This prospectus supplement No. 2 (“Prospectus
Supplement”) further updates, amends and supplements (i) the prospectus dated September 20, 2021 (the “Prospectus”),
which forms a part of our registration statement on Form S-1, File No. 333-259446 relating to the issuance of 12,045,000 shares of our
common stock, par value $0.0001 per share (“Common Stock”), consisting of (a) 11,500,000 shares of our Common Stock issuable
upon exercise of a like number of warrants to purchase our Common Stock at an exercise price of $11.50 per share originally issued as
part of units in our initial public offering and (b) 545,000 shares of our Common Stock issuable upon exercise of a like number of warrants
(the “Private Placement Warrants”) to purchase our Common Stock at an exercise price of $11.50 per share originally issued
as part of units sold in a private placement in connection with our initial public offering, as well as the offer and sale, from time
to time, by the selling securityholders named in the Prospectus, or any of their pledgees, donees, assignees and successors-in-interest
(“permitted transferees” and, collectively with such selling securityholders, the “Selling Securityholders”),
of (a) up to an aggregate of 7,500,000 shares of our Common Stock that were issued to certain investors (collectively, the “PIPE
Investors”) in connection with the sale of shares for a purchase price of $10.00 per share in a private placement immediately prior
to closing of our business combination agreement, (b) up to an aggregate of 2,750,000 shares initially purchased by New Beginnings Sponsor,
LLC, a Delaware limited liability company in a private placement in September 2020, (c) up to an aggregate of 45,496,960 shares of
our Common Stock otherwise held by the Selling Securityholders, (d) up to an aggregate of 100,000 shares of our Common Stock that may
be issued upon exercise of warrants pursuant to a Warrant, dated as of March 5, 2021, by and between Airspan Networks Inc. and DISH Network
Corporation, a Nevada corporation, (e) up to an aggregate of 545,000 shares of our Common Stock that may be issued upon exercise of the
Private Placement Warrants, (f) up to an aggregate of 2,271,026 shares of our Common Stock that may be issued upon exercise of warrants
to purchase one share of our Common Stock per warrant, at an exercise price of $12.50 (“Post-Combination $12.50 Warrants”),
(g) up to an aggregate of 2,271,026 shares of our Common Stock that may be issued upon exercise of warrants to purchase one share of our
Common Stock per warrant, at an exercise price of $15.00 (“Post-Combination $15.00 Warrants”), (h) up to an aggregate of 2,271,026
shares of our Common Stock that may be issued upon exercise of warrants to purchase one share of our Common Stock per warrant, at an exercise
price of $17.50 (“Post-Combination $17.50 Warrants”), (i) up to an aggregate of 4,680,500 shares of our Common Stock that
may be issued upon conversion of senior secured convertible notes issued on August 13, 2021, (j) up to an aggregate of 545,000 Private
Placement Warrants, (k) up to an aggregate of 2,271,026 Post-Combination $12.50 Warrants, (l) up to an aggregate of 2,271,026 Post-Combination
$15.00 Warrants and (m) up to an aggregate of 2,271,026 Post-Combination $17.50 Warrants; and (ii) the prospectus dated October 27, 2021
(the “Warrant Prospectus” and together with the Prospectus, the “Prospectuses”), which forms a part of our registration
statement on Form S-4, File No. 333-256137 relating to the issuance of up to 9,000,000 shares of our common stock, par value $0.0001 per
share (“Common Stock”), issuable from time to time upon the exercise of 9,000,000 outstanding warrants, consisting of (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, in each case, that were issued by us on August 13, 2021 as part of the consummation of a business combination transaction between
us (then known as New Beginnings Acquisition Corp.), Artemis Merger Sub Corp., a wholly-owned direct subsidiary of Airspan, and Airspan
Networks Inc.
This Prospectus Supplement
is being filed to update, amend and supplement the information included or incorporated by reference in the Prospectuses with the information
contained in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the Securities and Exchange
Commission (the “SEC”) on November 12, 2021 (the “Report”). Accordingly, we have attached the Report to this Prospectus
Supplement and the Report is incorporated by reference into this Prospectus Supplement.
Our Common Stock, Public Warrants,
Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants are listed on the NYSE American
LLC (“NYSE American”) under the symbols “MIMO”, “MIMO WS”, “MIMO WSA”, “MIMO WSB”
and “MIMO WSC”, respectively. On November 11, 2021, the closing price of our Common Stock was $6.23 per share, the closing
price of our Public Warrants was $0.82 per warrant, the closing price of our Post-Combination $12.50 Warrants was $32.47 per warrant,
the closing price of our Post-Combination $15.00 Warrants was $13.16 per warrant and the closing price of our Post-Combination $17.50
Warrants was $28.73 per warrant.
The attached information updates,
amends and supplements certain information contained in the Prospectuses. To the extent information in this Prospectus Supplement differs
from, updates or conflicts with information contained in the Prospectuses, the information in this Prospectus Supplement is the more current
information. This Prospectus Supplement is not complete without, and should not be delivered or utilized, except in conjunction with the
Prospectuses, including any supplements and amendments thereto. You should read this Prospectus Supplement in conjunction with the Prospectuses,
including any supplements and amendments thereto.
We are an “emerging growth
company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and are subject to reduced public company reporting
requirements. See “Risk Factors.”
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended September 30, 2021
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition
period from to
Airspan Networks Holdings Inc.
(Exact name of registrant
as specified in its charter)
Delaware
|
|
001-39679
|
|
85-2642786
|
(State or other jurisdiction
of incorporation or organization)
|
|
(Commission File Number)
|
|
(I.R.S. Employer
Identification Number)
|
777 Yamato Road, Suite 310, Boca Raton, Florida
|
|
33431
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Registrant’s
telephone number, including area code: (561) 893-8670
New Beginnings Acquisition Corp.
800 1st Street, Unit 1
Miami Beach, Florida 33139
(Former name or former
address, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class:
|
|
Trading Symbol:
|
|
Name of Each Exchange on Which Registered:
|
Common stock, par value $0.0001 per share
|
|
MIMO
|
|
NYSE American, LLC
|
Warrants, exercisable for shares of common stock at an exercise price of $11.50 per share
|
|
MIMO WS
|
|
NYSE American, LLC
|
Warrants, exercisable for shares of common stock at an exercise price of $12.50 per share
|
|
MIMO WSA
|
|
NYSE American, LLC
|
Warrants, exercisable for shares of common stock at an exercise price of $15.00 per share
|
|
MIMO WSB
|
|
NYSE American, LLC
|
Warrants, exercisable for shares of common stock at an exercise price of $17.50 per share
|
|
MIMO WSC
|
|
NYSE American, LLC
|
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
☒
|
Emerging growth company
|
☒
|
|
|
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 5, 2021,
72,024,437
shares of the registrant’s common stock, par value $0.0001 per share, were issued and outstanding.
AIRSPAN NETWORKS HOLDINGS INC.
Quarterly Report on Form 10-Q
Table of Contents
INTRODUCTORY NOTE
On August 13, 2021 (the
“Closing”), New Beginnings Acquisition Corp., a Delaware corporation (“New Beginnings”), Artemis Merger Sub Corp.,
a Delaware corporation and wholly-owned direct subsidiary of New Beginnings (“Merger Sub”), and Airspan Networks Inc., a Delaware
corporation (“Legacy Airspan”), consummated their previously announced business combination (the “Business Combination”)
pursuant to the terms of the Business Combination Agreement, dated as of March 8, 2021 (the “Business Combination Agreement”).
Pursuant to the Business
Combination Agreement, on the Closing Date, (i) New Beginnings changed its name to “Airspan Networks Holdings Inc.” (the
“Company”) and (ii) shares of Legacy Airspan capital stock issued and outstanding immediately prior to the Closing (including
shares of Legacy Airspan capital stock issued pursuant to the net exercise of warrants to purchase Legacy Airspan capital stock, but excluding
shares of Legacy Airspan restricted stock that were not Legacy Airspan accelerated restricted stock) were automatically converted into
and became the right to receive 59,726,486 shares of Common Stock and 9,000,000 of our Post-Combination Warrants (as defined below).
