**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**








**FORM
10-Q**








**(Mark
one)**


x   **Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**





**For
the quarterly period ended April 3, 2005**





**OR**





 ̈   **Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**





**For
the transition period from** **** **to** **** **.**





**Commission
file number 000-31031**








**AIRSPAN
NETWORKS INC.**


**(Exact
name of registrant as specified in its charter)**





**Washington**
    **75-2743995****(State
      or other jurisdiction of**
      **incorporation
      or organization)**
    **(I.R.S.
      Employer**
      **Identification
      No.)****777
      Yamato Road, Suite 105**
      **Boca
      Raton, FL**
    **33431****(Address
      of principal executive offices)**
    **(Zip
      Code)**




**Registrant’s
telephone number, including area code:**


**561-893-8670**





Indicate
by a check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes x No  ̈





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).    Yes x No  ̈


Number of
shares outstanding of the registrant’s common stock as of May 6, 2005:
38,200,826 ****







**PART
1. FINANCIAL INFORMATION**





**Item
1. Financial Statements**


**AIRSPAN
NETWORKS INC.**


**CONDENSED
CONSOLIDATED BALANCE SHEETS**


(in
thousands except for share and per share data)





**December
      31,**
      **2004
      (1)**
    
    **April
      3,**
      **2005****(unaudited)****ASSETS****Current
      Assets**Cash
      and cash equivalents
    
    $
    66,296
    
    $
    51,424Restricted
      cash
    
    
    1,687
    
    
    1,881Accounts
      receivable, less allowance for doubtful accounts of $5,207 at December 31,
      2004 and $3,121 at
      April
      3, 2005
    
    
    20,947
    
    
    14,807Unbilled
      accounts receivable
    
    
    43
    
    
    178Inventory
    
    
    12,834
    
    
    13,474Prepaid
      expenses and other current assets
    
    
    5,702
    
    
    6,937Total
      Current Assets
    
    
    107,509
    
    
    88,701Property,
      plant and equipment, net
    
    
    3,707
    
    
    3,546Goodwill
    
    
    789
    
    
    789Intangible
      assets, net
    
    
    1,672
    
    
    1,545Long-term
      accounts receivable
    
    
    305
    
    
    297Other
      non-current assets
    
    
    1,216
    
    
    1,265Total
      Assets
    
    $
    115,198
    
    $
    96,143**LIABILITIES
      AND STOCKHOLDERS’ EQUITY****Current
      Liabilities**Accounts
      payable
    
    $
    24,615
    
    $
    13,657Accrued
      taxes
    
    
    653
    
    
    562Deferred
      revenue
    
    
    627
    
    
    644Customer
      advances
    
    
    4,789
    
    
    1,495Other
      accrued expenses
    
    
    11,349
    
    
    9,397Total
      Current Liabilities
    
    
    42,033
    
    
    25,755**Stockholders’
      Equity**Preferred
      stock, $0.0001 par value; 74,200 shares authorized at December 31, 2004
      and April 3, 2005: 73,000 issued at December 31, 2004 and April 3, 2005
    
    
    -
    
    
    -Common
      stock, $0.0003 par value; 100,000,000 shares authorized at December 31,
      2004 and April 3, 2005: 37,644,627 issued at December 31, 2004 and
      37,997,254 issued at April 3, 2005
    
    
    11
    
    
    11Note
      receivable - stockholder
    
    
    (87
    )
    
    (87
    )Additional
      paid in capital
    
    
    260,356
    
    
    260,906Accumulated
      other comprehensive income
    
    
    418
    
    
    -Accumulated
      deficit
    
    
    (187,533
    )
    
    (190,442
    )Total
      Stockholders’ Equity
    
    
    73,165
    
    
    70,388Total
      Liabilities and Stockholders’ Equity
    
    $
    115,198
    
    $
    96,143





(1)
Derived from audited financial statements


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











**AIRSPAN
NETWORKS INC.**


**CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS**


(in
thousands except for share and per share data)





**Quarter
      Ended****April
      4, 2004**
    
    **April
      3, 2005****(unaudited)**Revenue
    
    $
    12,420
    
    $
    22,218Cost
      of revenue
    
    
    (8,693
    )
    
    (15,362
    )Gross
      profit
    
    
    3,727
    
    
    6,856Operating
      expenses:Research
      and development
    
    
    5,046
    
    
    4,598Sales
      and marketing
    
    
    2,560
    
    
    2,572Bad
      debt provision
    
    
    -
    
    
    316General
      and administrative
    
    
    2,051
    
    
    2,827Amortization
      of intangibles
    
    
    246
    
    
    128Total
      operating expenses
    
    
    9,903
    
    
    10,441Loss
      from operations
    
    
    (6,176
    )
    
    (3,585
    )Interest
      expense
    
    
    (2
    )
    
    -Interest
      and other income
    
    
    809
    
    
    676Loss
      before income taxes
    
    
    (5,369
    )
    
    (
      2,909
    )Income
      tax charge
    
    
    16
    
    
    -Net
      loss
    
    $
    (5,385
    )
    $
    (
      2,909
    )Net
      loss per share - basic and diluted
    
    $
    (0.15
    )
    $
    (0.08
    )Weighted
      average shares outstanding- basic and diluted
    
    
    35,893,740
    
    
    37,880,759




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










**AIRSPAN
NETWORKS INC.**


**CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**


(in
thousands)





**Year-to-date****April
      4, 2004**
    
    **April
      3, 2005****(unaudited)****CASH
      FLOWS FROM OPERATING ACTIVITIES**Net
      loss
    
    $
    (5,385
    )
    $
    (
      2,909
    )Adjustments
      to reconcile net loss to net cash used in operating activities:Depreciation
      and amortization
    
    
    726
    
    
    535Change
      in operating assets and liabilities:(Increase)/decrease
      in receivables
    
    
    (240
    )
    
    6,140Decrease/(increase)
      in inventories
    
    
    1,709
    
    
    (640
    )Increase
      in other current assets
    
    
    (2,962
    )
    
    (
      1,788
    )Increase/(decrease)
      in accounts payable
    
    
    1,416
    
    
    (10,958
    )Increase
      in deferred revenue
    
    
    634
    
    
    17Increase/(decrease)
      in customer advances
    
    
    12,013
    
    
    (3,294
    )Increase/(decrease)
      in accrued expenses
    
    
    447
    
    
    (
      2,043
    )Decrease
      in long-term accounts receivable
    
    
    -
    
    
    8Increase
      in other non current assets
    
    
    (21
    )
    
    (49
    )Net
      cash from/(used in) operating activities
    
    
    8,337
    
    
    (14,981
    )**CASH
      FLOWS FROM INVESTING ACTIVITIES**Purchase
      of property and equipment
    
