%
Sales and marketing   7,482    17.8%   6,490    23.4%
General and administrative   4,445    10.6%   3,915    14.1%
Amortization of intangibles   299    0.7%   389    1.4%
Total operating expenses  $27,750    66.0%  $23,291    83.8%

 

Research and development— Research and development expenses were $15.5 million for the three months ended June 30, 2021, an increase of $3.0 million from $12.5 million for the three months ended June 30, 2020. The increase was primarily due to increased headcount spend for additional employees primarily located in India of $2.1 million, and increased sub-contract development costs of $0.9 million.

 

Sales and marketing— Sales and marketing expenses were $7.5 million for the three months ended June 30, 2021, an increase of $1.0 million from $6.5 million for the three months ended June 30, 2020. The increase was the result of:

 

  $1.1 million due to increased sales and marketing headcount; and

 

  $0.1 million of increased travel expense.

 

These decreases were offset by:

 

  $0.1 million decrease in facility costs; and

 

  $0.1 million decrease in agent commissions.

 

General and administrative— General and administrative expenses of $4.4 million for the three months ended June 30, 2021 increased by $0.5 million from $3.9 million for the three months ended June 30, 2020. The increase was primarily due to an increase in other professional support services of $0.5 million, an increase in non-cash share-based compensation expense of $0.2 million and an increase in headcount costs of $0.1 million, offset by a decrease of $0.3 million in professional fees.

 

Amortization of intangibles— Amortization of intangibles of $0.3 million for the three months ended June 30, 2021 decreased marginally by $0.1 million from $0.4 million for the three months ended June 30, 2020.

 

Non-Operating Expenses

 

Interest expense, net— Interest expense, net was $2.5 million for the three months ended June 30, 2021, an increase of $0.9 million from $1.6 million for the three months ended June 30, 2020. The increase was primarily due to higher interest rates under the Fortress Credit Agreement, compared to the PWB Facility in place for the three months ended June 30, 2020.

 

Gain on extinguishment of debt – Gain on extinguishment of debt was $2.1 million for the three months ended June 30, 2021, an increase of $2.1 million from nil for the three months ended June 30, 2020. For the three and six months ended June 30, 2021, the Company recorded a gain on extinguishment of debt for a loan received under the Paycheck Protection Program (the “PPP Loan”) of $2.1 million and the accrued interest of $23 thousand, respectively for the PPP Loan.

 

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Other expense, net— Other expense, net was $1.4 million for the three months ended June 30, 2021, an increase of $0.6 million from $0.8 million for the three months ended June 30, 2020. The increase was primarily due to the $0.6 million revaluation related to Japanese yen volatility against the U.S. dollar, resulting in a loss on revaluation of Japanese yen denominated balances during the three months ended June 30, 2021.

 

Income tax expense— Income tax expense remained consistent at $0.1 million for the three months ended June 30, 2021 and 2020.

 

Net Loss

 

We had a net loss of $10.4 million for the three months ended June 30, 2021 compared to a net loss of $11.1 million for the three months ended June 30, 2020, a decrease of $0.7 million due to:

 

  Increase in gross profit of $4.5 million; and

 

  Increase in gain on extinguishment of debt of $2.1 million.

 

This increase was offset by:

 

  Increase in operating expenses of $4.4 million;

 

  Increase in interest costs of $0.9 million; and

 

  Increase in other expense of $0.6 million.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA (previously defined and used as described above) for the three months ended June 30, 2021 was a loss of $5.4 million, representing an improvement of $1.7 million from a loss of $7.1 million for the three months ended June 30, 2020.