PART I – FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated BALANCE SHEETS
(in thousands, except for share data)
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
85,058
|
|
|
$
|
18,196
|
|
Restricted cash
|
|
|
186
|
|
|
|
422
|
|
Accounts receivable, net of allowance of $243 and $374 at September 30, 2021 and December 31, 2020, respectively
|
|
|
53,438
|
|
|
|
71,621
|
|
Inventory
|
|
|
13,976
|
|
|
|
12,019
|
|
Prepaid expenses and other current assets
|
|
|
11,738
|
|
|
|
7,602
|
|
Total current assets
|
|
|
164,396
|
|
|
|
109,860
|
|
Property, plant and equipment, net
|
|
|
6,900
|
|
|
|
4,833
|
|
Goodwill
|
|
|
13,641
|
|
|
|
13,641
|
|
Intangible assets, net
|
|
|
6,732
|
|
|
|
7,629
|
|
Right- of- use assets, net
|
|
|
7,144
|
|
|
|
7,882
|
|
Other non-current assets
|
|
|
3,831
|
|
|
|
3,837
|
|
Total assets
|
|
$
|
202,644
|
|
|
$
|
147,682
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
24,700
|
|
|
$
|
36,849
|
|
Deferred revenue
|
|
|
5,045
|
|
|
|
7,521
|
|
Other accrued expenses
|
|
|
28,137
|
|
|
|
22,538
|
|
Subordinated debt
|
|
|
10,445
|
|
|
|
10,065
|
|
Current portion of long-term debt
|
|
|
281
|
|
|
|
298
|
|
Total current liabilities
|
|
|
68,608
|
|
|
|
77,271
|
|
Long-term debt
|
|
|
-
|
|
|
|
2,087
|
|
Subordinated term loan - related party
|
|
|
37,149
|
|
|
|
34,756
|
|
Senior term loan
|
|
|
39,978
|
|
|
|
36,834
|
|
Convertible debt
|
|
|
40,748
|
|
|
|
-
|
|
Other long-term liabilities
|
|
|
22,230
|
|
|
|
17,147
|
|
Total liabilities
|
|
|
208,713
|
|
|
|
168,095
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 250,000,000 shares authorized; 72,024,437 and 59,710,047 shares issued and outstanding at September 30, 2021 and December 31, 2020
|
|
|
7
|
|
|
|
6
|
|
Additional paid-in capital
|
|
|
740,169
|
|
|
|
674,906
|
|
Accumulated deficit
|
|
|
(746,245
|
)
|
|
|
(695,325
|
)
|
Total stockholders’ deficit
|
|
|
(6,069
|
)
|
|
|
(20,413
|
)
|
Total liabilities and stockholders’ deficit
|
|
$
|
202,644
|
|
|
$
|
147,682
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
$
|
32,447
|
|
|
$
|
25,227
|
|
|
$
|
106,487
|
|
|
$
|
60,520
|
|
Maintenance, warranty and services
|
|
|
6,476
|
|
|
|
10,811
|
|
|
|
20,419
|
|
|
|
30,889
|
|
Total revenues
|
|
|
38,923
|
|
|
|
36,038
|
|
|
|
126,906
|
|
|
|
91,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
|
20,990
|
|
|
|
17,344
|
|
|
|
66,605
|
|
|
|
41,179
|
|
Maintenance, warranty and services
|
|
|
825
|
|
|
|
1,349
|
|
|
|
3,021
|
|
|
|
3,446
|
|
Total cost of revenues
|
|
|
21,815
|
|
|
|
18,693
|
|
|
|
69,626
|
|
|
|
44,625
|
|
Gross profit
|
|
|
17,108
|
|
|
|
17,345
|
|
|
|
57,280
|
|
|
|
46,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
17,529
|
|
|
|
13,239
|
|
|
|
47,427
|
|
|
|
38,952
|
|
Sales and marketing
|
|
|
10,315
|
|
|
|
7,051
|
|
|
|
25,157
|
|
|
|
21,464
|
|
General and administrative
|
|
|
19,347
|
|
|
|
4,043
|
|
|
|
28,247
|
|
|
|
11,990
|
|
Amortization of intangibles
|
|
|
299
|
|
|
|
596
|
|
|
|
897
|
|
|
|
1,374
|
|
Loss on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
Total operating expenses
|
|
|
47,490
|
|
|
|
24,929
|
|
|
|
101,728
|
|
|
|
73,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(30,382
|
)
|
|
|
(7,584
|
)
|
|
|
(44,448
|
)
|
|
|
(27,018
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(3,630
|
)
|
|
|
(1,480
|
)
|
|
|
(8,580
|
)
|
|
|
(4,676
|
)
|
Gain on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
2,096
|
|
|
|
-
|
|
Other income (expense), net
|
|
|
7,516
|
|
|
|
(685
|
)
|
|
|
636
|
|
|
|
(1,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(457
|
)
|
|
|
(172
|
)
|
|
|
(624
|
)
|
|
|
(370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(26,953
|
)
|
|
$
|
(9,921
|
)
|
|
$
|
(50,920
|
)
|
|
$
|
(33,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.41
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(0.57
|
)
|
Weighted average shares outstanding - basic and diluted
|
|
|
66,276,223
|
|
|
|
59,710,047
|
|
|
|
61,923,661
|
|
|
|
59,710,047
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
|
|
|
|
|
Series
B Shares
|
|
|
Series
B-1 Shares
|
|
|
Series
C Shares
|
|
|
Series
C-1 Shares
|
|
|
Series
D Shares
|
|
|
Series
D-1 Shares
|
|
|
Series
D-2 Shares
|
|
|
Series
E Shares
|
|
|
Series
E-1 Shares
|
|
|
Series
F Shares
|
|
|
Series
F-1 Shares
|
|
|
Series
G Shares
|
|
|
Series
H Shares
|
|
|
Total
Shares
|
|
|
Total
Mezzanine
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2020 (as previously reported)
|
|
|
-
|
|
|
|
72,123
|
|
|
|
-
|
|
|
|
416,667
|
|
|
|
1,080,993
|
|
|
|
325,203
|
|
|
|
370,000
|
|
|
|
615,231
|
|
|
|
393,511
|
|
|
|
352,076
|
|
|
|
46,325
|
|
|
|
740,987
|
|
|
|
168,288
|
|
|
|
4,581,404
|
|
|
$
|
363,481
|
|
Retrospective
application of the recapitalization due to the Business Combination (Note 3)
|
|
|
-
|
|
|
|
(72,123
|
)
|
|
|
-
|
|
|
|
(416,667
|
)
|
|
|
(1,080,993
|
)
|
|
|
(325,203
|
)
|
|
|
(370,000
|
)
|
|
|
(615,231
|
)
|
|
|
(393,511
|
)
|
|
|
(352,076
|
)
|
|
|
(46,325
|
)
|
|
|
(740,987
|
)
|
|
|
(168,288
|
)
|
|
|
(4,581,404
|
)
|
|
$
|
(363,481
|
)
|
Balance
at December 31, 2020, effect of Business Combination (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
June 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
Legacy Airspan Common Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
Common B
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
Balance at December 31, 2020 (as previously reported)
|
|
|
202,582
|
|
|
|
466,952
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
311,431
|
|
|
$
|
(695,325
|
)
|
|
$
|
(383,894
|
)
|
Retrospective application of the recapitalization due to the Business Combination (Note 3)
|
|
|
(202,582
|
)
|
|
|
(466,952
|
)
|
|
|
-
|
|
|
|
59,710,047
|
|
|
|
6
|
|
|
|
363,475
|
|
|
|
-
|
|
|
|
363,481
|
|
Balance at December 31, 2020, effect of Business Combination (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
674,906
|
|
|
|
(695,325
|
)
|
|
|
(20,413
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,549
|
)
|
|
|
(13,549
|
)
|
Issuance of Series H preferred stock, net of issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
653
|
|
|
|
-
|
|
|
|
653
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
661
|
|
|
|
-
|
|
|
|
661
|
|
Balance at March 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
676,220
|
|
|
$
|
(708,874
|
)
|
|
$
|
(32,648
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,418
|
)
|
|
|
(10,418
|
)
|
Exercise of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,277
|
|
|
|
-
|
|
|
|
69
|
|
|
|
-
|
|
|
|
69
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
828
|
|
|
|
-
|
|
|
|
828
|
|
Balance at June 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,724,324
|
|
|
$
|
6
|
|
|
$
|
677,117
|
|
|
$
|
(719,292
|
)
|
|
$
|
(42,169
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,953
|
)
|
|
|
(26,953
|
)
|
Exercise of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,162
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
Extinguishment of pre-combination warrant liability in connection with the Reverse Recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,284
|
|
|
|
-
|
|
|
|
10,284
|
|
Business Combination and PIPE financing, net of redemptions and equity issuance costs of $26.2 million
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,297,951
|
|
|
|
1
|
|
|
|
52,097
|
|
|
|
-
|
|
|
|
52,098
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
661
|
|
|
|
-
|
|
|
|
661
|
|
Balance at September 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
72,024,437
|
|
|
$
|
7
|
|
|
$
|
740,169
|
|
|
$
|
(746,245
|
)
|
|
$
|
(6,069
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
|
|
|
|
|
Series
B Shares
|
|
|
Series
B-1 Shares
|
|
|
Series
C Shares
|
|
|
Series
C-1 Shares
|
|
|
Series
D Shares
|
|
|
Series
D-1 Shares
|
|
|
Series
D-2 Shares
|
|
|
Series
E Shares
|
|
|
Series
E-1 Shares
|
|
|
Series
F Shares
|
|
|
Series
F-1 Shares
|
|
|
Series
G Shares
|
|
|
Series
H Shares
|
|
|
Total
Shares
|
|
|
Total
Mezzanine
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2019 (as previously reported)
|
|
|
72,123
|
|
|
|
-
|
|
|
|
416,667
|
|
|
|
-
|
|
|
|
1,450,993
|
|
|
|
325,203
|
|
|
|
-
|
|
|
|
615,231
|
|
|
|
393,511
|
|
|
|
352,076
|
|
|
|
46,325
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,672,129
|
|
|
$
|
309,923
|
|
Retrospective
application of the recapitalization due to the Business Combination (Note 3)
|
|
|
(72,123
|
)
|
|
|
|
|
|
|
(416,667
|
)
|
|
|
|
|
|
|
(1,450,993
|
)
|
|
|
(325,203
|
)
|
|
|
|
|
|
|
(615,231
|
)
|
|
|
(393,511
|
)
|
|
|
(352,076
|
)
|
|
|
(46,325
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,672,129
|
)
|
|
$
|
(309,923
|
)
|
Balance
at December 31, 2019, effect of Business Combination (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
Legacy Airspan Common Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
Common B
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
Balance at December 31, 2019 (as previously reported)
|
|
|
202,582
|
|
|
|
466,952
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
308,788
|
|
|
$
|
(669,682
|
)
|
|
$
|
(360,894
|
)
|
Retrospective application of the recapitalization due to the Business Combination (Note 3)
|
|
|
(202,582
|
)
|
|
|
(466,952
|
)
|
|
|
-
|
|
|
|
59,710,047
|
|
|
|
6
|
|
|
|
363,475
|
|
|
|
-
|
|
|
|
363,481
|
|
Balance at December 31, 2019, effect of Business Combination (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
672,263
|
|
|
|
(669,682
|
)
|
|
|
2,587
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,015
|
)
|
|
|
(13,015
|
)
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
492
|
|
|
|
-
|
|
|
|
492
|
|
Balance at March 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
672,755
|
|
|
$
|
(682,697
|
)
|
|
$
|
(9,936
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,053
|
)
|
|
|
(11,053
|
)
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
495
|
|
|
|
-
|
|
|
|
495
|
|
Balance at June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
673,250
|
|
|
$
|
(693,750
|
)
|
|
$
|
(20,494
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,921
|
)
|
|
|
(9,921
|
)
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
495
|
|
|
|
-
|
|
|
|
495
|
|
Balance at September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
59,710,047
|
|
|
$
|
6
|
|
|
$
|
673,745
|
|
|
$
|
(703,671)
|
|
|
$
|
(29,920
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated STATEMENTS OF CASH FLOWS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(50,920
|
)
|
|
$
|
(33,989
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,117
|
|
|
|
3,624
|
|
Foreign exchange (gain) loss on long-term debt
|
|
|
(8
|
)
|
|
|
12
|
|
Bad debt expense
|
|
|
182
|
|
|
|
-
|
|
Gain on extinguishment of debt
|
|
|
(2,096
|
)
|
|
|
-
|
|
Change in fair value of warrants and derivatives
|
|
|
(7,045
|
)
|
|
|
1,756
|
|
Share-based compensation
|
|
|
2,150
|
|
|
|
1,482
|
|
Total adjustments
|
|
|
(3,700
|
)
|
|
|
6,874
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
|
|
18,001
|
|
|
|
7,480
|
|
(Increase) decrease in inventory
|
|
|
(1,957
|
)
|
|
|
4,679
|
|
(Increase) decrease in prepaid expenses and other current assets
|
|
|
(452
|
)
|
|
|
836
|
|
Decrease in other operating assets
|
|
|
6
|
|
|
|
86
|
|
(Decrease) in accounts payable
|
|
|
(15,799
|
)
|
|
|
(6,238
|
)
|
(Decrease) increase in deferred revenue
|
|
|
(2,476
|
)
|
|
|
568
|
|
Increase in other accrued expenses
|
|
|
5,599
|
|
|
|
483
|
|
Increase in other long-term liabilities
|
|
|
468
|
|
|
|
1,086
|
|
Increase in accrued interest on long-term debt
|
|
|
5,917
|
|
|
|
2,677
|
|
Net cash used in operating activities
|
|
|
(45,313
|
)
|
|
|
(15,458
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(4,287
|
)
|
|
|
(1,159
|
)
|
Net cash used in investing activities
|
|
|
(4,287
|
)
|
|
|
(1,159
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayments under line of credit, net
|
|
|
-
|
|
|
|
(237
|
)
|
Borrowings under other long-term debt
|
|
|
-
|
|
|
|
2,073
|
|
Proceeds from the Business Combination, issuance of convertible debt and PIPE
financing, net of issuance costs paid
|
|
|
115,501
|
|
|
|
-
|
|
Proceeds from the exercise of stock options
|
|
|
78
|
|
|
|
-
|
|
Proceeds from the sale of Series G stock, net
|
|
|
-
|
|
|
|
21,913
|
|
Proceeds from the sale of Series H stock, net
|
|
|
505
|
|
|
|
-
|
|
Proceeds from the issuance of Series H warrants
|
|
|
142
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
116,226
|
|
|
|
23,749
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
66,626
|
|
|
|
7,132
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of year
|
|
|
18,618
|
|
|
|
3,013
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
85,244
|
|
|
$
|
10,145
|
|
AIRSPAN
NETWORKS HOLDINGS INC.
