NOTES
TO UNAUDITED CONDENSED Consolidated FINANCIAL STATEMENTS
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1.
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BUSINESS AND BASIS OF PRESENTATION
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Business
On August 13, 2021 (the “Closing”),
Airspan Networks Holdings Inc. (formerly New Beginnings Acquisition Corp.) (the “Company”) consummated its previously announced
business combination transaction (the “Business Combination”) pursuant to the business combination agreement (the “Business
Combination Agreement”), dated March 8, 2021, by and among the Company, Artemis Merger Sub Corp., a Delaware corporation (“Merger
Sub”) and wholly-owned direct subsidiary of the Company, and Airspan Networks Inc., a Delaware corporation (“Legacy Airspan”)
(See Note 3). In connection with the closing of the Business Combination, the Company changed its
name to Airspan Networks Holdings Inc.. Unless the context otherwise requires, references 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. In addition, unless the context otherwise requires, references to “New Beginnings”
and “NBA” are references to New Beginnings Acquisition Corp., the Company’s name prior to Closing.
The Company designs and produces wireless
network equipment for 4G and 5G networks for both mainstream public telecommunications service providers and private network implementations.
Airspan provides Radio Access Network (“RAN”) products based on Open Virtualized Cloud Native Architectures, that support
technologies including 5G new radio (“5G NR”) and Long Term Evolution (“LTE”), and Fixed Wireless standards, operating
in licensed, lightly-licensed and unlicensed frequencies.
The market for the Company’s
wireless systems includes mobile carriers, other public network operators and private and government network operators for command and
control in industrial and public safety applications such as smart utilities, defense, transportation, mining and oil and gas. The Company’s
strategy applies the same network technology across all addressable sectors.
The Company’s main operations
are in Slough, United Kingdom (“U.K.”); Mumbai and Bangalore, India; Tokyo, Japan; Airport City, Israel; Santa Clara, California;
and the Company’s corporate headquarters are in the United States (“U.S.”) in Boca Raton, Florida.
Basis of Presentation and Principles
of Consolidation
The accompanying condensed
financial statements include the accounts of the Company, its wholly-owned subsidiaries and Airspan IP Holdco LLC
(“Holdco”) – 99.8% owned by Airspan. Non-controlling interest in the results of operations of consolidated
subsidiaries represents the minority equity holders’ share of the profit or loss of Holdco. The non-controlling interest in
net assets of this subsidiary, and the net income or loss attributable to the non-controlling interest, were not recorded by the
Company as they are considered immaterial. All significant inter-company balances and transactions have been eliminated in
consolidation. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (“GAAP”).
The Company’s interim condensed
consolidated financial statements and related notes are unaudited. In the opinion of management, all adjustments (including normal recurring
adjustments) and disclosures necessary for a fair presentation of these interim financial statements have been included. The results reported
in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. Certain
information and footnote disclosures required by GAAP have been condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual
Report on Form 10-K as of and for the year ended December 31, 2020, and Legacy Airspan’s financial statements as of and for the
year ended December 31, 2020, included in the Company’s Form S-4 registration statement (File No. 333-256137) which is available
on EDGAR.
Liquidity
The Company has historically incurred
losses from operations. In the past, these losses have been financed through cash on hand or capital raising activities including borrowings
or the sale of newly issued shares.
The Company had $164.4
million of current assets and $68.6
million of current liabilities at September 30, 2021. During the nine months ended September 30, 2021, the Company used $45.3 45,313 million
in cash flow from operating activities. The Company is investing heavily in 5G research and development and the Company expects to
continue to use cash from operations during the remainder of 2021 and through the first half of 2022. Cash on hand and borrowing
capacity under the Fortress Credit Agreement (see Note 9) may not allow the Company to reasonably expect to meet its forecasted cash
requirements.
Going concern
The accompanying condensed consolidated
financial statements have been prepared and are presented assuming the Company’s ability to continue as a going concern. As discussed
in Notes 9 and 10 to the financial statements, the Company’s Convertible Notes and senior term loans require certain prospective
financial covenants to be met. The Company’s business plan for 2021 and first half of 2022 contemplates increased revenue and reduced
operating losses to achieve satisfaction of the financial covenants. Given the continued uncertainty in the global markets, in the event
that the Company was unable to achieve these prospective covenants, the Company’s senior term loan (see Note 9) and the subordinated
loan (see Note 8) could become due prior to the maturity date. As of September 30, 2021, the Company was not in compliance with the respective
covenants of both the Convertible Notes and senior term loans; however, the Company was granted a waiver from compliance for these covenants
as of September 30, 2021 and prospectively for December 31, 2021.
In order to address the need to satisfy
the Company’s continuing obligations and realize its long-term strategy, management has taken several steps and is considering additional
actions to improve its operating and financial results, which the Company expects will be sufficient to meet the prospective covenants
of the Company’s Convertible Notes and senior term loan and provide the ability to continue as a going concern, including the following:
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focusing the Company’s efforts to increase sales in additional geographic markets;
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continuing to develop 5G product offerings that will expand the market for the Company’s products;
and
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continuing to evaluate and implement cost reduction initiatives to reduce non-strategic costs in operations
and expand the Company’s labor force in lower cost geographies.
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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. The continued impact on our
supply chains has caused delayed production and fulfilment of customer orders, disruptions and delays of logistics and increased
logistic costs. As a further consequence of the COVID-19 pandemic, component lead times have extended as demand outstrips supply on
certain components, including semiconductors, and has caused the costs of components to increase. 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. The
Company cannot at this time accurately predict what effects, or their extent, the coronavirus outbreak will have on the remainder of
its 2021 and 2022 operating results, due to uncertainties relating to the ultimate geographic spread of the virus, the severity of
the disease, the duration of the outbreak, component shortages and increased component costs, the length of voluntary business
closures, and governmental actions taken in response to the outbreak. More generally, the widespread health crisis has and may
continue to adversely affect the global economy, resulting in an economic downturn that could affect demand for our products and
therefore impact the Company’s results.
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Use of estimates
The preparation of condensed consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and cash equivalents and restricted
cash
The Company considers all highly liquid
investments with an original maturity, or remaining maturity when acquired, of three months or less to be cash equivalents. Cash and cash
equivalents are all maintained in bank accounts.
Schedule of cash and cash
equivalents
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September 30,
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2021
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2020
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Cash and cash equivalents
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$
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85,058
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|
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$
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10,007
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Restricted cash
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|
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186
|
|
|
|
138
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Total cash, cash equivalents and restricted cash
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$
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85,244
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$
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10,145
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Restricted cash consists of cash on
deposit and cash pledged as collateral to secure the guarantees described in Note 9. The cash on deposit balance reflects the remaining
balance available of the senior term loan (see Note 9) that is solely for the purpose of financing the manufacture of products for a specific
customer’s network. Restricted cash balances were as follows (in thousands):
Schedule of restricted cash
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September 30,
2021
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December 31,
2020
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Customer and supplier guarantees
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$
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176
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$
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298
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Landlord guarantees
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10
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124
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Total
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$
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186
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$
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422
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Accounts receivable
Accounts receivable represent receivables
from customers in the ordinary course of business. These are recorded at the invoiced amount and do not bear interest. Receivables are
recorded net of the allowance for doubtful accounts in the accompanying condensed consolidated balance sheets. The Company evaluates the
collectability of its accounts receivable based on a combination of factors, such as historical experience, credit quality, country risk,
current level of business, age of the accounts receivable and current economic conditions. The Company regularly analyzes its customer
accounts overdue more than 90 days and when it becomes aware of a specific customer’s inability to meet its financial obligations,
the Company records a specific allowance to reduce the related receivable to the amount it reasonably believes to be collectible. When
collection efforts cease or collection is considered remote, the account and related allowance are written off.
Inventory
Inventory is stated at the lower of
cost or net realizable value under the average cost method. Cost includes all costs incurred in bringing each product to its present location
and condition. We record inventory write-downs to net realizable value through an allowance for obsolete and slow-moving items based on
inventory turnover trends and historical experience.
Property, plant and equipment
Property, plant and equipment are stated
at cost, less accumulated depreciation. The costs of additions and betterments that substantially extend the useful life of an asset are
capitalized and the expenditures for ordinary repairs and maintenance are expensed in the period incurred as part of general and administrative
expenses in the consolidated statements of operations. Depreciation is provided on all tangible fixed assets at rates calculated to write
off the cost, less estimated residual value, based on prices prevailing at the date of acquisition of each asset evenly over its expected
useful life, as follows:
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Plant, machinery and equipment — over 2 to 5 years
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Furniture and fixtures — over 4 to 5 years
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Leasehold improvements — over lesser of the minimum lease term or the useful life
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Goodwill
Goodwill is the result of a business
combination that occurred in 2018. 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 the overall
financial performance of the Company and 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. The Company’s annual assessment date is December 31.
Based on the results of the assessments
performed, no indicators of impairment were noted. Accordingly, no further impairment testing was completed and no impairment
charges related to goodwill were recognized during all periods presented in the condensed consolidated financial statements.
Intangible assets, net
The Company’s intangible assets
are primarily the result of business combinations and include acquired developed technology, customer relationships, trademarks and non-compete
agreements. These are amortized utilizing a straight line method over their estimated useful lives. When establishing useful lives, the
Company considers the period and the pattern in which the economic benefits of the intangible asset are consumed or otherwise used; 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 the Company’s finite-lived intangible assets.
