**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




x
            
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934**For
                the quarterly period ended September 28, 2008**ORo
            
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the transition period from ________________ to
                ________________





Commission
      file number: **000-31031**





**AIRSPAN
      NETWORKS INC.**


(Exact
      name of registrant as specified in its charter)





**Washington**
            
            **75-2743995**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)**777
                Yamato Road, Suite 310**
              **Boca
                Raton, FL**
            
            **33431**(Address
                of principal executive offices)
            
            (Zip
                Code)





**561-893-8670**


(Registrant’s
      telephone number, including area code)





**None**


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





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


Yes
x No
o





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




Large
      accelerated filer o A ccelerated
      filer x Non-a ccelerated
      filer oSmaller reporting company
x





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


Yes
oNo
x





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.





Class
            
            Outstanding
                at October 31, 2008Common
                Stock, $.0003 par value per share
            
            59,472,165
                shares








**TABLE
      OF CONTENTS**




**Page**
              **Number****PART
                I. FINANCIAL INFORMATION**Item
                1.
            Financial
                StatementsCondensed
                Consolidated Balance Sheets
            
            3Condensed
                Consolidated Statements of Operations
            
            4Condensed
                Consolidated Statements of Cash Flows
            
            5Notes
                to Condensed Consolidated Financial Statements
            
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            17Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            26Item
                4.
            Controls
                and Procedures
            
            27**PART
                II. OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            
            28Item
                1A.
            Risk
                Factors
            
            29Item
                6.
            Exhibits
            
            30Signatures
            
            30





2




**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**


**AIRSPAN
        NETWORKS INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(in
        thousands, except for share data)**
 
 **September 28,**
              
              **December 31,****2008**
              
              **2007****(unaudited)**
              
              **(audited)****ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              21,936
              
              $
              30,815Restricted
                  cash
              
              
              200
              
              
              393Short-term
                  investments
              
              
              9,013
              
              
              5,504Accounts
                  receivable, less allowance for doubtful accounts of$2,559
                  at September 28, 2008 and $2,878 at December 31, 2007
              
              
              18,251
              
              
              33,853Inventory
              
              
              13,101
              
              
              16,720Prepaid
                  expenses and other current assets
              
              
              5,655
              
              
              5,338Total
                  current assets
              
              
              68,156
              
              
              92,623Property,
                  plant and equipment, net
              
              
              5,121
              
              
              5,895Goodwill
              
              
              10,231
              
              
              10,231Intangible
                  assets, net
              
              
              1,171
              
              
              1,870Other
                  non-current assets
              
              
              3,475
              
              
              3,402**Total
                  assets**
              
              $
              88,154
              
              $
              114,021**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Accounts
                  payable
              
              $
              9,214
              
              $
              11,938Deferred
                  revenue
              
              
              3,407
              
              
              5,125Customer
                  advances
              
              
              291
              
              
              892Other
                  accrued expenses
              
              
              11,471
              
              
              13,063Short-term
                  debt
              
              
              12,500
              
              
              7,500Total
                  current liabilities
              
              
              36,883
              
              
              38,518Long-term
                  debt and accrued interest on long-term debt
              
              
              1,978
              
              
              1,978**Total
                  liabilities**
              
              
              38,861
              
              
              40,496**Commitments
                  and contingencies****Stockholders'
                  equity**Preferred
                  stock, $0.0001 par value; 250,000 shares authorized atSeptember
                  28, 2008 and December 31, 2007; 200,690 sharesissued
                  at September 28, 2008 and December 31, 2007
              
              
              -
              
              
              -Common
                  stock, $0.0003 par value; 100,000,000 shares authorizedat
                  September 28, 2008 and December 31, 2007; 59,400,042 and 58,542,517
                  shares
                  issued at September 28, 2008 and December 31, 2007,
                  respectively
              
              
              18
              
              
              17Note
                  receivable – stockholder
              
              
              (87
              )
              
              (87
              )Additional
                  paid-in capital
              
              
              352,111
              
              
              349,718Accumulated
                  deficit
              
              
              (302,749
              )
              
              (276,123
              )**Total
                  stockholders' equity**
              
              
              49,293
              
              
              73,525**Total
                  liabilities and stockholders' equity**
              
              $
              88,154
              
              $
              114,021





*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*


3





**AIRSPAN
      NETWORKS INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


(in
      thousands except for share and per share data)





**Quarter Ended**
            
            **Year-to-Date****September 28,**
              **2008**
            
            **September 30,**
              **2007**
            
            **September 28,**
              **2008**
            
            **September 30,**
              **2007****(unaudited)**
            
            **(unaudited)**Revenue
            
            $
            17,789
            
            $
            22,470
            
            $
            56,339
            
            $
            71,203Cost
                of revenue
            
            
            (12,294
            )
            
            (14,680
            )
            
            (38,864
            )
            
            (53,312
            )Gross
                profit
            
            
            5,495
            
            
            7,790
            
            
            17,475
            
            
            17,891Operating
                expenses:Research
                and development
            
            
            5,511
            
            
            6,185
            
            
            19,185
            
            
            17,572Sales
                and marketing
            
            
            3,653
            
            
            3,521
            
            
            12,194
            
            
            10,391Bad
                debts
            
            
            492
            
            
            632
            
            
            965
            
            
            1,587General
                and administrative
            
            
            3,537
            
            
            3,311
            
            
            11,072
            
            
            11,475Amortization
                of intangibles
            
            
            230
            
            
            234
            
            
            698
            
            
            702Restructuring
            
            
            50
            
            
            -
            
            
            690
            
            
            (485
            )Total
                operating expenses
            
            
            13,473
            
            
            13,883
            
            
            44,804
            
            
            41,242Loss
                from operations
            
            
            (7,978
            )
            
            (6,093
            )
            
            (27,329
            )
            
            (23,351
            )Interest
                income, net
            
            
            54
            
            
            31
            
            
            287
            
            
            518Other
                income (expense), net
            
            
            (358
            )
            
            317
            
            
            (45
            )
            
            321Loss
                before income taxes
            
            
            (8,282
            )
            
            (5,745
            )
            
            (27,087
            )
            
            (22,512
            )Income
                tax (provision)/benefit
            
            
            528
            
            
            (24
            )
            
            461
            
            
            (61
            )Net
                loss before deemed dividend
            
            
            (7,754
            )
            
            (5,769
            )
            
            (26,626
            )
            
            (22,573
            )Deemed
                dividend associated withissuance
                of preferred stock
            
            
            -
            
            
            (4,138
            )
            
            -
            
            
            (4,138
            )Net
                loss attributable tocommon
                stockholders
            
            $
            (7,754
            )
            $
            (9,907
            )
            $
            (26,626
            )
            $
            (26,711
            )Net
                loss per share - basic and diluted
            
            $
            (0.13
            )
            $
            (0.24
            )
            $
            (0.45
            )
            $
            (0.65
            )Weighted
                average shares outstanding- basic and diluted
            
            
            59,030,071
            
            
            41,905,579
            
            
            58,770,836
            
            
            41,084,881





*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*


4


**AIRSPAN
      NETWORKS INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(in
      thousands)**





**Year to date**
            
            **Year to date****September 28,**
              **2008**
            
            **September 30,**
              **2007****(unaudited)**
            
            **(unaudited)****Cash
                flows from operating activities**Net
                loss
            
            $
            (26,626
            )
            $
            (22,573
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Depreciation
                and amortization
            
            
            2,985
            
            
            2,835Accrued
                interest on long-term debt
            
            
            -
            
            
            31Non-cash
                stock compensation
            
            
            2,003
            
            
            1,846Loss
                on sale of property, plant and equipment
            
            
            2
            
            
            10Bad
                debts
            
            
            965
            
            
            1,587Changes
                in operating assets and liabilities:Decrease
                in receivables
            
            
            14,637
            
            
            3,118Decrease
                in inventories
            
            
            3,619
            
            
            6,135Increase
                in other current assets
            
            
            (317
            )
            
            572Decrease
                in accounts payables
            
            
            (2,724
            )
            
            (253
            )Decrease
                in deferred revenue
            
            
            (1,717
            )
            
            (1,543
            )Decrease
                in customer advances
            
            
            (601
            )
            
            (432
            )Decrease
                in other accrued expenses
            
            
            (1,567
            )
            
            (4,901
            )Decrease
                in other operating assets
            
            
            120
            
            
            933Net
                cash used in operating activities
            
            
            (9,221
            )
            
            (12,635
            )**Cash
                flows from investing activities**Purchase
                of property, plant and equipment
            
            
            (1,515
            )
            
            (1,921
            )Purchase
                of short-term investments
            
            
            (10,659
            )
            
            (12,274
            )Proceeds
                from sale of short-term investments
            
            
            7,150
            
            
            11,994Net
                cash used in investing activities
            
            
            (5,024
            )
            
            (2,201
            )**Cash
                flows from financing activities**Borrowings
                under line of credit
            
            
            5,000
            
            
            7,500Proceeds
                from public offering, net of issuance costs
            
            
            -
            
            
            28,022Proceeds
                from the exercise of stock options
            
            
            62
            
            
            1,122Proceeds
                from the sale of common stock
            
            
            304
            
            
            602Net
                cash provided by financing activities
            
            
            5,366
            
            
            37,246(Decrease)
                increase in cash and cash equivalents
            
            
            (8,879
            )
            
            22,410**Cash
                and cash equivalents, beginning of period**
            
            
            30,815
            
            
            15,890**Cash
                and cash equivalents, end of period**
            
            $
            21,936
            
            $
            38,300





*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*


5





**Airspan
      Networks Inc.**


**Notes
      to Condensed Consolidated Financial Statements******


(Unaudited)





**NOTE
      1 – BUSINESS AND BASIS OF PRESENTATION**





Airspan
      Networks Inc. (“Airspan” or “the Company”) is a global supplier of broadband
      wireless equipment supporting the Worldwide Interoperability for Microwave
      Access (“WiMAX”) protocol standard, which provides a wide area telecommunication
      access network to connect end-users to telecom backbone networks. The WiMAX
      standard is established by the WiMAX Forum ® ,
      a
      self-regulatory, industry standards-setting organization. While our main product
      focus is WiMAX, we utilize other supplemental technologies, including Wireless
      Fidelity (“WiFi”)
      and Voice-over-Internet Protocol (“VoIP”), which allow communications network
      operators and service providers to deliver high-speed data and voice services
      cost-effectively using wireless communications rather than wired
      infrastructure.




Historically,
      the primary market for our wireless systems has been fixed point to multi-point
      applications. Our development of new technology has expanded the market to
      include portable and mobile applications. Today, we produce radio base station
      equipment to transmit radio signals from a central location to the end-user
      who
      is equipped with a subscriber receiving unit. Our WiMAX products now enable
      major network migrations to Internet Protocol, which makes higher transmission
      speeds possible due to more efficient transmission techniques. After the
      expected certification of mobile WiMAX standards, we expect our mobile
      applications will be made available directly to end-user devices such as laptops
      and personal digital assistants to deliver wireless connectivity - at home,
      in
      the office and on the move. Leveraging our experience with WiMAX technology
      and
      our experience gained from 15 years of developing and deploying broadband
      wireless systems, we are focused on developing products for these mobile WiMAX
      applications in addition to our fixed wireless products.