UNAUDITED
CONDENSED consolidated STATEMENTS OF CASH FLOWS
(CONTINUED)
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
8,045
|
|
|
$
|
4,623
|
|
Cash paid for income taxes
|
|
$
|
552
|
|
|
$
|
394
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
Reclassification of redeemable convertible preferred stock warrants to common stock
|
|
$
|
10,284
|
|
|
$
|
-
|
|
Non-cash net liabilities assumed from business combination
|
|
$
|
38
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
AIRSPAN
NETWORKS HOLDINGS INC.
NOTES
TO UNAUDITED CONDENSED Consolidated FINANCIAL STATEMENTS
|
1.
|
BUSINESS AND BASIS OF PRESENTATION
|
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:
|
●
|
focusing the Company’s efforts to increase sales in additional geographic markets;
|
|
●
|
continuing to develop 5G product offerings that will expand the market for the Company’s products;
and
|
|
●
|
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.
|
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.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
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
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash and cash equivalents
|
|
$
|
85,058
|
|
|
$
|
10,007
|
|
Restricted cash
|
|
|
186
|
|
|
|
138
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
85,244
|
|
|
$
|
10,145
|
|
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
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Customer and supplier guarantees
|
|
$
|
176
|
|
|
$
|
298
|
|
Landlord guarantees
|
|
|
10
|
|
|
|
124
|
|
Total
|
|
$
|
186
|
|
|
$
|
422
|
|
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:
|
●
|
Plant, machinery and equipment — over 2 to 5 years
|
|
●
|
Furniture and fixtures — over 4 to 5 years
|
|
●
|
Leasehold improvements — over lesser of the minimum lease term or the useful life
|
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.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
References to “we”, “us”,
“our” or the “Company” after the Closing of the Business Combination are to Airspan Networks Holdings Inc. and
its consolidated subsidiaries, and prior to the Closing of the Business Combination are to Legacy Airspan and its consolidated subsidiaries,
in each case, except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed
financial statements and related notes thereto included elsewhere in this report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this
Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future
operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,”
“estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,
based on information currently available. A number of factors could cause actual events, performance or results to differ materially from
the events, performance and results discussed in the forward-looking statements, which may include, among other things: the risk of downturns
and the possibility of rapid change in the highly competitive industry in which we operate; changes in laws and regulations affecting
our business; the risk that we and our current and future collaborators are unable to successfully develop and commercialize our products
or services, or experience significant delays in doing so; the risk that we do not achieve or sustain profitability; the risk that we
will need to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all; the risk
that we experience difficulties in managing our growth and expanding operations; the risk that third-party suppliers and manufacturers
are not able to fully and timely meet their obligations; the risk of product liability or regulatory lawsuits or proceedings relating
to our products and services; and the risk that we are unable to secure our intellectual property. For further information identifying
important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please
refer to the Risk Factors section of our Annual Report on Form 10-K (as amended) filed with the U.S. Securities and Exchange Commission
(the “SEC”), or our registration statement on Form S-1 (the “Registration Statement”)
as filed with the SEC on September 10, 2021. Our securities filings can be accessed on the EDGAR section of the SEC’s website
at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise
any forward-looking statements whether as a result of new information, future events or otherwise.
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the
notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Certain information contained in the discussion and analysis
set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many factors, including those set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We offer a complete range of 4G and 5G network
build and network densification products with an expansive portfolio of software and hardware tools for indoor and outdoor, compact femto,
pico, micro and macro base stations, as well as an industry leading 802.11ac and 802.11ax fixed wireless access and backhaul solution
portfolio for point-to-point and point-to-multipoint applications. Our solutions help network operators monetize the potential of 4G and
5G technologies and use cases and, in addition, allow enterprises to establish their own private networks especially in 5G, where dedicated
spectrum has been allocated. We have developed differentiated RAN software and hardware products to help operators get the maximum capacity
and coverage in the following ways:
|
●
|
Very high performance wireless network technology for both access and backhaul components of the network.
|
|
●
|
Energy efficient and integrated form factors, enabling cost effective deployment of RAN technology that
are able to avoid zoning and site acquisition constraints, which translate into a quicker time-to-market for our customers.
|
|
●
|
Easy to use, affordable and comprehensive core network elements to support 4G, 5G and fixed wireless services.
|
|
●
|
Sophisticated provisioning and orchestration software for both backhaul and RAN for 4G and 5G access and
the core network that can also integrate a wide range of access.
|
|
●
|
Fully virtualized cloud native modular software and hardware solutions that adhere to open standards allowing
our operator customers to fundamentally shift the dynamics of the value and supply chains of the wireless industry. This decreases vendor
lock-in and as a result lowers total cost of ownership typical of traditional incumbent competitors.
|
The market for our wireless systems includes leading
mobile CSPs, large enterprises, military communications integrators and ISPs. Our strategy applies the same network technology across
all addressable sectors.
Our main operations are in: Slough, United Kingdom;
Mumbai and Bangalore, India; Tokyo, Japan; Airport City, Israel; and Santa Clara, California, and our corporate headquarters is in Boca
Raton, Florida.
Recent Developments
The Business Combination
We consummated the Business Combination on August
13, 2021, pursuant to the terms of the Business Combination Agreement. Under the Business Combination Agreement, Legacy Airspan became
a wholly-owned subsidiary of the Company. Thereafter, the Company was renamed Airspan Networks Holdings Inc.
In connection with the Business Combination, holders
of 9,997,049 shares of Common Stock sold in NBA’s initial public offering properly exercised their right to have such shares redeemed
for a full pro rata portion of NBA’s trust account, which was approximately $10.10 per share, or an aggregate redemption payment
of $100.97 million.
As a result of the Business Combination, (i) 59,726,486
shares of Common Stock (including 345,471 shares of restricted Common Stock), 3,000,000 Post-Combination $12.50 Warrants, 3,000,000 Post-Combination
$15.00 Warrants and 3,000,000 Post-Combination $17.50 Warrants were issued to Legacy Airspan stockholders, (ii) outstanding options to
purchase Legacy Airspan Common Stock and Legacy Airspan Class B Common Stock were converted into options to purchase an aggregate of 5,815,796
shares of Common Stock, (iii) $17,500,000 in cash was paid and RSUs with respect to 1,750,000 shares of Common Stock were issued to the
participants in Legacy Airspan’s management incentive plan (the “MIP”) and (iv) 4,257,718 shares of Common Stock were
reserved for issuance in connection with future grants under the 2021 Plan.
In connection with the Business Combination, we
also issued 7,500,000 shares of Common Stock to the PIPE Investors, at a price of $10.00 per share, for aggregate consideration of $75.0
million, and $50.0 million in aggregate principal amount of Convertible Notes.
After giving effect to the transactions and redemptions
described above, there were 72,024,437 shares of our Common Stock issued and outstanding immediately following the Closing. Our Common
Stock, Public Warrants, Post-Combination $12.50 Warrants, Post-Combination $15.00 Warrants and Post-Combination $17.50 Warrants commenced
trading on the NYSE American under the symbols “MIMO”, “MIMO WS”, “MIMO WSA”, “MIMO WSB”
and “MIMO WSC”, respectively, on August 16, 2021.
Following the closing of the Business Combination,
Legacy Airspan was deemed the accounting acquirer, and the Company is the successor SEC registrant. Although the legal acquirer in the
Business Combination Agreement was New Beginnings, for financial accounting and reporting purposes under GAAP, the Business Combination
is accounted for as a reverse recapitalization. A reverse recapitalization does not result in a new basis of accounting, and the financial
statements of the combined entity represent the continuation of the financial statements of Legacy Airspan in many respects. Under this
method of accounting, New Beginnings will be treated as the acquired company for financial statement reporting purposes and the Business
Combination will be treated as the equivalent of Legacy Airspan issuing stock for the net assets of New Beginnings, accompanied by a recapitalization.
Accordingly, the consolidated assets, liabilities and results of operations of Legacy Airspan became the historical financial statements
of the Company, and New Beginnings’ assets, liabilities and results of operations were consolidated with Legacy Airspan’s
on August 13, 2021. The net assets of New Beginnings will be stated at historical cost, with no goodwill or other intangible assets recorded.
Operations prior to the Business Combination will be those of Legacy Airspan.
The most significant change in our future reported
financial position and results as a result of the Business Combination is an increase in cash (as compared to Legacy Airspan’s balance
sheet immediately prior to the Business Combination) of approximately $115.5 million and an increase of indebtedness (as compared to Legacy
Airspan’s balance sheet immediately prior to the Business Combination) of $40.7 million as a result of the issuance of the Convertible
Notes. Total non-recurring transaction costs are approximately $27.0 million.