    
    (325
    )
    
    (247
    )Net
      cash used in investing activities
    
    
    (325
    )
    
    (247
    )**CASH
      FLOWS FROM FINANCING ACTIVITIES**Exercise
      of stock options
    
    
    615
    
    
    550Restricted
      cash movement
    
    
    (149
    )
    
    (194
    )Net
      cash from financing activities
    
    
    466
    
    
    356Increase/(decrease)
      in cash and cash equivalents
    
    
    8,478
    
    
    (14,872
    )Cash
      and cash equivalents, beginning of period
    
    
    33,926
    
    
    66,296Cash
      and cash equivalents, end of period
    
    $
    42,404
    
    $
    51,424**SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION**Interest
      paid
    
    $
    2
    
    $
    -





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





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share data)**


**BUSINESS**





We are a
global supplier of Broadband Wireless Access (“BWA”) equipment that allows
communications service providers (often referred to as “local exchange
carriers,” or simply telephone companies), internet service providers (often
referred to as “ISPs”) and other telecommunications users, such as utilities and
enterprises, to cost-effectively deliver high-speed data and voice services
using radio frequencies rather than wires. We call this transmission method
“Broadband Wireless”. The primary market for our systems has historically been a
subset of the fixed broadband wireless access systems market, which is the
point-to-multipoint market in radio frequencies below 6.0GHz. That market now
encompasses BWA applications that are nomadic and portable as well as
fixed.





Each of
our wireless access systems utilizes digital wireless techniques, which provide
wide-area coverage, security and resistance to fading. Our systems can be
deployed rapidly and cost effectively, providing an attractive alternative or
complement to traditional copper wire, cable, or fiber-optic communications
access networks. Our products also include software tools that optimize
geographic coverage of our systems and provide ongoing network management. To
facilitate the deployment and operation of our systems, we also offer network
installation, training and support services. A more complete description of our
various wireless access systems is provided below. Our BWA systems (the “Airspan
BWA Solutions”) have been installed by more than 300 network operators in more
than 95 countries and are being tested by numerous other service
providers.





Our
initial products were developed and sold originally to provide wireless voice
connections between network operators and their end customers. Product
enhancements introduced in 1998 enabled us to offer both voice and data
connectivity over a single wireless link. We have continued to develop the
capabilities and features of the original products, and today we sell them to
operators globally as the AS4000 and AS4020 products, in systems capable of
delivering high-capacity broadband data with carrier-quality voice connections
using our proprietary Code Division Multiple Access (“CDMA”) technology.





In
October 2002, we strengthened our position in the BWA equipment market with the
acquisition of the WipLL (Wireless Internet Protocol in the Local Loop) business
from Marconi (“Marconi WipLL”) pursuant to a stock purchase agreement, and
renamed the business Airspan Networks (Israel) Limited (“Airspan Israel”). The
products and services produced by Airspan Israel enable operators in licensed
and unlicensed wireless bands to offer high-speed, low cost, wireless broadband
connections for data and voice over IP using CDMA technology. We acquired all of
the issued and outstanding capital stock and debt of Marconi WipLL in exchange
for $3 million of cash.





In
October 2003, we began marketing our AS4030 and AS3030 product range of Airspan
branded high-end point-to-multipoint and point-to-point products suitable for
operators wishing to deliver service offerings to medium and large businesses
and multi-tenant dwellings that require considerable bandwidth for their end
users. These products, based on 802.16 Orthogonal Frequency Division
Multiplexing (“OFDM”) technology, can also be used for a wide range of backhaul
applications, for example connecting remote base stations to a central
office.





In
December, 2003, we acquired the fixed wireless access business of Nortel
Networks known as “Proximity” under a Purchase and Sale Agreement. The Proximity
products enable operators to provide carrier class circuit switched voice and
data services, based on a Time Division Multiple Access (“TDMA”) technology. We
acquired inventory relating to the Proximity business as well as existing assets
associated with the manufacture, development and support of the Proximity
product line. We also assumed the product supply obligations associated with
customer contracts and certain other liabilities and obligations along with the
workforce of 26 persons directly employed in the Proximity business. The final
purchase price was $13.1 million.





On March
9, 2005 we announced the introduction of a new product line known as “AS.MAX”.
AS.MAX is a full portfolio of WiMAX systems, Base Stations and Customer Premise
Equipment (“CPEs”), using OFDM technology and based on the 802.16 standard. The
AS.MAX product range is designed to serve both:





·
    our
      traditional fixed point-to-multipoint BWA market;
and


·
    new
      BWA markets, for nomadic, portable and eventually mobile
      applications





On March
29, 2005, we entered into a definitive Purchase Agreement with Arelnet Limited
(“Arelnet”) (TASE: ARNT), an Israeli company providing Voice over IP (“VoIP”)
network infrastructure equipment and solutions, including soft switches and
gateways supporting major VoIP standards. Under the Purchase Agreement, we will
acquire all of the outstanding shares of Arelnet, for a purchase price of $8.7
million, comprised of $4.0 million of cash and $4.7 million of the Company's
common stock (the “Common Stock”). The aggregate number of shares of Common
Stock to be issued in the transaction will be determined upon the closing of
transaction based upon the volume weighted average trading price of the Common
Stock as quoted on Bloomberg LP, for the thirty business days ending on the day
preceding the closing date.





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share
data)**





We expect
to issue the Common Stock in reliance on an exemption from registration under
Section 3(a)(10) of the Securities Act of 1933, as amended. The availability of
the exemption and the closing of the transactions contemplated by the Purchase
Agreement is contingent upon, among other things, the determination by an
appropriate governmental authority, after a public hearing at which all
interested parties are invited to attend, that the terms and conditions of the
issuance of the Common Stock in the transaction are fair. Together with
Arelnet we have applied for a “fairness hearing” to be conducted by the District
Court of Tel Aviv. We expect the hearing to be conducted in May, 2005. The
closing of the transaction is also subject, among other things, to the approval
of the shareholders of Arelnet. A meeting of Arelnet’s shareholders is scheduled
to occur in May, 2005. We expect to complete the transaction in the second
quarter 2005.





Our
corporate headquarters are located in Boca Raton, Florida. Our primary
operations, manufacturing and product development centers are located in
Uxbridge, U.K., and Airport City, Israel. Our telephone number in Boca Raton is
(561) 893-8670. Further contact details and the location of all Airspan’s
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 generally accepted accounting principles 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 generally accepted accounting principles 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, 2004 has been derived from
the audited financial statements at that date included in the company’s Form
10-K/A for the year ended December 31, 2004 but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.





