**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**




ý
            
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934**For
                the quarterly period ended July 1, 2007**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  ̈





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





Non-accelerated
      filer  ̈   Large
      accelerated filer  ̈   Accelerated
      filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes  ̈  No 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 August 7, 2007Common
                Stock, $.0003 par value per share
            
            40,857,386
                shares








**TABLE
      OF CONTENTS**


**Page
                Number**PART
                1.
            FINANCIAL
                INFORMATION
            1Item
                1.
            FINANCIAL
                STATEMENTS
            1CONDENSED
                CONSOLIDATED BALANCE SHEETS
            1CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS
            2CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS
            3Notes
                to Condensed Consolidated Financial Statements
            4Item
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            14Item
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
            22Item
                4.
            CONTROLS
                AND PROCEDURES
            23Part
                II.
            OTHER
                INFORMATION
            24Item
                1.
            LEGAL
                PROCEEDINGS
            24Item
                1A.
            RISK
                FACTORS
            24Item
                6.
            EXHIBITS
            37SIGNATURES
            
            37EXHIBIT INDEX
            
            38







i





**PART
      1.**  **FINANCIAL
      INFORMATION**


**Item
      1.**  **FINANCIAL
      STATEMENTS**


**AIRSPAN
                NETWORKS INC.****CONDENSED
                CONSOLIDATED BALANCE SHEETS**(in
                thousands, except for share data)**December 31,
                2006**
            
            **July
                1, 2007****(Unaudited)**
            
            **(Unaudited)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            15,890
            
            $
            13,257Restricted
                cash
            
            
            1,111
            
            
            628Short-term
                investments
            
            
            10,233
            
            
            10,519Accounts
                receivable, less allowance for doubtful accounts of$5,489
                at December 31, 2006 and $6,514 at July 1, 2007
            
            
            31,063
            
            
            27,143Unbilled
                accounts receivable
            
            
            711
            
            
            58Inventory
            
            
            23,624
            
            
            16,465Prepaid
                expenses and other current assets
            
            
            5,935
            
            
            4,490Total
                current assets
            
            
            88,567
            
            
            72,560Property,
                plant and equipment, net
            
            
            5,705
            
            
            5,581Goodwill
            
            
            10,231
            
            
            10,231Intangible
                assets, net
            
            
            2,806
            
            
            2,337Other
                non-current assets
            
            
            3,245
            
            
            3,150**Total
                assets**
            
            $
            110,554
            
            $
            93,859**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            15,940
            
            $
            11,692Accrued
                taxes
            
            
            687
            
            
            646Deferred
                revenue
            
            
            6,656
            
            
            3,770Customer
                advances
            
            
            1,665
            
            
            1,856Other
                accrued expenses
            
            
            16,197
            
            
            13,388Short-term
                debt
            
            
            —
            
            
            7,500Total
                current liabilities
            
            
            41,145
            
            
            38,852Long-term
                debt
            
            
            1,554
            
            
            1,611Accrued
                interest on long-term debt
            
            
            153
            
            
            149**Total
                liabilities**
            
            
            42,852
            
            
            40,612**Commitments****Stockholders’
                equity**Preferred
                stock, $0.0001 par value; 250,000 shares authorized at December 31,
                2006
                and July 1, 2007; 200,690 shares issued at December 31, 2006 and
                July 1, 2007Common
                stock, $0.0003 par value; 100,000,000 shares authorized at
                December 31, 2006 and July 1, 2007; 40,380,910 and 40,847,673 issued
                at December 31, 2006 and July 1, 2007, respectively
            
            
            12
            
            
            12Note
                receivable - stockholder
            
            
            (87
            )
            
            (87
            )Additional
                paid-in capital
            
            
            308,768
            
            
            311,117Accumulated
                deficit
            
            
            (240,991
            )
            
            (257,795
            )**Total
                stockholders’ equity**
            
            
            67,702
            
            
            53,247T**otal
                liabilities and stockholders’ equity**
            
            $
            110,554
            
            $
            93,859*The
                accompanying notes are an integral part of these financial
                statements.*








1





**AIRSPAN
                NETWORKS INC.****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS**(in
                thousands except for share and per share data)**Quarter
                Ended**
            