As a majority of Legacy Airspan’s current
management team and business operations comprise our management and operations, we will need to implement procedures and processes to
address public company regulatory requirements and customary practices. We expect we will incur additional annual expenses as a public
company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external
accounting and legal and administrative resources, including increased audit and legal fees.
Convertible Notes
On July 30, 2021, we entered into the Convertible
Note Purchase Agreement, pursuant to which, on August 13, 2021, we issued $50.0 million in aggregate principal amount of Convertible Notes.
The Convertible Notes bear interest at a rate equal to 7.0% per annum (the “Base Rate”), payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, beginning on September 30, 2021. Under certain circumstances, a default interest
will apply following an event of default under the Convertible Notes at a per annum rate equal to the lower of (i) the Base Rate plus
3.75% and (ii) the maximum amount permitted by law. The Convertible Notes will mature on December 30, 2024, unless earlier accelerated,
converted, redeemed or repurchased.
The Convertible Notes, together with all accrued
but unpaid interest thereon, are convertible, in whole or in part, at any time prior to the payment in full of the principal amount thereof
(together with all accrued but unpaid interest thereon), into shares of Common Stock at a conversion price equal to $12.50 per share.
The conversion price with respect to the Convertible Notes is subject to adjustment to reflect stock splits and subdivisions, stock and
other dividends and distributions, recapitalizations, reclassifications, combinations and other similar changes in capital structure.
The conversion price with respect to the Convertible Notes is also subject to a broad-based weighted average anti-dilution adjustment
in the event we issue, or are deemed to have issued, shares of Common Stock, other than certain excepted issuances, at a price below the
conversion price then in effect.
COVID-19 Update
The spread of COVID-19, a novel strain of coronavirus,
has and continues to alter the behavior of business and people in a manner that is having negative effects on local, regional and global
economies. The COVID-19 pandemic continues to have an impact with short-term disruptions on our supply chains, as governments take robust
actions to minimize the spread of localized COVID-19 outbreaks. 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 have 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 have increased the risk of supply delays. We cannot at this time accurately predict what effects, or their extent, the coronavirus
outbreak will have on the remainder of our 2021 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 our results of operations and financial condition.
Further quantification of these pandemic effects,
to the extent relevant and material, are included in the discussion of results of operations below.
How We Assess the Performance of Our Business
In assessing the performance of our business,
we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of
our business are revenue, cost of revenue, research and development, sales and marketing, general and administrative, interest expense,
income taxes and net income. To further help us assess our performance with these key indicators, we use Adjusted EBITDA as a non-GAAP
financial measure. We believe Adjusted EBITDA provides useful information to investors and expanded insight to measure our revenue and
cost performance as a supplement to our GAAP consolidated financial statements. See the “Adjusted EBITDA” sections below for
a reconciliation to net income (loss), the most directly comparable GAAP measure.
Revenues
We derive the majority of our revenues from sales
of our networking products, with the remaining revenue generated from software licenses and service fees relating to non-recurring engineering,
product maintenance contracts and professional services for our products. We sell our products and services to end customers, distributors
and resellers. Products and services may be sold separately or in bundled packages.
Our top three customers accounted for 60.4% and
63.0% of revenue for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and
2020, our top three customers accounted for 59.6% and 64.2%, respectively.
Our sales outside the U.S. and North America accounted for
73.2% and 68.1% of our total revenue in three months ended September 30, 2021 and 2020, respectively, and 70.3% and 67.3% of our total
revenue in nine months ended September 30, 2021 and 2020, respectively. The following table identifies the percentage of our revenue by
customer geographic region in the periods identified.
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Geographic Area
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
United States
|
|
|
26.2
|
%
|
|
|
31.8
|
%
|
|
|
29.2
|
%
|
|
|
31.9
|
%
|
Other North America
|
|
|
0.6
|
%
|
|
|
0.1
|
%
|
|
|
0.5
|
%
|
|
|
0.8
|
%
|
North America
|
|
|
26.8
|
%
|
|
|
31.9
|
%
|
|
|
29.7
|
%
|
|
|
32.7
|
%
|
India
|
|
|
32.4
|
%
|
|
|
24.7
|
%
|
|
|
20.4
|
%
|
|
|
24.4
|
%
|
Japan
|
|
|
22.0
|
%
|
|
|
26.8
|
%
|
|
|
34.0
|
%
|
|
|
27.4
|
%
|
Other Asia
|
|
|
2.7
|
%
|
|
|
2.5
|
%
|
|
|
2.4
|
%
|
|
|
1.5
|
%
|
Asia
|
|
|
57.1
|
%
|
|
|
54.0
|
%
|
|
|
56.8
|
%
|
|
|
53.3
|
%
|
Europe
|
|
|
1.2
|
%
|
|
|
4.6
|
%
|
|
|
3.8
|
%
|
|
|
5.2
|
%
|
Africa and the Middle East
|
|
|
11.6
|
%
|
|
|
5.8
|
%
|
|
|
5.8
|
%
|
|
|
5.5
|
%
|
Latin America and the Caribbean
|
|
|
3.3
|
%
|
|
|
3.7
|
%
|
|
|
3.9
|
%
|
|
|
3.3
|
%
|
Total revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Cost of Revenues
Cost of revenues consists of component and material
costs, direct labor costs, warranty costs, royalties, overhead related to manufacture of our products and customer support costs. Our
gross margin is affected by changes in our product mix both because our gross margin on software and services is higher than the gross
margin on base station related equipment, and because our different product lines generate different margins. In addition, our gross
margin is affected by changes in the average selling price of our systems and volume discounts granted to significant customers. The
COVID-19 pandemic continues to have an impact with disruptions to our supply chains, which have caused extended component lead times,
increased component costs, as well as disruption and increased expenses in logistics. We expect the average selling prices of our existing
products to continue to decline and we intend to continue to implement product cost reductions and develop and introduce new products
or product enhancements in an effort to maintain or increase our gross margins. Further, we may derive an increasing
proportion of our revenue from the sale of our integrated systems through distribution channels. Revenue derived from these sales channels
typically carries a lower gross margin than direct sales.
Operating Expenses
Research and Development
Research and development expenses consist primarily
of salaries and related costs for personnel and expenses for design, development, testing facilities and equipment depreciation. These
expenses also include costs associated with product development efforts, including consulting fees and prototyping costs from initial
product concept to manufacture and production as well as sub-contracted development work. We expect to continue to make substantial investments
in research and development.
Sales and Marketing
Sales and marketing expenses consist of salaries
and related costs for personnel, sales commissions, consulting and agent’s fees and expenses for advertising, travel, technical
assistance, trade shows, and promotional and demonstration materials. We expect to continue to incur substantial expenditures related
to sales and marketing activities.
General and Administrative
General and administrative expenses consist primarily
of salaries and related expenses for our personnel, audit, professional and consulting fees and facilities costs.
Non-Operating Expenses
Interest Expense, Net
Interest expense consists primarily of interest
associated with our senior secured credit facility, which consisted of a term loan and revolving credit facility, the Convertible Notes
and two subordinated loan facilities. Interest on the term loan was determined based on the highest of the LIBOR Rate, commercial lending
rate of the collateral agent and federal funds rate, plus an applicable margin. Interest on the revolving credit facility is based on
the LIBOR Rate plus an applicable margin. On December 30, 2020 we amended and restated the terms of our credit facility with Fortress.
(See Note 9 of the notes to unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further
discussion on this agreement.)
Income Tax (Expense) Benefit
Our provision for income tax (expense) benefit
includes the expected benefit of all deferred tax assets, including our net operating loss carryforwards. Our net operating loss carryforwards
will begin to expire in 2025 and continue to expire through 2037. Our tax (expense) benefit has been impacted by non-deductible expenses,
including equity compensation and research and development amortization.
Net Loss
Net loss is determined by subtracting operating
and non-operating expenses from revenues.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income before
depreciation and amortization, interest expense and income taxes, and also adjusted to add back share-based compensation costs, changes
in the fair value of the warrant liability and embedded derivatives and one-time costs related to the Business Combination, as these costs
are not considered a part of our core business operations and are not an indicator of ongoing, future company performance. We use Adjusted
EBITDA to evaluate our performance, both internally and as compared to our peers, because these measures exclude certain items that may
not be indicative of our core operating results, as well as items that can vary widely among companies within our industry. For example,
share-based compensation costs can be subject to volatility from changes in the market price per share of our Common Stock or variations
in the value and number of shares granted.
Adjusted EBITDA is one of the primary metrics
used by management to evaluate the financial performance of our business because it excludes, among other things, the effects of certain
transactions that are outside the control of management, while other measures can differ significantly depending on long-term strategic
decisions regarding capital structure, the jurisdictions in which we operate and capital investments.
We present this non-GAAP financial measure because
we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we
believe it is helpful in highlighting trends in our operating results by focusing on our core operating results and is useful to evaluate
our performance in conjunction with our GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure and should not be considered
as an alternative to operating income, net income or earnings per share, as a measure of operating performance, cash flows or as a measure
of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered
a substitute for or superior to GAAP measures.
In particular, Adjusted EBITDA is subject to certain
limitations, including the following:
|
●
|
Adjusted EBITDA does not reflect interest expense, or the amounts necessary to service interest or principal payments under the Fortress Credit Agreement;
|
|
●
|
Adjusted EBITDA does not reflect income tax provision (benefit), and because the payment of taxes is part of our operations, tax provision is a necessary element of our costs and ability to operate;
|
|
●
|
Although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any costs of such replacements;
|
|
●
|
Adjusted EBITDA does not reflect the noncash component of share-based compensation;
|
|
●
|
Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations; and
|
|
●
|
Other companies in our industry may calculate Adjusted EBITDA or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.
|
We adjust for these limitations by relying primarily
on our GAAP results and using Adjusted EBITDA only as supplemental information.
Segments
Our business is organized around one reportable
segment, the development and supply of broadband wireless products and technologies. This is based on the objectives of the business and
how our chief operating decision maker, the President and Chief Executive Officer, monitors operating performance and allocates resources.