For
further information, refer to the consolidated financial statements and
footnotes thereto included in the company’s Annual Report on Form 10-K, as
amended by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2004.





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





**CONTINGENCIES**





*Warranty*





The
Company provides a limited warranty for periods, usually 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 is amortized over the warranty period. Management believes
that the amounts provided for are sufficient for all future warranty costs on
equipment sold through April 3, 2005 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 the Company’s product warranty liabilities was as
follows for the three months ended April 3, 2005.





**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**Three
      months ended April 3, 2005Product
      warranty liability
    
    $
    604
    
    $
    82
    
    $
    (44
    )
    $
    (128
    )
    $
    514





*Other
guarantees*





The
Company had delivered to its landlords and customers bank guarantees aggregating
to $1,502 at December 31, 2004 and $1,563 at April 3, 2005. The foregoing
figures represent the maximum potential amount of future payments the Company
could be required to make under these guarantees. The guarantees secure payment
or performance obligations of the Company under contracts. The Company has
pledged cash to the banks as collateral for the guarantees in the same amounts
as the guarantees. These pledges have been classified as restricted cash. The
Company has not recognized any liability for these guarantees as in management’s
opinion the likelihood of having to make payments under the guarantees is
remote. These guarantees will all expire before the end of 2010 with the
majority expiring in the fourth quarter of 2010.





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share
data)**


**


*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 Eric D. Stonestrom (our President and Chief Executive Officer),
Joseph J. Caffarelli (our former Senior Vice President and Chief Financial
Officer), Matthew Desch (our Chairman) and Jonathan Paget (our Executive Vice
President and Chief Operating Officer) (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 April 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, 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 300 other nearly identical
actions filed against other companies. On July 15, 2002, the Company moved to
dismiss all claims against it and the Individual Defendants. On October 9, 2002,
the Court dismissed the Individual Defendants from the case without prejudice
based upon Stipulations of Dismissal filed by the plaintiffs and the Individual
Defendants. This dismissal disposed of the Section 15 and 20(a) control person
claims without prejudice, since these claims were asserted only against the
Individual Defendants. On February 19, 2003, the Court dismissed the Section
10(b) claim against us, but allowed the Section 11 claim to proceed. On October
13, 2004, the Court certified a class in six of the approximately 300 other
nearly identical actions. In her Opinion, Judge Scheindlin noted that the
decision is intended to provide strong guidance to all parties regarding class
certification in the remaining cases. Judge Scheindlin determined that the class
period for Section 11 claims is the period between the IPO and the date that
unregistered shares entered the market. Judge Scheindlin also ruled that a
proper class representative of a Section 11 class must (1) have purchased shares
during the appropriate class period; and (2) have either sold the shares at a
price below the offering price or held the shares until the time of suit. In two
of the six cases, the class representatives did not meet the above criteria and
therefore, the Section 11 cases were not certified. Plaintiffs have not yet
moved to certify a class in the Airspan case.





Airspan
has approved a settlement agreement and related agreements which set forth the
terms of a settlement between Airspan, the Individual Defendants, the plaintiff
class and the vast majority of the other approximately 300 issuer defendants and
the individual defendants currently or formerly associated with those companies.
Among other provisions, the settlement provides for a release of Airspan and the
individual defendants for the conduct alleged in the action to be wrongful.
Airspan would agree to undertake certain responsibilities, including agreeing to
assign away, not assert, or release certain potential claims Airspan may have
against its underwriters. The settlement agreement also provides a guaranteed
recovery of $1 billion to plaintiffs for the cases relating to all of the
approximately 300 issuers. To the extent that the underwriter defendants settle
all of the cases for at least $1 billion, no payment will be required under the
issuers’ settlement agreement. To the extent that the underwriter defendants
settle for less than $1 billion, the issuers are required to make up the
difference. It is anticipated that any potential financial obligation of Airspan
to plaintiffs pursuant to the terms of the settlement agreement and related
agreements will be covered by existing insurance. The Company currently is not
aware of any material limitations on the expected recovery of any potential
financial obligation to plaintiffs from its insurance carriers. Its carriers are
solvent, and the company is not aware of any uncertainties as to the legal
sufficiency of an insurance claim with respect to any recovery by plaintiffs.
Therefore, we do not expect that the settlement will involve any payment by
Airspan. If material limitations on the expected recovery of any potential
financial obligation to the plaintiffs from Airspan’s insurance carriers should
arise, Airspan’s maximum financial obligation to plaintiffs pursuant to the
settlement agreement would be less than $3.4 million.





On
February 15, 2005, the court granted preliminary approval of the settlement
agreement, subject to certain modifications consistent with its opinion. The
Court ruled that the issuer defendants and the plaintiffs must submit a revised
settlement agreement which provides for a mutual bar of all contribution claims
by the settling and non-settling parties and does not bar the parties from
pursuing other claims. The issuers and plaintiffs have negotiated a revised
settlement agreement consistent with the court’s opinion and are in the process
of obtaining approval from those issuer defendants that are not in bankruptcy.
At this point all but five of the issuer defendants that are not in bankruptcy
have approved the revised settlement agreement. The parties have submitted a
revised settlement agreement to the court. The underwriter defendants will have
until May 16, 2005 to object to the revised settlement agreement. There is no
assurance that the court will grant final approval to the settlement. If the
settlement agreement is not approved and 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 .





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share
data)**





Except as
set forth above the Company is not currently subject to any other material legal
proceedings. The Company may from time to time become a party to various other
legal proceedings arising in the ordinary course of its business.





**STOCK
COMPENSATION**





At April
3, 2004, the Company had three stock option employee compensation
plans, the 2004
omnibus equity compensation plan and the
2000 Employee Stock Purchase Plan (“ESPP”). The Company accounts for these plans
under the recognition and measurement principles of APB Opinion No.25 Accounting
for Stock Issued to Employees, and related interpretations. In all periods shown
the Company has valued stock-based employee compensation using the intrinsic
value method. All options granted under these plans had an exercise price equal
to the market value of the underlying common stock on the date of grant. There
was no stock-based compensation cost reflected in net income in 2004 and 2005
related to these stock option plans. Awards
under the 2004 omnibus equity compensation plan may be made to Participants in
the form of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii)
Stock Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi) Stock
Awards; (vii) Performance Shares; (viii) Other Stock-Based Awards; and (ix)
other forms of equity-based compensation as may be provided and are permissible
under this Plan and the law. The Company recognized a charge of $56 in the first
quarter 2005 relating to the issuance of 200,000 shares of  restricted
stock awarded under the 2004 omnibus equity compensation plan. The restricted
stock vests over a four year period from January 28, 2005. In addition, half of
the restricted stock awarded in the first quarter 2005 have performance
conditions relating to 2005 annual earnings and shipment targets.