Our
      primary target customers are communications service providers and other network
      operators that deploy WiMAX networks in licensed and unlicensed (license-exempt)
      spectrums worldwide. These customers include incumbent local exchange carriers
      (often referred to as “local exchange carriers”, “ILECs”, or simply telephone
      companies), Internet service providers (often referred to as “ISPs”), Wireless
      Internet Service providers (often referred to as “WISPs”), Mobile Virtual
      Network Operators (often referred to as “MVNOs”), Competitive Local Exchange
      Carriers (“CLECs”), and other telecommunications users, such as utilities and
      other enterprises. As mobile WiMAX products are deployed, we are also targeting
      mobile and cellular carriers, which represent a significant expansion of our
      traditional addressable market. Our broadband wireless systems have been
      installed by more than 500 network operators in more than 100
      countries.




Each
      of
      our wireless systems uses digital radio technologies, which provide wide-area
      or
      local-area coverage, robust security and resistance to fading. Our systems
      synchronize available bandwidth with the specific services being provided,
      thereby facilitating the most efficient use of radio equipment resources and
      spectrum. Our systems are designed as modular solutions enabling the expansion
      of existing deployments as technologies and customer needs evolve. We provide
      a
      wide range of subscriber devices that deliver voice and data connection, or
      a
      combination of both, eliminating the need for multiple access devices in
      customer premises.





Our
      network management systems provide diagnostic and management tools that allow
      our customers to monitor and optimize their installations. To facilitate the
      deployment and operation of our systems, we also offer network installation
      (generally through subcontractors), training, radio planning and support
      services.





In
      2007,
      we introduced a portable miniature device (the MiMAX subscriber terminal) that
      can be plugged into a standard laptop, enabling WiMAX for data services,
      including VoIP. Our MiMAX USB received WiMAX certification by the WiMAX
      Forum ® in the
      second quarter of 2008.





Earlier
      in 2008, we announced the MacroMAXe mobile-WiMAX base station, developed in
      partnership with Fujitsu. MacroMAXe is an all-in-one base station offering
      the
      range and features typically included in larger base station equipment. In
      addition, the MacroMAXe uses new Gallium-Nitride power amplifier technology
      from
      Fujitsu which allows for extremely low power consumption.




6





Our
      corporate headquarters are located in Boca Raton, Florida. Our main operations,
      manufacturing and product development centers are located in Uxbridge, United
      Kingdom and Airport City, Israel. Our telephone number in Boca Raton is (561)
      893-8670. Further contact details and the location of all our worldwide offices
      may be found at *www.airspan.com* .





*Basis
      of Presentation*





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
      do
      not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statements. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included and are of a normal
      recurring nature. The interim operating results are not necessarily indicative
      of operating results expected in subsequent periods or for the year as a
      whole.





The
      condensed consolidated balance sheet at December 31, 2007 has been derived
      from
      the audited financial statements at that date included in our Form 10-K for
      the
      year ended December 31, 2007 but does not include all of the information and
      footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. For further information,
      refer to the consolidated financial statements and footnotes thereto included
      in
      our Annual Report on Form 10-K for the year ended December 31, 2007.





Certain
      prior year amounts have been reclassified to conform to the current year
      classification.





All
      notes
      to the condensed consolidated financial statements are shown in thousands,
      except for share and per share data.




**NOTE
      2 - INVENTORY**





Inventory
      consists of the following:


**September 28,**
              
              **December 31,****2008**
              
              **2007****(unaudited)**
              
              **(audited)**Purchased
                  parts and materials
              
              $
              6,230
              
              $
              6,941Work
                  in process
              
              
              1,259
              
              
              1,283Finished
                  goods and consumables
              
              
              14,882
              
              
              20,585Inventory
                  provision
              
              
              (9,270
              )
              
              (12,089
              )$
              13,101
              
              $
              16,720


Inventories
      are stated at the lower of cost or market value. Cost includes all costs
      incurred in bringing each product to its present location and condition, as
      follows:




·
            Purchased
                parts and materials, finished goods — average cost·
            Work
                in process— cost of direct materials and labor.




**NOTE
      3 - ACCRUED RESTRUCTURING CHARGES**





In
      the
      fourth quarter of 2002, the decision was made to completely outsource all of
      our
      manufacturing. As a result, a $1.0 million restructuring charge was recorded
      for
      the closure of our Riverside, Uxbridge facility in 2003. All of this cost
      related to the excess facility. A further $0.4 million was recognized as
      restructuring in the income statement in the fourth quarter of 2003 as we
      reassessed the ability to sublease the Riverside facility. In the second quarter
      of 2007, the lessor completed renovations and incurred actual costs of
      approximately $0.8 million, which the Company was required to pay; therefore,
      we
      reduced the liability to $1.0 million, including the estimated legal and other
      fees we expected to incur. All cash outflows in connection with this
      restructuring were paid in February 2008.




7





In
      the
      third quarter of 2006, the Company commenced a company-wide restructuring
      program to reduce operating expenses. The operating expense reduction was
      accomplished primarily through reductions in worldwide headcount. In 2006,
      the
      Company recorded restructuring charges of $2.2 million. The Company made
      approximately $0.4 million of cash outlays in 2007 related to amounts accrued
      in
      2006. All remaining cash outlays related to this program were completed in
      the
      second quarter of 2007.




In
      the
      second quarter of 2008, the Company announced its intention to reduce worldwide
      operating expenses by approximately 15%. The operating expense reduction was
      accomplished primarily through reductions in worldwide headcount. In the second
      quarter of 2008, the Company recorded restructuring charges of $0.6 million.
      An
      additional $0.1 million was recorded as a restructuring charge in the third
      quarter of 2008. All payments in connection with these charges were made in
      the
      second and third quarters of 2008.




The
      restructuring charges and their utilization are summarized as follows:





**Total expected**
              **to be**
              **incurred**
            
            **Incurred**
              **during the**
              **quarter ended**
              **September 28,**
              **2008**
            
            **Cumulative**
              **incurred at**
              **September 28,**
              **2008****(unaudited)**
            
            **(unaudited)**
            
            **(unaudited)**Termination
                benefits
            
            $
            732
            
            $
            50
            
            $
            690Contract
                termination costs
            
            
            -
            
            
            -
            
            
            -Other
                associated costs
            
            
            -
            
            
            -
            
            
            -$
            732
            
            $
            50
            
            $
            690





**Balance at**
            
            
            
            
            
            **Balance at****Beginning**
            
            **Restructuring**
            
            
            
            **End****of Period**
            
            **Charge**
            
            **Utilized**
            
            **of Period****Nine
                months ended September 28, 2008 (unaudited)**Termination
                benefits
            
            $
            -
            
            $
            690
            
            $
            (690
            )
            $
            -Contract
                termination costs
            
            
            796
            
            
            -
            
            
            (796
            )
            
            -Other
                associated costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -$
            796
            
            $
            690
            
            $
            1,486
            )
            $
            -**Year
                ended December 31, 2007 (audited)**Termination
                benefits
            
            $
            375
            
            $
            -
            
            $
            (375
            )
            $
            -Contract
                termination costs
            
            
            1,437
            
            
            (639
            )
            
            (2
            )
            
            796Other
                associated costs
            
            
            50
            
            
            (50
            )
            
            -
            
            
            -$
            1,862
            
            $
            (689
            )
            $
            (377
            )
            $
            796





**NOTE
      4 – COMMITMENTS AND CONTINGENCIES**





*Commitments*





As
      of
      September 28, 2008, our material commitments consisted of obligations on
      operating leases, repayment of principal and interest owed on the loans made
      to
      us by the Finnish Funding Agency for Technology and Innovation (the “Tekes
      Loans”) and purchase commitments to our manufacturing subcontractors. These
      purchase commitments totaled $22.7 million at September 28, 2008. We have no
      material capital commitments.




8




*Warranty*





The
      Company provides limited warranties, usually for periods ranging from twelve
      to
      twenty-four months, to all purchasers of its new equipment. Warranty expense
      is
      accrued at the date revenue is recognized on the sale of equipment and is
      recognized as a cost of revenue. The expense is estimated based on analysis
      of
      historic costs and other relevant factors. Management believes that the amounts
      provided are sufficient for all future warranty costs on equipment sold through
      September 28, 2008 but if actual product failure rates, material usage or
      service delivery costs differ from estimates, revisions to the estimated
      warranty liability would be required.




Information
      regarding the changes in our product warranty liabilities was as follows for
      the
      nine months ended September 28, 2008.





**Balance at**
              **beginning**
              **of period**
            
            **Accrual**
              **for**
              **warranties**
              **issued**
              **during the**
              **period**
            
            **Changes**
              **in accruals**
              **related to**
              **pre-**
              **existing**
              **warranties**
              **(including**
              **changes in**
              **estimates)**
            
            **Settlements**
              **made (in**
              **cash or in**
              **kind)**
              **during the**
              **period**
            
            **Balance at**
              **end of**
              **period**Nine
                months ended September 28, 2008Product
                warranty liability
            
            $
            1,010
            
            $
            314
            
            $
            (37
            )
            $
            (275
            )
            $
            1,012





*Other
      guarantees*





As
      of
      September 28, 2008, the Company had pledged cash to banks as collateral for
      guarantees aggregating $1.2 million, of which $0.1 million is recorded as
      restricted cash in current assets related to customers and $1.1 million is
      recorded as other non-current assets related to property leases. The Company
      has
      also issued guarantees of its own obligations to customers under the line of
      credit provided by Silicon Valley Bank (“SVB”) for a total of $3.0 million,
      which does not require any related pledge of cash collateral. The Company has
      not recognized any liability for these guarantees. These guarantees will all
      expire before the end of 2011 with the majority expiring in 2009.





In
      addition to the guarantees mentioned above, the Company has issued a guarantee
      to Tekes, the main public funding organization for research and development
      in
      Finland, for the repayment of loans taken out by its fully consolidated
      subsidiary, Airspan Networks (Finland) OY (“Radionet”). These loans totaled $2.0
      million at September 28, 2008, which includes $0.2 million of accrued interest,
      and are recorded in long-term debt. This guarantee expires only when Radionet
      has fulfilled all its obligations to Tekes.





*Legal
      claims*




On
      and
      after July 23, 2001, three Class Action Complaints were filed in the United
      States District Court for the Southern District of New York naming as defendants
      Airspan, and certain current or former officers and directors (referred to
      herein as the “Individual Defendants”) together with certain underwriters of our
      July 2000 initial public offering. A Consolidated Amended Complaint, which
      is
      now the operative complaint, was filed on July 19, 2002. The complaint alleges
      violations of Sections 11 and 15 of the Securities Act of 1933 and Sections
      10(b) and 20(a) of the Securities Exchange Act of 1934 for issuing a
      Registration Statement and Prospectus that contained materially false and
      misleading information and failed to disclose material information. In
      particular, the plaintiffs allege that the underwriter-defendants agreed to
      allocate stock in our initial public offering to certain investors in exchange
      for excessive and undisclosed commissions and agreements by those investors
      to
      make additional purchases of stock in the aftermarket at pre-determined prices.
      The action seeks damages in an unspecified amount.