Results of Operations
The following table summarizes key components
of our results of operations for the periods indicated:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
$
|
38,923
|
|
|
$
|
36,038
|
|
|
$
|
126,906
|
|
|
$
|
91,409
|
|
Cost of revenues
|
|
|
21,815
|
|
|
|
18,693
|
|
|
|
69,626
|
|
|
|
44,625
|
|
Gross profit
|
|
|
17,108
|
|
|
|
17,345
|
|
|
|
57,280
|
|
|
|
46,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
17,529
|
|
|
|
13,239
|
|
|
|
47,427
|
|
|
|
38,952
|
|
Sales and marketing
|
|
|
10,315
|
|
|
|
7,051
|
|
|
|
25,157
|
|
|
|
21,464
|
|
General and administrative
|
|
|
19,347
|
|
|
|
4,043
|
|
|
|
28,247
|
|
|
|
11,990
|
|
Amortization of intangibles
|
|
|
299
|
|
|
|
596
|
|
|
|
897
|
|
|
|
1,374
|
|
Loss on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
Total operating expenses
|
|
|
47,490
|
|
|
|
24,929
|
|
|
|
101,728
|
|
|
|
73,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(30,382
|
)
|
|
|
(7,584
|
)
|
|
|
(44,448
|
)
|
|
|
(27,018
|
)
|
Interest expense, net
|
|
|
(3,630
|
)
|
|
|
(1,480
|
)
|
|
|
(8,580
|
)
|
|
|
(4,676
|
)
|
Gain on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
2,096
|
|
|
|
-
|
|
Other (expense) income, net
|
|
|
7,516
|
|
|
|
(685
|
)
|
|
|
636
|
|
|
|
(1,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(26,496
|
)
|
|
|
(9,749
|
)
|
|
|
(50,296
|
)
|
|
|
(33,619
|
)
|
Income tax expense
|
|
|
(457
|
)
|
|
|
(172
|
)
|
|
|
(624
|
)
|
|
|
(370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(26,953
|
)
|
|
$
|
(9,921
|
)
|
|
$
|
(50,920
|
)
|
|
$
|
(33,989
|
)
|
Three Months Ended September 30, 2021 Compared to the Three Months
Ended September 30, 2020
Revenues
Revenues for the above periods are presented below:
|
|
Three Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
$
|
32,447
|
|
|
|
83.4
|
%
|
|
$
|
25,227
|
|
|
|
70.0
|
%
|
Maintenance, warranty and services
|
|
|
6,476
|
|
|
|
16.6
|
%
|
|
|
10,811
|
|
|
|
30.0
|
%
|
Total revenues
|
|
$
|
38,923
|
|
|
|
100.0
|
%
|
|
$
|
36,038
|
|
|
|
100.0
|
%
|
Revenue from products and software licenses of
$32.4 million for the three months ended September 30, 2021 increased by $7.2 million from $25.2 million for the three months ended September
30, 2020. This increase was primarily due to increases in sales of products to one customer in Asia Pacific of $3.4 million, sales of
products to one customer in Africa and the Middle East of $2.1 million and sales of products to two customers in the U.S. of $1.8 million.
Revenue from maintenance, warranty and services
of $6.5 million for the three months ended September 30, 2021 decreased by $4.3 million from $10.8 million for the three months ended
September 30, 2020. This decrease was primarily due to the termination of a maintenance agreement with a North American customer which
generated revenue of $2.7 million in the three months ended September 30, 2020 and other service revenue decreased by $1.7 million due
to successful completion of projects in the three months ended September 30, 2020 not replicated in the three months ended September 30,
2021.
Cost of Revenues
Cost of revenues for the above periods are presented
below:
|
|
Three Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
$
|
20,990
|
|
|
|
53.9
|
%
|
|
$
|
17,344
|
|
|
|
48.1
|
%
|
Maintenance, warranty and services
|
|
|
825
|
|
|
|
2.1
|
%
|
|
|
1,349
|
|
|
|
3.8
|
%
|
Total cost of revenues
|
|
$
|
21,815
|
|
|
|
56.0
|
%
|
|
$
|
18,693
|
|
|
|
51.9
|
%
|
Cost of revenues from products and software licenses
of $21.0 million for the three months ended September 30, 2021 increased by $3.7 million from $17.3 million for the three months ended
September 30, 2020. This increase was primarily due to revenue growth, offset by an increase in indirect costs caused by the worldwide
shortage of electronics, component costs and expediting fees and limited availability of cargo space.
Cost of revenues from maintenance, warranty and
services of $0.8 million for the three months ended September 30, 2021 decreased by $0.5 million from $1.3 million for the three months
ended September 30, 2020 due to lower revenue in the three months ended September 30, 2021.
Operating Expenses
Operating expenses for the above periods are presented
below:
|
|
Three Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
17,529
|
|
|
|
45.0
|
%
|
|
$
|
13,239
|
|
|
|
36.7
|
%
|
Sales and marketing
|
|
|
10,315
|
|
|
|
26.5
|
%
|
|
|
7,051
|
|
|
|
19.6
|
%
|
General and administrative
|
|
|
19,347
|
|
|
|
49.7
|
%
|
|
|
4,043
|
|
|
|
11.2
|
%
|
Amortization of intangibles
|
|
|
299
|
|
|
|
0.8
|
%
|
|
|
596
|
|
|
|
1.7
|
%
|
Total operating expenses
|
|
$
|
47,490
|
|
|
|
122.0
|
%
|
|
$
|
24,929
|
|
|
|
69.2
|
%
|
Research and development— Research
and development expenses were $17.5 million for the three months ended September 30, 2021, an increase of $4.3 million from $13.2 million
for the three months ended September 30, 2020. The increase was primarily due to the MIP payout of $1.8 million, increased headcount-related
expenses of $1.5 million and increased patent fee provision of $1.0 million.
Sales and marketing— Sales and marketing
expenses were $10.3 million for the three months ended September 30, 2021, an increase of $3.2 million from $7.1 million for the three
months ended September 30, 2020, primarily due to the MIP payout of $3.3 million.
General and administrative— General
and administrative expenses of $19.3 million for the three months ended September 30, 2021 increased by $15.3 million from $4.0 million
for the three months ended September 30, 2020. The increase was primarily due to the MIP payout of $13.4 million, increased director and
officer insurance and other public company expenses of $0.6 million, increased professional and legal fees of $0.7 million, an increase
in headcount and related costs of $0.3 million and increased facility costs of $0.3 million.
Amortization of intangibles— Amortization
of intangibles of $0.3 million for the three months ended September 30, 2021 decreased by $0.3 million from $0.6 million for the three
months ended September 30, 2020 due to the amortization of trademarks completing.
Non-Operating Expenses
Interest expense, net— Interest expense, net
was $3.6 million for the three months ended September 30, 2021, an increase of $2.1 million from $1.5 million for the three months ended
September 30, 2020. The increase was primarily due to higher interest rates under the Fortress Credit Agreement and Convertible Notes,
compared to the PWB Facility in place for the three months ended September 30, 2020.
Other (expense) income, net— Other
(expense) income, net was income of $7.5 million for the three months ended September 30, 2021, a difference of $8.2 million from an expense
of $0.7 million for the three months ended September 30, 2020. The difference was primarily due to $7.7 million in gains on changes to
the fair value of the warrant and derivative fair values offset by $0.2 million in foreign currency losses.
Income tax expense— Income tax expense
was $0.5 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively.
Net Loss
We had a net loss of $27.0 million for the three
months ended September 30, 2021 compared to a net loss of $9.9 million for the three months ended September 30, 2020, a decrease of $17.1
million due to the same factors described above.
Non-GAAP Financial Measures
Adjusted EBITDA
The following table presents the reconciliation
of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA:
|
|
Three Months Ended
September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
2020
|
|
Net Loss
|
|
$
|
(26,953
|
)
|
|
$
|
(9,921
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
3,630
|
|
|
|
1,480
|
|
Income tax (benefit) expense
|
|
|
457
|
|
|
|
172
|
|
Depreciation and amortization
|
|
|
988
|
|
|
|
1,278
|
|
EBITDA
|
|
|
(21,878
|
)
|
|
|
(6,991
|
)
|
Share-based compensation expense
|
|
|
661
|
|
|
|
495
|
|
Change in fair value of warrant liability and derivatives
|
|
|
(11,562
|
)
|
|
|
692
|
|
Transaction costs allocated to the warrants
|
|
|
3,824
|
|
|
|
-
|
|
Management Incentive Plan expense related to Business Combination
|
|
|
18,513
|
|
|
|
–
|
|
Adjusted EBITDA
|
|
$
|
(10,442
|
)
|
|
$
|
(5,804
|
)
|
Nine Months Ended September 30, 2021 Compared to the Nine Months
Ended September 30, 2020
Revenues
Revenues for the above periods are presented below:
|
|
Nine Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
$
|
106,487
|
|
|
|
83.9
|
%
|
|
$
|
60,520
|
|
|
|
66.2
|
%
|
Maintenance, warranty and services
|
|
|
20,419
|
|
|
|
16.1
|
%
|
|
|
30,889
|
|
|
|
33.8
|
%
|
Total revenues
|
|
$
|
126,906
|
|
|
|
100.0
|
%
|
|
$
|
91,409
|
|
|
|
100.0
|
%
|
Revenue from products and software licenses
of $106.5 million for the nine months ended September 30, 2021 increased by $46.0 million from $60.5 million for the nine months
ended September 30, 2020. This increase was primarily due to increase in sales of products in Asia Pacific of $26.3 million,
primarily to two customers, and growth in distribution sales in the North American market of $13.6 million, while Middle
East and Africa, Latin America and Europe accounted for $2.6 million, $2.3 million and $1.0 million respectively.
Revenue from maintenance, warranty and services
of $20.4 million for the nine months ended September 30, 2021 decreased by $10.5 million from $30.9 million for the nine months ended
September 30, 2020. This decrease was primarily due to the termination of a maintenance and features agreement with a North American customer
at the end of the first quarter of 2021 resulted in revenue of $6.2 million during the nine months ended September 30, 2020 that did not
recur in the nine months ended September 30, 2021 and successful completion of time and materials projects in the nine months ended
September 30, 2020 which resulted in revenue of $2.9 million for an Asia Pacific customer and $1.4 million for a European group that did
not recur in the nine months ended September 30, 2021.
Cost of Revenues
Cost of revenues for the above periods are presented
below:
|
|
Nine Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and software licenses
|
|
$
|
66,605
|
|
|
|
52.5
|
%
|
|
$
|
41,179
|
|
|
|
45.0
|
%
|
Maintenance, warranty and services
|
|
|
3,021
|
|
|
|
2.4
|
%
|
|
|
3,446
|
|
|
|
3.8
|
%
|
Total cost of revenues
|
|
$
|
69,626
|
|
|
|
54.9
|
%
|
|
$
|
44,625
|
|
|
|
48.8
|
%
|
Cost of revenues from products and software licenses
of $66.6 million for the nine months ended September 30, 2021 increased by $25.4 million from $41.2 million for the nine months ended
September 30, 2020. This increase was primarily due to revenue growth which was impacted by a change in product mix, with most of the
growth relating to product sales, which carry lower margins than services. In addition, there has been an increase in indirect costs caused
by the worldwide shortage of electronics, component costs and expediting fees and limited availability of cargo space.