The
following table illustrates the effect on net loss and net loss per share if the
Company had applied the fair value recognition provisions of FASB Statement No.
123, Accounting for Stock-Based Compensation, to stock based employee
compensation.





**Quarter
      Ended****April
      4, 2004**
    
    **April
      3, 2005****(unaudited)**Net
      loss, as reported
    
    $
    (5,385
    )
    $
    (2,909
    )Add
      back:Stock-based
      employee compensation cost included in the determination of net loss as
      reported
    
    
    -
    
    
    56Deduct:Stock-based
      employee compensation cost that would have been included in the
      determination of net loss if the fair value method had been applied to all
      awards
    
    
    (489
    )
    
    (568
    )Pro
      forma net loss
    
    $
    (5,874
    )
    $
    (3,421
    )Net
      loss per share - basic and diluted
    
    $
    (0.15
    )
    $
    (0.08
    )Pro
      forma net loss per share- basic and diluted
    
    $
    (0.16
    )
    $
    (0.09
    )





**INVENTORY**





Inventory
consists of the following:





**December
      31, 2004**
    
    **April
      3,**
      **2005****(unaudited)**Purchased
      parts and materials
    
    $
    4,419
    
    $
    4,180Work
      in progress
    
    
    1,214
    
    
    1,193Finished
      goods and consumables
    
    
    7,201
    
    
    8,101$
    12,834
    
    $
    13,474





**ACCRUED
RESTRUCTURING CHARGES**





In the
fourth quarter of 2002 the decision was made to completely outsource all our
manufacturing. As a result the Company recorded a $975 restructuring charge for
the closure of its Riverside, Uxbridge facility in 2003. All of this cost
relates to the excess facility. A further $368 was recognized as restructuring
in the income statement in the fourth quarter of 2003 as the Company reassessed
the ability to sublease the Riverside facility. All cash outflows in connection
with this restructuring are expected to occur by the end of 2006.





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share
data)**





During
the first quarter of 2004 the Company revised its original restructuring
programs and initiated a new program to further reduce operating expenses. This
program was completed by the end of the third quarter of 2004. The total cost
incurred for this restructuring program was $413, recorded as a restructuring
charge, related to termination costs for 21 employees. All of these employees
had left the Company by December 31, 2004.





In
conjunction with the purchase of the Proximity business in 2003 the Company
implemented its plan to relocate the Proximity business from Maidenhead, England
and Sunrise, Florida to the Company’s facilities in Uxbridge, England and Boca
Raton, Florida. The Company recorded acquisition-related restructuring charges
of $520, in the fourth quarter of 2003, in connection with the relocation of the
Proximity business. The estimated relocation costs were reduced during 2004 to
$181. The adjustment formed part of the revised fair value adjustments of the
Proximity acquisition. This relocation plan was completed by December 31,
2004.





The
restructuring charges and their utilization are summarized as follows:





**Balance
      at****beginning
      of period**
    
    **Restructuring
      charge**
    
    **Accrued
      on acquisition**
    
    **Utilized**
    
    **Balance
      at**
      **end
      of**
      **period****(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**Three
      months ended April 3, 2005Contract
      termination costs
    
    $
    599
    
    
    -
    
    
    -
    
    $
    (78
    )
    $
    521Other
      associated costs
    
    
    61
    
    
    -
    
    
    -
    
    
    (2
    )
    
    59$
    660
    
    $
    -
    
    $
    -
    
    $
    (80
    )
    $
    580Year
      ended December 31, 2004One-time
      termination benefits
    
    
    -
    
    $
    413
    
    
    -
    
    $
    (413
    )
    
    -Contract
      termination costs
    
    $
    947
    
    
    -
    
    
    -
    
    
    (348
    )
    $
    599Other
      associated costs
    
    
    592
    
    
    -
    
    $
    (339
    )
    
    (192
    )
    
    61$
    1,539
    
    $
    413
    
    $
    (339
    )
    $
    (953
    )
    $
    660





All
charges will result in direct cash outlays.





**SEGMENTAL
INFORMATION**





As a
developer and supplier of fixed wireless communications access systems and
solutions, 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. The majority of the Company’s revenue is generated from products
manufactured in the United Kingdom, Mexico and Israel, with additional revenue
generated from sales of original equipment manufacturer’s (OEM) products.





An
analysis of revenue by geographical market is given below:





**Quarter
      Ended****April
      4,**
      **2004**
    
    **April
      3,**
      **2005****(unaudited)**USA
      and Canada
    
    $
    175
    
    $
    1,199Asia
    
    
    1,088
    
    
    1,769Europe
    
    
    2,381
    
    
    2,217Africa
      and the Middle East
    
    
    695
    
    
    1,414Latin
      America and Caribbean
    
    
    8,081
    
    
    15,619$
    12,420
    
    $
    22,218





**AIRSPAN
NETWORKS INC.**
 **NOTES
TO THE CONDENSED FINANCIAL STATEMENTS**
 **(in
thousands, except for share and per share
data)**


****


**COMPREHENSIVE
LOSS**





Total
comprehensive loss was $5,603 for the quarter ended April 4, 2004 and $3,327 for
the quarter ended April 3, 2005 comprising:








**Quarter
      Ended****April
      4,**
      **2004**
    
    **April
      3,**
      **2005****(unaudited)**Net
      loss
    
    $
    (5,385
    )
    $
    (2,909
    )Other
      comprehensive income/(loss):Movement
      in the fair value of cash flow hedges-
      unrealized gain on foreign currency cash flow hedges
    
    
    244
    
    
    --
      reclassification of adjustment for gains realized in net loss
    
    
    (462
    )
    
    (418
    )Comprehensive
      loss
    
    $
    (5,603
    )
    $
    (3,327
    )





**NET
LOSS PER SHARE**





Net loss
per share is computed using the weighted average number of shares of common
stock outstanding less the number of shares subject to repurchase. Shares
associated with stock options and or common stock to be issued on the conversion
of the Company’s Series A Preferred stock are not included in the calculation of
diluted net loss per share as they are antidilutive.





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





**Quarter
      Ended****April
      4,**
      **2004**
    
    **April
      3,**
      **2005****(unaudited)**Numerator:Net
      loss per share
    
    $
    (5,385
    )
    $
    (
      2,909
    )Denominator:Weighted
      average common shares outstanding basic and diluted
    
    
    35,893,740
    
    
    37,880,759Net
      loss per share- basic and diluted
    
    $
    (0.15
    )
    $
    (0.08
    )





In 2000,
the Company adopted the 2000 Employee Stock Purchase Plan (“ESPP”), which
qualifies as an employee stock purchase plan under Section 423 of the Internal
Revenue Code of 1986. As of April 3, 2005, there were 1,825,577 shares of common
stock reserved for issuance under the ESPP.