The Company reviews 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
The Company reviews its 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 impairments were
recorded during the three and nine months ended September 30, 2021 and 2020.
Other non-current assets
Other non-current assets represent the value of
funded employee severance benefit accounts and deposits issued to landlords. Eighteen employees are entitled to one month of the employee’s
current salary, multiplied by the number of years of employment. The Company accrues a liability for this obligation and funds an employee
severance benefit account monthly. The deposited funds include earnings accumulated up to the balance sheet date. The deposited funds
may be withdrawn by the employee only upon the fulfillment of the obligation pursuant to labor law or agreements. The value of these funds
is recorded in other non-current assets and the liability is recorded in other long-term liabilities in the Company’s condensed
consolidated balance sheets.
Right-of-use assets and Lease liabilities
The Company adopted Accounting
Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” in 2019. This new standard establishes
a right-of-use (“ROU”) model that requires the Company to recognize ROU assets and lease liabilities on the balance
sheet for all leases with a term longer than 12 months at commencement of the lease. Lease payments are recognized in the condensed
consolidated statements of operations on a straight-line basis over the lease term.
Convertible Notes
Concurrent with the Business Combination, the Company
issued convertible notes. Refer to Notes 3 and 10 for further discussion on the convertible notes. The convertible notes are accounted
as a liability under the traditional convertible debt model and measured at amortized cost under Accounting Standard Codification (“ASC”)
470-20.
The Company accounts for the embedded derivatives
at fair value under ASC 815, Derivatives and Hedging (“ASC 815”). Under ASC 815, an embedded feature in a debt instrument
that meets the definition of a derivative is fair valued at issuance and remeasured at each reporting period with changes in fair value
recognized in earnings.
The Company evaluated the
guidance in ASC 815 and concluded the conversion option is not considered indexed to the Company’s own stock. As a result, the
redemption feature and conversion option were bifurcated from the Convertible Notes and are separately measured at fair value at
each reporting period within other long-term liabilities in the Condensed Consolidated Balance Sheets with changes in their
respective fair values recognized in other income (expense), net within the Condensed Consolidated Statements of Operations.
Common Stock Warrants and Post-Combination
Warrants
The Company (then known as New
Beginnings Acquisition Corp.) issued 11,500,000 public
warrants (the “Public Warrants”) and 545,000 private
placement warrants (the “Private Placement Warrants”, and the Public Warrants together with the Private Placement
Warrants, the “Common Stock Warrants”) in connection with NBA’s initial public offering. The Common
Stock Warrants entitle each holder to purchase one share of the Company’s common stock (the “Common Stock”) at an
exercise price of at $11.50 per
share. As of September 30, 2021, 12,045,000
Common Stock Warrants are outstanding.
At Closing of the Business
Combination, the Company issued Post-Combination Warrants (as defined below) exercisable for 9,000,000 shares of Company Common
Stock. The Post-Combination Warrants include: (i) 3,000,000 warrants exercisable to purchase one share of the Company’s Common
Stock at a price of $12.50 per share (the “Post-Combination $12.50 Warrants”); (ii) 3,000,000 warrants exercisable
to purchase one share of the Company’s Common Stock at a price of $15.00 per share (the “Post-Combination $15.00
Warrants”); and (iii) 3,000,000 warrants exercisable to purchase one share of the Company’s Common Stock at a price of
$17.50 per share (the “Post-Combination $17.50 Warrants” and the Post-Combination $17.50 Warrants, together with the Post-Combination $12.50 Warrants and
Post-Combination $15.00 Warrants, the “Post-Combination Warrants”). As of September 30, 2021, there were 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
outstanding. The Post-Combination Warrants may only be exercised during the period commencing on the Closing and terminating on the
earlier of (i) two years following the date of the Closing and (ii) the redemption date, as further described in Note 14,
at the exercise prices described above.
The Company evaluated the Common Stock Warrants
and Post-Combination Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity (“ASC 815-40”)
and concluded they do not meet the criteria to be classified in stockholders’ equity. Since the Common Stock Warrants and Post-Combination
Warrants meet the definition of a derivative under ASC 815-40, the Company records these warrants as liabilities on the Condensed Consolidated
Balance Sheets within other long-term liabilities and measures these warrants at fair value at each reporting period date, with changes
in their respective fair values recognized in other income (expense), net within the Condensed Consolidated Statements of Operations.
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 the Company’s product
sales, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation
is satisfied), which typically occurs at shipment of the product. For product sales, the Company generally does 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. For new product
design or software development services, the customer does not control the asset being created, the customer is not simultaneously receiving
or consuming the benefits from the work performed and the work performed has alternative use to the Company. Therefore, revenue related
to these projects is recognized at a point in time which is when the specified developed technology has been delivered and accepted by
the customer.
Revenue from professional service contracts
primarily relates to training and other consulting arrangements performed by the Company for its customers. Revenues from professional
services contracts provided on a time and materials basis are recognized when the Company has 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 the Company’s performance obligations are satisfied. This is typically the contractual service period,
which is generally one year. Maintenance and support services are a distinct performance obligation that includes the stand-ready obligation
to provide telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or
extended hardware warranty, which is considered a service type warranty.
Revenue from software licenses is primarily
related to the sale of perpetual licenses to customers. The software delivered to the customer has stand-alone functionality and the customer
can use the intellectual property as it exists at any time. Therefore, the Company recognizes revenue when the software license is delivered
to the customer. There are no further performance obligations once the software license is delivered to the customer.
Payment terms to customers generally
range from prepayment to 120 days from invoice, which are considered to be standard payment terms. The Company assesses its ability
to collect from its customers based primarily on the creditworthiness and past payment history of the customer. The Company has elected
to apply the practical expedient that allows an entity to not adjust the promised amount of consideration in customer contracts for the
effect of a significant financing component when the period between the transfer of product and services and payment of the related consideration
is less than one year. The estimated cost of any post-sale obligations, including basic product warranties, is accrued at the time revenue
is recognized based on a number of factors, which include historical experience and known conditions that may impact future warranty costs.
The Company accounts for shipping and
handling activities as a fulfilment cost rather than an additional promised service. Therefore, revenue related to shipping and handling
activities is included in product revenues. Shipping and handling costs are accrued and recorded as cost of revenue when the related revenue
is recognized. Billings to customers for reimbursement of out-of-pocket expenses, including travel, lodging and meals, are recorded as
revenue, and the associated costs incurred by the Company for those items are recorded as cost of revenue. Revenue related to the reimbursement
of out-of-pocket costs are accounted for as variable consideration.
Contract Balances
A contract asset is recorded when revenue
is recognized in advance of our right to receive consideration (i.e., we must perform additional services in order to receive consideration).
Amounts are recorded as receivables when our right to consideration is unconditional. When consideration is received, or we have an unconditional
right to consideration in advance of delivery of goods or services, a contract liability is recorded. The transaction price can include
non-refundable upfront fees, which are allocated to the identifiable performance obligations.
Contract assets are included within
accounts receivables and contract liabilities are included in deferred revenue in our condensed consolidated balance sheets.
Costs to Obtain or Fulfill
a Contract
The Company capitalizes commission
expenses paid to internal sales personnel and sales agent commissions that are incremental to obtaining customer contracts, for which
the related revenue is recognized over a future period. These costs are incurred on initial sales of product, maintenance and professional
services and maintenance and support contract renewals. The Company defers these costs and amortizes them over the period of benefit,
which the Company generally considers to be the contract term or length of the longest delivery period as contract capitalization costs
in the condensed consolidated balance sheets. Commissions paid relating to contract renewals are deferred and amortized on a straight-line
basis over the related renewal period as commissions paid on renewals are commensurate with commissions paid on initial sales transactions.
Costs to obtain or fulfil contracts were not significant for the three months ended September 30, 2021 and 2020. Costs to obtain a contract
for development and engineering service contracts are expensed as incurred in accordance with the practical expedient as the contractual
period of these contracts are generally one year or less.
Warranty Liabilities
The Company provides a limited warranty
for periods, usually ranging from 12 to 24 months, to all purchasers of its new products. Warranty expense is accrued on the sale of products
and is recognized as a cost of revenue. The expense is estimated based on analysis of historic costs and other relevant factors.
Foreign currency
The U.S. dollar is the functional currency
of all of the Company’s foreign subsidiaries. Foreign currency denominated monetary assets and liabilities of subsidiaries for which
the U.S. dollar is the functional currency are remeasured based on exchange rates at the end of the period. Non-monetary assets and liabilities
of these operations are remeasured at historical rates in effect when the asset was recognized or the liability was incurred. Revenues
and expenses for foreign entities transacted in local currency are remeasured at average exchange rates in effect during each period.
The resulting remeasurement gains and losses are recognized within other income (expense), net on the Company’s condensed consolidated
statements of operations.
The Company recorded foreign currency
losses of $17 thousand and $2.4 million for the three and nine months ended September 30, 2021, respectively, and foreign currency gains
of $0.1 million for both the three and nine months ended September 30, 2020, which are included in other income (expense), net.
Significant Concentrations
Financial instruments, which potentially
subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, restricted cash and accounts receivable.
The Company places its cash and cash equivalents in highly rated financial instruments. The Company maintains certain of its cash balances
in various U.S. banks, which at times, may exceed federally insured limits. The Company has not experienced any losses on such accounts.