Cost of revenues from maintenance, warranty and
services of $3.0 million for the nine months ended September 30, 2021 decreased by $0.4 million from $3.4 million for
the nine months ended September 30, 2020, which is attributable to a decrease in revenues from maintenance.
Operating Expenses
Operating expenses for the above periods are presented
below:
|
|
Nine Months Ended September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
% of
Revenue
|
|
|
2020
|
|
|
% of
Revenue
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
47,427
|
|
|
|
37.4
|
%
|
|
$
|
38,952
|
|
|
|
42.6
|
%
|
Sales and marketing
|
|
|
25,157
|
|
|
|
19.8
|
%
|
|
|
21,464
|
|
|
|
23.5
|
%
|
General and administrative
|
|
|
28,247
|
|
|
|
22.3
|
%
|
|
|
11,990
|
|
|
|
13.1
|
%
|
Amortization of intangibles
|
|
|
897
|
|
|
|
0.7
|
%
|
|
|
1,374
|
|
|
|
1.5
|
%
|
Loss on sale of assets
|
|
|
-
|
|
|
|
-
|
%
|
|
|
22
|
|
|
|
-
|
%
|
Total operating expenses
|
|
$
|
101,728
|
|
|
|
80.2
|
%
|
|
$
|
73,802
|
|
|
|
80.7
|
%
|
Research and development— Research
and development expenses were $47.4 million for the nine months ended September 30, 2021, an increase of $8.4 million from $39.0 million
for the nine months ended September 30, 2020. The increase was primarily due to increased headcount expenses of $5.2 million, the MIP
payout of $1.8 million, an increased patent fee provision of $1.0 million and $0.4 million of other increased costs.
Sales and marketing— Sales and marketing
expenses were $25.2 million for the nine months ended September 30, 2021, an increase of $3.7 million from $21.5 million for the nine
months ended September 30, 2020. The increase was the result of the MIP payout of $3.3 million and $0.4 million of other increased costs.
General and administrative— General
and administrative expenses of $28.2 million for the nine months ended September 30, 2021 increased by $16.2 million from $12.0 million
for the nine months ended September 30, 2020. The increase was primarily due to the MIP payout of $13.4 million, increased legal and professional
fees of $1.4 million, increased director and officer insurance and other public company expenses of $0.6 million, $0.4 million of additional
share-based compensation and an increase in other costs of $0.4 million.
Amortization of intangibles— Amortization
of intangibles of $0.9 million for the nine months ended September 30, 2021 decreased by $0.5 million from $1.4 million for the nine months
ended September 30, 2020 due to the amortization of trademarks completing.
Non-Operating Expenses
Interest expense, net— Interest expense,
net was $8.6 million for the nine months ended September 30, 2021, an increase of $3.9 million from $4.7 million for the nine months ended
September 30, 2020. The increase was primarily due to higher interest rates under the Fortress Credit Agreement and Convertible Notes,
compared to the PWB Facility in place for the nine months ended September 30, 2020.
Gain on extinguishment of debt – Gain
on extinguishment of debt was $2.1 million for the nine months ended September 30, 2021, an increase of $2.1 million from the nine months
ended September 30, 2020. For the nine months ended September 30, 2021, we recorded a gain on extinguishment of debt for the PPP Loan
of $2.1 million and the accrued interest of $23 thousand.
Other income (expense), net— Other
income (expense), net was income of $0.6 million for the nine months ended September 30, 2021, a difference of $2.5 million from an expense
of $1.9 million for the nine months ended September 30, 2020. The difference was primarily due to $4.9 million in gains on changes to
the fair value of the warrant liability and derivative fair values offset by $2.4 million in foreign currency losses.
Income tax expense— Income tax expense
was $0.6 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively.
Net Loss
We had a net loss of $50.9 million for the nine
months ended September 30, 2021 compared to a net loss of $34.0 million for the nine months ended September 30, 2020, a decrease of $16.9
million due to the same factors described above.
Non-GAAP Financial Measures
Adjusted EBITDA
The following table presents the reconciliation
of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA:
|
|
Nine Months Ended
September 30,
|
|
($ in thousands)
|
|
2021
|
|
|
2020
|
|
Net Loss
|
|
$
|
(50,920
|
)
|
|
$
|
(33,989
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
8,580
|
|
|
|
4,676
|
|
Income tax expense
|
|
|
624
|
|
|
|
370
|
|
Depreciation and amortization
|
|
|
3,117
|
|
|
|
3,624
|
|
EBITDA
|
|
|
(38,599
|
)
|
|
|
(25,319
|
)
|
Share-based compensation expense
|
|
|
2,150
|
|
|
|
1,482
|
|
Change in fair value of warrant liability and derivatives
|
|
|
(7,045
|
)
|
|
|
1,756
|
|
Transaction costs allocated to the warrants
|
|
|
3,824
|
|
|
|
-
|
|
Management Incentive Plan expense related to Business Combination
|
|
|
18,513
|
|
|
|
–
|
|
Adjusted EBITDA
|
|
$
|
(21,157
|
)
|
|
$
|
(22,081
|
)
|
Liquidity and Capital Resources
To date, our principal sources of liquidity have
been our cash and cash equivalents and cash generated from operations, proceeds from the issuance of long term debt, preferred and common
stock, and the sale of certain receivables. Our capital requirements depend on a number of factors, including sales, the extent of our
spending on research and development, expansion of sales and marketing activities and market adoption of our products and services.
We 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, we used $45.3 million in cash flows
from operating activities, primarily from the collection of our outstanding accounts receivables. We are investing heavily in 5G research
and development and expect to use cash from operations during the remainder of 2021 to fund research and development activities. Cash
on hand and the available borrowing capacity under the Fortress Credit Agreement may not allow us to meet our forecasted cash requirements.
Days sales outstanding (“DSO”) is
a measurement of the time it takes to collect receivables. DSO is calculated by dividing accounts receivable, net as of the end of the
quarter by the average daily revenue for the quarter. Average daily revenue for the quarter is calculated by dividing the quarterly revenue
by ninety days. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected. We are
also actively evaluating the potential negative impact of COVID-19 on our customers’ ability to pay our accounts receivable. DSO
can fluctuate due to the timing and nature of contracts, as well as the payment terms of individual customers. DSO was 124 days and 79
days as of September 30, 2021 and December 31, 2020, respectively. The increase in DSO as of September 30, 2021 is attributable
to an increase in the balance of contract assets and higher sales to customers with longer average payment terms. Notwithstanding the
DSO of 79 days as of December 31, 2020, our accounts receivable were $71.6 million due to high sales volumes in the fourth quarter of
2020. As of September 30, 2021, our accounts receivable were $53.4 million.
During 2020, we and four of our wholly owned
subsidiaries had the PWB Facility with PWB and Ally. Under the PWB Facility, we could borrow up to $45 million, subject to
compliance with certain covenants. (See Note 7 of the notes to the unaudited condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q.) In addition to the PWB Facility, we had an aggregate of $39.0 million of subordinated debt with
two other lenders. (See Notes 8 and 9 of the notes to the unaudited condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q.)
During 2020, we entered into several amendments
to the PWB Facility. These amendments modified the financial and funding covenants and extended the due date for the audited consolidated
financial statements. The PWB Facility was extended to mature on December 31, 2020. On December 30, 2020, Fortress and certain other lenders
purchased the outstanding indebtedness under the PWB Facility. Fortress replaced PWB as administrative agent and collateral agent under
the facility. On the same date, Fortress, the other lenders party thereto, Legacy Airspan and certain of its subsidiaries modified the
terms of such indebtedness by amending and restating the existing credit agreement, including an extension of the maturity date.
On August 6, 2015, we issued Golden Wayford Limited
the $10.0 million subordinated Golden Wayford Note pursuant to the subordinated convertible purchase agreement, also dated August 6, 2015.
The Golden Wayford Note, in the amount of $9.0 million plus interest, matured on September 30, 2020. We were not able to agree to an extended
maturity date and the Golden Wayford Note remained outstanding as of December 31, 2020 and in default under the terms of the arrangement.
We were granted a limited waiver under the Fortress Credit Agreement which waives each actual and prospective default and event of default
existing under the Fortress Credit Agreement directly as a result of the non-payment of the Golden Wayford Note for so long as the Golden
Wayford Note remains in effect. The waiver is limited to the actual and prospective defaults under the Fortress Credit Agreement as they
existed on December 30, 2020 and not to any other change in facts or circumstances occurring after December 30, 2020. The waiver does
not restrict Fortress from exercising any rights or remedies they may have with respect to any other default or event of default under
the Fortress Credit Agreement or the related loan documents.
On December 30, 2020, Legacy Airspan and
each of our subsidiaries (other than Dense Air Limited or any of its subsidiaries) as guarantors, entered into the Fortress Credit
Agreement with Fortress. At Closing, on August 13, 2021, the Company, Legacy Airspan and certain of our 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. As of September 30, 2021, we were not in
compliance with all applicable covenants under the Fortress Credit Agreement; however, we were granted a waiver from compliance for
these covenants as of September 30, 2021 and prospectively for December 31, 2021. See Note 7 and Note 9 of the notes to the
unaudited condensed consolidated financial statements included in this Quarterly Reports on Form 10-Q for further discussion on this
agreement.
On August 13, 2021, we closed the Business Combination.
In connection with the Closing, we issued 7,500,000 shares of Common Stock to the PIPE Investors, at a price of $10.00 per share, for
aggregate consideration of $75.0 million, and $50.0 million in aggregate principal amount of Convertible Notes. As of September 30,
2021, we were not in compliance with all applicable covenants under the Fortress Convertible Note Agreement; however, we were granted
a waiver from compliance with these covenants as of September 30, 2021 and prospectively for December 31, 2021. See Note 10 of the notes
to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion of
this agreement.
As of September 30, 2021, the Company had commitments
with its main subcontract manufacturers under various purchase orders and forecast arrangements of $86.9 million, the majority of
which have expected delivery dates during the next six months.
As of the date of this report, we believe our
existing cash resources are sufficient to fund the cash needs of our business for at least the next 12 months.