During
the three months ended April 3, 2005, 352,627 options granted pursuant to the
1998 and 2003 stock option plans were exercised at an average exercise price of
$1.56.











**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 AS AMENDED BY AMENDMENT NO.1 ON FORM 10-K/A FOR THE YEAR
ENDED DECEMBER 31, 2004, 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) A SLOWDOWN OF EXPENDITURES BY COMMUNICATION SERVICE PROVIDERS;
(II) INCREASED COMPETITION FROM ALTERNATIVE COMMUNICATION SYSTEMS; (III) THE
FAILURE OF OUR EXISTING OR PROSPECTIVE CUSTOMERS TO PURCHASE PRODUCTS AS
PROJECTED; (IV) OUR INABILITY TO SUCCESSFULLY IMPLEMENT COST REDUCTION OR
CONTAINMENT PROGRAMS; (V) A LOSS OF ANY OF OUR KEY CUSTOMERS; (VI) OUR ABILITY
TO RETAIN AXTEL, S.A. DE CV (“AXTEL”) AS OUR LARGEST CUSTOMER; AND (VII) OUR
ABILITY TO CONTINUE TO SELL THE PROXIMITY INVENTORY ON TERMS AND CONDITIONS
COMPARABLE TO THOSE CURRENTLY UTILIZED. THE COMPANY IS ALSO SUBJECT TO THE RISKS
AND UNCERTAINTIES DESCRIBED IN ITS FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING ITS ANNUAL REPORT ON FORM 10-K AS AMENDED BY AMENDMENT
NO.1 ON FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2004.**





**COMPARISON
OF THE QUARTER ENDED APRIL 3, 2005 TO THE QUARTER ENDED APRIL 4, 2004**





Revenue





Revenue
totaled $22.2 million for the quarter ended April 3, 2005 representing a 79%
increase from the $12.4 million reported for the quarter ended April 4, 2004.
The increase in revenues was primarily attributable to an increase in sales of
our Proximity and WipLL products. In particular, the increase in revenue in the
first quarter 2005 as compared to the first quarter of 2004 is the result of an
approximate 100% increase in revenues attributable to Axtel, our largest
customer. Revenue for the first quarter of 2005 was 41% lower than revenue
recorded for the fourth quarter of 2004, primarily due to lower sales of our
Proximity product to Axtel. During the first quarter 2005, revenue was derived
from 110 customers in 54 countries. Geographically, 70% of our revenue was
derived from customers in Latin America and the Caribbean, 11% from Europe and
8% from Asia. African and Middle Eastern customers and North American customers
accounted for 6% and 5% of revenues, respectively. In the first quarter 2005,
sales to customers in Latin America and Caribbean increased by $7.8 million
compared to the first quarter of 2004.





Cost of
Revenue





Cost of
revenue increased 77% to $15.4 million in the quarter ended April 3, 2005 from
$8.7 million in the quarter ended April 4, 2004. All of the increase is
attributable to the increase in revenue. The gross profit for the first quarter
of 2005 was $6.9 million (31% of revenue) compared to a gross profit of $3.7
million (30% of revenue) for the first quarter 2004 and compared to a gross
profit for the fourth quarter 2004 of $10.5 million (28% of revenue). The
increase in gross profit in the first quarter 2005 as compared to the first
quarter 2004 was due primarily to comparable amounts of period costs being
spread over a larger quarterly revenue base.





Research
and Development Expenses





Research
and development expenses decreased 9% to $4.6 million in the quarter ended April
3, 2005 from $5.0 million in the quarter ended April 4, 2004. The decrease was
due to the effect of headcount and expense reduction programs completed in 2004.
These reductions were partially offset by increased investment in our WiMAX
development plans. We expect to begin commercial WiMAX deployments in the second
half of 2005.





Sales and
Marketing Expenses





Sales and
marketing expenses remained constant at $2.6 million for both the first quarter
of 2004 and the first quarter of 2005.











Bad Debt
Provision





In the
first quarter 2005, we recorded a bad debt provision of $0.3 million relating to
customer accounts for which management has determined that full recovery was
unlikely. No provisions were made for bad debts in the corresponding quarter of
2004.





General
and Administrative Expenses





General
and administrative expenses increased 38% to $2.8 million in the quarter ended
April 3, 2005 from $2.1 million in the quarter ended April 4, 2004. The increase
is primarily due to an increase in legal and professional expenditures,
including costs related to activities to facilitate compliance with the Sarbanes
Oxley Act of 2002 and legal and accounting costs incurred in the pursuit of
certain acquisition opportunities.





Amortization
of Intangibles





We
recorded an expense of $0.1 million in the first quarter 2005 compared with an
expense of $0.2 million for the first quarter 2004. The reduction in
amortization expense is a result of the reduction in the value attributed to the
intangibles acquired as part of the Proximity purchase in the fourth quarter of
2003. The adjustments to the purchase price allocation in both the second and
fourth quarter of 2004 were primarily a result of the increased value attributed
to the acquired Proximity inventory. These intangibles are expected to be fully
amortized by the end of 2008.





Interest
Expense and Interest and Other Income





We had no
interest expense in the first quarter of 2005 or the first quarter of 2004.
Interest and other income decreased to $0.7 million for the quarter ended April
3, 2005 from $0.8 million for the quarter ended April 4, 2004. The decrease was
due primarily to lower foreign exchange gains of $0.4 million recorded in the
first quarter of 2005 as compared to the $0.7 million recorded in the comparable
period of 2004. Interest income increased to $0.3 million in the first quarter
of 2005 compared to $0.1 million in the first quarter of 2004 as a result of
higher interest rates on higher average cash balances. The foreign exchange
gains in 2005 and 2004 are primarily a result of our settlement of certain
currency hedging contracts entered into by the Company to protect itself against
a strengthening of the British pound against the US dollar.





Income
Taxes





We did
not have a material income tax charge in either the first quarter of 2005 or
2004 primarily due to our current loss making position and losses brought
forward. We are subject to US franchise taxes resulting from business activities
performed within certain States in the United States of America.





Net Loss





Our net
loss of $2.9 million, or $0.08 per share, in the quarter ended April 3, 2005
compares to a net loss of $5.4 million, or $0.15 per share, for the quarter
ended April 4, 2004, a decrease of $2.5 million, or 46%. Comparing the first
quarters of 2005 and 2004, the increase in gross profit of $3.1 million was
partially offset by higher operating expenses of $0.5 million and lower net
interest and other income of $0.1 million.