The Company’s accounts receivable
are derived from sales of its products and approximately 72.6% and 68.2% of product sales were to non-U.S. customers for the three months
ended September 30, 2021 and 2020, respectively and approximately 70.8% and 68.1% of product sales were to non-U.S. customers for the
nine months ended September 30, 2021 and 2020, respectively. Three customers accounted for $34.7 million or 64.9% of the net accounts
receivable balance at September 30, 2021 and two customers accounted for $52.6 million or 73% of the net accounts receivable balance at
December 31, 2020. The Company requires payment in advance or payment security in the form of a letter of credit to be in place at the
time of shipment, except in cases where credit risk is considered to be acceptable. The Company’s top 3 customers accounted for
60.4% and 63.0% of revenue for the three months ended September 30, 2021 and 2020, respectively, and 59.6% and 64.2% of revenue for the
nine months ended September 30, 2021 and 2020, respectively. For the three and nine months ended September 30, 2021, the Company had two
customers whose revenue was greater than 10% of the three and nine-month period’s total revenue. For the three and nine months ended
September 30, 2020, the Company had three customers whose revenue was greater than 10% of the three and nine-month period’s total
revenue.
The Company received 97.6% and 99.1%
of goods for resale from five suppliers in the three months ended September 30, 2021 and 2020, respectively. The Company received 98.3%
and 97.8% of goods for resale from five suppliers in the nine months ended September 30, 2021 and 2020, respectively. The Company outsources
the manufacturing of its base station products to contract manufacturers and obtains subscriber terminals from vendors in the Asia Pacific
region. In the event of a disruption to supply, the Company would be able to transfer the manufacturing of base stations to alternate
contract manufacturers and has alternate suppliers for the majority of subscriber terminals.
Share-based compensation
The Company estimates the fair
value of share-based awards on the date of grant using the Black-Scholes option pricing model. The value of the portion of the award
that is ultimately expected to vest is recognized as an expense in the condensed consolidated statements of operations over the
requisite service periods. Share-based compensation expense recognized in the condensed consolidated statements of operations
includes compensation expense for share-based awards granted based on the estimated grant date fair value. Compensation expense for
all share-based awards is recognized using the straight-line single-option method. 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. (See Note 15).
Segment reporting
The Company operates as a single 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.
Income taxes
The Company accounts for income taxes
in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes.
Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial
statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits
are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations
of the jurisdictions in which the Company operates, estimates of future taxable income and available tax planning strategies. If tax regulations,
operating results or the ability to implement tax planning strategies vary, adjustments to the carrying value of deferred tax assets and
liabilities may be required. Valuation allowances related to deferred tax assets are recorded based on the “more likely than not”
criteria of ASC 740.
ASC 740-10 requires that the
Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would
more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not”
threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than
50 percent likelihood of being realized upon ultimate settlement with the relevant tax authorities. The Company does not have any
other material uncertain tax positions.
The Company recognizes accrued
interest related to unrecognized tax benefits, if any, in interest expense and penalties in operating expenses. As of September 30,
2021 and December 31, 2020, the Company did not have any amounts accrued for interest and penalties or recorded
for uncertain tax positions.
Other taxes
Taxes on the sale of products and services
to U.S. customers are collected by the Company as an agent and recorded as a liability until remitted to the respective taxing authority.
For sales in applicable countries outside the U.S., the Company is subject to value added tax (VAT). These taxes have been presented on
a net basis in the condensed consolidated financial statements.
Fair value measurements
We carry certain assets and liabilities
at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer
a liability in an orderly transaction between market participants on the measurement date. The three-tier hierarchy for inputs used in
measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows:
|
Level 1
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
Level 2
|
Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
|
|
Level 3
|
Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability.
|
Assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance
of a particular input to the fair value measurement requires judgment, and may affect the placement of assets and liabilities being measured
within the fair value hierarchy. (See Note 12).
Earnings (loss) per share
Basic earnings (loss) per
share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for each period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares and common share
equivalents outstanding for each period. Diluted earnings (loss) per share reflects the potential dilution that could occur if outstanding
stock options and warrants at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method.
The potential issuance of common stock upon conversion of the Convertible Notes is evaluated under the if-converted method. Potential
common shares are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive.
All potential common shares are anti-dilutive in periods of net loss.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2017-04 (amended by ASU 2019-10), “Intangibles – Goodwill and other
(Topic 350): Simplifying the Test for Goodwill Impairment.” which simplifies the test for goodwill impairment by removing the
second step of the test. There is a one-step qualitative test, and this ASU does not amend the optional qualitative assessment of goodwill
impairment. The new standard was adopted by the Company on January 1, 2021, and it did not have a material impact on the Company’s
condensed consolidated financial statements.
In August 2018, the FASB issued ASU
No. 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting
for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” which requires implementation
costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs
would be capitalized by the customers in a software licensing arrangement. The new standard was adopted by the Company on January 1, 2021,
and it did not have a material impact on the Company’s condensed consolidated financial statements.
In December 2019, the FASB issued ASU
No. 2019-12, “Income taxes (Topic 740): Simplifying the Accounting for Income Taxes.” which simplifies the accounting
for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifies and amends the existing guidance.
The new standard was adopted by the Company on January 1, 2021, and it did not have a material impact on the Company’s condensed
consolidated financial statements.
In August 2020, the FASB issued ASU
2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts
in Entity’s Own Equity (Subtopic 815-40)”. This ASU simplifies the accounting for certain financial instruments with characteristics
of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments
and made certain disclosure amendments to improve the information provided to users. The new standard will be adopted by the Company on
January 1, 2022. The new standard is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In August 2020, the FASB issued ASU
2020-06, “Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s
Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”. This ASU provides
guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another
Topic. The new standard will be adopted by the Company on January 1, 2022. The new standard is not expected to have a material impact
on the Company’s condensed consolidated financial statements.
In March 2020, the FASB issued ASU
No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”
which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships,
and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks
of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions
around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or
transaction based and less susceptible to manipulation. This ASU provides companies with optional guidance to ease the potential accounting
burden associated with transitioning away from reference rates that are expected to be discontinued. This new standard may be adopted
by the Company no later than December 1, 2022, with early adoption permitted. The potential adoption of this standard is not expected
to have a material impact on the Company’s condensed consolidated financial statements.
|
3.
|
THE BUSINESS COMBINATION
|
On August 13, 2021, the Company and
Legacy Airspan completed the Business Combination, with Legacy Airspan surviving the Business Combination as a wholly owned subsidiary
of the Company, and the Company was renamed Airspan Networks Holdings Inc. Cash proceeds from the Business Combination totaled approximately
$115.5 million, which included funds held in NBA’s trust account and the completion of the concurrent private placement of shares
of Common Stock (the “PIPE” or “PIPE Financing”) and sale of the Company’s senior secured convertible notes
(the “Convertible Notes Financing”).
In accordance with the terms and subject
to the conditions of the Business Combination Agreement, at the effective time of the Business Combination, each share of Legacy Airspan
capital stock issued and outstanding immediately prior to the Closing automatically converted into and became the right to receive a specified
number of shares of the Company’s Common Stock and Post-Combination Warrants. The aggregate transaction consideration paid in the
Business Combination was (i) 59,426,486 shares of the Company’s Common Stock, (ii) 3,000,000 Post-Combination $12.50 Warrants, (iii)
3,000,000 Post-Combination $15.00 Warrants, (iv) 3,000,000 Post-Combination $17.50 Warrants and (v) $17,500,000 in cash. The aggregate
transaction consideration was allocated among the holders of shares of Legacy Airspan capital stock (including holders of shares of Airspan
capital stock issued pursuant to the net exercise of warrants to purchase Legacy Airspan capital stock and holders of shares of Legacy
Airspan restricted stock), holders of Legacy Airspan stock options and participants (the “MIP Participants”) in Legacy Airspan’s
Management Incentive Plan (the “MIP”).
Prior to the Business Combination,
the Company (then known as New Beginnings Acquisition Corp.) issued 11,500,000 Public Warrants and 545,000 Private Placement Warrants.
Following the Business Combination, the Common Stock Warrants remain exercisable for Common Stock of the Company. All other features of
the Common Stock Warrants remained unchanged. There were no cash obligations for the Company pertaining to these Common Stock Warrants.
Prior to the consummation of the Business
Combination, holders of an aggregate of 9,997,049 shares of Common Stock sold in NBA’s initial public offering exercised their right
to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from NBA’s initial public offering,
calculated as of two business days prior to the consummation of the Business Combination, which was approximately $10.10 per share, or
$101.0 million in the aggregate.
At Closing, the Company filed the second amended
and restated certificate of incorporation (the “Restated Certificate of Incorporation”). Among other things, the Restated Certificate
of Incorporation increased the number of shares of (a) Common Stock the Company is authorized to issue from 100,000,000 shares
to 250,000,000 shares and (b) preferred stock the Company is authorized to issue from 1,000,000 shares to 10,000,000 shares.