 

The following table presents the reconciliation of Net Loss, the most directly comparable GAAP measure, to Adjusted EBITDA:

 

   Three Months Ended
June 30,
 
($ in thousands)  2021   2020 
Net Loss  $(10,418)  $(11,053)
           
Adjusted for:          
Interest expense, net   2,512    1,606 
Income tax (benefit) expense   92    93 
Depreciation and amortization   1,076    1,204 
EBITDA   (6,738)   (8,150)
Share-based compensation expense   828    495 
Change in fair value of warrant liability   545    534 
Adjusted EBITDA  $(5,365)  $(7,121)

 

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Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

 

Revenues

 

Revenues for the above periods are presented below:

 

   Six Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Revenues:                
Products and software licenses  $74,040    84.2%  $35,293    63.7%
Maintenance, warranty and services   13,943    15.8%   20,078    36.3%
Total revenues  $87,983    100%  $55,371    100%

 

Revenue from products and software licenses of $74.0 million for the six months ended June 30, 2021 increased by $38.7 million from $35.3 million for the six months ended June 30, 2020. This increase was primarily due to an increase in sales of products to two customers in Asia Pacific of $22.1 million and an increase in sales of fixed wireless access and CBRS products of $16.6 million.

 

Revenue from maintenance, warranty and services of $13.9 million for the six months ended June 30, 2021 decreased by $6.2 million from $20.1 million for the six months ended June 30, 2020. This decrease was primarily due to a software feature delivered to a U.S. customer in 2020 that did not reoccur in 2021 amounting to $1.9 million and the termination of a maintenance agreement with a North American customer at the end of the first quarter of 2021 that generated revenue of $2.8 million in the six months ended June 30, 2021. Asia Pacific services decreased by $0.7 million and the rest of the world decreased by $0.8 million.

 

Cost of Revenues

 

Cost of revenues for the above periods are presented below:

 

   Six Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Cost of Revenues:                    
Products and software licenses  $45,615    51.8%  $23,835    43.0%
Maintenance, warranty and services   2,196    2.5%   2,097    3.8%
Total cost of revenues  $47,811    54.3%  $25,932    46.8%

 

Cost of revenues from products and software licenses of $45.6 million for the six months ended June 30, 2021 increased by $21.8 million from $23.8 million for the six months ended June 30, 2020. This increase was primarily due to revenue growth and, to a lesser extent, lower indirect costs in the six months ended June 30, 2021.

 

Cost of revenues from maintenance, warranty and services of $2.2 million for the six months ended June 30, 2021 increased marginally from $2.1 million by $0.1 million for the six months ended June 30, 2020.

 

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Operating Expenses

 

Operating expenses for the above periods are presented below:

 

   Six Months Ended June 30, 
($ in thousands)  2021   % of Revenue   2020   % of Revenue 
Operating expenses:                    
Research and development  $29,898    34.0%  $25,713    46.4%
Sales and marketing   14,842    16.9%   14,413    26.0%
General and administrative   8,900    10.1%   7,947    14.4%
Amortization of intangibles   598    0.7%   778    1.4%
Loss on sale of assets       %   22    0.0%
Total operating expenses  $54,238    61.6%  $48,873    88.3%

 

Research and development— Research and development expenses were $29.9 million for the six months ended June 30, 2021, an increase of $4.2 million from $25.7 million for the six months ended June 30, 2020. The increase was primarily due to increased headcount spend for additional employees primarily located in India of $3.5 million, an increase in sub-contract development costs of $0.5 million and an increase in other outside services and material and supplies of $0.4 million, offset by a reduction in travel costs of $0.2 million as a result of the pandemic.

 

Sales and marketing— Sales and marketing expenses were $14.8 million for the six months ended June 30, 2021, an increase of $0.4 million from $14.4 million for the six months ended June 30, 2020. The increase was the result of:

 

  $0.2 million due to increased sales and marketing headcount; and

 

  $0.6 million increase in agent commissions on increased revenue.

 

These increases were offset by:

 

  $0.3 million of reduced travel expense due to the pandemic; and

 

  $0.1 million decrease in product advertising and promotions.

 

General and administrative— General and administrative expenses of $8.9 million for the six months ended June 30, 2021 increased by $1.0 million from $7.9 million for the six months ended June 30, 2020. The increase was primarily due to an increase in other professional support services of $0.7 million, an increase in non-cash share-based compensation expense of $0.3 million and an increase in headcount costs of $0.2 million, offset by a decrease in facility costs of $0.2 million.