9




This
      action is being coordinated with approximately three hundred nearly identical
      actions filed against other companies. On October 9, 2002, the Court dismissed
      the Individual Defendants from the case without prejudice. This dismissal
      disposed of the Section 15 and 20(a) control person claims without
      prejudice.  On February 19, 2003, the Court dismissed the Section 10(b)
      claim against us, but allowed the Section 11 claim to proceed. On December
      5,
      2006, the Second Circuit vacated a decision by the district court granting
      class
      certification in six of the coordinated cases, which are intended to serve
      as
      test, or “focus,” cases.   The plaintiffs selected these six cases,
      which do not include Airspan.  The district court’s decisions in the six
      focus cases are intended to provide strong guidance for the parties in the
      remaining cases.  On April 6, 2007, the Second Circuit denied a petition
      for rehearing filed by the plaintiffs, but noted that the plaintiffs could
      ask
      the district court to certify more narrow classes than those that were
      rejected.




On
      August
      14, 2007, the plaintiffs filed amended complaints in the six focus cases. 
The amended complaints include a number of changes, such as changes to the
      definition of the purported class of investors.  On September 27, 2007, the
      plaintiffs moved to certify classes in the six focus cases.  The six focus
      case issuers and the underwriters named as defendants in the focus cases filed
      motions to dismiss the amended complaints against them.  On March 26, 2008,
      the District Court dismissed the Section 11 claims of those members of the
      putative classes in the focus cases who sold their securities for a price in
      excess of the initial offering price and those who purchased outside the
      previously certified class period.  With respect to all other claims, the
      motions to dismiss were denied.  On October 10, 2008, at the request of
      plaintiffs, plaintiffs’ motion for class certification was withdrawn, without
      prejudice. Due to the inherent uncertainties of litigation, we cannot accurately
      predict the ultimate outcome of the matter.  We cannot predict whether we
      will be able to renegotiate a settlement that complies with the Second Circuit’s
      mandate, nor can we predict the amount of any such settlement and whether that
      amount would be greater than Airspan’s insurance coverage.  If Airspan is
      found liable, we are unable to estimate or predict the potential damages that
      might be awarded, whether such damages would be greater than Airspan’s insurance
      coverage and whether such damages would have a material impact on our results
      of
      operations or financial condition in any future period.




On
      October 9, 2007, a purported  Airspan  shareholder
      filed a complaint for violation of Section 16(b) of the Securities Exchange
      Act of 1934, which prohibits short-swing trading, against the Company's initial
      public offering underwriters. The complaint, Vanessa
      Simmonds v.  Credit
      Suisse Group, et al., Case No. C07-01638, filed in the District Court for
      the Western District of Washington, seeks the recovery of short-swing
      profits. The Company is named as a nominal defendant. No recovery is
      sought from the Company.




From
      time
      to time, the Company receives and reviews offers from third parties with respect
      to licensing their patents and other intellectual property in connection with
      the manufacture of our WiMAX and other products. There can be no assurance
      that
      disputes will not arise with such third parties if no agreement can be reached
      regarding the licensing of such patents or intellectual property.




We
      have
      received letters/communications from Wi-LAN
      Inc. (“Wi-LAN”) offering
      licenses of various Wi-LAN patents and contending that products complying with
      802.11 and 802.16 standards are covered by certain patents allegedly owned
      by
      Wi-LAN. The Company, in consultation with its patent counsel, has been reviewing
      Wi-LAN's allegations and has had extensive correspondence with Wi-LAN regarding
      those allegations. We continue to believe that we do not require a license
      from
      Wi-LAN, however, Wi-LAN continues to threaten the Company with litigation unless
      it negotiates a license with Wi-LAN with respect to the patents in question.
      There can be no assurance as to the ultimate outcome of this
      matter.




Except
      as
      set forth above, we are not currently subject to any other material legal
      proceedings. We may from time to time become a party to various other legal
      proceedings arising in the ordinary course of our business.




**NOTE
      5 - STOCK COMPENSATION**




At
      September 28, 2008, we had three stock option plans as well as the 2004 Omnibus
      Equity Compensation Plan and the 2000 Employee Stock Purchase Plan (the “ESPP”).
      Awards under the 2004 Omnibus Equity Compensation Plan may be made to
      participants in the form of Incentive Stock Options, Nonqualified Stock Options,
      Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Awards,
      Performance Shares, Other Stock-Based Awards and others forms of equity based
      compensation as may be provided and are permissible under this Plan and the
      law.
      Employee stock options granted under all of the plans generally vest over a
      four-year period and expire on the tenth anniversary of their issuance. All
      options granted under the stock option plans had an exercise price equal to
      the
      market value of the underlying common stock on the date of grant. Restricted
      stock is common stock that is subject to a risk of forfeiture or other
      restrictions that will lapse upon satisfaction of specified performance
      conditions and/or the passage of time. Awards of restricted stock that vest
      only
      by the passage of time will generally fully vest after four years from the
      date
      of grant. At September 28, 2008, the Company had reserved a total of 11,930,242
      shares of its common stock for issuance under the above plans.




10





Under
      our
      ESPP, eligible employees may purchase shares of common stock through payroll
      deductions. 661,494 shares were issued during the nine months ended September
      28, 2008.




The
      following table summarizes share-based compensation expense under SFAS No.
      123
      (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) for the three and nine
      months ended September 28, 2008 and September 30, 2007, which was allocated
      as
      follows (in thousands):





Three
              Months
              Ended
              September
              28, 2008
            
            Three
              Months
              Ended
              September
              30, 2007
            
            Nine Months
              Ended
              September
              28, 2008
            
            Nine Months
              Ended
              September
              30, 2007Research
                and development
            
            $
            196
            
            $
            277
            
            $
            681
            
            $
            601Sales
                and marketing
            
            
            134
            
            
            152
            
            
            413
            
            
            548General
                and administrative
            
            
            278
            
            
            179
            
            
            834
            
            
            694Stock-based
                compensation expense included in operating expense
            
            
            608
            
            
            608
            
            
            1,928
            
            
            1,843Cost
                of sales
            
            
            21
            
            
            16
            
            
            75
            
            
            33Total
                stock-based compensation
            
            $
            629
            
            $
            624
            
            $
            2,003
            
            $
            1,876





SFAS
      123(R) requires companies to estimate the fair value of share-based awards
      on
      the date of grant using an option-pricing model. The value of the portion of
      the
      award that is ultimately expected to vest is recognized as an expense in our
      consolidated statement of operations over the requisite service periods.
      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. SFAS 123(R)
      requires forfeitures to be estimated at the time of grant and revised, if
      necessary, in subsequent periods if actual forfeitures differ from those
      estimates.




To
      calculate option-based compensation under SFAS 123(R), we used the Black-Scholes
      option-pricing model. Our determination of fair value of option-based awards
      on
      the date of grant using the Black-Scholes model is affected by our stock price
      as well as assumptions regarding a number of subjective variables. These
      variables include, but are not limited to our expected stock price volatility
      over the term of the awards, and actual and projected employee stock option
      exercise behaviors.





*Fair
      Value and Assumptions Used to Calculate Fair Value under SFAS
      123(R)*





There
      were no restricted stock shares granted during the first nine months of 2008.
      The weighted average fair value of each restricted stock share granted under
      our
      equity compensation plans for the first nine months of fiscal 2007 was $4.69.
      The fair value of each restricted stock award is estimated on the date of grant
      using the intrinsic value method.




11





The
      weighted average fair value of each option granted during the first nine months
      of 2008 and the first nine months of 2007 was $0.55 and $2.64, respectively.
      The
      fair value of each option award is estimated on the date of grant using the
      Black-Scholes option pricing model, using the following weighted average
      assumptions:





Nine Months EndedSeptember 28,
              2008
            
            September 30,
              2007Expected
                volatility
            
            
            82
            %
            
            80
            %Risk-free
                interest rate
            
            
            3.12
            %
            
            4.59
            %Expected
                life (years)
            
            
            5
            
            
            5Expected
                dividend yield
            
            
            0
            %
            
            0
            %





*Assumptions
      for Option-Based Awards under SFAS 123(R)*





The
      expected volatility is determined based on historical price changes of our
      common stock over a period of time which approximates the expected option
      term.





The
      risk-free interest rate assumption is based upon observed interest rates
      appropriate for the term of our stock options.




The
      expected term of options is estimated based on our historical data regarding
      exercise behavior.





The
      dividend yield assumption is based on our history and expectation of no dividend
      payouts.





As
      share-based compensation expense recognized in the consolidated statement of
      operations is based on awards ultimately expected to vest, it has been reduced
      for estimated forfeitures. Forfeitures were estimated based on our historical
      experience.





**NOTE
      6 - NET LOSS PER SHARE**





Net
      loss
      attributable to common stockholders per share is computed using the weighted
      average number of shares of common stock outstanding. Shares associated with
      stock options and common stock to be issued on the conversion of Series B
      Preferred Stock are not included in the calculation of diluted net loss
      attributable to common stockholders per share as they are
      anti-dilutive.




The
      following table sets forth the computation of basic and diluted net loss per
      share for the periods indicated.





**Quarter End**
            
            **Year-to-Date****September**
              **28,****2008**
            
            **September**
              **30,****2007**
            
            **September**
              **28, 2008**
            
            **September**
              **30, 2007****(unaudited)**
            
            **(unaudited)**Numerator:Net
                loss
            
            $
            (7,754
            )
            $
            (9,907
            )
            $
            (26,626
            )
            $
            (26,711
            )Denominator:Weighted
                average common shares outstanding basic and diluted
            
            
            59,030,071
            
            
            41,905,579
            
            
            58,770,836
            
            
            41,084,881Net
                loss per share- basic and diluted
            
            $
            (0.13
            )
            $
            (0.24
            )
            $
            (0.45
            )
            $
            (0.65
            )




12





There
      were 8,357,734 stock options outstanding at September 28, 2008 and 5,463,565
      stock options outstanding at September 30, 2007 that have been excluded from
      the
      computation of diluted net loss per share as their effect was anti-dilutive.
      If
      the Company had reported net income, the calculation of these per share amounts
      would have included the dilutive effect of these common stock equivalents using
      the treasury stock method for stock options. There were 200,690 shares of
      convertible preferred stock at September 28, 2008 and September 30, 2007,
      respectively, that were also excluded from the computation of diluted net loss
      per share as their effect was anti-dilutive. The 200,690 shares of convertible
      preferred stock would be convertible into 21,630,856 common shares as of
      September 28, 2008 and September 30, 2007, respectively. There were 87,637
      and
      109,940 non-vested shares of restricted stock at September 28, 2008 and
      September 30, 2007, respectively, that were excluded from the computation of
      diluted net loss per share as their effect was anti-dilutive.





**NOTE
      7 - GEOGRAPHIC INFORMATION**





As
      a
      developer and supplier of broadband wireless equipment, the Company has one
      reportable segment. The revenue of this single segment is comprised primarily
      of
      revenue from products and, to a lesser extent, services. In 2008, the majority
      of the Company’s revenue was generated from products manufactured in the United
      Kingdom, Mexico and Israel, with additional revenue generated from sales of
      original equipment manufacturers’ products.