In connection with the closing of
the Business Combination, certain former stockholders of Legacy Airspan (the “Legacy Airspan Holders”) and certain NBA stockholders
(the “Sponsor Holders”) entered into a registration rights and lock-up agreement (the “Registration Rights and Lock-Up
Agreement”). Subject to certain exceptions, the Registration Rights and Lock-Up Agreement provides for 44,951,960 shares of Common
Stock, as well as 2,271,026 Post-Combination $12.50 Warrants, 2,271,026 Post-Combination $15.00 Warrants and 2,271,026 Post-Combination
$17.50 Warrants (and the shares of Common Stock issuable upon exercise of such Post-Combination Warrants), in each case, held by the
Legacy Airspan Holders to be locked-up for a period of six months following the Closing, while the 2,750,000 shares of Common Stock held
by the Sponsor Holders will be locked-up for a period of one year following the Closing, in each
case subject to earlier release upon (i) the date on which the last reported sale price of the Common Stock equals or exceeds $12.50
per share for any 20 trading days within any 30-day trading period or (ii) the date on which we complete a liquidation, merger, capital
stock exchange or other similar transaction after the Closing that results in all of our stockholders having the right to exchange their
shares of our Common Stock for cash, securities or other property. The Registration Rights and Lock-Up Agreement also provided
that the Private Placement Warrants and shares of Common Stock underlying the units sold by NBA in a private placement concurrent with
its initial public offering (the “Private Placement Units”), along with any shares of Common Stock underlying the Private
Placement Warrants, were locked-up for a period of 30 days following the Closing so long as such securities were held by the initial
purchasers of the Private Placement Units or their permitted transferees.
The Company accounted for the Business
Combination as a reverse recapitalization, which is the equivalent of Legacy Airspan issuing stock for the net assets of New Beginnings,
accompanied by a recapitalization, with New Beginnings treated as the acquired company for accounting purposes. The determination of New
Beginnings as the “acquired” company for accounting purposes was primarily based on the fact that subsequent to the Business
Combination, Legacy Airspan will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the
combined company and Legacy Airspan’s senior management will comprise all of the senior management of the combined company. The
net assets of New Beginnings were stated at historical cost with no goodwill or other intangible assets recorded. Reported results from
operations included herein prior to the Business Combination are those of Legacy Airspan. The shares and corresponding capital amounts
and loss per share related to Legacy Airspan’s outstanding convertible preferred stock and common stock prior to the Business Combination
have been retroactively restated to reflect the conversion ratio established pursuant to the Business Combination Agreement.
In connection with the Business Combination,
the Company incurred underwriting fees and other costs considered direct and incremental to the transaction totaling $27.0 million, consisting
of legal, accounting, financial advisory and other professional fees. These amounts are reflected within additional paid-in capital in
the condensed consolidated balance sheet as of September 30, 2021.
PIPE Financing
Concurrent with the execution of the
Business Combination, the Company entered into subscription agreements with certain investors (the “PIPE Investors”) pursuant
to which the PIPE Investors subscribed for and purchased an aggregate of 7,500,000 shares of Common Stock for an aggregate purchase price
of $75.0 million.
Convertible Notes Financing
Concurrent with the execution of the
Business Combination, the Company issued $50,000,000 aggregate principal amount of senior secured convertible notes (the “Convertible
Notes”). The Convertible Notes bear interest at a rate equal to 7.0% per annum, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, beginning on September 30, 2021. The Convertible Notes mature on December 30, 2024, unless
earlier accelerated, converted, redeemed or repurchased. The Convertible Notes are pari passu in right of payment and lien priority
and are secured by a security interest in (a) all of the real, personal and mixed property in which liens are granted or purported to
be granted pursuant to any of the collateral documents as security for the obligations, (b) all products, proceeds, rents and profits
of such property, (c) all of each loan party’s book and records and (d) all of the foregoing whether now owned or existing, in each
case excluding certain excluded assets.
Each Convertible Note, together with
all accrued but unpaid interest, are convertible, in whole or in part, at the option of the holder, at any time prior to the payment in
full of the principal amount (together with all accrued but unpaid interest thereon), into shares of Common Stock at a conversion price
equal to $12.50 per share (see Note 10).
Summary of Net Proceeds
The following table summarizes the
elements of the net proceeds from the Business Combination as of September 30, 2021:
Schedule of business combination
|
|
|
|
|
Cash—Trust Account (net of redemptions of $101 million)
|
|
$
|
15,184,107
|
|
Cash—Convertible Notes Financing
|
|
|
48,669,322
|
|
Cash—PIPE Financing
|
|
|
75,000,000
|
|
|
|
|
|
|
Non-cash net liabilities acquired from New Beginnings
|
|
|
(38,216
|
)
|
|
|
|
|
|
Add: Asset prepayments made at Closing
|
|
|
3,684,000
|
|
Less: Fair value of Common Stock Warrants
|
|
|
(13,176,450
|
)
|
Less: Fair value of Post-Combination Warrants
|
|
|
(1,980,000
|
)
|
Less: Fair value of Convertible Notes issued
|
|
|
(48,273,641
|
)
|
Less: Underwriting fees and other issuance costs paid at Closing
|
|
|
(23,353,127
|
)
|
Less: Other Business Combination-related costs paid prior to September 30, 2021
|
|
|
(3,618,792
|
)
|
|
|
|
|
|
Additional Paid-in-Capital from Business Combination, net of issuance costs paid
|
|
$
|
52,097,203
|
|
|
|
|
|
|
Less: Non-cash net liabilities assumed from New Beginnings
|
|
|
38,216
|
|
Less: Non-cash net assets assumed from New Beginnings
|
|
|
(3,684,000
|
)
|
Add: Non-cash fair value of Common Stock Warrants
|
|
|
13,176,450
|
|
Add: Non-cash fair value of Post-Combination Warrants
|
|
|
1,980,000
|
|
Add: Non-cash fair value of Convertible Notes issued
|
|
|
48,273,641
|
|
Add: Other issuance costs included in accounts payable and accrued liabilities
|
|
|
3,618,792
|
|
|
|
|
|
|
Cash proceeds from the Business Combination
|
|
$
|
115,500,302
|
|
Summary of Shares Issued
The following table summarizes the
number of shares of Common Stock outstanding immediately following the consummation of the Business Combination:
Schedule of number of shares Common Stock outstanding
|
|
|
|
|
New Beginnings shares outstanding prior to the Business Combination
|
|
|
14,795,000
|
|
Less: redemption of New Beginnings shares
|
|
|
(9,997,049
|
)
|
Shares issued pursuant to the PIPE
|
|
|
7,500,000
|
|
New Beginnings and PIPE shares prior to the Business Combination
|
|
|
12,297,951
|
|
|
|
|
|
|
Conversion of Legacy Airspan preferred stock
|
|
|
56,857,492
|
|
Conversion of Legacy Airspan common stock
|
|
|
1,182,912
|
|
Conversion of Legacy Airspan common restricted stock
|
|
|
339,134
|
|
Conversion of Legacy Airspan Class B common stock
|
|
|
1,340,611
|
|
Conversion of Legacy Airspan Class B restricted common stock
|
|
|
6,337
|
|
Total shares of Company Common Stock outstanding immediately
following the Business Combination
|
|
|
72,024,437
|
|
The 5,815,796 common stock options exchanged for options to purchase Legacy Airspan
Common Stock and Legacy Airspan Class B Common Stock, the restricted stock units (“RSUs”) with respect to 1,750,000 shares
of Common Stock issued to the MIP Participants, and 4,257,718 shares of Common Stock reserved for issuance with future grants under the
2021 Plan are not issued shares and are not included in the table above.
The following is a summary of revenue
by category (in thousands):
Schedule of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products sales
|
|
$
|
30,983
|
|
|
$
|
24,617
|
|
|
$
|
103,495
|
|
|
$
|
58,509
|
|
Non-recurring engineering (“NRE”)
|
|
|
3,569
|
|
|
|
4,978
|
|
|
|
10,465
|
|
|
|
13,630
|
|
Product maintenance contracts
|
|
|
1,415
|
|
|
|
3,014
|
|
|
|
4,667
|
|
|
|
8,811
|
|
Professional service contracts
|
|
|
1,492
|
|
|
|
2,822
|
|
|
|
5,287
|
|
|
|
8,451
|
|
Software licenses
|
|
|
1,023
|
|
|
|
511
|
|
|
|
2,137
|
|
|
|
1,460
|
|
Other
|
|
|
441
|
|
|
|
96
|
|
|
|
855
|
|
|
|
548
|
|
Total revenue
|
|
$
|
38,923
|
|
|
$
|
36,038
|
|
|
$
|
126,906
|
|
|
$
|
91,409
|
|
Revenue recognized at a point in time
for NRE services amounted to $1.4 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively,
and $4.9 million and $7.7 million for the nine months ended September 30, 2021 and 2020, respectively. For services performed on a customer’s
owned asset, since the customer controls the asset being enhanced, revenue is recognized over time as services are rendered. Revenue recognized
over time for NRE services using a cost-based input method amounted to $2.2 million and $1.9 million for the three months ended September
30, 2021 and 2020, respectively, and $5.6 million and $5.9 million for the nine months ended September 30, 2021 and 2020, respectively.
The Company is allowed to bill for services performed under the contract in the event the contract is terminated.