 

Amortization of intangibles— Amortization of intangibles of $0.6 million for the six months ended June 30, 2021 decreased marginally by $0.2 million from $0.8 million for the six months ended June 30, 2020.

 

Non-Operating Expenses

 

Interest expense, net— Interest expense, net was $4.9 million for the six months ended June 30, 2021, an increase of $1.7 million from $3.2 million for the six months ended June 30, 2020. The increase was primarily due to higher interest rates under the Fortress Credit Agreement entered into on December 30, 2020, compared to the PWB Facility in place for the six months ended June 30, 2020.

 

Gain on extinguishment of debt – Gain on extinguishment of debt was $2.1 million for the six months ended June 30, 2021, an increase of $2.1 million from nil for the six months ended June 30, 2020. For the six months ended June 30, 2021, the Company recorded a gain on extinguishment of debt for the PPP Loan of $2.1 million and the accrued interest of $23 thousand, respectively for the PPP Loan.

 

Operating expense, net— Other expense, net was $6.9 million for the six months ended June 30, 2021, an increase of $5.7 million from $1.2 million for the six months ended June 30, 2020. The increase was primarily due to the non-cash fair value adjustment of our warrant liabilities of $3.5 million and $2.2 million related to Japanese yen volatility against the U.S. dollar, resulting in a loss on revaluation of Japanese yen denominated balances during the six months ended June 30, 2020.

 

Income tax expense— Income tax expense remained consistent at $0.2 million for the six months ended June 30, 2021 and 2020.

 

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Net Loss

 

We had a net loss of $24.0 million for the six months ended June 30, 2021 compared to a net loss of $24.1 million for the six months ended June 30, 2020, a decrease of $0.1 million due to:

 

  Increase in gross profit of $10.7 million; and

 

  Increase in gain on extinguishment of debt of $2.1 million.

 

This increase was offset by:

 

  Increase in operating expenses of $5.4 million;

 

  Increase in interest costs of $1.8 million; and

 

  Increase in other expense of $5.7 million.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA (previously defined and used as described above) for the six months ended June 30, 2021 was a loss of $10.7 million, representing an improvement of $5.6 million from a loss of $16.3 million for the six months ended June 30, 2020. The increase in Adjusted EBITDA was primarily due to an increase in revenues of $32.6 million, as well as increases in cost of revenue of $21.9 million and operating expenses of $5.4 million primarily due to the factors described above.

 

The following table presents the reconciliation of Net Loss, the most directly comparable GAAP measure, to Adjusted EBITDA:

 

   Six Months Ended June 30, 
($ in thousands)  2021   2020 
Net Loss  $(23,967)  $(24,068)
           
Adjusted for:          
Interest expense, net   4,950    3,196 
Income tax (benefit) expense   167    198 
Depreciation and amortization   2,129    2,346 
EBITDA   (16,721)   (18,328)
Share-based compensation expense   1,489    987 
Change in fair value of warrant liability   4,517    1,064 
Adjusted EBITDA  $(10,715)  $(16,277)

 

Liquidity and Capital Resources

 

To date, our principal sources of liquidity have been our cash and cash equivalents and cash generated from operations, proceeds from the issuance of long term debt, preferred and common stock, and the sale of certain receivables. Our capital requirements depend on a number of factors, including sales, the extent of our spending on research and development, expansion of sales and marketing activities and market adoption of our products and services.

 

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We had $75.2 million of current assets and $59.5 million of current liabilities at June 30, 2021. During the six months ended June 30, 2021, we used $3.8 million in cash flows from operating activities, primarily from the collection of our outstanding accounts receivables. We are investing heavily in 5G research and development and expect to use cash from operations during the remainder of 2021 to fund research and development activities. Cash on hand and the available borrowing capacity under the Fortress Credit Agreement may not allow us to meet our forecasted cash requirements.