An
      analysis of revenue by location of the customer is given below:


**Quarter
                End**
            
            **Year-to-Date****September
                28, 2008**
            
            **September
                30, 2007**
            
            **September
                28, 2008**
            
            **September
                30, 2007****(unaudited)**
            
            **(unaudited)**USA
                and Canada
            
            $
            3,996
            
            $
            1,954
            
            $
            9,343
            
            $
            6,890Asia
            
            
            2,564
            
            
            1,892
            
            
            6,184
            
            
            16,035Europe
            
            
            4,775
            
            
            7,439
            
            
            13,283
            
            
            23,046Africa
                and the Middle East
            
            
            1,908
            
            
            3,050
            
            
            11,567
            
            
            4,177Latin
                America and Caribbean
            
            
            4,546
            
            
            8,135
            
            
            15,962
            
            
            21,055$
            17,789
            
            $
            22,470
            
            $
            56,339
            
            $
            71,203





**NOTE
      8 – AMENDMENT TO LOAN AND SECURITY AGREEMENT**





On
      August
      21, 2008, we and our wholly-owned subsidiary, Airspan Communications Limited,
      entered into a Second Amendment to our August 1, 2006 Loan and Security
      Agreement, as amended August 7, 2007 (the “Loan and Security Agreement”) with
      SVB, with respect to a revolving credit line. For the term of the credit line,
      which expires on December 31, 2009, we may, subject to certain adjustments,
      borrow up to the lesser of (i) (a) 80% of eligible accounts receivable plus
      (as
      long as the Company’s worldwide cash and investments exceeds $20 million and the
      Company’s cash and investments maintained at SVB and its affiliates exceeds $15
      million) (b) the lesser of (1) 60% of eligible inventory and (2) $8 million
      (the
“Borrowing Base”) and (ii) $20 million. As of September 28, 2008, the Company
      had $2.2 million of unused available credit. We are currently using the credit
      line and we expect to continue to use it for the remainder of 2008. Although
      we
      believe the credit facility will increase our financial resources and financial
      flexibility, our use of the credit facility does present certain risks. Our
      ability to borrow under the credit facility is a function of, among other
      things, our base of eligible accounts receivable and inventory and the rate
      at
      which advances are made against eligible receivables and inventory (the “Advance
      Rate”). If the amount or quality of our accounts receivable or inventory
      deteriorates or the Advance Rate or eligibility criteria are adjusted adversely
      by SVB, our ability to borrow under the credit facility will be directly,
      negatively affected. If there is an adverse adjustment in the Borrowing Base
      at
      a time when we are unable to, within three business days, repay SVB the amount
      by which the Borrowing Base has been decreased, we will likely be in default
      under the Loan and Security Agreement. In addition, the credit facility requires
      us to satisfy certain financial covenants, including the maintenance of tangible
      net worth. As of September 28, 2008, the tangible net worth requirement was
      $30.0 million and the Company’s actual tangible net worth was $37.9 million. The
      Company was in compliance with all of the financial covenants at September
      28,
      2008. There is no assurance the Company will be able to meet this covenant
      in
      future quarters as required by the Loan and Security Agreement. In the event
      the
      Company is unable to meet this test in the future, we would plan to seek an
      amendment or waiver of this covenant. There can be no assurance that any such
      waiver or amendment would be granted. As a result, we may be required to repay
      any or all of our existing borrowings and we cannot provide any assurance that
      we will be able to borrow under the Loan and Security Agreement at a time when
      we most need money to fund working capital or other needs and prohibit us from
      paying dividends on our capital stock. The credit facility also contains various
      provisions that restrict our use of cash and operating flexibility. These
      provisions could have important consequences for us, including (i) causing
      us to
      use a portion of our cash flow from operations for debt repayment and/or service
      rather than other perceived needs, (ii) precluding us from incurring additional
      debt financing for future working capital or capital expenditures and (iii)
      impacting our ability to take advantage of significant, perceived business
      opportunities, such as acquisition opportunities or to react to market
      conditions. Our failure to meet financial and other covenants could give rise
      to
      a default under the Loan and Security Agreement. In the event of an uncured
      default, the Loan and Security Agreement provides that all amounts owed to
      SVB
      are immediately due and payable and that SVB has the right to enforce its
      security interest in our assets. The Loan and Security Agreement is secured
      by
      collateral, including all of our rights and interests in substantially all
      of
      our personal property, including accounts receivable, inventory, equipment,
      general intangibles, intellectual property, books and records, contract rights
      and proceeds of the above items. At September 28, 2008, $12.5 million of
      indebtedness was outstanding under the Loan and Security Agreement. Advances
      under the Loan and Security Agreement bear interest at SVB's prime rate plus
      a
      percentage ranging from 0.0% to 1.75%, depending on certain financial and
      collateral tests. The monthly interest is calculated based on the higher amount
      of outstanding borrowings or $10.0 million. We have issued $3.0 million of
      letters of credit under the facility, which were still outstanding at September
      28, 2008.




13





**NOTE
      9 - RECENT ACCOUNTING PRONOUNCEMENTS**





***Adopted
      Accounting Standards***




Effective
      January 1, 2008, the Company adopted SFAS No. 157, “Fair Value
      Measurements”, or SFAS 157, which defines fair value as the exchange price that
      would be received for an asset or paid to transfer a liability (an exit price)
      in the principal or most advantageous market for the asset or liability in
      an
      orderly transaction between market participants at the measurement date.
      SFAS 157 establishes a three-level fair value hierarchy that prioritizes
      the inputs used to measure fair value. This hierarchy requires entities to
      maximize the use of observable inputs and minimize the use of unobservable
      inputs. The three levels of inputs used to measure fair value are as
      follows:





Level
      1 –
quoted prices in active markets for identical assets or liabilities


Level
      2 –
inputs other than Level 1 quoted prices that are directly or indirectly
      observable


Level
      3 –
significant unobservable inputs that are supported by little or no market
      activity





The
      Company’s adoption of SFAS 157 did not have a material impact on its
      consolidated financial statements. The Company has segregated all financial
      assets and liabilities at fair value on a recurring basis into the most
      appropriate level within the fair value hierarchy based on the inputs used
      to
      determine the fair value at the measurement date in the table below. Financial
      Accounting Standards Board (“FASB”) Staff Position FSP FAS 157-2—Effective Date
      of FASB Statement No. 157 (“FSP FAS 157-2”) delayed the effective date of SFAS
      157 for all nonfinancial assets and liabilities until January 1, 2009,
      except those that are recognized or disclosed at fair value in the financial
      statements on a recurring basis. We
      are
      evaluating the impact that FSP
      FAS
      157-2 will
      have on our consolidated financial statements. In
      October 2008, the FASB issued Staff Position No. 157-3, *Determining the Fair Value of a Financial Asset When the Market for That Asset
      is Not Active* (FSP
      157-3). FSP 157-3 clarifies the application of SFAS 157 to financial assets
      for
      which an active market does not exist. Specifically, FSP 157-3 addresses the
      following SFAS 157 application issues: (1) how a reporting entity’s own
      assumptions should be considered in measuring fair value when observable inputs
      do not exist; (2) how observable inputs in inactive markets should be considered
      when measuring fair value; and (3) how the use of market quotes should be
      considered when assessing the relevance of inputs available to measure fair
      value. FSP 157-3 applies to financial assets within the scope of accounting
      pronouncements that require or permit fair value measurements in accordance
      with
      SFAS 157 and was effective upon issuance. We do not expect that FSP 157-3 will
      have a material impact on our consolidated financial statements.




14


As
      of
      September 28, 2008, financial assets and liabilities subject to fair value
      measurements were as follows (in thousands):


As of September
                  28, 2008Level 1
                  (a)
              
              Level 2
                  (b)
              
              Level 3
              
              BalanceAssetsCash
                  equivalents
              
              $
              10,498
              
              $
              649
              
              $
              -
              
              $
              11,147Available
                  for sale investments
              
              $
              -
              
              $
              9,007
              
              $
              -
              
              $
              9,007





(a)     These
      consist of money market funds that are priced at the market price.


(b)     These
      consist of commercial paper with short maturities and infrequent secondary
      market trades and are priced via mathematical calculations; in the event that
      a
      transaction is observed on the same security, the accretion schedule is
      revised.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows entities the option to measure
      eligible financial instruments at fair value as of specified dates. Such
      election, which may be applied on an instrument-by-instrument basis, is
      typically irrevocable once elected. Upon adoption, we did not elect the fair
      value option for any items within the scope of SFAS 159 and, therefore, the
      adoption of SFAS 159 did not have an impact on our consolidated financial
      statements.





In
      June
      2007, the FASB ratified Emerging Issues Task Force (“EITF”) 07-3, “Accounting
      for Nonrefundable Advance Payments for Goods or Services Received for Use in
      Future Research and Development Activities” (“EITF 07-3”). EITF 07-3 requires
      nonrefundable advance payments for research and development goods or services
      to
      be deferred and capitalized. The adoption of EITF 07-3 did not have a material
      effect on our consolidated financial statements.




In
      October 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a
      Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”). FSP
      157-3 clarifies the application of SFAS 157 in a market that is not active
      and
      provides an example to illustrate key considerations in determining the fair
      value of a financial asset when the market for that financial asset is not
      active. FSP 157-3 was effective for us on September 28, 2008 for all financial
      assets and liabilities recognized or disclosed at fair value in our Condensed
      Consolidated Financial Statements on a recurring basis (at least annually).
      The
      adoption of FSP 157-3 did not have a material impact on our consolidated
      financial statements.




***Future
      Adoption of Accounting Standards***




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”). SFAS 141R requires the acquiring entity in a
      business combination to recognize the full fair value of assets acquired and
      liabilities assumed in the transaction whether full or partial acquisition,
      establishes the acquisition-date fair value as the measurement objective for
      all
      assets acquired and liabilities assumed, requires expensing of most transaction
      and restructuring costs, and requires the acquirer to disclose all information
      needed to evaluate and understand the nature and financial effect of the
      business combination. SFAS 141R applies to all transactions or other events
      in
      which an entity obtains control of one or more businesses, including
      combinations achieved without transfer of consideration, for example, by
      contract alone or through the lapse of minority veto rights. SFAS 141R applies
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first fiscal year beginning after December 15, 2008.
      Management expects that the adoption of SFAS 141R could have a material effect
      on our consolidated financial statements if there are any acquisitions after
      January 1, 2009.





In
      December 2007, EITF 07-01, “Accounting for Collaborative Arrangements
      Related to the Development and Commercialization of Intellectual Property”
(“ EITF 07-01”)
      was issued. EITF 07-01
      prescribes the accounting for collaborations. It requires certain transactions
      between collaborators to be recorded in the income statement on either a gross
      or net basis within expenses when certain characteristics exist in the
      collaboration relationship. Based
      on
      the nature of the arrangement, payments to or from collaborators would be
      evaluated and the terms of the arrangement, the nature of the entity's business
      and whether those payments are within the scope of other accounting literature
      would be presented. Companies are also required to disclose the nature and
      purpose of collaborative arrangements along with the accounting policies and
      the
      classification and amounts of significant financial-statement amounts related
      to
      the arrangements. EITF 07-1 is effective for financial statements issued
      for fiscal years beginning after December 15, 2008, and interim periods
      within those fiscal years, and is to be applied retrospectively to all periods
      presented for all collaborative arrangements existing as of the effective date.
      We are in the process of reviewing whether the adoption ofEITF
      07-01 will have a material impact on our consolidated financial
      statements.


15




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an Amendment
      of ARB No. 51” (“SFAS
      160”) .
      SFAS
      160 will change the accounting and reporting for minority interests, which
      will
      be recharacterized as noncontrolling interests and classified as a separate
      component of equity rather than as a liability.  SFAS 160 is effective for
      fiscal years beginning on or after December 15, 2008. Management
      expects that the adoption of SFAS 160 will not have a material effect on our
      consolidated financial statements.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS
      161”).  SFAS 161 amends and expands the disclosure requirements of
      SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”
(“SFAS 133”) to provide a better understanding of how and why an entity uses
      derivative instruments, how derivative instruments and related hedged items
      are
      accounted for, and their effect on an entity’s financial position, financial
      performance, and cash flows.  SFAS 161 is effective for fiscal years
      beginning after November 15, 2008. We do not expect that the adoption of SFAS
      161 will have a material impact on our consolidated financial
      statements.