The opening and closing balances of
our contract asset and liability balances from contracts with customers as of September 30, 2021 and December 31, 2020 were as follows:
Schedule of contracts with customers asset and liability
|
|
|
|
|
|
|
|
|
|
|
Contracts
Assets
|
|
|
Contracts
Liabilities
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
$
|
5,361
|
|
|
$
|
7,521
|
|
Balance as of September 30, 2021
|
|
|
11,522
|
|
|
|
5,045
|
|
Change
|
|
$
|
6,161
|
|
|
$
|
(2,476
|
)
|
Revenues for the three and nine months
ended September 30, 2021 and 2020, include the following:
Schedule of revenues from contract liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in the beginning of year contract liability balance
|
|
$
|
626
|
|
|
$
|
541
|
|
|
$
|
5,053
|
|
|
$
|
2,355
|
|
Warranty Liabilities
Information regarding the changes in
the Company’s product warranty liabilities for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):
Schedule of product warranty liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Balance, beginning of period
|
|
$
|
1,099
|
|
|
$
|
967
|
|
|
$
|
1,019
|
|
|
$
|
981
|
|
Accruals
|
|
|
236
|
|
|
|
16
|
|
|
|
496
|
|
|
|
197
|
|
Settlements
|
|
|
(139
|
)
|
|
|
(51
|
)
|
|
|
(319
|
)
|
|
|
(246
|
)
|
Balance, end of period
|
|
$
|
1,196
|
|
|
$
|
932
|
|
|
$
|
1,196
|
|
|
$
|
932
|
|
|
5.
|
GOODWILL AND INTANGIBLE ASSETS, NET
|
The Company had goodwill of $13.6 million
as of September 30, 2021 and December 31, 2020 resulting from a prior acquisition.
Intangible assets, net consists
of the following (in thousands):
Schedule of Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
September 30, 2021
|
|
|
|
Average
Useful Life
(in years)
|
|
Gross Carrying
Amount
|
|
|
Accumulated Amortization
|
|
|
Net Carrying Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally developed technology
|
|
10
|
|
$
|
7,810
|
|
|
$
|
(2,213
|
)
|
|
$
|
5,597
|
|
Customer relationships
|
|
6
|
|
|
2,130
|
|
|
|
(1,005
|
)
|
|
|
1,125
|
|
Trademarks
|
|
2
|
|
|
720
|
|
|
|
(720
|
)
|
|
|
-
|
|
Non-compete
|
|
3
|
|
|
180
|
|
|
|
(170
|
)
|
|
|
10
|
|
Total acquired intangible assets
|
|
|
|
$
|
10,840
|
|
|
$
|
(4,108
|
)
|
|
$
|
6,732
|
|
|
|
Weighted
|
|
December 31, 2020
|
|
|
|
Average
Useful Life
(in years)
|
|
Gross Carrying
Amount
|
|
|
Accumulated Amortization
|
|
|
Net Carrying Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally developed technology
|
|
10
|
|
$
|
7,810
|
|
|
$
|
(1,627
|
)
|
|
$
|
6,183
|
|
Customer relationships
|
|
6
|
|
|
2,130
|
|
|
|
(739
|
)
|
|
|
1,391
|
|
Trademarks
|
|
2
|
|
|
720
|
|
|
|
(720
|
)
|
|
|
-
|
|
Non-compete
|
|
3
|
|
|
180
|
|
|
|
(125
|
)
|
|
|
55
|
|
Total acquired intangible assets
|
|
|
|
$
|
10,840
|
|
|
$
|
(3,211
|
)
|
|
$
|
7,629
|
|
Amortization expense related to the
Company’s intangible assets amounted to $0.3 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively,
and $0.9 million and $1.4 million for the nine months ended September 30, 2021 and 2020, respectively.
Estimated amortization expense for
the remainder of 2021 and thereafter related to the Company’s intangible assets is as follows (in thousands):
Schedule of estimated amortization expense
|
|
|
|
|
2021
|
|
$
|
294
|
|
2022
|
|
|
1,136
|
|
2023
|
|
|
1,136
|
|
2024
|
|
|
1,107
|
|
2025
|
|
|
781
|
|
Thereafter
|
|
|
2,278
|
|
Total
|
|
$
|
6,732
|
|
|
6.
|
OTHER ACCRUED EXPENSES
|
Other accrued expenses consist
of the following (in thousands):
Schedule of other accrued expenses
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Payroll and related benefits and taxes
|
|
$
|
9,292
|
|
|
$
|
6,812
|
|
Royalties
|
|
|
2,347
|
|
|
|
3,401
|
|
Agent and sales commissions
|
|
|
3,889
|
|
|
|
2,501
|
|
Right-of-use lease liability, current portion
|
|
|
2,853
|
|
|
|
2,671
|
|
Tax liabilities
|
|
|
806
|
|
|
|
1,967
|
|
Product warranty liabilities
|
|
|
1,196
|
|
|
|
1,019
|
|
Product marketing
|
|
|
1,022
|
|
|
|
869
|
|
Manufacturing subcontractor costs
|
|
|
3,307
|
|
|
|
1,243
|
|
Legal and professional services
|
|
|
2,051
|
|
|
|
221
|
|
Other
|
|
|
1,374
|
|
|
|
1,834
|
|
Other accrued expenses
|
|
$
|
28,137
|
|
|
$
|
22,538
|
|
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 dated such date. The Golden Wayford Note was amended and restated on November 28, 2017,
to reduce the interest rate thereon and to reflect the application of the payment of $1.0 million of principal on such note. The Golden
Wayford Note had an original maturity date of February 16, 2016, which through subsequent amendments was extended to June 30, 2020. The
conversion rights related to this agreement expired on its maturity date, June 30, 2020, and on this date the loan was reclassified from
Subordinated Convertible Debt to Subordinated Debt.
The principal and accrued interest
under the Golden Wayford Note would have been automatically converted into common shares at the time of the next equity financing and
consummated prior to, on or after the maturity date (June 30, 2020). Such conversion right expired in accordance with its term. Interest
accrues at 5.0% per annum and is payable quarterly, however, because such payment is prohibited by the terms of the subordination, interest
is (in accordance with the terms of the related promissory note) paid in kind.
On December 30, 2020, Pacific Western
Bank (“PWB”) and Ally Bank (“Ally”) assigned their interests in a loan facility under the Second Amended and Restated
Loan and Security Agreement with Legacy Airspan (the “PWB Facility”) to certain new lenders pursuant to an assignment agreement
(the “Assignment Agreement”) and PWB entered into a resignation and assignment agreement (the “Agent Resignation Agreement”)
pursuant to which PWB resigned in its capacity as agent under all of the transaction documents and DBFIP ANI LLC (“Fortress”)
became the successor agent (as defined in the Agent Resignation Agreement), replacing PWB in such capacity under the PWB Facility.
The Golden Wayford Note was subordinate
to the PWB Facility and, after giving effect to the Assignment Agreement, the Resignation Agreement and a Reaffirmation and Omnibus Amendment,
is now subordinate to the obligations under Legacy Airspan’s Assignment Agreement, Resignation and Assignment Agreement and Credit
Agreement (the “Fortress Credit Agreement”) with DBFIP ANI LLC (“Fortress”) (see Note 8). A limited waiver under
the Fortress Credit Agreement 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.
The Company had subordinated debt outstanding
of $9.0 million, plus $1.4 million and $1.1 million of accrued interest as of September 30, 2021 and December 31, 2020, respectively.
|
8.
|
SUBORDINATED TERM LOAN – RELATED PARTY
|
On February 9, 2016, Legacy
Airspan entered into a $15.0
million subordinated term loan agreement with a related party (the “Subordinated Loan Agreement”) that was due to mature
on February 9, 2018. On July 12, 2016, Legacy Airspan entered into an additional $15.0 million Amendment No. 1 to Subordinated Term
Loan Agreement that was due to mature on February 9, 2018. On July 3, 2017, Legacy Airspan entered into Amendment No. 2 to the
Subordinated Term Loan Agreement that extended the maturity date to June 30, 2019. On May 23, 2019, Legacy Airspan entered into
Amendment No. 3 to the Subordinated Term Loan Agreement that extended the maturity date to December 31, 2020. On March 30, 2020,
Legacy Airspan entered into Amendment No. 4 to the Subordinated Term Loan Agreement that extended the maturity date to December
31, 2021. On December 30, 2020, Legacy Airspan entered into Amendment No. 5 to the Subordinated Term Loan
Agreement that extended the maturity date to the later of (a) December 30, 2024 and (b) 365 days after the maturity date of the
Fortress Credit Agreement (as in effect on December 30, 2020) (see Note 8). The term loan was subordinate to the PWB Facility and on
December 30, 2020, the interests of PWB and Ally in the PWB Facility were assigned to new lenders pursuant to the Assignment
Agreement and PWB entered into the Agent Resignation Agreement pursuant to which PWB resigned in its capacity as agent under all of
the transaction documents and Fortress became the successor agent (as defined in the Agent Resignation Agreement), replacing PWB in
such capacity under the PWB Facility.
Prior to May 23, 2019, interest accrued
at 2.475% per annum and was payable quarterly. In accordance with the amendments below, the interest rate changed as follows:
|
(a)
|
Amendment No. 3, on May 23, 2019, the interest rate changed to 9.0% per annum to be accrued;
|
|
(b)
|
Amendment No. 4, on March 30, 2020, the interest rate changed to 9.0% per annum through December 31, 2020
and from and after January 1, 2021, at a rate of 12.0% per annum to be accrued; and
|
|
(c)
|
Amendment No. 5, on December 30, 2020, the interest rate from January 1, 2021 and thereafter changed to
9.0% per annum to be accrued, subject to reversion to 12.0% if a condition subsequent is not satisfied. The subsequent condition was satisfied.
|
The principal and accrued interest
may be repaid early without penalty.
The Company had a subordinated term
loan outstanding of $30.0 million, plus $7.1 million and $4.8 million of accrued interest as of September 30, 2021 and December 31, 2020,
respectively.