Cash Flows
The following table summarizes the changes to
our cash flows for the periods presented:
|
|
For the Nine Months Ended September 30,
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(45,313
|
)
|
|
$
|
(15,458
|
)
|
Net cash used in investing activities
|
|
|
(4,287
|
)
|
|
|
(1,159
|
)
|
Net cash provided by financing activities
|
|
|
116,226
|
|
|
|
23,749
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
66,626
|
|
|
|
7,132
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
|
18,618
|
|
|
|
3,013
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
85,244
|
|
|
$
|
10,145
|
|
Operating Activities
Net cash used in operating activities was $45.3 million
for the nine months ended September 30, 2021, an increase of $29.8 million from net cash used in operating activities of $15.5 million
for the nine months ended September 30, 2020. The increase is a result of $2.3 million less generated from working capital, $16.9 million
less from results of our operations and a $10.6 million decrease in non-cash adjustments.
Investing Activities
Net cash used in investing activities was $4.3 million
for the nine months ended September 30, 2021, an increase of $3.1 million from $1.2 million for the nine months ended September
30, 2020 due to higher purchases of property and equipment.
Financing Activities
Net cash provided by financing activities was $116.2 million
for the nine months ended September 30, 2021. This included $115.5 of net proceeds from the Business Combination, $0.5 million of net
proceeds from the sale of Legacy Airspan Series H senior preferred stock, $0.1 million of proceeds from the issuance of Legacy Airspan
Series H warrants and $78 thousand of proceeds from the exercise of stock options.
Net cash provided by financing activities was
$23.7 million for the nine months ended September 30, 2020. This included $2.1 million from borrowings under long-term debt and $21.9
million of net proceeds from the sale of Legacy Airspan Series G senior preferred stock offset by $0.2 million of net repayments under
a line of credit.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition
and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance
with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis, we evaluate the effectiveness of our estimates and judgments,
including those related to revenue recognition, allowance for doubtful accounts, intangible assets, net, impairment of long-lived assets,
preferred stock warrants, share-based compensation and income taxes.
We base our estimates and judgments on historical
experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions and may change as future events occur.
We believe the following critical accounting policies
are dependent on significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue recognition
We derive the majority of our revenue from sales
of our networking products and software licenses, with the remaining revenue generated from service fees relating to maintenance contracts,
professional services and training for our products. We sell our products and services to end customers, distributors and resellers. Products
and services may be sold separately or in bundled packages.
A contract’s transaction price is allocated
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of our
contracts have multiple distinct performance obligations, as the promise to transfer individual goods or services is separately identifiable
from other promises in the contracts and the customer can benefit from these individual goods or services either on their own or together
with other resources that are readily available to the customer. For contracts with multiple performance obligations, we allocate the
contract’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling
prices are determined based on the prices at which we separately sell these products. For items that are not sold separately, we estimate
the stand-alone selling prices using either an expected cost-plus margin or the adjusted market assessment approach depending on the nature
of the specific performance obligation.
For all of our product sales, revenue is recognized
when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs
at shipment of the product. For product sales, we generally do not grant return privileges, except for defective products during the warranty
period. Sales taxes collected from customers are excluded from revenues.
Revenue from non-recurring engineering is recognized
at a point in time or over time depending on if the customer controls the asset being created or enhanced.
Revenue from professional service contracts primarily
relates to training and other consulting arrangements performed by us for our customers. Revenues from professional services contracts
provided on a time and materials basis are recognized when we have the right to invoice under the practical expedient as amounts correspond
directly with the value of the services rendered to date.
Revenue from product maintenance contracts is
recognized over time as our performance obligations are satisfied.
Revenue from software licenses is recognized when
the software license is delivered to the customer. There are no further performance obligations once the software license is delivered
to the customer.
Revenue related to shipping and handling activities
is included in product revenues. Revenue related to the reimbursement of out-of-pocket costs are accounted for as variable consideration.
Intangible Assets, Net
Intangible assets, net includes Goodwill and Other
Intangible Assets. Goodwill and intangible assets result primarily from business combination acquisitions. Our intangible assets include
internally developed technology, customer relationships, trademarks and non-compete agreements.
Goodwill
Goodwill results primarily from business combination
acquisitions. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair
value of the net tangible assets and other intangible assets acquired. Goodwill is not amortized, rather, an impairment test is conducted
on an annual basis, or more frequently if indicators of impairment are present, which are determined through a qualitative assessment.
A qualitative assessment includes consideration of the economic, industry and market conditions in addition to our overall financial performance
and the financial performance of these assets. If our qualitative assessment does not conclude that it is more likely than not that the
estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test,
the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of
valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth
rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions
used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt
structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment.
If not, we compare the fair value with its carrying amount. To the extent the carrying amount exceeds its fair value, an impairment charge
of the reporting unit’s goodwill would be necessary. Our annual assessment date is December 31.
Other Intangible Assets
We have recorded other finite-lived intangible
assets as a result of the Mimosa business combination. Our internally developed technology, customer relationships, trademarks and non-compete
agreements are amortized utilizing an accelerated method over their estimated useful lives. When establishing useful lives, we consider
the period and the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up; or, if that pattern
cannot be reliably determined, using a straight-line amortization method over a period that may be shorter than the ultimate life of such
intangible asset. There is no residual value associated with our finite-lived intangible assets. We review our trade name assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.
We review for impairment indicators of finite-lived
intangibles and other long-lived assets as described below in “Impairment of long-lived assets.”
Impairment of long-lived assets
We review our long-lived assets for impairment
when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. This review consists of
a comparison of the carrying value of the asset with the asset’s expected future undiscounted cash flows. Estimates of expected
future cash flows represent management’s best estimate based on reasonable and supportable assumptions and projections. If the expected
undiscounted future cash flows exceed the carrying value of the asset, no impairment is recognized. If the carrying value of the asset
exceeds the expected undiscounted future cash flows, impairment exists and is determined by the excess of the carrying value over the
fair value of the asset. Any impairment provisions recognized are permanent and may not be restored in the future. No impairment of long-lived
assets was recorded in the three and nine months ended September 30, 2021 or 2020, as a result of our assessments.
Convertible Notes
Concurrent with the Business Combination, we issued
the 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 ASC 470-20. We evaluated the guidance in
ASC 815 and concluded the conversion option does not meet ASC 815-10-15-74(a) conditions as the conversion option is not considered indexed
to our Common Stock. As a result the redemption feature and conversion option were bifurcated from the Convertible Notes and will be separately
measured at fair value at each reporting period.
Common Stock Warrants and Post-Combination Warrants
NBA issued 11,500,000 Public Warrants
and 545,000 Private Placement Warrants in connection with NBA initial public offering. The Common Stock Warrants entitle
each holder to purchase one share of 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, we issued
Post-Combination Warrants exercisable for 9,000,000 shares of Company Common Stock. The Post-Combination Warrants issued pursuant
to the Post-Combination Warrant Agreement 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, 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.
We evaluated the Common Stock Warrants and Post
Combination Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity, 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, we recorded these warrants as liabilities on the Condensed Consolidated Balance Sheets at fair
value, with subsequent changes in their respective fair values recognized in the change in fair value of Common Stock Warrant liabilities
within the Consolidated Statements of Operations at each reporting date.
Share-based compensation
We apply ASC 718, Share-based Payments. ASC 718
requires awards classified as equity awards to be accounted for using the estimated grant date fair value. The value of the portion
of the award that is ultimately expected to vest is recognized as an expense in the 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. Because share-based compensation expense
is based on awards that are ultimately expected to vest, share-based compensation expense has been reduced to account for estimated forfeitures.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates.
We determine the fair value of stock options using
the Black-Scholes option pricing model, which is impacted by the following assumptions:
|
●
|
Expected Term — Expected term is estimated based on our prior five years of historical data regarding expired, forfeited or if applicable, exercise behavior.
|
|
●
|
Expected Volatility — Since we have limited historical basis for determining our own volatility, the expected volatility assumption was based on the average historical volatility of a representative peer group, which includes consideration of the peer company’s industry, market capitalization, state of life cycle and capital structure.
|
|
●
|
Expected Dividend Yield — The dividend yield assumption is based on our history and our expectation of no dividend payouts.
|
|
●
|
Risk-Free Interest Rate — The risk-free interest rate assumption is based upon observed interest rates appropriate for an equivalent remaining term equal to the expected life of the award.
|
Income taxes
We account 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, we consider tax regulations of the jurisdictions
in which we operate, 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 are recorded related to deferred tax assets based on the “more likely than not” criteria of
ASC 740.
ASC 740-10 requires that we 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. We do not have any other material uncertain tax positions. We recognize interest accrued
related to unrecognized tax benefits, if any in interest expense and penalties in operating expenses.
Recent Accounting Pronouncements
Refer to Note 2 of our unaudited condensed consolidated
unaudited financial statements included in this filing for further information on Accounting Pronouncements.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements,
including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either
have, or are reasonably likely to have, a current or future material effect on our condensed consolidated financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public
companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable
to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating
the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set
forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to,
among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant
to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the
Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial
statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between
executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions
will apply for a period of five years following the completion of NBA’s initial public offering or until we are no longer an “emerging
growth company,” whichever is earlier.
We will remain an “emerging growth company”
under the JOBS Act until the earliest of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing
of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) when
we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our common
equity held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter;
or (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year
period.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Interest Rate Risk
Interest on the senior term loan under the Fortress
Credit Agreement, commencing December 30, 2020, is determined by reference to either LIBOR or a “base rate”, in each case,
plus an applicable margin, based on the respective level of our Net EBITDA Leverage Ratio.
The interest rate for Tranche 1 (the initial term
loan) under the Fortress Credit Agreement is based on the level of our Net EBITDA Leverage Ratio. The initial applicable rate for Tranche
1 is set at Level V – which is the base rate plus 10.0% per annum, of which the margin cash component is 5.5% and the margin
PIK component is 4.5%. With respect to Tranche 2, the relevant applicable rate is 5.0% and is payable monthly as interest paid in kind.
(See Note 9 of the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.)
Because interest expense is subject to fluctuation,
if interest rates increase, our debt service obligations on such variable rate indebtedness would increase even though the amount borrowed
remained the same. Accordingly, an increase in interest rates would adversely affect our profitability. Due to the economic effects of
the COVID-19 pandemic, market interest rates have declined significantly, with the 30-day LIBOR rate remaining constant at 0.9% as of
September 30, 2021. We cannot predict, however, whether or for how long interest rates will remain at these low levels.