In
      April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of
      Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be
      considered in developing renewal or extension assumptions used to determine
      the
      useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
      and Other Intangible Assets”. FSP 142-3 is effective for fiscal years beginning
      after December 15, 2008. We
      do not
      expect that FSP
      142-3 will
      have
      a material impact on our consolidated financial statements.





In
      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
      Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the
      sources of accounting principles and provides entities with a framework for
      selecting the principles used in preparation of financial statements that are
      presented in conformity with generally accepted accounting principles (“GAAP”).
      The current GAAP hierarchy has been criticized because it is directed to the
      auditor rather than the entity, it is complex, and it ranks FASB Statements
      of
      Financial Accounting Concepts, which are subject to the same level of due
      process as FASB Statements of Financial Accounting Standards, below industry
      practices that are widely recognized as generally accepted but that are not
      subject to due process. The FASB believes the GAAP hierarchy should be directed
      to entities because it is the entity (not its auditors) that is responsible
      for
      selecting accounting principles for financial statements that are presented
      in
      conformity with GAAP. The adoption of SFAS 162 is not expected to have a
      material impact on our consolidated financial statements.





**NOTE
      10 – SUBSEQUENT EVENTS**





On
      November 5, 2008, the Company filed a definitive proxy statement with the
      Securities and Exchange Commission. The definitive proxy statement contains
      proposals (i) to approve an amendment to the Company’s Second Amended and
      Restated Articles of Incorporation, as amended, effecting a reverse stock split
      of the Company’s common stock at a ratio to be determined by the Company’s Board
      of Directors within a range of one-for-five shares to one-for-fifteen shares,
      (ii) to approve an amendment and restatement of the ESPP to increase the number
      of shares of common stock reserved for issuance thereunder and to allow for
      nine
      additional separate offering periods, the final offering period to commence
      on
      August 16, 2017 and terminate on August 15, 2018, and (iii) to approve a stock
      option exchange program under which eligible employees (including executive
      officers but excluding non-employee members of the Company’s Board of Directors)
      will be offered the opportunity to exchange their eligible options to purchase
      shares of common stock outstanding under the Company’s equity compensation plans
      for a smaller number of new options at a lower exercise price. The Company
      currently plans to hold a special meeting of shareholders to vote on these
      proposals on December 16, 2008.


16


**Item
      2.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




**The
      following discussion should be read in conjunction with the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2007, as well as the
      financial statements and notes thereto. Except for historical matters contained
      herein, statements made in this quarterly report on Form 10-Q are
      forward-looking and are made pursuant to the safe harbor provisions of the
      Private Securities Litigation Reform Act of 1995. Without limiting the
      generality of the foregoing, words such as “may”, “will”, “to”, “plan”,
“expect”, “believe”, “anticipate”, “intend”, “could”, “would”, “estimate”, or
“continue” or the negative other variations thereof or comparable terminology
      are intended to identify forward-looking statements. Investors and others are
      cautioned that a variety of factors, including certain risks, may affect our
      business and cause actual results to differ materially from those set forth
      in
      the forward-looking statements. These risk factors include, without limitation,
      (i) risks to our ability to develop and sell WiMAX certified mobile
      products in a timely fashion; (ii) a slowdown of expenditures by
      communication service providers and failure of the WiMAX market to develop
      as
      anticipated; (iii) increased competition from alternative communication
      systems; (iv) a higher than anticipated rate of decline in our legacy
      business and/or a slower than anticipated rate of growth in the WiMAX business;
      (v) encroachment of large telecommunications carriers and equipment
      suppliers on the WiMAX market; (vi) the failure of our existing or
      prospective customers to purchase products as projected; (vii) our
      inability to successfully implement cost reduction or containment programs;
      (viii) our inability to retain our key customers; (ix) possible
      infringement of third party technologies which may result in lawsuits that
      could
      be costly to defend and prohibit us from selling our products; (x) risks to
      our ability to compensate for declining sales of obsolescent products with
      increased sales of new products; and (xi) disruptions to our operations in
      Israel, including the absence of employees, due to required military service,
      caused by political and military tensions in the Middle East. The Company is
      also subject to the risks and uncertainties described in its filings with the
      Securities and Exchange Commission, including those set forth in its Annual
      Report on Form 10-K for the year ended December 31, 2007, its quarterly report
      on Form 10-Q for the quarter ended March 30, 2008 and under Item 1A of Part
      II
      in this quarterly report on Form 10-Q for the quarter ended September 28,
      2008.**





**Overview**





We
      are a
      global supplier of broadband wireless equipment supporting the WiMAX protocol
      standard, which provides a wide area telecommunication access network to connect
      end users to telecom backbone networks. Our primary target customers are
      communications service providers and other network operators that deploy WiMAX
      networks in licensed and unlicensed (license exempt) spectrums
      worldwide.




Historically,
      our business addressed communications service providers that used fixed,
      non-WiMAX wireless infrastructure to deliver services in those parts of their
      service areas that are difficult or not cost effective to reach using copper
      or
      fiber. We now offer a comprehensive range of WiMAX solutions to support these
      traditional fixed wireless applications as well as the broader market for the
      mobile applications that WiMAX is expected to enable. We are leveraging many
      years of experience in complex radio systems design to provide innovative and
      cost effective products for all types of WiMAX users.




We
      have
      transitioned our company over the last three years to focus on WiMAX product
      development and sales and marketing. As a result, a majority of our resources
      are dedicated to WiMAX-based products and we are dependent on the acceptance
      of
      WiMAX solutions in the marketplace.




Since
      1998 we have evolved from being the supplier of a single product line of
      broadband wireless access (“BWA”) equipment that utilized our proprietary
      technology to a supplier of a highly diversified suite of BWA equipment,
      including certain equipment that has been developed to conform with WiMAX and
      the WiFi standards. The diversification of our product portfolio has been the
      product of both internal research and development and targeted acquisitions.





As
      a
      result of the migration of telecommunications to platforms that operate using
      the Internet protocol, we expect that our BWA equipment which is designed to
      handle communications over the Internet will become increasingly important
      to
      us. Due to the projected popularity of technologies such as WiMAX and WiFi,
      we
      also anticipate that our WiMAX and WiFi products will become increasingly
      important to us. Our WiMAX and WiFi products are designed to be inter-operable
      with any other equipment that is WiMAX or WiFi Certified,
      respectively. ****** Accordingly,
      these relatively new products face certain opportunities and risks that our
      proprietary products did not encounter.


17


The
      market for BWA equipment has been characterized by rapid technological
      developments and evolving industry standards. Our future success will therefore
      depend on our ability to adapt to these new standards and to successfully
      introduce new technologies that meet customer preferences. We anticipate that
      we
      will need to continue to devote considerable resources to research and
      development to maintain and/or improve upon our competitive position.





Since
      July 1, 2003, we have acquired three suppliers of BWA equipment. Depending
      on
      the opportunities available, we may continue to expand our business through,
      among other things, acquisitions of other businesses and technologies and joint
      ventures. Accordingly, we anticipate our future results of operation and
      financial condition may be directly or indirectly materially affected by our
      acquisition and joint venture efforts. Acquisitions are inherently risky and
      our
      future growth may depend on our ability to successfully acquire, operate and
      integrate new businesses into our company.




**Critical
      Accounting Policies and Estimates**




Our
      Condensed Consolidated Financial Statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America.
      We review the accounting policies used in reporting our financial results on
      a
      regular basis. The preparation of these financial statements requires us to
      make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses and related disclosure of contingent assets and
      liabilities. On an ongoing basis, we evaluate our process used to develop
      estimates. We base our estimates on historical experience and on various other
      assumptions that are believed to be reasonable for making judgments about the
      carrying value of assets and liabilities that are not readily apparent from
      other sources. Actual results may differ from these estimates due to actual
      outcomes being different from those on which we based our assumptions.





Our
      significant accounting policies were described in Note 1 to our audited
      Consolidated Financial Statements and our critical accounting policies were
      included in the Management’s Discussion and Analysis of Financial Condition and
      Results of Operations section in our Annual Report on Form 10-K for the year
      ended December 31, 2007. With the exception of the items discussed in Note
      9 in the accompanying Condensed Consolidated Financial Statements, there have
      been no significant changes to these policies and no recent accounting
      pronouncements or changes in accounting pronouncements during the nine months
      ended September 28, 2008.




***Comparison
      of the Quarter Ended September 28, 2008 to the Quarter Ended September 30,
      2007***




Revenue




Revenue
      totaled $17.8 million for the quarter ended September 28, 2008, representing
      a
      21% decrease from the $22.5 million reported for the quarter ended September
      30,
      2007. The decrease compared to the third quarter of 2007 was attributable to
      a
      25% reduction in WiMAX products and an 11% reduction in non-WiMAX revenues.
      The
      decrease in WiMAX revenue was due to a smaller number of customer shipments
      above $2 million made in the current quarter compared to the same period of
      2007. In addition, certain customers in Africa were not able to complete their
      funding of letters of credit due to the ongoing credit crisis.
      Non-WiMAX revenues decreased to $5.7 million in the quarter ending
      September 28, 2008 from $6.4 million in the quarter ending September 30, 2007
      as
      a result of the ongoing decline of our legacy business.





Geographically,
      in the third quarter of 2008, approximately 27% of our revenue was derived
      from
      customers in Europe, 26% from customers in Mexico, Latin America and the
      Caribbean, 22% from customers in the United States and Canada, 14% from
      customers in Asia and 11% from customers in Africa and the Middle
      East.





During
      the third quarter of 2008, more than 100 customers purchased WiMAX equipment
      from us compared with 70 customers during the third quarter of
      2007.


18


Cost
      of
      Revenue




Cost
      of
      revenue decreased 16% to $12.3 million in the quarter ended September 28, 2008
      from $14.7 million in the quarter ended September 30, 2007 primarily due to
      the
      decrease in revenue in the third quarter of 2008. The gross profit for the
      third
      quarter of 2008 was $5.5 million (31% of revenue) compared to a gross profit
      of
      $7.8 million (35% of revenue) for the third quarter of 2007. The lower margin
      percentage in the third quarter of 2008 reflects the higher percentage of period
      related costs on lower revenue as well as a change in product mix.





Research
      and Development Expenses




Research
      and development expenses decreased 11% to $5.5 million in the quarter ended
      September 28, 2008 from $6.2 million in the quarter ended September 30, 2007.
      The decrease year over year is primarily due to reduced personnel and
      subcontract development costs.




Sales
      and
      Marketing Expenses




Sales
      and
      marketing expenses increased 5% to $3.7 million in the quarter ended September
      28, 2008 from $3.5 million in the quarter ended September 30, 2007. The increase
      as compared to the third quarter of 2007 is primarily attributable to additional
      headcount and trade shows.





Bad
      Debt
      Provision




In
      the
      third quarter of 2008, we recorded bad debt provisions of $0.5 million relating
      to customer accounts for which management has determined that full recovery
      is
      unlikely. We recorded bad debt provisions of $0.6 million in the third quarter
      of 2007.





General
      and Administrative Expenses




General
      and administrative expenses increased 9% to $3.5 million in the quarter ended
      September 28, 2008 from $3.3 million in the quarter ended September 30, 2007.
      The increase from the third quarter of 2007 was primarily attributable to higher
      stock compensation expense and professional fees, offset by lower headcount
      related costs in the third quarter of 2008.