 

Days sales outstanding (“DSO”) is a measurement of the time it takes to collect receivables. DSO is calculated by dividing accounts receivable, net as of the end of the quarter by the average daily revenue for the quarter. Average daily revenue for the quarter is calculated by dividing the quarterly revenue by ninety days. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected. We are also actively evaluating the potential negative impact of COVID-19 on our customers’ ability to pay our accounts receivable. DSO can fluctuate due to the timing and nature of contracts, as well as the payment terms of individual customers. DSO was 87 days and 121 days at June 30, 2021 and 2020, respectively and 79 days, 103 days and 61 days at December 31, 2020, 2019 and 108, respectively. Notwithstanding the DSO of 79 days at December 31, 2020, our accounts receivable were $71.6 million due to high sales volumes in the fourth quarter of 2020. As at March 31, 2021, our accounts receivable were $32.4 million, following collections relating to sales made in the fourth quarter of 2020.

 

During the years ended December 31, 2020, 2019 and 2018, we sold certain accounts receivable balances related to one customer under that customer’s vendor financing program that had a carrying value of approximately $11.5 million, $73.0 million and $152.7 million, respectively. The vendor financing program allowed us to sell this customer’s approved receivables in advance of their 120-day contracted payment terms. We made use of this program to manage working capital. This vendor financing program was terminated by the customer in the second quarter of 2019, however the program contributed to the lower DSO for 2018.

 

During 2020, Legacy Airspan and four of our wholly owned subsidiaries had a loan facility with Pacific Western Bank and Ally Bank (“PWB”) under a Second Amended and Restated Loan and Security Agreement (the “PWB Facility”). Under the PWB Facility, Legacy Airspan could borrow up to $45 million, subject to compliance with certain covenants. (See Note 7 of the notes to the audited financial statements of Legacy Airspan included in this prospectus.) In addition to this PWB Facility, Legacy Airspan had an aggregate of $39.0 million of subordinated debt with two other lenders. (See Notes 8 and 9 of the notes to the audited financial statements of Legacy Airspan included in this prospectus.)

 

During 2020, Legacy Airspan entered into several amendments to the PWB Facility. These amendments modified the financial and funding covenants and extended the due date for the audited consolidated financial statements. The PWB Facility was extended to mature on December 31, 2020. On December 30, 2020, Fortress and certain other lenders purchased the outstanding indebtedness under the PWB Facility. Fortress replaced Pacific Western Bank as administrative agent and collateral agent under the facility. On the same date, Fortress, the other lenders party thereto, Legacy Airspan and certain of its subsidiaries modified the terms of such indebtedness by amending and restating the existing credit agreement, including an extension of the maturity date.

 

On August 6, 2015, Legacy Airspan issued Golden Wayford Limited a $10.0 million subordinated Convertible Note Promissory Note (the “Golden Wayford Note”) pursuant to the subordinated convertible purchase agreement, also dated August 6, 2015. The Golden Wayford Note, in the amount of $9.0 million plus interest, matured on June 30, 2020. We were not able to agree to an extended maturity date and the Golden Wayford Note remained outstanding as of December 31, 2020 and in default under the terms of the arrangement. We were granted a limited waiver under the Fortress Credit Agreement which waives each actual and prospective default and event of default existing under the Fortress Credit Agreement directly as a result of the non-payment of the Golden Wayford Note for so long as the Golden Wayford Note remains in effect. The waiver is limited to the actual and prospective defaults under the Fortress Credit Agreement as they existed on December 30, 2020 and not to any other change in facts or circumstances occurring after December 30, 2020. The waiver does not restrict Fortress from exercising any rights or remedies they may have with respect to any other default or event of default under the Fortress Credit Agreement or the related loan documents.

 

On December 30, 2020, Legacy Airspan and each of our subsidiaries (other than Dense Air Limited or any of its subsidiaries) as guarantors, entered into the Fortress Credit Agreement with Fortress. See “Certain Relationships and Related Person Transactions” and Note 10 of the notes to the consolidated audited financial statements of Legacy Airspan included in this prospectus for further discussion on this agreement.