Other
Comprehensive (Loss)/Income





Other
comprehensive loss for the quarter ended April 3, 2005 arose from the monthly
settlement of certain currency hedging contracts together with the
reclassification of their realized gains to net income of $0.4 million. These
forward exchange contracts are used to hedge our UK expenses through to April
2005. Other comprehensive income for the quarter ended April 4, 2004 was $0.2
million.





**Restructuring**





In the
fourth quarter of 2002 the decision was made to completely outsource all our
manufacturing. As a result we recorded a $975,000 restructuring charge for the
closure of our Riverside, Uxbridge facility in 2003. All of this cost related to
the excess facility. A further $368,000 was recognized as restructuring in the
income statement in the fourth quarter of 2003 as the Company reassessed the
ability to sublease the Riverside facility. All cash outflows in connection with
this restructuring are expected to occur by the end of 2006.





During
the first quarter of 2004 the Company revised its original restructuring
programs and initiated a new program to further reduce operating expenses. This
program was completed by the end of the third quarter of 2004. The total cost
incurred for this restructuring program was $413,000, recorded as a
restructuring charge, related to termination costs for 21 employees. All of
these employees had left the Company by December 31, 2004.











In
conjunction with the purchase of the Proximity business in 2003, the Company
implemented its plan to relocate the Proximity business from Maidenhead, England
and Sunrise, Florida to the Company’s facilities in Uxbridge, England and Boca
Raton, Florida. The Company recorded acquisition-related restructuring charges
of $520,000, in the fourth quarter of 2003, in connection with the relocation of
the Proximity business. The estimated relocation costs were reduced during 2004
to $181,000. The adjustment formed part of the revised fair value adjustments of
the Proximity acquisition. This relocation plan was completed by December 31,
2004.





The
restructuring charges and their utilization are summarized as follows (in US
dollar ‘000s):





**Balance
      at****beginning
      of period**
    
    **Restructuring
      charge**
    
    **Accrued
      on acquisition**
    
    **Utilized**
    
    **Balance
      at**
      **end
      of**
      **period****(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**
    
    **(unaudited)**Three
      months ended April 3, 2005Contract
      termination costs
    
    $
    599
    
    
    -
    
    
    -
    
    $
    (78
    )
    $
    521Other
      associated costs
    
    
    61
    
    
    -
    
    
    -
    
    
    (2
    )
    
    59$
    660
    
    $
    -
    
    $
    -
    
    $
    (80
    )
    $
    580Year
      ended December 31, 2004One-time
      termination benefits
    
    
    -
    
    $
    413
    
    
    -
    
    $
    (413
    )
    
    -Contract
      termination costs
    
    $
    947
    
    
    -
    
    
    -
    
    
    (348
    )
    $
    599Other
      associated costs
    
    
    592
    
    
    -
    
    $
    (339
    )
    
    (192
    )
    
    61$
    1,539
    
    $
    413
    
    $
    (339
    )
    $
    (953
    )
    $
    660





All
charges will result in direct cash outlays.





**Liquidity
and Capital Resources**




Since
inception, we have financed our operations through private sales of convertible
preferred stock, which have totaled $146.5 million (net of transaction expenses)
and an initial public offering of common stock, which we completed on July 25,
2000. In the initial public offering, we issued 6,325,000 shares of common stock
for approximately $86 million in cash (net of underwriting discounts, commission
and other expenses). In our most recent private sale of convertible preferred
stock, which we closed in September 2004, we raised $29.2 million through the
issuance of Series A preferred stock to Oak Investment Partners XI, Limited
Partnership. In November 2004, we also raised $4.4 million through the sale of
treasury stock that was acquired through a share buy back program completed in
2002. We have used the proceeds of the sales of securities to finance
acquisitions, working capital and for other general corporate purposes.





As of
April 3, 2005, we had cash and cash equivalents of $51.4 million and $1.9
million of restricted cash. Restricted cash is held as collateral for landlords
and customers and contributions from employees in respect of the Employee Share
Purchase Plan. We do not have a line of credit or similar borrowing facility,
nor do we have any material capital commitments.





Until we
are able to generate cash from operations, if ever, we intend to use our
existing cash resources to finance our operations and/or business combinations.
We believe we have sufficient cash resources to finance operations for at least
the next twelve months.





For the
three months ended April 3, 2005, we used $15.0 million of cash in operating
activities compared with a cash inflow of $8.3 million for the three months
ended April 4, 2004. The operating cash outflow for the first quarter of 2005
was primarily a result of a decrease in accounts payable, customer advances and
accrued expenses of $11.0 million, $3.3 million, $2.0 million respectively, the
net loss of $2.9 million, and an increase in other current assets of $1.8
million. The cash outflow was partially offset by a decrease in receivables of
$6.1 million. The cash inflow for the first quarter of 2004, was primarily as a
result of our net increase in customer advance payments of approximately $12
million in connection with contract payments made by a customer in Latin America
, $1.7 million from a decrease in inventory levels and $1.4 million from an
increase in accounts payable whish were partially offset by a net loss of $5.4
million and a $2.9 million increase in other current assets. Days sales
outstanding increased to 59 days at the end of the first quarter 2005 from 49 at
the end of the fourth quarter 2004, and compared to 82 days at the end of the
first quarter 2004. Inventory turns were 4.6 at the end of the first quarter of
2005, compared with 8.4 for the fourth quarter 2004 and 2.1 turns for the first
quarter of 2004.





The net
cash used in investing activities for the first quarter of 2005 and 2004 was
$0.2 million and $0.3 million respectively, all of which related to capital
purchases.











Our net
cash inflow from financing activities for the three months ended April 3, 2005
was $0.4 million compared with an inflow of $0.5 million for the three months
ended April 4, 2004. During the first quarter 2005, we generated $0.6 million
upon the exercises of stock options. This inflow was partially offset by a $0.2
million increase in restricted cash. Restricted cash increases when the Company
issues a guarantee secured by cash collateral or additional contributions are
collected from employees under the ESPP and decreases whenever such a guarantee
is cancelled or shares are actually purchased under the ESPP.





We have
no material commitments other than obligations on operating leases, the forward
exchange contracts mentioned below in Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK and purchase commitments to our manufacturing
subcontractors. These purchase commitments totaled $21.1 million at December 31,
2004 and at April 3, 2005 totaled $17.4 million.





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, as amended by Amendment No.1 on Form 10-K/A, for the fiscal year ended
December 31, 2004. There can be no assurances that our efforts to acquire other
businesses will be successful.