Amortization
      of Intangibles




We
      recorded amortization of intangibles expense of $0.2 million in the third
      quarter of 2008 and for the third quarter of 2007. The amortization expense
      arises primarily as a result of our acquisition of intangible assets in
      connection with the ArelNet and Radionet acquisitions in June and November
      2005,
      respectively.





Restructuring





In
      the
      third quarter of 2007, we did not record a restructuring charge. In the second
      quarter of 2008, we recorded a restructuring charge of $0.6 million to reflect
      the restructuring program we commenced in May 2008, the goal of which was to
      reduce operating expenses by approximately 15% compared to the level of
      operating expenses recorded in the first quarter of 2008. The cost reduction
      was
      accomplished primarily as a result of a reduction in worldwide headcount. As
      of
      the end of the third quarter of 2008, we had reduced headcount by approximately
      13% compared to levels at the end of the first quarter of 2008. The majority
      of
      the headcount reduction was completed by the end of the third quarter. We
      recorded a restructuring charge of approximately $0.1 million in the third
      quarter of 2008. The restructuring resulted in a direct cash outlay primarily
      in
      the second and third quarters of 2008. We achieved cost savings of approximately
      $2 million relative to the cost structure that existed in the first quarter
      of
      2008. Despite our efforts to prepare reliable projections, we recognize that
      our
      forecasts may prove to be imprecise due to unforeseen events, including
      unanticipated expenses or difficulties associated with requiring retained staff
      members to assume additional responsibilities and/or reorganizing our operations
      to more cost efficiently produce a given level of product revenue. See also
      “NOTE 3 - ACCRUED RESTRUCTURING CHARGES” to our condensed consolidated financial
      statements contained in this quarterly report on Form 10-Q for additional
      information regarding the restructuring.


19


Interest
      Income, Net




At
      September 28, 2008, the outstanding principal and accrued interest payable
      on
      the Tekes Loans was $2.0 million. We also had outstanding borrowings under
      the
      bank line of credit for $12.5 million after drawing down $5.0 million in the
      third quarter of 2008. In the third quarter of 2008 and the third quarter of
      2007, we incurred interest expense of $0.2 million on these loans. We had
      interest income of $0.2 million in both the third quarter of 2008 and the third
      quarter of 2007.





Other
      Income (Expense), Net




Other
      income (expense), net decreased to an expense of $0.4 million in the third
      quarter of 2008 from income of $0.3 million in the third quarter of 2007,
      primarily due to foreign exchange differences on cash balances.





Income
      Tax Credits (Charge), Net





In
      the
      third quarter of 2008, we recorded a net tax credit of $0.5 million, primarily
      relating to research and development tax credits in the United Kingdom, for
      which we became eligible starting in August 2008. The net tax credit is based
      on
      the Company’s effective tax rate, which includes the effects of the tax credits.
      Such tax credit reflects an estimate of eligible research and development costs
      to be incurred through the fourth quarter of 2008.  The
      Company recorded a tax charge of $24 thousand in the third quarter of 2007.
      The
      Company was not eligible for the research and development tax credits in the
      UK
      in 2007.





Deemed
      Dividend Upon Issuance of Stock





In
      the
      third quarter of 2007, we recognized a non-cash charge of $4.1 million for
      a
      deemed dividend to our Series B preferred stockholders. We did not recognize
      a
      similar charge in the third quarter of 2008.





On
      September 26, 2007, we issued 15,000,000 shares of common stock in a public
      offering. As the sale price of these shares to the underwriters on a per share
      basis was less than $2.90 per share, there was an anti-dilution adjustment
      to
      the number of shares of common stock issuable on conversion of the Series B
      Preferred Stock. As a result of the anti-dilution adjustment, we recorded a
      deemed dividend of $4.1 million, calculated by multiplying the number of
      additional shares to be received on conversion (1.38 million shares) by $2.99,
      the closing price of the Company’s common stock on The NASDAQ Global Market on
      September 25, 2007, the date of the closing of the Private Placement.





Net
      Loss
      Attributable to Common Stockholders




For
      the
      reasons described above, we incurred a net loss of $7.8 million, or $(0.13)
      per
      share, in the quarter ended September 28, 2008, compared to a net loss of $9.9
      million, or $(0.24) per share, for the quarter ended September 30, 2007.




***Comparison
      of the Nine Months Ended September 28, 2008 to the Nine Months Ended September
      30, 2007***




Revenue




Revenue
      totaled $56.3 million for the nine months ended September 28, 2008, representing
      a 21% decrease from the $71.2 million reported for the nine months ended
      September 30, 2007. Non-WiMAX revenues decreased to $18.2 million in the
      nine months ending September 28, 2008 from $26.4 million in the nine months
      ending September 30, 2007. WiMAX revenues for the first nine months of 2008
      were
      $38.1 million compared to $44.8 million in the first nine months of 2007.
      Included within the first nine months WiMAX revenue for 2007 of $44.8 million
      was $11.5 million of revenues related to Yozan, which is no longer a significant
      customer of the Company. Revenues from Yozan were only $29 thousand in the
      first
      nine months of 2008.


20


Cost
      of
      Revenue




Cost
      of
      revenue decreased 27% to $38.9 million in the nine months ended September 28,
      2008 from $53.3 million in the nine months ended September 30, 2007 primarily
      due to decreased sales. The cost of revenue for the first nine months of 2007
      included a charge of $6.3 million for inventory provisions on non-WiMAX
      products. The gross profit for the first nine months of 2008 was $17.5 million
      (31% of revenue) compared to a gross profit of $17.9 million (25% of revenue)
      for the first nine months of 2007. The increase in gross margin percentage
      in
      the first nine months of 2008 as compared to the first nine months of 2007
      is
      attributable to the impact of more revenue coming from products with higher
      product margins as well as the charge for inventory provisions in the first
      nine
      months of 2007.





Research
      and Development Expenses




Research
      and development expenses increased 9% to $19.2 million in the nine months ended
      September 28, 2008 from $17.6 million in the nine months ended September 30,
      2007. The increase year over year is primarily due to increased personnel costs
      as we were investing more heavily in the development of WiMAX products earlier
      in 2008.




Sales
      and
      Marketing Expenses




Sales
      and
      marketing expenses increased 17% to $12.2 million in the nine months ended
      September 28, 2008 from $10.4 million in the nine months ended September 30,
      2007. The increase as compared to the first nine months of 2007 is primarily
      attributable to additional headcount in 2008.





Bad
      Debt
      Provision




In
      the
      first nine months of 2008, we recorded bad debt provisions of $1.0 million
      relating to customer accounts for which management has determined that full
      recovery is unlikely. We recorded bad debt provisions of $1.6 million in the
      first nine months of 2007.





General
      and Administrative Expenses




General
      and administrative expenses decreased 3% to $11.1 million in the first nine
      months ended September 28, 2008 from $11.5 million in the nine months ended
      September 30, 2007. The decrease from the first nine months of 2007 was
      primarily attributable to lower headcount related costs in the first nine months
      of 2008.





Amortization
      of Intangibles




We
      recorded amortization of intangibles expense of $0.7 million in the first nine
      months of 2008 and for the first nine months of 2007. The amortization expense
      arises primarily as a result of our acquisition of intangible assets in
      connection with the ArelNet and Radionet acquisitions in June and November
      2005,
      respectively.





Restructuring





In
      the
      first nine months of 2007, we recorded a restructuring credit of $0.5 million.
      In the first nine months of 2008, we recorded a restructuring charge of $0.7
      million to reflect the restructuring program we commenced in May 2008, the
      goal
      of which was to reduce operating expenses by approximately 15% compared to
      the
      level of operating expenses recorded in the first quarter of 2008. The cost
      reduction was accomplished primarily as a result of a reduction in worldwide
      headcount. As of the end of the third quarter of 2008, we had reduced headcount
      by approximately 13% compared to levels at the end of the first quarter of
      2008.
      The majority of the headcount reduction was completed by the end of the third
      quarter of 2008. The restructuring resulted in a direct cash outlay primarily
      in
      the second and third quarters of 2008. We achieved annual cost savings of
      approximately $2 million relative to the cost structure that existed in the
      first quarter of 2008. Despite our efforts to prepare reliable projections,
      we
      recognize that our forecasts may prove to be imprecise due to unforeseen events,
      including unanticipated expenses or difficulties associated with reducing our
      workforce, requiring retained staff members to assume additional
      responsibilities and/or reorganizing our operations to more cost efficiently
      produce a given level of product revenue. See also “NOTE 3 - ACCRUED
      RESTRUCTURING CHARGES” to our condensed consolidated financial statements
      contained in this quarterly report on Form 10-Q for additional information
      regarding the restructuring.


21


Interest
      Income, Net




At
      September 28, 2008, the outstanding principal and accrued interest payable
      on
      the Tekes Loans was $2.0 million. We also had outstanding borrowings under
      the
      bank line of credit for $12.5 million after drawing down $5.0 million in the
      third quarter of 2008. In the first nine months of 2008, we incurred interest
      expense of $0.4 million on these loans compared to interest expense of $0.2
      million in the first nine months of 2007 due to higher amounts outstanding
      under
      the line of credit.  Interest
      income decreased to $0.7 million in the first nine months of 2008 compared
      to
      $0.8 million in the first nine months of 2007.





Other
      Income (Expense), Net





Other
      income (expense), net decreased to $45 thousand of expense in the first nine
      months of 2008 from $0.3 million in income in the first nine months of 2007,
      primarily due to foreign exchange losses in the first nine months of 2008 on
      assets in currencies other than the US dollar.





Income
      Tax Credits (Charge), Net





In
      the
      first nine months of 2008, we recorded a net tax credit of $0.5 million,
      primarily relating to research and development tax credits in the United
      Kingdom, for which we became eligible starting in August 2008. The credit
      recorded in the first nine months of 2008 is based on the Company’s effective
      tax rate, which includes the effects of the tax credits. Such tax credit
      reflects an estimate of eligible research and development costs to be incurred
      through the fourth quarter of 2008. The Company recorded a tax charge of $0.1
      million in the first nine months of 2007. The Company was not eligible for
      the
      research and development tax credits in the UK in 2007.





Deemed
      Dividend Upon Issuance of Stock





In
      the
      third quarter of 2007, we recognized a non-cash charge of $4.1 million for
      a
      deemed dividend to our Series B preferred stockholders. We did not recognize
      a
      similar charge in the third quarter of 2008.





On
      September 26, 2007, we issued 15,000,000 shares of common stock in a public
      offering. As the sale price of these shares to the underwriters on a per share
      basis was less than $2.90 per share, there was an anti-dilution adjustment
      to
      the number of shares of common stock issuable on conversion of the Series B
      Preferred Stock. As a result of the anti-dilution adjustment, we recorded a
      deemed dividend of $4.1 million, calculated by multiplying the number of
      additional shares to be received on conversion (1.38 million shares) by $2.99,
      the closing price of the Company’s common stock on The NASDAQ Global Market on
      September 25, 2007, the date of the closing of the Private Placement.





Net
      Loss
      Attributable to Common Stockholders




For
      the
      reasons described above, we incurred a net loss of $26.6 million, or $(0.45)
      per
      share, in the nine months ended September 28, 2008, compared to a net loss
      of
      $26.7 million, or $(0.65) per share, for the nine months ended September 30,
      2007.