On December 30, 2020, Legacy
Airspan, together with Holdco, Airspan Networks (SG) Inc., Mimosa Networks, Inc., Mimosa Networks International, LLC, Airspan
Communications Limited, Airspan Networks LTD, and Airspan Japan K.K. as guarantors, together with the other parties thereto, entered
into the Assignment Agreement, the Resignation and Assignment Agreement, and a Reaffirmation and Omnibus Amendment, the result of
which was the amendment and restatement of the terms of the PWB Facility under the Fortress Credit Agreement with the new lenders as
the lenders thereunder. Fortress in its capacity became the administrative agent, collateral agent and trustee for the lenders and
other secured parties. At Closing, on August 13, 2021, the Company, Legacy Airspan and certain of the Company’s subsidiaries who
are party to the Fortress Credit Agreement entered into a Waiver and Consent, Second Amendment, Restatement, Joinder and Omnibus
Amendment to Credit Agreement and Other Loan Documents relating to the Fortress Credit Agreement with Fortress to, among other
things, add the Company as a guarantor, recognize and account for the Business Combination, recognize and account for the
Convertible Notes and provide updated procedures for replacement of LIBOR.
The Fortress Credit Agreement initial
term loan total commitment of $34.0 million and a term loan commitment of $10.0 million were both funded to Legacy Airspan on December
30, 2020. Pursuant to the Fortress Credit Agreement, the Company may expand the term loan commitment by $20.0 million subject to the terms
and conditions of the agreement. The maturity date of the total loan commitment is December 30, 2024. The Fortress Credit Agreement contains
a prepayment premium of 5.0% if the prepayment occurs during the period from December 30, 2021 through December 29, 2022, and 3.0% if
the prepayment occurs during the period from December 30, 2022 through December 29, 2023. The Fortress Credit Agreement also contains
a prohibition on prepayment during the period from December 30, 2020 through December 29, 2021. Subsequent to December 29, 2021, the Company
may prepay this loan but will incur a related fee in the amount of a make-whole amount of interest that would have been payable had such
prepayment not been made.
As of September 30, 2021, the Company
was not in compliance with all applicable covenants under the Fortress Credit Agreement; however, the Company was granted a waiver from
compliance for these covenants as of September 30, 2021 and prospectively for December 31, 2021.
The Company had a senior term loan
outstanding of $44.0 million, plus $1.8 million and $25 thousand of accrued interest as of September 30, 2021 and December 31, 2020, respectively.
On August 13, 2021, the Company, together
with Airspan Networks Inc., Holdco, Airspan Networks (SG) Inc., Mimosa Networks, Inc., Mimosa Networks International, LLC, Airspan Communications
Limited, Airspan Networks LTD, and Airspan Japan K.K. as guarantors, and Fortress, entered into a Senior Secured Convertible Note Purchase
and Guarantee Agreement (the “Fortress Convertible Note Agreement”), in order to meet the available cash requirement of the
reverse recapitalization described in Note 3. The Fortress Convertible Note Agreement of $50.0 million was funded to the Company on August
13, 2021, the date of the reverse recapitalization. The Convertible Notes bear interest at 7.0% per annum and the maturity date of the
Convertible Notes is December 30, 2024. The Convertible Notes are pari passu in right of payment and lien priority and are secured
by a security interest in (a) all of the real, personal and mixed property in which liens are granted or purported to be granted pursuant
to any of the collateral documents as security for the obligations, (b) all products, proceeds, rents and profits of such property, (c)
all of each loan party’s book and records and (d) all of the foregoing whether now owned or existing, in each case excluding certain
excluded assets.
The following is the allocation among
the freestanding instruments (in thousands) at the issuance date:
Schedule of convertible notes
|
|
|
|
|
Convertible Notes
|
|
$
|
41,887
|
|
Conversion option derivative
|
|
|
7,474
|
|
Call and contingent put derivative
|
|
|
639
|
|
Total Convertible Notes
|
|
$
|
50,000
|
|
As of September 30 2021, the Company
had convertible debt outstanding as shown below (in thousands):
Schedule of convertible debt
|
|
|
|
|
|
|
September 30,
2021
|
|
Convertible Notes
|
|
$
|
41,887
|
|
Accrued Interest(a)
|
|
|
254
|
|
Subtotal
|
|
|
42,141
|
|
Loan discount costs
|
|
|
(1,393
|
)
|
Total Convertible Notes
|
|
$
|
40,748
|
|
|
(a)
|
The accrued interest will accrete to principal value by the end of the term, December 30, 2024.
|
As of September 30, 2021, the Company
was not in compliance with all applicable covenants under the Fortress Convertible Note Agreement; however, the Company was granted a
waiver from compliance for these covenants as of September 30, 2021 and prospectively for December 31, 2021.
As of September 30, 2021 and
December 31, 2020, Long-term debt consists of (in thousands):
Schedule of long-term debt
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
PPP Loan
|
|
$
|
-
|
|
|
$
|
2,087
|
|
Finnish Funding Agency for Technology and Innovation (“Tekes”)
|
|
|
432
|
|
|
|
458
|
|
|
|
|
432
|
|
|
|
2,545
|
|
Less current portion – product development loan
|
|
|
(281
|
)
|
|
|
(298
|
)
|
Less accrued interest on product development loan – current
|
|
|
(151
|
)
|
|
|
(160
|
)
|
Total long-term debt
|
|
$
|
-
|
|
|
$
|
2,087
|
|
On April 27, 2020, under the Paycheck
Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, administered
by the Small Business Administration (“SBA”), Legacy Airspan entered into a promissory note of approximately $2.1 million
with First Home Bank (“PPP Loan”). The promissory note bears interest at a rate of 1% and is payable in monthly installments
of principal and interest over 18 months beginning seven months from the date of this promissory note and continuing on the 5th day of
each month thereafter. A final payment of the entire unpaid balance of principal and interest will be due on April 27, 2022, the maturity
date. On March 8, 2021, Legacy Airspan applied for the promissory note to be forgiven by the SBA in whole or in part and was notified
on June 10, 2021 that the SBA has approved Legacy Airspan’s application to forgive the entire loan and accrued interest. For the
nine months ended September 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.
At both September 30, 2021 and December 31,
2020, there were two capital loans amounting to $0.3 million with Tekes, the main public funding organization for research and development
in Finland.
|
12.
|
FAIR VALUE MEASUREMENTS
|
The Company’s assets and liabilities
recorded at fair value are categorized based upon a fair value hierarchy that ranks the quality and reliability of the information used
to determine fair value.
The Company has certain non-financial
assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair
value only when impairment is recognized. These assets include property, plant and equipment, goodwill and intangible assets, net. The
Company did not record impairment to any non-financial assets in the three and nine months ended September 30, 2021 and 2020. The Company
does not have any non-financial liabilities measured and recorded at fair value on a non-recurring basis.
Financial Disclosures about Fair
Value of Financial Instruments
The table below sets forth information
related to the Company’s condensed consolidated financial instruments (in thousands):
Schedule of Fair Value of Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
in
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
|
|
Fair
Value
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Hierarchy
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
1
|
|
$
|
85,058
|
|
|
$
|
85,058
|
|
|
$
|
18,196
|
|
|
$
|
18,196
|
|
Restricted
cash
|
|
1
|
|
|
186
|
|
|
|
186
|
|
|
|
422
|
|
|
|
422
|
|
Cash
and investment in severance benefit accounts
|
|
1
|
|
|
3,570
|
|
|
|
3,570
|
|
|
|
3,567
|
|
|
|
3,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
term loan(a)
|
|
2
|
|
$
|
37,149
|
|
|
$
|
22,798
|
|
|
$
|
34,756
|
|
|
$
|
24,327
|
|
Subordinated
debt(a)
|
|
2
|
|
|
10,445
|
|
|
|
6,375
|
|
|
|
10,065
|
|
|
|
6,624
|
|
Senior
term loan(a)
|
|
2
|
|
|
39,978
|
|
|
|
36,608
|
|
|
|
36,834
|
|
|
|
37,948
|
|
Convertible
debt
|
|
2
|
|
|
40,748
|
|
|
|
46,362
|
|
|
|
-
|
|
|
|
-
|
|
Long-term
debt
|
|
2
|
|
|
-
|
|
|
|
-
|
|
|
|
2,087
|
|
|
|
2,087
|
|
Public
Warrants
|
|
1
|
|
|
8,625
|
|
|
|
8,625
|
|
|
|
-
|
|
|
|
-
|
|
Warrants(b)
|
|
3
|
|
|
870
|
|
|
|
870
|
|
|
|
7,632
|
|
|
|
7,632
|
|
|
(a)
|
As of September 30, 2021, the fair value of the subordinated term loan, subordinated debt and senior term
loan considered the senior status of the senior term loan (Fortress Credit Agreement), followed by the junior status of the subordinated
term loan and subordinated debt. The implied yields of the senior term loan, subordinated term loan and subordinated debt were 12.8%,
18.6% and 17.7%, respectively. As of December 31, 2020, the fair value of the subordinated term loan, subordinated debt and senior term
loan considered the senior status of the senior term loan (Fortress Credit Agreement), followed by the junior status of the subordinated
term loan and subordinated debt. The senior term loan face value was adjusted for $4.7 million of original issue discounts and $1.4 million
of fair value of Series H warrants issued to lenders pursuant to the Fortress Credit Agreement, resulting in the fair value of the senior
term loan totaling $37.9 million, with a 12.80% implied yield. The implied yields of the subordinated term loan and subordinated debt
were 17.05% and 16.57%, respectively.