During 2020, the interest rates charged under
the PWB Facility ranged as follows:
|
●
|
revolving facility: from 6.0% to 7.0%;
|
|
●
|
term loan: from 7.75% to 8.75%; and
|
|
●
|
non-formula loan: from 6.0% to 8.75%.
|
During the first nine months of 2021, the interest
rates charged under the Fortress Credit Agreement remained constant at:
On July 30, 2021, we entered into the
Fortress Convertible Note Agreement, pursuant to which we issued $50.0 million aggregate principal amount of Convertible Notes. The
stated rate of interest is 7% on the Convertible Notes, payable quarterly. See Note 10 of the notes to the unaudited condensed
consolidated financial statements included in this Quarterly Report on Form 10-Q.
Foreign Currency Exchange Rate Risk
The following table shows our revenue by currency
as a percentage of our total revenue for the periods presented:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
U.S. dollars
|
|
|
74.7
|
%
|
|
|
71.4
|
%
|
|
|
63.6
|
%
|
|
|
69.6
|
%
|
Japanese yen
|
|
|
22.0
|
%
|
|
|
26.5
|
%
|
|
|
33.8
|
%
|
|
|
27.3
|
%
|
Other
|
|
|
3.3
|
%
|
|
|
2.1
|
%
|
|
|
2.6
|
%
|
|
|
3.1
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Total Japanese yen denominated sales for the periods
presented were:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
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2021
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2020
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2021
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2020
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Japanese yen
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JPY 942,552
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JPY 999,069
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JPY 4,604,881
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JPY 2,632,998
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Average exchange rate of $1 U.S. = JPY
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110.02
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104.61
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107.38
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105.51
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U.S. dollar equivalent
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$
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8,567
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$
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9,551
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$
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42,884
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$
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24,955
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If the average exchange rates used had been higher or lower by 10%, they would have decreased or increased the total Japanese yen denominated sale value by:
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$
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779
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$
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868
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$
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3,898
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$
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2,269
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We expect the proportions of sales in Japanese
yen to fluctuate over time although they were a small percentage of the total in all years. Our sensitivity analysis for changes in foreign
currency exchange rates does not factor in changes in sales volumes.
Our operating results are affected by movements
in foreign currency exchange rates against the U.S. dollar, particularly the U.K. pound sterling and Israeli shekel. This is because most
of our operating expenses, which may fluctuate over time, are incurred in pounds sterling or Israeli shekels.
During the nine months
ended September 30, 2021 and 2020, we paid operating expenses in local currency of approximately 16 million pounds sterling (approximately
$23 million) and 10 million pounds sterling (approximately $13 million), respectively. If during the nine months ended September 30, 2021
and 2020 the average exchange rates had been higher or lower by 10%, the pound sterling denominated operating expenses would have decreased
or increased by $3 million and $1 million, during the nine months ended September 30, 2021 and 2020, respectively. None of these expenses
were hedged.
During the nine months
ended September 30, 2021 and 2020, we paid operating expenses in local currency of approximately 115 million Israeli shekel (approximately
$35 million) and 107 million Israeli shekel (approximately $31 million), respectively. If during the nine months ended September 30, 2021
and 2020 the average exchange rates had been higher or lower by 10%, the Israeli shekel denominated operating expenses would have decreased
or increased by $4 million and $3 million, during the nine months ended September 30, 2021 and 2020, respectively. None of these expenses
were hedged.
Item 4. Controls and Procedures
Previously Reported
Material Weakness
In
light of the SEC’s Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies,
promulgated on April 12, 2021, New Beginnings Acquisition Corp. reported a material weakness due to the failure of its disclosure controls
and procedures to initially identify, evaluate and record properly its warrants, as described in its Form 10-K/A filed May 14, 2021.
In addition, in connection
with Legacy Airspan’s financial statement close process for the years ended December 31, 2020 and 2019, a material weakness was
identified occurred because (i) Legacy Airspan had inadequate processes and controls to ensure an appropriate level of precision
related to its financial statement footnote disclosures, and (ii) Legacy Airspan did not have sufficient resources with the adequate
technical skills to meet the emerging needs of its financial reporting requirements.
Management, with oversight
from the Audit Committee of our board of directors (the “Board”),and the Board is in the process of implementing a remediation
plan for this material weakness, including, among other things, hiring additional accounting personnel and implementing process level
and management review controls to ensure financial statement disclosures are complete and accurate and to identify and address emerging
risks.
Evaluation of Disclosure
Controls and Procedures
Under the supervision
and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation
of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal
executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
As a result of the material
weaknesses discussed above, our chief executive officer and chief financial officer have concluded that, as of September 30, 2021, our
disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified
in SEC rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer
and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal
Control over Financial Reporting
Other than our remediation
efforts described above, there was no change in our internal control over financial reporting that occurred during the quarter ended of
September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to
Note 13 – Commitments and Contingencies in the Notes to the unaudited condensed consolidated financial statements contained elsewhere
in this Quarterly Report on Form 10–Q for information regarding certain litigation to which we are a party.
Item 1A. Risk Factors
Factors that could cause our actual results to
differ materially from those in this Quarterly Report are any of the risks described in the “Risk Factors” section of the
Company’s Annual Report on Form 10-K (as amended) filed with the U.S. Securities and Exchange Commission (the “SEC”),
or our registration statement on Form S-1 (the “Registration Statement”) as filed with
the SEC on September 10, 2021, or under the heading “Risk Factors” in our prospectus
as filed with the SEC on September 20, 2021 pursuant to Rule 424(b)(3), which is incorporated herein by reference. Any of these
factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk
factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Other
than the additional risk factor detailed below, there have been no material changes to our principal risks that we believe are
material to our business, results of operations and financial condition, from the risk factors previously disclosed in the
prospectus mentioned above which is accessible on the SEC’s website at www.sec.gov.
The inability of our supply chain to deliver certain
key components could materially adversely affect our business, financial condition and results of operations.
Our products
contain a significant number of components that we source globally, including from Vietnam and Malaysia. If our supply
chain fails to deliver products to us in sufficient quality and quantity on a timely basis, we will be challenged to meet our
customer order delivery timelines and could incur significant additional expenses for expedited freight and other related costs. Our
supply chain has been, and may continue to be, adversely impacted by events outside of our control, including macroeconomic events,
trade restrictions, economic recessions or natural occurrences, such as the ongoing disruptions from the COVID-19 pandemic. As a
result of COVID-19, we have experienced delays in supply chain deliveries, extended lead times and shortages of key components, some
raw material cost increases and slowdowns at certain production facilities. These disruptions have delayed and may continue to delay
the timing of some orders and expected deliveries of our products. Certain of our customer contracts contain penalties for late or
incomplete deliveries. These supply chain disruptions and delays may, in turn, cause us to be unable to make timely or complete
deliveries to our customers, which may expose us to those penalties. Further, supply chain disruptions could result in longer
lead times, inventory supply challenges and further increased costs, which could harm our ability to compete for future business.
Accordingly, we remain subject to significant risks of supply chain disruptions or shortages, which could materially adversely
affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
Contemporaneously with
the execution of the Business Combination Agreement, the PIPE Investors entered into certain subscription agreements, pursuant to which
such investors agreed to subscribe for and purchase an aggregate of 7,500,000 shares of Common Stock at a purchase price of $10.00 per
share for an aggregate purchase price of $75,000,000. At the Closing, we consummated the sale of such shares.
On July 30, 2021, we
entered into the Fortress Convertible Note Agreement, pursuant to which, on August 13, 2021, in connection with the Closing, we issued
$50,000,000 aggregate principal amount of Convertible Notes, which are convertible into shares of our Common Stock.
We issued the securities
in the foregoing transactions under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”),
and/or Rule 506 of Regulation D promulgated under the Securities Act of 1933, as a transaction not requiring registration under
Section 5 of the Securities Act. The parties receiving the securities represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed
to the certificates representing the securities (or reflected in restricted book entry with our transfer agent). The parties also had
adequate access, through business or other relationships, to information about us.
Item 3. Defaults Upon
Senior Securities
Not applicable.
Item 4. Mine Safety
Disclosure
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or
incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit
Number
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Description
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3.1
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Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed with the SEC on August 19, 2021)
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3.2
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Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed with the SEC on August 19, 2021)
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4.1
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Warrant Agreement dated August 13, 2021 by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.4 to Form 8-K filed with the SEC on August 19, 2021)
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10.1
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Amended and Restated Registration Rights and Lock-Up Agreement, dated as of August 13, 2021 by and among the Company, certain equityholders of the Company named therein and certain equityholders of Legacy Airspan named therein (incorporated by reference to Exhibit 10.1 to Form 8-K filed with the SEC on August 19, 2021)
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10.2
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Stockholders Agreement, dated as of August 13, 2021, by and among the Company and certain stockholders of the Company named therein (incorporated by reference to Exhibit 10.2 to Form 8-K filed with the SEC on August 19, 2021)
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10.3
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Waiver and Consent, Second Amendment, Restatement, Joinder and Omnibus Amendment to Credit Agreement and Other Loan Documents, dated as of August 13, 2021, by and among the Company, Airspan Networks Inc., certain of its subsidiaries, as guarantors, DBFIP ANI LLC, as administrative and collateral agent, and the holders of the Convertible Notes party thereto (incorporated by reference to Exhibit 10.3 to Form 8-K filed with the SEC on August 19, 2021)
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10.4
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Joinder Agreement, dated as of August 13, 2021, by Airspan Networks Holdings Inc. and the guarantors party thereto to DBFIP ANI LLC, in its capacities as administrative agent, collateral agent and trustee for the holders of the Convertible Notes (incorporated by reference to Exhibit 10.48 to Form 8-K filed with the SEC on August 19, 2021)
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10.5
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Senior Secured Convertible Note Purchase and Guarantee Agreement, dated July 30, 2021, by and among the Company, Artemis Merger Sub Corp., DBFIP ANI LLC, as agent, collateral agent and trustee and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to Form 8-K filed with the SEC on August 19, 2021)
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10.6
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2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-4 filed with the SEC on May 14, 2021)
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31.1*
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Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
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31.2*
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Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
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32.1*
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
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32.2*
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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104
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Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)
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*
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These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
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SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized on November 12, 2021.
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AIRSPAN NETWORKS HOLDINGS INC.
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By:
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/s/ Eric Stonestrom
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Name:
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Eric Stonestrom
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Title:
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Chief Executive Officer
(Principal Executive Officer)
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By:
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/s/ David Brant
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Name:
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David Brant
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Title:
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Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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