 

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On August 13, 2021, we closed the Business Combination. In connection with the Closing, we issued 7,500,000 shares of Common Stock to the PIPE Investors, at a price of $10.00 per share, for aggregate consideration of $75.0 million, and $50.0 million in aggregate principal amount of Convertible Notes to the Convertible Note Purchasers.

 

As of the Closing Date, we had (i) approximately $120.6 million of cash and cash equivalents (which amount includes $18.5 million that has subsequently been paid or will be paid under Legacy Airspan’s management incentive plan as a result of the Closing), net of transaction costs relating to the Business Combination of approximately $27.8 million, (ii) approximately $45.6 million in indebtedness outstanding under the Fortress Credit Agreement, with an average annualized interest cost of 10.4% at such date, (iii) $50.0 million in indebtedness outstanding under the Convertible Notes, with an interest rate equal to 7.0% per annum, and (iv) subordinated indebtedness of approximately $47.1 million.

 

As of the date of this prospectus, we believe our existing cash resources are sufficient to fund the cash needs of our business for at least the next 12 months.

 

Cash Flows

 

The following table summarizes the changes to our cash flows for the periods presented:

 

   For the
Six Months Ended June 30,
   For the Year Ended
December 31,
 
(in thousands)  2021   2020   2020   2019   2018 
Statement of Cash Flows Data:                         
Net cash provided by (used in) operating activities  $(3,816)  $(15,829)  $(20,367)  $(28,230)  $(48,687)
Net cash used in investing activities   (3,123)   (404)   (2,226)   (2,673)   (2,753)
Net cash provided by financing activities   716    15,776    38,198    26,913    43,774 
Increase (decrease) in cash and cash equivalents   (6,223)   (457)   15,605    (3,990)   (7,666)
Cash, cash equivalents and restricted cash, beginning of period   18,618    3,013    3,013    7,003    14,669 
Cash, cash equivalents and restricted cash, end of period  $12,395   $2,556   $18,618   $3,013   $7,003 

 

Operating Activities

 

Net cash used in operating activities was $3.8 million for the six months ended June 30, 2021, a decrease of $12.0 million from net cash used in operating activities of $15.8 million for the six months ended June 30, 2020. The decrease is a result of $15.8 million generated from working capital and a $0.3 million increase in non-cash adjustments, offset by $2.0 million from results of our operations.

 

Net cash used in operating activities was $20.4 million for the year ended December 31, 2020, a decrease of $7.8 million from $28.2 million for the year ended December 31, 2019. The decrease of $7.8 million is a result of $19.4 million related to changes in working capital, offset by $26.4 million of the results of our operations and a $0.8 million increase in share-based compensation.

 

Net cash used in operating activities was $28.2 million for the year ended December 31, 2019, a decrease of $20.5 million from $48.7 million for the year ended December 31, 2018. The decrease of $20.5 million was primarily as result of $35.3 million related to changes in working capital and a decrease in bad debt expense of $0.7 million, offset by $16.7 million of the results of our operations, a $1.5 million increase in depreciation and amortization and $1.0 million increase in share-based compensation.

 

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Investing Activities

 

Net cash used in investing activities was $3.1 million for the six months ended June 30, 2021, an increase of $2.7 million from $0.4 million for the six months ended June 30, 2020 due to higher purchases of property and equipment.

 

Net cash used in investing activities was $2.2 million for the year ended December 31, 2020, a decrease of $0.5 million from $2.7 million for the year ended December 31, 2019. This decrease in cash used was due to lower purchases of property and equipment.

 

Net cash used in investing activities was $2.7 million for the year ended December 31, 2019, a decrease of $0.1 million from $2.8 million for the year ended December 31, 2018. This decrease in cash used was primarily due to higher purchases of property and equipment during the year ended December 31, 2019 than in the year ended December 31, 2018, however, net cash used in investing activities during the year ended December 31, 2018 included a one-time a business acquisition.