We have
considered and may in the future seek to raise additional equity or debt capital
to assist us in financing an acquisition and/or on-going operations of any
business that we 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 and we anticipate that the terms of such financing, if secured, will be
determined at some future date. There can be no assurances 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.





**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 April 3,
2005 and December 31, 2004, we had cash, cash equivalents and restricted cash of
$53.3 million and $68.0 million, respectively. Substantially all of these
amounts consisted of highly liquid investments with purchase to maturity terms
of less than 90 days. These investments are exposed to interest rate risk, but a
hypothetical increase or decrease in market interest rates by two percentage
points from April 3, 2005 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
three months ended April 3, 2005, 96% of our sales were denominated in U.S.
dollars, 2% were denominated in euro and 2% were denominated in
Australian dollars. Comparatively, for the three months ended April 4,
2004, 95% of our sales were denominated in US dollars, 4% were
denominated in euro, and 1% was denominated in Australian dollars. Our
total euro denominated sales for the three months ended April 3, 2005 were
$0.5 million, which were recorded at an average exchange rate of $1US =
€0.7545. Our total Australian dollar denominated sales for the three months
ended April 3, 2005 were $0.3 million,  which were recorded at an
average exchange rate of $1US = AUS$1.277. If the average exchange rates used
had been higher or lower during the three month period ended April 3, 2005 by
10%, they would have decreased or increased the total Australian dollar and
euro-denominated sales value by $0.1 million. We expect the proportions of sales
in euro and Australian dollars 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.





We have
from time to time entered into fair value currency hedging contracts that lock
in minimum exchange rates for payments due to us under some of our sales
contracts where those payments are to be made in currencies other than US
dollars. We do not enter into any currency hedging activities for speculative
purposes. The costs of these contracts are included under interest and other
income in our financial statements. There were no fair value currency hedge
contracts outstanding at April 3, 2005. We will continue to monitor our foreign
currency exposures and may modify hedging strategies, as we deem prudent.





We have
also entered into cash flow currency hedges. Our operating results are affected
by movement in foreign currency exchange rates, particularly the rate between
U.S. dollars and U.K. pounds sterling and the rate between U.S. dollars and
Israeli shekels. This is because most of our operating expenses, which may
fluctuate over time, are incurred in pounds sterling and Israeli shekels. During
the three months ended April 3, 2005, we paid expenses in local currency of
approximately 3.4 million pounds sterling, at an average rate of $1US = 0.5235
pounds sterling. During the three months ended April 3, 2005, we paid expenses
in local currency of approximately 9.9 million Israeli shekels, at an average
rate of $1US = 4.3348 shekels. If the expenses in pounds sterling had not been
hedged and the average exchange rates for U.K. pounds sterling and Israeli
shekels had been higher or lower for the three month period ended April 3, 2005
by 10%, the total pounds sterling and Israeli shekel denominated operating
expenses would have decreased or increased by $0.7 million and $0.3 million
respectively.











We expect
the proportions of operating expenses paid in pounds sterling and Israeli
shekels to fluctuate over time. To hedge our pound sterling foreign currency
risk, we had an outstanding forward exchange contract at April 3, 2005 to
purchase 0.8 million pounds sterling at an average exchange rate of $1US =
0.5339 pounds sterling in April 2005.





Equity
Price Risk





We do not
own any equity investments, other than in 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**





Our
management is responsible for establishing and maintaining adequate internal
control over the Company's financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.





There are
inherent limitations in the effectiveness of any internal control, including the
possibility of human error and the circumvention or overriding of controls.
Accordingly, even effective internal controls can provide only reasonable
assurances with respect to financial statement preparation. Further because of
changes in conditions, the effectiveness of internal controls may vary over time
such that the degree of compliance with the policies or procedures may
deteriorate.





As of the
end of the period covered by this quarterly report, an evaluation was performed
under the supervision and with the participation of Airspan's management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of Airspan's disclosure controls and
procedures as defined in Section 13a-15(e) and 15d-15(e) of the Securities
Exchange Act.





Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that as of such date, our disclosure controls and procedures were (1)
not sufficiently designed to ensure that material information relating to
Airspan, including our consolidated subsidiaries, was made known to them by
others within those entities, particularly in the period in which this report
was being prepared and (2) not effective, in that they did not provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. More specifically, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were not effective
due to the material weakness in the Company's internal control over financial
reporting described in the following paragraph.





Although
the Company did not have any material equity transactions in the three month
period ended April 3, 2005, during that period management restated the financial
statements included in the Company's Quarterly Report on Form 10-Q for the
period ended October 3, 2004 and the financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004 by
filing a Form 10-Q/A and Form 10-K/A on April 27, 2005. The Company believes
that such restatements were required to correct the Company’s omission in its
2004 consolidated financial statements of a $10.4 million, non-cash deemed
dividend from the embedded beneficial conversion feature associated with the
issuance of a Series A Preferred Stock on September 13, 2004. This resulted in
the misstatement of the net loss attributable to common stockholders and net
loss per share as well as a misclassification within stockholders' equity at
October 3, 2004 and December 31, 2004. As a result, management concluded that
there was a control deficiency that was a material weakness and that the Company
did not maintain effective controls over financial reporting at October 3, 2004,
December 31, 2004 and April 3, 2005.





*Remediation
Steps to Address Material Weakness*





To
address the Company's material weakness relating to the accounting and
disclosure for complex and non-standard Stockholders' equity transactions the
Company is in the process of enhancing its internal control processes in order
to be able to comprehensively review the accounting and disclosure implications
of such transactions.











There
have been no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that
occurred during our last fiscal quarter that has materially affected or is
reasonably likely to materially affect our internal control over financial
reporting.





**Part
II OTHER INFORMATION**





**Item
1. LEGAL PROCEEDINGS**





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 Eric D. Stonestrom (our President and Chief Executive Officer),
Joseph J. Caffarelli (our former Senior Vice President and Chief Financial
Officer), Matthew Desch (our Chairman) and Jonathan Paget (our Executive Vice
President and Chief Operating Officer) (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 April 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, 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 300 other nearly identical
actions filed against other companies. On July 15, 2002, the Company moved to
dismiss all claims against it and the Individual Defendants. On October 9, 2002,
the Court dismissed the Individual Defendants from the case without prejudice
based upon Stipulations of Dismissal filed by the plaintiffs and the Individual
Defendants. This dismissal disposed of the Section 15 and 20(a) control person
claims without prejudice, since these claims were asserted only against the
Individual Defendants. On February 19, 2003, the Court dismissed the Section
10(b) claim against us, but allowed the Section 11 claim to proceed. On October
13, 2004, the Court certified a class in six of the approximately 300 other
nearly identical actions. In her Opinion, Judge Scheindlin noted that the
decision is intended to provide strong guidance to all parties regarding class
certification in the remaining cases. Judge Scheindlin determined that the class
period for Section 11 claims is the period between the IPO and the date that
unregistered shares entered the market. Judge Scheindlin also ruled that a
proper class representative of a Section 11 class must (1) have purchased shares
during the appropriate class period; and (2) have either sold the shares at a
price below the offering price or held the shares until the time of suit. In two
of the six cases, the class representatives did not meet the above criteria and
therefore, the Section 11 cases were not certified. Plaintiffs have not yet
moved to certify a class in the Airspan case.