|
|
(b)
|
As of September 30, 2021
and December 31, 2020, the fair value of warrants outstanding that are classified as liabilities are included in other long-term
liabilities in the Company’s condensed consolidated balance sheets. The key inputs to the valuation models that were utilized to estimate the fair
value of the Post-Combination Warrants and Private Placement Warrants were as follows:
|
Schedule of assumptions
|
|
|
|
|
|
|
|
|
|
|
Post- Combination
Warrants
|
|
|
Private
Placement
Warrants
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Stock price
|
|
$
|
6.68
|
|
|
$
|
6.68
|
|
Exercise price
|
|
$
|
12.50 - $17.50
|
|
|
$
|
11.50
|
|
Risk free rate
|
|
|
0.21
|
%
|
|
|
0.72
|
%
|
Expected volatility
|
|
|
42.5
|
%
|
|
|
34.1
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
The conversion option derivative and call and contingent put derivative are considered a Level 3 measurement due to the utilization
of significant unobservable inputs in the valuation. The Company utilized a binomial model to estimate the fair value of the embedded
derivative features requiring bifurcation associated with the Convertible Notes payable at issuance date and as of the September 30, 2021
reporting date. The key inputs to the valuation models that were utilized to estimate the fair value of the convertible debt derivative
liabilities include:
|
Schedule of assumptions
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
Issuance Date
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Stock price
|
|
$
|
6.68
|
|
|
$
|
9.75
|
|
Conversion strike price
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
Volatility
|
|
|
33.00
|
%
|
|
|
25.00
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Risk free rate
|
|
|
0.59
|
%
|
|
|
0.51
|
%
|
Debt discount rate
|
|
|
12.80
|
%
|
|
|
12.80
|
%
|
Coupon interest rate
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
Face amount (in thousands)
|
|
|
50,000
|
|
|
|
50,000
|
|
Contingent put inputs and assumptions:
|
|
|
|
|
|
|
|
|
Probability of fundamental change
|
|
|
25
|
%
|
|
|
25
|
%
|
The following table presents a roll-forward of the Level 3
instruments:
Schedule of warrants
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Warrants (a)
|
|
Conversion option derivative
|
|
|
Call and contingent put derivative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2020
|
|
$
|
-
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrants assumed in Business Combination
|
|
|
2,996
|
|
|
|
|
|
|
|
|
Issuance of convertible note payable derivative liabilities
|
|
|
-
|
|
|
7,473
|
|
|
|
639
|
|
Change in fair value
|
|
|
(2,126
|
)
|
|
(4,599
|
)
|
|
|
707
|
|
Ending balance, September 30, 2021
|
|
$
|
870
|
|
$
|
2,874
|
|
|
$
|
1,346
|
|
|
(a)
|
The $7,632 of Series D-1 and
Series H warrants were converted as part of the Business Combination. Refer to Note 14 for roll-forward.
|
The fair value of the Company’s
cash and cash equivalents and restricted cash approximate the carrying value because of their short-term nature of these accounts.
The estimated fair value of long-term
debt approximated its carrying amount because based on the arrangement of the financing of the debt and pursuant to the terms of the CARES
ACT, the Company applied for this debt to be forgiven by the SBA in whole or in part.
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
The Company had commitments with its
main subcontract manufacturers under various purchase orders and forecast arrangements of $86.9 million at September 30, 2021, the
majority of which have expected delivery dates during the next six months.
Certain officers of the Company have
change in control payments that they would be entitled to receive in the event of a change in control.
Contingencies and Legal Proceedings
From time to time, the Company receives
and reviews correspondence from third parties with respect to licensing their patents and other intellectual property in connection with
the sale of the Company’s products. Disputes may arise with such third parties if an agreement cannot be reached regarding the licensing
of such patents or intellectual property.
On October 14, 2019, Barkan Wireless
IP Holdings, L.P. (“Barkan”) filed a suit against Sprint Corporation and related entities (“Sprint”) alleging
patent infringement based in part on two of the Company’s products, Airave 4 and Magic Box Gold. See Barkan Wireless IP Holdings,
L.P. v. Sprint Corporation et al, Case No. 2:19-cv-00336-JRG (E.D. Tex.). On March 26, 2021, after a settlement between Barkan and
Sprint, the Court granted an agreed motion to dismiss and the case was closed. Sprint has demanded that the Company indemnify Sprint
$3,870,000 for a portion of the amounts Sprint paid to defend and settle the case. On April 27, 2021, Sprint gave notice that it intends
to set-off amounts it owes the Company until Sprint’s indemnity demand is satisfied. The Company is currently evaluating Sprint’s
indemnity demand and the extent of the Company’s indemnity obligation, if any. On July 6, 2021 Airspan invoked its rights
under the dispute resolution clause in its agreement with Sprint to call for a meeting with Sprint to discuss the unresolved dispute.
The parties are in negotiations on the matter in question.
Except as set forth above, the Company
is not currently subject to any other material legal proceedings. The Company may from time to time become a party to various other legal
proceedings arising in the ordinary course of its business. While the results of such claims and litigation cannot be predicted with certainty,
the Company currently believes that it is not a party to any litigation the final outcome of which is likely to have a material adverse
effect on the Company’s condensed consolidated financial position, results of operations or cash flows.
|
14.
|
COMMON STOCK AND WARRANTS
|
Common Stock
As of September 30, 2021, 260,000,000
shares, $0.0001 par value per share are authorized, of which, 250,000,000 shares are designated as Common Stock and 10,000,000 shares
are designated as Preferred Stock. As of September 30, 2021, there were 72,024,437 shares of Common Stock issued and outstanding
and no shares of preferred stock issued or outstanding.
Holders of our Common Stock are entitled
to receive dividends when, as and if declared by the board of directors, payable either in cash, in property or in shares of capital stock.
As of September 30, 2021, the Company had not declared any dividends.
Legacy Airspan Warrants
The Company accounted for Legacy Airspan convertible
preferred stock warrants that have been earned and are exercisable into shares of Legacy Airspan’s convertible preferred stock as
liabilities pursuant to ASC 480, “Distinguishing Liabilities from Equity” as the warrants were exercisable into shares
of Legacy Airspan convertible preferred stock that are contingently redeemable upon events outside the control of Legacy Airspan. The
warrant liability is included in Other Long-term Liabilities on the accompanying condensed consolidated balance sheets. The warrants are
remeasured 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 Other income (expense), net on the accompanying condensed consolidated statements of operations.
In January 2021 and February 2021,
Legacy Airspan issued warrants for the purchase of 6,097 and 406, respectively, shares of Legacy Airspan Series H Convertible Preferred
Stock to certain holders of Legacy Airspan Series H Senior Convertible Preferred Stock (one warrant for every two shares of Legacy Airspan
Series H Senior Convertible Preferred Stock purchased in January and February 2021, respectively) with an exercise price of $61.50 per
share and a 5-year term (“Series H warrants”). Legacy Airspan accounted for the initial fair value of the Series H warrants
as a discount on the Legacy Airspan Series H Senior Convertible Preferred Stock issuance and recorded a corresponding warrant liability.
In June 2014, Legacy Airspan issued
warrants to purchase 203,252 shares of Legacy Airspan Series D Convertible Preferred Stock (originally 12,500 taking effect for 16.26
to 1 stock split) to holders of Legacy Airspan Series D Convertible Preferred Stock with an exercise price of $61.50 per share, subject
to certain performance requirements (the “D Warrants”). These warrants were unvested at December 31, 2020 and 2019 as the
performance criteria had not been met and therefore, no liability has been recorded with respect to these instruments. The D warrants
expired (unearned/unexercised) on January 31, 2021.
As of December 31, 2020, the Series
D and Series H Warrants fair value were determined using a hybrid scenario approach, including a Monte Carlo simulation.
The Legacy Airspan convertible preferred
stock warrants were converted as part of the Closing of the Business Combination (Note 3) and ceased to exist after the Business Combination.
As a result, no Legacy Airspan warrants
were issued and outstanding as of September 30, 2021:
Schedule of Warrants issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy Airspan Warrants Outstanding
|
|
|
|
Series D
|
|
|
Series D-1
|
|
|
Series H
|
|
Outstanding as of December 31, 2020
|
|
|
203,252
|
|
|
|
162,601
|
|
|
|
139,428
|
|
Issuance of warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
6,503
|
|
Warrants expired
|
|
|
(203,252
|
)
|
|
|
–
|
|
|
|
–
|
|
Conversion of warrants in Business Combination
|
|
|
–
|
|
|
|
(162,601
|
)
|
|
|
(145,931
|
)
|
Outstanding as of September 30, 2021
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
The change in fair value of the Legacy Airspan
warrant liability during the nine months ending September 30, 2021 was:
Schedule of fair value of warrant liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability
|
|
(in thousands)
|
|
Series D-1
|
|
|
Series H
|
|
|
Total
|
|
As of December 31, 2020
|
|
$
|
4,109
|
|
|
$
|
3,523
|
|
|
$
|
7,632
|
|
Fair value of warrants at issuance
|
|
|
–
|
|
|
|
142
|
|
|
|
142
|
|
Increase in fair value
|
|
|
3,541
|
|
|
|
976
|
|
|
|
4,517
|
|
Conversion of warrants in Business Combination
|
|
|
(7,650
|
)
|
|
|
(4,641
|
)
|
|
|
(12,291
|
)
|
As of September 30, 2021
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Common Stock Warrants
As of September 30, 2021, there are
12,045,000 Common Stock Warrants outstanding, consisting of 11,500,000 and 545,000 Public Warrants and Private Placement Warrants, respectively.