 

Financing Activities

 

Net cash provided by financing activities was $0.7 million for the six months ended June 30, 2021. This included $0.5 million of net proceeds from the sale of Series H senior preferred stock, $0.1 million of proceeds from the issuance of Legacy Airspan Series H warrants and $0.1 of proceeds from the exercise of stock options.

 

Net cash provided by financing activities was $15.8 million for the six months ended June 30, 2020. This included $1.8 million of net borrowings under the line of credit, $2.1 million from borrowings under long-term debt and $11.9 million of net proceeds from the sale of Legacy Airspan Series G senior preferred stock.

 

Net cash provided by financing activities was $38.2 million for the year ended December 31, 2020. This included $32.1 million of proceeds from the sale of Legacy Airspan Series G and Series H senior preferred stock, $8.1 million of borrowings under the term loan and other long term debt, net of $2.0 million of repayments under the line of credit.

 

Net cash provided by financing activities was $26.9 million for the year ended December 31, 2019. This included $23.0 million of borrowings of subordinated convertible debt, $7.8 million of proceeds from the sale of Legacy Airspan Preferred Stock, net of $3.9 million of repayments under the line of credit.

 

Net cash provided by financing activities was $43.8 million for the year ended December 31, 2018. This included $34.9 million of proceeds from the sale of Legacy Airspan Preferred Stock, $9.3 million of net borrowings under the line of credit, net of $0.4 million of repayments of the subordinated convertible debt.

 

Contractual Obligations

 

The following table includes aggregated information about contractual obligations as of December 31, 2020 that are expected to affect our liquidity and cash flow in future periods is as follows:

 

(in thousands of U.S. dollars)  Total   Less than 1
year
   1 to 3
years
   3 to 5
years
   More than 5
years
 
Long-term debt  $91,231   $10,363   $2,087   $78,781   $ 
Operating lease obligations   9,086    2,695    4,114    2,277     
Purchase obligations   55,600    55,600             
   $155,917   $68,658   $6,201   $81,058   $ 

 

Off-Balance Sheet Arrangements

 

We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our consolidated financial statements.

 

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Critical Accounting Policies and Estimates

 

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate the effectiveness of our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts, intangible assets, net, impairment of long-lived assets, preferred stock warrants, share-based compensation and income taxes.

 

We base our estimates and judgments 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. Actual results may differ from these estimates under different assumptions or conditions and may change as future events occur.

 

We believe the following critical accounting policies are dependent on significant judgments and estimates used in the preparation of our consolidated financial statements.

 

Revenue recognition

 

We derive the majority of our revenue from sales of our networking products and software licenses, with the remaining revenue generated from service fees relating to maintenance contracts, professional services and training for our products. We sell our products and services to end customers, distributors and resellers. Products and services may be sold separately or in bundled packages.

 

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of our contracts have multiple distinct performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and the customer can benefit from these individual goods or services either on their own or together with other resources that are readily available to the customer. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling prices are determined based on the prices at which we separately sell these products. For items that are not sold separately, we estimate the stand-alone selling prices using either an expected cost-plus margin or the adjusted market assessment approach depending on the nature of the specific performance obligation.

 

For all of our product sales, revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at shipment of the product. For product sales, we generally do not grant return privileges, except for defective products during the warranty period. Sales taxes collected from customers are excluded from revenues.

 

Revenue from non-recurring engineering is recognized at a point in time or over time depending on if the customer controls the asset being created or enhanced.

 

Revenue from professional service contracts primarily relates to training and other consulting arrangements performed by us for our customers. Revenues from professional services contracts provided on a time and materials basis are recognized when we have the right to invoice under the practical expedient as amounts correspond directly with the value of the services rendered to date.

 

Revenue from product maintenance contracts is recognized over time as our performance obligations are satisfied.

 

Revenue from software licenses is recognized when the software license is delivered to the customer. There are no further performance obligations once the software license is delivered to the customer.

 

Revenue related to shipping and handling activities is included in product revenues. Revenue related to the reimbursement of out-of-pocket costs are accounted for as variable consideration.