Airspan
has approved a settlement agreement and related agreements which set forth the
terms of a settlement between Airspan, the Individual Defendants, the plaintiff
class and the vast majority of the other approximately 300 issuer defendants and
the individual defendants currently or formerly associated with those companies.
Among other provisions, the settlement provides for a release of Airspan and the
individual defendants for the conduct alleged in the action to be wrongful.
Airspan would agree to undertake certain responsibilities, including agreeing to
assign away, not assert, or release certain potential claims Airspan may have
against its underwriters. The settlement agreement also provides a guaranteed
recovery of $1 billion to plaintiffs for the cases relating to all of the
approximately 300 issuers. To the extent that the underwriter defendants settle
all of the cases for at least $1 billion, no payment will be required under the
issuers’ settlement agreement. To the extent that the underwriter defendants
settle for less than $1 billion, the issuers are required to make up the
difference. It is anticipated that any potential financial obligation of Airspan
to plaintiffs pursuant to the terms of the settlement agreement and related
agreements will be covered by existing insurance. The Company currently is not
aware of any material limitations on the expected recovery of any potential
financial obligation to plaintiffs from its insurance carriers. Its carriers are
solvent, and the company is not aware of any uncertainties as to the legal
sufficiency of an insurance claim with respect to any recovery by plaintiffs.
Therefore, we do not expect that the settlement will involve any payment by
Airspan. If material limitations on the expected recovery of any potential
financial obligation to the plaintiffs from Airspan’s insurance carriers should
arise, Airspan’s maximum financial obligation to plaintiffs pursuant to the
settlement agreement would be less than $3.4 million.





On
February 15, 2005, the Court granted preliminary approval of the settlement
agreement, subject to certain modifications consistent with its opinion. The
Court ruled that the issuer defendants and the plaintiffs must submit a revised
settlement agreement which provides for a mutual bar of all contribution claims
by the settling and non-settling parties and does not bar the parties from
pursuing other claims. The issuers and plaintiffs have negotiated a revised
settlement agreement consistent with the Court’s opinion and are in the process
of obtaining approval from those issuer defendants that are not in bankruptcy.
At this point all but five of the issuer defendants that are not in bankruptcy
have approved the revised settlement agreement. The parties have submitted a
revised settlement agreement to the Court. The underwriter defendants will have
until May 16, 2005 to object to the revised settlement agreement. There is no
assurance that the Court will grant final approval to the settlement. If the
settlement agreement is not approved and 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.











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
2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS**





Not
Applicable





**Item
3. DEFAULTS UPON SENIOR SECURITIES**





None





**Item
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None





**Item
5. OTHER INFORMATION**





None







**Item
6. EXHIBITS**





3.1
    Amended
      and Restated Articles of Incorporation of Airspan(1)3.2
    Articles
      of Amendment to the Articles of Incorporation (2)3.2
    Amended
      and Restated Bylaws of Airspan (3)4.1
    Form
      of Airspan’s common stock certificate (4)10.1
    1998
      Stock Option and Restricted Stock Plan (4)10.2
    2000
      Employee Stock Purchase Plan, as amended (4)10.3
    Employment
      Agreement with Eric Stonestrom (4), (5)10.4
    Employment
      Agreement with Jonathan Paget (4), (5)10.5
    Employment
      Agreement with Peter Aronstam, as amended (5), (7)10.6
    2001
      Supplemental Stock Option Plan (6)10.7
    Employment
      Agreement with Henrik Smith-Petersen (5), (7)10.8
    Employment
      Agreement with David Brant (5), (7)10.9
    2003
      Supplemental Stock Option Plan (3)10.10
    Airspan
      Omnibus Equity Compensation Plan (1)10.11
    Purchase
      and License Agreement, dated as of December 28, 2004, by and between
      Airspan Communications Limited and Axtel S.A. de C.V. (11)
      (12)10.12
    Technical
      Assistance Support Services Agreement for FWA Equipment, dated as of
      February 14, 2003, by and between Nortel Networks UK Limited and Axtel,
      S.A. de C.V. (8)**10.13
    Preferred
      Stock Purchase Agreement, dated as of September 10, 2004 among Airspan
      Networks, Inc. and Oak Investment Partners XI, Limited Partnership (9)10.14
    Amendment
      to Preferred Stock Purchase Agreement (10)10.15
    Amendment
      Agreement No. 3 to FWA TASS, dated as of December 28, 2004, between
      Airspan Communications Limited and Axtel S.A. de C.V. (11)
      (12)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***99.1
    Press
      Release issued May 11, 2005***








*     
Filed herewith


**    Confidential
treatment has been granted with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.


***
Furnished herewith











1
    Incorporated
      by reference to Airspan’s Form 10-Q for the quarter ended April 4, 2004.2
    Incorporated
      by reference to the Company’s report on Form 8-K filed on September 15,
      2004.3
    Incorporated
      by reference to Airspan’s Form 10-K for the year ended December 31, 2003.4
    Incorporated
      by Reference to Airspan’s Registration Statement on Form S-1 (333-34514)
      filed July 18, 20005
    Management
      Agreement or Compensatory Plan or Arrangement6
    Incorporated
      by Reference to Airspan’s Form 10-K for the year ended December 31, 20007
    Incorporated
      by Reference to Airspan’s Form 10-K for the year ended December 31, 20028.
    Incorporated
      by reference by the Company’s report on Form 8-K/A filed on July 6, 2004.9
    Incorporated
      by reference to the Company’s report on Form 8-K filed on September 13,
      2004.10
    Incorporated
      by reference to the Company’s report on Form 8-K filed on September 27,
      2004.11
    Portions
      of this document have been omitted and were filed separately with the SEC
      on March 16, 2005 pursuant to a request for confidential
      treatment.12
    Incorporated
      by reference to the Company’s Form 10-K for the year ended December 31,
      2004.








****


**SIGNATURES**





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





May 13,
2005





AIRSPAN
      NETWORKS INC.By:
    /s/
      PETER ARONSTAMPeter
      Aronstam*Chief
      Financial Officer*