As part of NBA’s initial public
offering, 11,500,000 Public Warrants were sold. The Public Warrants entitle the holder thereof to purchase one share of Common Stock at
a price of $11.50 per share, subject to adjustment. The Public Warrants may be exercised only for a whole number of shares of Common Stock.
No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will expire on October 30, 2025 at 5:00p.m.,
New York City time, or earlier upon redemption or liquidation.
The Company may redeem the Public Warrants
when exercisable, in whole and not in part, at a price of $0.01 per warrant, so long as the Company provides not less than 30 days’
prior written notice of redemption to each warrant holder, and if, and only if, the reported last sale price of the Common Stock equals
or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the
Company sends the notice of redemption to the warrant holders.
Simultaneously with the Company’s
initial public offering, NBA consummated a private placement of 545,000
Private Placement Warrants with its sponsor. The Private Placement Warrants are exercisable for one share of Common Stock at a
price of $11.50 per share, subject to adjustment. The Private Placement Warrants are identical to the Public Warrants, except that, so
long as the Private Placement Warrants are held by the initial purchaser or its permitted transferees, the Private Placement Warrants
: (1) may be exercised for cash or on a cashless basis; (2) may not be transferred, assigned or sold until thirty (30) days after the
date of the Closing; and (3) may not be redeemed.
Post-Combination Warrants
As of September 30, 2021, there are
9,000,000 Post-Combination Warrants outstanding.
At Closing, the Company issued Post-Combination
Warrants exercisable for 9,000,000 shares of Company Common Stock. The Post-Combination Warrants include: (i) 3,000,000 Post-Combination
$12.50 Warrants; (ii) 3,000,000 Post-Combination $15.00 Warrants; and (iii) 3,000,000 Post-Combination $17.50 Warrants. As of September
30, 2021, there were 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 outstanding. The Post-Combination Warrants may only be exercised during the period commencing on the Closing and terminating
on the earlier of (i) two years following the date of the Closing and (ii) the redemption date, as further described below,
for a price of $12.50 per Post-Combination $12.50 Warrant, $15.00 per Post-Combination $15.00 Warrant and $17.50 per Post-Combination
$17.50 Warrant.
|
15.
|
SHARE-BASED COMPENSATION
|
Common Stock options
Prior to the Business Combination,
the Company maintained its 2009 Omnibus Equity Compensation Plan (the “2009 Plan”). Upon Closing of the Business Combination,
awards under the 2009 Plan were converted at the exchange ratio calculated in accordance with the Business Combination Agreement and the
2021 Stock Incentive Plan (the “2021 Plan” and together with the 2009 Plan, “the Plans”) was adopted and approved.
As of September 30, 2021, there were 11,781,146 shares of Common Stock reserved under the Plans.
The following table sets forth the
activity for all Common Stock options:
Schedule of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
|
5,500,135
|
|
|
$
|
3.99
|
|
|
|
6.79
|
|
Granted(a)
|
|
|
445,664
|
|
|
|
6.29
|
|
|
|
|
|
Exercised
|
|
|
(16,439
|
)
|
|
|
4.75
|
|
|
|
|
|
Forfeited
|
|
|
(155,932
|
)
|
|
|
4.22
|
|
|
|
|
|
Outstanding, September 30, 2021(b)
|
|
|
5,773,428
|
|
|
$
|
4.16
|
|
|
|
6.19
|
|
Exercisable, September 30, 2021(c)
|
|
|
4,068,628
|
|
|
$
|
3.76
|
|
|
|
5.32
|
|
|
(a)
|
The weighted average grant-date fair value of options granted during the nine months ending September
30, 2021 was $4.21 per share.
|
|
(b)
|
The aggregate intrinsic value of all options outstanding as of September 30, 2021 was $14.6 million.
|
|
(c)
|
The aggregate intrinsic value of all vested/exercisable options as of September 30, 2021 was $11.9 million.
|
Restricted Stock Awards
The following table sets forth the activity for all restricted
stock awards:
|
|
Number of Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
|
337,187
|
|
|
$
|
3.83
|
|
|
|
8.59
|
|
Granted
|
|
|
25,566
|
|
|
|
6.29
|
|
|
|
|
|
Forfeited
|
|
|
(17,282
|
)
|
|
|
2.08
|
|
|
|
|
|
Outstanding, September 30, 2021
|
|
|
345,471
|
|
|
$
|
4.10
|
|
|
|
8.37
|
|
Restricted Stock Units
As part of the consideration in the
Business Combination, RSUs with respect to 1,750,000 shares of Common Stock were granted to the participants in Legacy Airspan’s
MIP. For the RSUs granted to MIP Participants, the weighted average grant date fair value was $9.75. The RSUs granted in connection with
the MIP vest one year after the date of the grant.
Because the Company maintained a full
valuation allowance on its U.S. deferred tax assets, it did not recognize any tax benefit related to share-based compensation expense
for the three and nine months ended September 30, 2021 and 2020. As of September 30, 2021, there was $4.2 million of unrecognized compensation
expense related to stock options to be recognized over a weighted average period of 2.25 years and $1.0 million of unrecognized compensation
expense related to restricted stock awards to be recognized over a weighted average period of 8.37 years.
The following table summarizes the
number of authorized, unissued shares of Common Stock, under all employee stock plans, to be issued upon exercise as of September 30,
2021:
Schedule of common stock reserved for future issuance under employee stock plans
|
|
|
|
|
Plans
|
|
Number of Shares
|
|
Total awards available to be issued
|
|
|
6,007,718
|
|
Total options outstanding
|
|
|
5,773,428
|
|
Total common stock reserved for future issuance under employee stock plans
|
|
|
11,781,146
|
|
The following table summarizes share-based
compensation expense for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Schedule of summarizes share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
214
|
|
|
$
|
199
|
|
|
$
|
682
|
|
|
$
|
598
|
|
Sales and marketing
|
|
|
140
|
|
|
|
103
|
|
|
|
476
|
|
|
|
309
|
|
General and administrative
|
|
|
293
|
|
|
|
180
|
|
|
|
950
|
|
|
|
538
|
|
Cost of sales
|
|
|
14
|
|
|
|
13
|
|
|
|
42
|
|
|
|
37
|
|
Total share-based compensation
|
|
$
|
661
|
|
|
$
|
495
|
|
|
$
|
2,150
|
|
|
$
|
1,482
|
|
Net loss per share is computed using
the weighted average number of shares of Common Stock outstanding less the number of shares subject to repurchase.
The following table sets forth the
computation of basic and diluted net loss per share for the periods indicated (in thousands, except share data):
Schedule of basic and diluted net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(26,953
|
)
|
|
$
|
(9,921
|
)
|
|
$
|
(50,920
|
)
|
|
$
|
(33,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
66,276,223
|
|
|
|
59,710,047
|
|
|
|
61,923,661
|
|
|
|
59,710,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.41
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(0.57
|
)
|
The following table sets forth the
amounts excluded from the computation of diluted net loss per share as of September 30, 2021 and 2020 because their effect was anti-dilutive.
Schedule of anti-dilutive net loss per share
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Stock options outstanding
|
|
|
5,773,428
|
|
|
|
5,557,254
|
|
Non-vested shares of restricted stock
|
|
|
345,471
|
|
|
|
345,817
|
|
Warrants (a)
|
|
|
|
|
|
|
|
|
Convertible notes (a)
|
|
|
|
|
|
|
|
|
|
(a)
|
The Convertible Notes and warrants referred to in Notes 10 and 14 were also excluded on an as converted
basis because their effect would have been anti-dilutive.
|
|
17.
|
RELATED PARTY TRANSACTIONS
|
As of both September 30, 2021 and December
31, 2020, there was an outstanding note receivable amounting to $87 thousand due from the Company’s President and Chief Executive
Officer in connection with the purchase of 500,000 shares of the Company’s common stock. The note was originally entered into in
1999 in the amount of $130 thousand of which $43 thousand had been repaid at September 30, 2021. No interest is due on the debt. The debt
is collateralized by Common Stock. Subsequent to September 30, 2021, the remainder of this outstanding note receivable was repaid in full.
As disclosed in Note 8, as of September
30, 2021 and December 31, 2020, Legacy Airspan has a Subordinated Term Loan with a related party.
|
18.
|
EQUITY METHOD INVESTMENTS
|
The Company accounts for its investment
in a wholly-owned subsidiary, Dense Air, as an equity method investment. Dense Air has been funded by its sole lender through convertible
debt with various restrictions and requirements including a conversion option on substantially all of the ownership interest in Dense
Air. Dense Air was designed to acquire and hold specific assets and the fixed price conversion option is economically similar to a call
option on the assets of Dense Air. Therefore, the Company concluded consolidation is not required. The Company did determine it has significant
influence in the operations of Dense Air and therefore, has applied the equity method of accounting. Given Dense Air has operated at a
loss since its inception, and the Company has not guaranteed the obligations of Dense Air or otherwise committed to provide further financial
support, equity method accounting has been discontinued. The investment had no value at September 30, 2021 and December 31, 2020.
There have been no dividends received
from Dense Air for the three and nine months ended September 30, 2021 and 2020.
On March 22, 2021, an investor acquired
the sole lender to Dense Air’s rights and obligations under a convertible loan agreement. Concurrently, the Company received a notice
of conversion from the investor to convert the outstanding amount of the loan into shares equating to 95% of the share capital of Dense
Air. The conversion is expected in the fourth quarter of 2021.
The Company receives reimbursement
of its expenses for providing certain management support functions to Dense Air, a related party, which are not material.