 

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Intangible Assets, Net

 

Intangible assets, net includes Goodwill and Other Intangible Assets. Goodwill and intangible assets result primarily from business combination acquisitions. Our intangible assets include internally developed technology, customer relationships, trademarks and non-compete agreements.

 

Goodwill

 

Goodwill results primarily from business combination acquisitions. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible assets and other intangible assets acquired. Goodwill is not amortized, rather, an impairment test is conducted on an annual basis, or more frequently if indicators of impairment are present, which are determined through a qualitative assessment. A qualitative assessment includes consideration of the economic, industry and market conditions in addition to our overall financial performance and the financial performance of these assets. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. If not, we compare the fair value with its carrying amount. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. Our annual assessment date is December 31.

 

Other Intangible Assets

 

We have recorded other finite-lived intangible assets as a result of the Mimosa business combination. Our internally developed technology, customer relationships, trademarks and non-compete agreements are amortized utilizing an accelerated method over their estimated useful lives. When establishing useful lives, we consider the period and the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up; or, if that pattern cannot be reliably determined, using a straight-line amortization method over a period that may be shorter than the ultimate life of such intangible asset. There is no residual value associated with our finite-lived intangible assets. We review our trade name assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.

 

We review for impairment indicators of finite-lived intangibles and other long-lived assets as described below in “Impairment of long-lived assets.”

 

Impairment of long-lived assets

 

We review our long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. This review consists of a comparison of the carrying value of the asset with the asset’s expected future undiscounted cash flows. Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions and projections. If the expected undiscounted future cash flows exceed the carrying value of the asset, no impairment is recognized. If the carrying value of the asset exceeds the expected undiscounted future cash flows, impairment exists and is determined by the excess of the carrying value over the fair value of the asset. Any impairment provisions recognized are permanent and may not be restored in the future. No impairment of long-lived assets was recorded in 2020, 2019, or 2018, as a result of our assessments.

 

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Preferred Stock Warrants

 

We account for Legacy Airspan preferred stock warrants at their estimated fair value and record Legacy Airspan preferred stock warrants as long-term liabilities in accordance with ASC 480, Accounting for Redeemable Equity Instruments (“ASC 480”). We account for Legacy Airspan preferred stock warrants that have been earned (based on their respective performance criteria) and are exercisable into shares of Legacy Airspan’s convertible preferred stock as liabilities, and are included in Other Long-term Liabilities. All Legacy Airspan preferred stock warrants are measured and recognized at fair value at each balance sheet date. At the end of each reporting period, changes in fair value during the period are recognized as a component of net income. We continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants and the completion of a liquidity event, at which time all convertible Legacy Airspan preferred stock warrants will be converted into warrants to purchase common stock and, accordingly, the liability will be reclassified to additional paid-in capital.

 

As of December 31, 2020, the Legacy Airspan Series D-1 and Series H warrants fair value were determined using a hybrid scenario approach, including a Monte Carlo simulation. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability.

 

As of December 31, 2019, the fair value of the Legacy Airspan Series D-1 Warrants were determined using a probability-weighted expected return method, which consisted of: (i) estimating the number of warrants to be earned based upon the likelihood of attaining each of the respective performance criteria; (ii) determining a relative fair value of the enterprise; and (iii) estimating the value per warrant based on a weighted allocation of each warrant (as converted) to the total common stock enterprise value. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability.

 

Share-based compensation

 

We apply ASC 718, Share-based Payments. ASC 718 requires awards classified as equity awards to be accounted for using the estimated grant date fair value. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service periods. Share-based compensation expense recognized in the consolidated statement of operations includes compensation expense for share-based awards granted based on the estimated grant date fair value. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense has been reduced to account for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

We determine the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:

 

Expected Term — Expected term is estimated based on our prior five years of historical data regarding expired, forfeited or if applicable, exercise behavior.
  
Expected Volatility — Since we have limited historical basis for determining our own volatility, the expected volatility assumption was based on the average historical volatility of a representative peer group, which includes consideratio