            **Year-to-Date****July
                2, 2006**
            
            **July
                1, 2007**
            
            **July
                2, 2006**
            
            **July
                1, 2007****(unaudited)**
            
            **(unaudited)**Revenue
            
            $
            45,435
            
            $
            22,073
            
            $
            69,235
            
            $
            48,733Cost
                of revenue
            
            
            (36,710
            )
            
            (20,223
            )
            
            (54,072
            )
            
            (38,631
            )Gross
                profit
            
            
            8,725
            
            
            1,850
            
            
            15,163
            
            
            10,102Operating
                expenses:Research
                and development
            
            
            6,675
            
            
            5,781
            
            
            12,785
            
            
            11,387Sales
                and marketing
            
            
            5,026
            
            
            3,508
            
            
            9,531
            
            
            6,870Bad
                debt
            
            
            715
            
            
            723
            
            
            1,251
            
            
            955General
                and administrative
            
            
            4,320
            
            
            3,982
            
            
            8,082
            
            
            8,174Amortization
                of intangibles
            
            
            275
            
            
            234
            
            
            550
            
            
            468Restructuring
            
            
            —
            
            
            (525
            )
            
            —
            
            
            (485
            )Total
                operating expenses
            
            
            17,011
            
            
            13,703
            
            
            32,199
            
            
            27,369Loss
                from operations
            
            
            (8,286
            )
            
            (11,853
            )
            
            (17,036
            )
            
            (17,267
            )Interest
                expense
            
            
            (72
            )
            
            (48
            )
            
            (84
            )
            
            (71
            )Interest
                and other income
            
            
            689
            
            
            223
            
            
            880
            
            
            571Loss
                before income taxes
            
            
            (7,669
            )
            
            (11,678
            )
            
            (16,240
            )
            
            (16,767
            )Income
                tax credits/(charge)
            
            
            (5
            )
            
            2
            
            
            279
            
            
            (37
            )Net
                loss
            
            
            ($7,674
            )
            
            ($11,676
            )
            $
            ($15,961
            )
            $
            ($16,804
            )Net
                loss per share - basic and diluted
            
            
            ($0.19
            )
            
            ($0.29
            )
            
            ($0.40
            )
            
            ($0.41
            )Weighted
                average shares outstanding- basic and diluted
            
            
            39,902,699
            
            
            40,820,968
            
            
            39,817,995
            
            
            40,674,533*The
                accompanying notes are an integral part of these condensed consolidated
                financial statements.*








2








**AIRSPAN
                NETWORKS INC.****CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS****(in
                thousands)****Year
                to date**
            
            **Year
                to date****July
                2, 2006**
            
            **July
                1, 2007****(unaudited)**
            
            **(unaudited)****Cash
                flows from operating activities**Net
                loss
            
            
            ($15,961
            )
            
            ($16,804
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Depreciation
                and amortization
            
            
            1,798
            
            
            1,855Accrued
                interest on long-term debt
            
            
            17
            
            
            53Non-cash
                stock compensation
            
            
            1,258
            
            
            1,252Revaluation
                of long-term debt
            
            
            81
            
            
            —Loss
                on sale of property, plant and equipment
            
            
            —
            
            
            8Changes
                in operating assets and liabilities:(Increase)/decrease
                in receivables
            
            
            (5,915
            )
            
            4,573(Increase)/decrease
                in inventories
            
            
            (5,068
            )
            
            7,159(Increase)/decrease
                in other current assets
            
            
            (2,920
            )
            
            1,445Increase/(decrease)
                in accounts payables
            
            
            367
            
            
            (4,248
            )Increase/(decrease)
                in deferred revenue
            
            
            3,683
            
            
            (2,886
            )(Decrease)/increase
                in customer advances
            
            
            (9,285
            )
            
            191Increase/(decrease)
                in other accrued expenses
            
            
            4,265
            
            
            (2,850
            )(Increase)/decrease
                in other operating assets
            
            
            (2,486
            )
            
            565Net
                cash used in operating activities
            
            
            (30,166
            )
            
            (9,687
            )**Cash
                flows from investing activities**Purchase
                of property, plant and equipment
            
            
            (2,203
            )
            
            (1,271
            )Purchase
                of short-term investments
            
            
            (2,005
            )
            
            (11,275
            )Proceeds
                from sale of short-term investments
            
            
            7,027
            
            
            10,989Net
                cash provided by (used in) investing activities
            
            
            2,819
            
            
            (1,557
            )**Cash
                flows from financing activities**Borrowings
                under line of credit
            