**Liquidity
      and Capital Resources**




As
      of
      September 28, 2008 we had cash, cash equivalents, short-term investments and
      current restricted cash of $31.1 million, as compared to $36.7 million at
      December 31, 2007. As of September 28, 2008, this consisted of cash and cash
      equivalents totaling $21.9 million, short-term investments totaling $9.0 million
      and $0.2 million of restricted cash in current assets. In addition, we had
      restricted cash of $1.1 million in other non-current assets. We have no material
      capital commitments.




Since
      inception, we have financed our operations through private sales of convertible
      preferred stock, public offerings of common stock and a secured bank line of
      credit.


22


On
      August
      21, 2008, we and our wholly-owned subsidiary, Airspan Communications Limited,
      entered into a Second Amendment to our August 1, 2006 Loan and Security
      Agreement, as amended August 7, 2007 (the “Loan and Security Agreement”) with
      SVB, with respect to a revolving credit line. For the term of the credit line,
      which expires on December 31, 2009, we may, subject to certain adjustments,
      borrow up to the lesser of (i) (a) 80% of eligible accounts receivable plus
      (as
      long as the Company’s worldwide cash and investments exceeds $20 million and the
      Company’s cash and investments maintained at SVB and its affiliates exceeds $15
      million) (b) the lesser of (1) 60% of eligible inventory and (2) $8 million
      (the
“Borrowing Base”) and (ii) $20 million. As of September 28, 2008, the Company
      had $2.2 million of unused available credit. We are currently using the credit
      line and we expect to continue to use it for the remainder of 2008. Although
      we
      believe the credit facility will increase our financial resources and financial
      flexibility, our use of the credit facility does present certain risks. Our
      ability to borrow under the credit facility is a function of, among other
      things, our base of eligible accounts receivable and inventory and the rate
      at
      which advances are made against eligible receivables and inventory (the “Advance
      Rate”). If the amount or quality of our accounts receivable or inventory
      deteriorates or the Advance Rate or eligibility criteria are adjusted adversely
      by SVB, our ability to borrow under the credit facility will be directly,
      negatively affected. If there is an adverse adjustment in the Borrowing Base
      at
      a time when we are unable to, within three business days, repay SVB the amount
      by which the Borrowing Base has been decreased, we will likely be in default
      under the Loan and Security Agreement. In addition, the credit facility requires
      us to satisfy certain financial covenants, including the maintenance of tangible
      net worth. As of September 28, 2008, the tangible net worth requirement was
      $30.0 million and the Company’s actual tangible net worth was $37.9 million. The
      Company was in compliance with all of the financial covenants at September
      28,
      2008. There is no assurance the Company will be able to meet this covenant
      in
      future quarters as required by the Loan and Security Agreement. In the event
      the
      Company is unable to meet this test in the future, we would plan to seek an
      amendment or waiver of this covenant. There can be no assurance that any such
      waiver or amendment would be granted. As a result, we may be required to repay
      any or all of our existing borrowings and we cannot provide any assurance that
      we will be able to borrow under the Loan and Security Agreement at a time when
      we most need money to fund working capital or other needs and prohibit us from
      paying dividends on our capital stock. The credit facility also contains various
      provisions that restrict our use of cash and operating flexibility. These
      provisions could have important consequences for us, including (i) causing
      us to
      use a portion of our cash flow from operations for debt repayment and/or service
      rather than other perceived needs, (ii) precluding us from incurring additional
      debt financing for future working capital or capital expenditures and (iii)
      impacting our ability to take advantage of significant, perceived business
      opportunities, such as acquisition opportunities or to react to market
      conditions. Our failure to meet financial and other covenants could give rise
      to
      a default under the Loan and Security Agreement. In the event of an uncured
      default, the Loan and Security Agreement provides that all amounts owed to
      SVB
      are immediately due and payable and that SVB has the right to enforce its
      security interest in our assets. The Loan and Security Agreement is secured
      by
      collateral, including all of our rights and interests in substantially all
      of
      our personal property, including accounts receivable, inventory, equipment,
      general intangibles, intellectual property, books and records, contract rights
      and proceeds of the above items. At September 28, 2008, $12.5 million of
      indebtedness was outstanding under the Loan and Security Agreement. Advances
      under the Loan and Security Agreement bear interest at SVB's prime rate plus
      a
      percentage ranging from 0.0% to 1.75%, depending on certain financial and
      collateral tests. The monthly interest is calculated based on the higher amount
      of outstanding borrowings or $10.0 million. We have issued $3.0 million of
      letters of credit under the facility, which were still outstanding at September
      28, 2008.





For
      the
      nine months ended September 28, 2008, we used $9.2 million of cash for operating
      activities, compared with an operating cash outflow of $12.6 million for the
      nine months ended September 30, 2007. The operating cash outflow for the first
      nine months of 2008 was primarily a result of the:





· net
      loss
      of $26.6 million;


· decrease
      of $2.7 million in accounts payable;


· decrease
      of $1.7 million in deferred revenue; and


· decrease
      of $1.6 million in other accrued expenses.





The
      cash
      outflow was offset by:


·  decrease
      of $14.6 million in receivables; and


·  decrease
      of $3.6 million in inventory.





Days
      sales outstanding were at 76 days at the end of the third quarter of 2008,
      up
      from 67 days at the end of the second quarter of 2008. The change from the
      end
      of the second quarter of 2008 to the end of the third quarter of 2008 primarily
      reflects the lower revenue level in the most recent period. Inventory turns
      were
      4.2 for the third quarter of 2008, compared with 4.8 for the second quarter
      of
      2008. The change in inventory turns is primarily attributable to the lower
      cost
      of sales in the third quarter.


23


The
      net
      cash used in investing activities for the nine months ended September 28, 2008
      was $5.0 million. The investing cash outflow for the first nine months of 2008
      resulted from $3.5 million of net purchases of investment securities and $1.5
      million of fixed asset purchases.





Our
      net
      cash provided by financing activities for the nine months ended September 28,
      2008 was $5.4 million, including $5.0 million drawn down on the line of credit,
      $0.3 million from sales of stock under the ESPP plan and $0.1 million from
      the
      exercise of stock options.





As
      of
      September 28, 2008, our material commitments consisted of obligations on
      operating leases, repayment of principal and interest owed on the Tekes Loans
      and purchase commitments to our manufacturing subcontractors. These purchase
      commitments totaled $22.7 million at September 28, 2008 and $25.0 million at
      September 30, 2007.





We
      have
      explored and may in the future explore and pursue other perceived opportunities
      to acquire wireless access and related businesses. We may seek to acquire such
      businesses through a variety of different legal structures and may utilize
      cash,
      common stock, preferred stock, other securities or some combination thereof
      to
      finance the acquisition. In connection with such activities, we are subject
      to a
      variety of risks, a number of which are described further in the Company’s Form
      10-K for the fiscal year ended December 31, 2007, in its Form 10-Q for the
      quarter ended March 30, 2008 and under Item 1A of Part II in this quarterly
      report on Form 10-Q for the quarter ended September 28, 2008. There can be
      no
      assurance that any efforts we may make to acquire other businesses will be
      successful.





We
      have
      raised equity in the past and may in the future seek to raise additional equity
      or debt capital to assist us in financing an acquisition and/or our on-going
      business operations or those of any business that we may in the future acquire.
      Among other securities, we may seek to sell additional shares of common stock,
      or shares of an existing or newly designated class of preferred stock or debt
      securities. We have not, as of the date of this report, entered into any
      definitive financing arrangements other than those described above. Particularly
      in light of extraordinary market conditions, there can be no assurance that
      we
      will be able to secure equity or debt capital in amounts and on terms acceptable
      to us. Although we will seek to secure financing on terms and conditions
      favorable to the Company and its existing shareholders, we may seek to raise
      capital by issuing securities, which, under certain circumstances, enjoy certain
      preferences and/or priorities relative to the common stock or which may result
      in material dilution of the interests of our existing
      shareholders.





Until
      we
      are able to generate positive cash flow from operations, if ever, we intend
      to
      use our existing cash resources and the Loan and Security Agreement, if
      available, together with, depending on market conditions and opportunities,
      the
      net proceeds of external financings to finance our operations. We currently
      believe we will have sufficient cash resources to finance our operations for
      at
      least the next twelve months.




On
      April 25, 2008, the Company received a letter from the NASDAQ Stock Market
      (the “Notice”) notifying the Company that for the 30 consecutive trading days
      preceding the date of the Notice, the bid price of the Company’s common stock
      had closed below the $1.00 per share minimum required for continued listing
      on
      The NASDAQ Global Market pursuant to NASDAQ Marketplace Rule 4450(a)(5). The
      Notice also stated that pursuant to NASDAQ Marketplace Rule 4450(e)(2), the
      Company had been provided 180 calendar days, or until October 22, 2008, to
      regain compliance.





On
      October 20, 2008, the Company received notification that NASDAQ has suspended
      for a three month period the enforcement of the rules requiring a minimum $1
      closing bid price or a minimum market value of publicly held shares. NASDAQ
      has
      said that it will not take any action to delist any security for these concerns
      during the suspension. NASDAQ has stated that, given the current extraordinary
      market conditions, this suspension will remain in effect through Friday, January
      16, 2009 and will be reinstated on Monday, January 19, 2009. As a result of
      this
      suspension, the Company now has until January 26, 2009 to regain compliance
      with
      the minimum bid price rule.


24


As
      a
      result of the suspension, if, at any time before January 26, 2009, the bid
      price
      of the Company’s common stock closes at $1.00 per share or more for a minimum of
      10 consecutive business days, we expect that NASDAQ will provide written
      notification that the Company has achieved compliance with the minimum bid
      price
      rule.





If
      the
      Company does not regain compliance with the minimum bid rule by January 26,
      2009, NASDAQ will provide written notification that its securities will be
      delisted. At that time, the Company may appeal NASDAQ’s determination to delist
      its securities to a Listing Qualifications Panel. The Company may also apply
      to
      transfer its securities to The NASDAQ Capital Market if it satisfies the
      requirements for initial inclusion set forth in Marketplace Rule 4310(c) on
      such
      date. If the Company’s application is approved, the Company will be afforded the
      remainder of this market’s second 180 calendar day compliance period in order to
      regain compliance while its common stock remains listed on The NASDAQ Capital
      Market.




On
      November 5, 2008, the Company filed a definitive proxy statement with the
      Securities and Exchange Commission. The definitive proxy statement, among other
      things, contains a proposal to approve an amendment to the Company’s Second
      Amended and Restated Articles of Incorporation, as amended, effecting a reverse
      stock split of the Company’s common stock at a ratio to be determined by the
      Company’s Board of Directors within a range of one-for-five shares to
      one-for-fifteen shares. The Company believes that such a reverse stock split
      will help facilitate the continued listing of its common stock on The NASDAQ
      Global Market and enhance the desirability and marketability of its common
      stock
      to the financial community and the investing public. The Company currently
      plans
      to hold a special meeting of shareholders to vote on the reverse stock split
      proposal on December 16, 2008.


25


**Item
      3.****QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**




Interest
      Rate Risk




The
      Company’s earnings are affected by changes in interest rates. As of September
      28, 2008 and December 31, 2007, we had cash, cash equivalents, short term
      investments and restricted cash of $31.2 million and $36.7 million,
      respectively. These amounts consisted of highly liquid investments, with more
      than 55% having purchase to maturity terms of 90 days or less. The balance
      has
      maturity terms of between 92 to 361 days. These investments are exposed to
      interest rate risk, but a hypothetical increase or decrease in market interest
      rates by two percentage points from September 28, 2008 rates would cause the
      fair market value of these short-term investments to change by an insignificant
      amount. Due to the short duration of these investments, a short-term increase
      in
      interest rates would not have a material effect on our financial condition
      or
      results of operations. Declines in interest rates over time would, however,
      reduce our interest income. Due to the uncertainty of the specific actions
      that
      would be taken to mitigate this, and their possible effects, the sensitivity
      analysis does not take into account any such action.




Foreign
      Currency Exchange Rate Risk




For
      the
      nine months ended September 28, 2008, 93% of our sales were denominated in
      US
      dollars, 2% were denominated in pounds sterling, 2% were denominated in
      Australian dollars, 2% were denominated in euro and 1% were denominated in
      the
      New Israeli Shekel. Comparatively, for the nine months ended September 30,
      2007,
      79% of our sales were denominated in US dollars, 17% were denominated in euro,
      1% were denominated in pounds sterling and 3% were denominated in Australian
      dollars. Our total pounds sterling denominated sales for the nine months ended
      September 28, 2008 were $1.1 million, which were recorded at an average exchange
      rate of $1US = GBP £0.50962. Our total Australian dollar denominated sales for
      the nine months ended September 28, 2008 were $1.1 million, which were recorded
      at an average exchange rate of $1US = AUS$1.08746. Our total euro denominated
      sales for the nine months ended September 28, 2008 were $1.1 million, which
      were
      recorded at an average exchange rate of $1US = €0.65534. Our total New Israeli
      Shekel denominated sales for the nine months ended September 28, 2008 were
      $0.6
      million, which were recorded at an average exchange rate of $1US = 3.5257
      Shekels. If the average exchange rates used had been higher or lower during
      the
      nine month period ended September 28, 2008 by 10%, they would have decreased
      or
      increased the total pounds sterling, Australian dollar, euro and New Israeli
      Shekel-denominated sales value by a total of $0.4 million. We expect the
      proportions of sales in euro, Australian dollars and New Israeli Shekels to
      fluctuate over time. The Company’s sensitivity analysis for changes in foreign
      currency exchange rates does not take into account changes in sales volumes.




For
      the
      nine months ended September 28, 2008, we incurred the majority of our cost
      of
      revenue in US dollars.




The
      Company’s operating results are affected by movements in foreign currency
      exchange rates against the US dollar, particularly the UK pound sterling and
      New
      Israeli Shekel. This is because most of our operating expenses, which may
      fluctuate over time, are incurred in pounds sterling and New Israeli Shekels.




During
      the nine months ended September 28, 2008, we paid expenses in local currency
      of
      approximately 11.5 million pounds sterling, at an average exchange rate of
      $1US
      = GBP £0.50962.. During the nine months ended September 28, 2008, we paid
      expenses in local currency of approximately 42.7 million New Israeli Shekels,
      at
      an average exchange rate of $1US = 3.5257 Shekels. If the average exchange
      rates
      for pounds sterling and New Israeli Shekels had been higher or lower for the
      nine month period ended September 28, 2008 by 10%, the total pounds sterling
      and
      New Israeli Shekel-denominated operating expenses would have decreased or
      increased by $2.0 million and $1.1 million, respectively.





We
      expect
      the proportions of operating expenses paid in pounds sterling and New Israeli
      Shekels to fluctuate over time.




We
      do not
      enter into any currency hedging activities for speculative purposes.


26




*Equity
      Price Risk*




We
      do not
      own any equity investments, other than the shares of our subsidiaries. As a
      result, we do not currently have any direct equity price risk.




*Commodity
      Price*




We
      do not
      enter into contracts for the purchase or sale of commodities. As a result,
      we do
      not currently have any direct commodity price risk.




**Item
      4.**  **CONTROLS
      AND PROCEDURES**




As
      of the
      end of the period covered by this quarterly report, an evaluation was performed
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures (as defined
      in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
      as
      amended). Based on that evaluation, and the similar evaluation undertaken at
      the
      end of 2007, the Chief Executive Officer and Chief Financial Officer concluded
      that as of September 28, 2008, our disclosure controls and procedures were
      effective.





There
      have been no changes in the Company’s internal controls over financial reporting
      that occurred during the Company’s third quarter of 2008 that have affected, or
      are reasonably likely to affect, the Company’s internal control over financial
      reporting.





As
      of the
      last business day of our second fiscal quarter (June 29, 2008), our public
      float, as calculated in accordance with Rule 12b-2 under the Securities Exchange
      Act of 1934, as amended ("Rule 12b-2"), was less than $50 million. As such,
      in
      addition to our being an accelerated filer (as defined in Rule 12b-2),
      we also became a smaller reporting company (as defined in Rule 12b-2)
      on such date.  At the end of our fiscal year, we will cease to be an
      accelerated filer and will only be a smaller reporting company.


27


**PART
      II.**  **OTHER
      INFORMATION**




**Item
      1.**  **LEGAL
      PROCEEDINGS**




On
      and
      after July 23, 2001, three Class Action Complaints were filed in the United
      States District Court for the Southern District of New York naming as defendants
      Airspan, and certain current or former officers and directors (referred to
      herein as the “Individual Defendants”) together with certain underwriters of our
      July 2000 initial public offering. A Consolidated Amended Complaint, which
      is
      now the operative complaint, was filed on July 19, 2002. The complaint alleges
      violations of Sections 11 and 15 of the Securities Act of 1933 and Sections
      10(b) and 20(a) of the Securities Exchange Act of 1934 for issuing a
      Registration Statement and Prospectus that contained materially false and
      misleading information and failed to disclose material information. In
      particular, the plaintiffs allege that the underwriter-defendants agreed to
      allocate stock in our initial public offering to certain investors in exchange
      for excessive and undisclosed commissions and agreements by those investors
      to
      make additional purchases of stock in the aftermarket at pre-determined prices.
      The action seeks damages in an unspecified amount.




This
      action is being coordinated with approximately three hundred nearly identical
      actions filed against other companies. On October 9, 2002, the Court dismissed
      the Individual Defendants from the case without prejudice. This dismissal
      disposed of the Section 15 and 20(a) control person claims without
      prejudice.  On February 19, 2003, the Court dismissed the Section 10(b)
      claim against us, but allowed the Section 11 claim to proceed. On December
      5,
      2006, the Second Circuit vacated a decision by the district court granting
      class
      certification in six of the coordinated cases, which are intended to serve
      as
      test, or “focus,” cases.   The plaintiffs selected these six cases,
      which do not include Airspan.  The district court’s decisions in the six
      focus cases are intended to provide strong guidance for the parties in the
      remaining cases.  On April 6, 2007, the Second Circuit denied a petition
      for rehearing filed by the plaintiffs, but noted that the plaintiffs could
      ask
      the district court to certify more narrow classes than those that were
      rejected.




On
      August
      14, 2007, the plaintiffs filed amended complaints in the six focus cases. 
The amended complaints include a number of changes, such as changes to the
      definition of the purported class of investors.  On September 27, 2007, the
      plaintiffs moved to certify classes in the six focus cases.  The six focus
      case issuers and the underwriters named as defendants in the focus cases filed
      motions to dismiss the amended complaints against them.  On March 26, 2008,
      the District Court dismissed the Section 11 claims of those members of the
      putative classes in the focus cases who sold their securities for a price in
      excess of the initial offering price and those who purchased outside the
      previously certified class period.  With respect to all other claims, the
      motions to dismiss were denied.  On October 10, 2008, at the request of
      plaintiffs, plaintiffs’ motion for class certification was withdrawn, without
      prejudice. Due to the inherent uncertainties of litigation, we cannot accurately
      predict the ultimate outcome of the matter.  We cannot predict whether we
      will be able to renegotiate a settlement that complies with the Second Circuit’s
      mandate, nor can we predict the amount of any such settlement and whether that
      amount would be greater than Airspan’s insurance coverage.  If Airspan is
      found liable, we are unable to estimate or predict the potential damages that
      might be awarded, whether such damages would be greater than Airspan’s insurance
      coverage and whether such damages would have a material impact on our results
      of
      operations or financial condition in any future period.




On
      October 9, 2007, a purported Airspan shareholder filed a complaint for
      violation of Section 16(b) of the Securities Exchange Act of 1934, which
      prohibits short-swing trading, against the Company's initial public offering
      underwriters.  The complaint, Vanessa Simmonds v. Credit Suisse Group,
      et al., Case No. C07-01638, filed in the District Court for the Western
      District of Washington, seeks the recovery of short-swing profits. The
      Company is named as a nominal defendant. No recovery is sought from the
      Company.




From
      time
      to time, the Company receives and reviews offers from third parties with respect
      to licensing their patents and other intellectual property in connection with
      the manufacture of our WiMAX and other products. There can be no assurance
      that
      disputes will not arise with such third parties if no agreement can be reached
      regarding the licensing of such patents or intellectual property.




We
      have
      received letters/communications from Wi-LAN offering licenses of various Wi-LAN
      patents and contending that products complying with 802.11 and 802.16 standards
      are covered by certain patents allegedly owned by Wi-LAN. The Company, in
      consultation with its patent counsel, has been reviewing Wi-LAN's allegations
      and has had extensive correspondence with Wi-LAN regarding those allegations.
      Wi-LAN continues to threaten the Company with litigation unless it negotiates
      a
      license with Wi-LAN with respect to the patents in question. There can be no
      assurance as to the ultimate outcome of this matter.


28


Except
      as
      set forth above, we are not currently subject to any other material legal
      proceedings. We may from time to time become a party to various other legal
      proceedings arising in the ordinary course of our business.





**Item
      1A. RISK FACTORS**




Except
      for the risk factor set forth below, there have been no material changes to
      the
      risk factors disclosed in Item 1A of Part 1 of the Company’s Annual Report on
      Form 10-K for the fiscal year ended December 31, 2007 and Item 1A of Part II
      of
      the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30,
      2008.




***Current
      adverse economic conditions could negatively impact the Company’s
      business.***




The
      Company’s operations are affected by local, national and worldwide economic
      conditions. The consequences of a prolonged recession may include a lower level
      of economic activity and uncertainty regarding capital and commodity markets.
      A
      lower level of economic activity may adversely affect the Company’s revenues and
      future growth, as well as the future growth of the WiMAX market upon which
      our
      business is substantially dependent. The current instability in the financial
      markets, as a result of recession or otherwise, may also affect the cost of
      capital and the Company’s ability to raise capital.




Current
      economic conditions may be exacerbated by insufficient financial sector
      liquidity which may impact our customers’ ability to pay timely for our
      products, increase customer bankruptcies and may lead to increased bad
      debts.


29


**Item
      6. EXHIBITS**




**31.1**
            **Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002*****31.2**
            **Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002*****32.1**
            **Certification
                of the Chief Executive Officer pursuant to section 906 of the
                Sarbanes-Oxley Act of 2002******32.2**
            **Certification
                of the Chief Financial Officer pursuant to section 906 of the
                Sarbanes-Oxley Act of 2002****







*****
            **Filed
                herewith********
            **Furnished
                herewith**




**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.




**AIRSPAN
                NETWORKS INC.**Date: November
                5, 2008
            By:
            /s/ DAVID
                BRANTName:  
                David BrantTitle:    
                Chief Financial Officer


30