            
            -
            
            
            7,500Proceeds
                from the exercise of stock options
            
            
            548
            
            
            1,111Net
                cash provided by financing activities
            
            
            548
            
            
            8,611Decrease
                in cash and cash equivalents
            
            
            (26,799
            )
            
            (2,633
            )**Cash
                and cash equivalents, beginning of period**
            
            
            44,140
            
            
            15,890**Cash
                and cash equivalents, end of period**
            
            $
            17,341
            
            $
            13,257*The
                accompanying notes are an integral part of these condensed consolidated
                financial statements.*





3


**Airspan
      Networks Inc.**


**Notes
        to Condensed Consolidated Financial Statements******
 (Unaudited)
 
 **BUSINESS**
 
 We
        are 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 and
        Voice-over-Internet Protocol, which allow communications network operators
        and
        service providers to cost-effectively deliver high-speed data and voice services
        using wireless communications rather than wired infrastructure.
  Historically
        the primary market for our wireless systems has been fixed point to multi-point
        applications. Today, we produce radio base equipment to transmit the signals
        from a central location to the end user who is equipped with a subscriber
        receiving unit. 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 PDAs to deliver wireless connectivity to end
        users -
        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,
        Internet service providers, Wireless Internet Service providers, Mobile Virtual
        Network Operators, Competitive Local Exchange Carriers, and other
        telecommunications users, such as utilities and other enterprises. As mobile
        WiMAX products are deployed, we will also be targeting mobile and cellular
        carriers, which represents a significant expansion to our historic addressable
        market. Our broadband wireless systems have been installed by more than 400
        network operators in more than 100 countries.
  Our
        corporate headquarters are located in Boca Raton, Florida. Our main operations,
        manufacturing and product development centers are located in Uxbridge, United
        Kingdom, Airport City, Israel and Espoo, Finland. 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 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, 2006 has been derived
        from
        the audited financial statements at that date included in our Form 10-K for
        the
        year ended December 31, 2006 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,
        2006.
  All
        notes
        to the condensed consolidated financial statements are shown in thousands,
        except for share and per share data.
  4
  **COMMITMENTS
        AND CONTINGENCIES**
  *Commitments*
  As
        of
        July 1, 2007, 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 $27.0 million at July 1, 2007. We have no material capital
        commitments.
   *Warranty*
  We
        provide limited warranties, usually for periods ranging from twelve to
        twenty-four months, to all purchasers of our 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, including “back to back” warranty
        coverage provided by our contract manufacturers. Management believes that
        the
        amounts provided are sufficient for all future warranty costs on equipment
        sold
        through July 1, 2007 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
        six months ended July 1, 2007.
  *Six
                  months ended July 1, 2007*
              
              **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**Product
                  warranty liability
              
              
              $
                  985
              
              
              $
                  269
              
              
              ($133)
              
              
              ($182)
              
              
              $
                  939
  *Other
        guarantees*
  We
        had
        delivered to landlords and customers bank guarantees aggregating $2,471 at
        July
        1, 2007 and $6,434 at December 31, 2006. 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 $1,344 of the guarantees. Where the cash has been
        pledged for guarantees that expire in less than one year, we have classified
        these pledges as restricted cash ($123 in aggregate). Where the guarantees
        have
        maturities greater than one year, the cash pledged as collateral has been
        classified as other non-current assets ($1,221). A total of $1,127 in guarantees
        has been issued under the line of credit provided by Silicon Valley Bank,
        which
        does not require any related pledge of cash collateral.
  For
        further discussion regarding our restricted cash balance, see “Management’s
        Discussion & Analysis - Liquidity and Capital Resources”. We have 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.
  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 the Company’s fully
        consolidated subsidiary, Airspan Networks (Finland) OY. These loans total
        $1,760
        at July 1, 2007, which includes $149 of accrued interest, and are recorded
        in
        long-term debt. This guarantee expires only when Airspan Networks (Finland)
        OY
        has fulfilled all of 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 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 former Executive
        Vice President and Chief Operating Officer) (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 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, 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.
  5
 This
        action is being coordinated with approximately three hundred 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 (the “focus cases”). The underwriter defendants
        appealed the decision and the Second Circuit vacated the District Court’s
        decision granting class certification in the focus cases on December 5, 2006.
        Plaintiffs filed a petition for rehearing. On January 5, 2007, the Second
        Circuit denied the petition, but noted that the plaintiffs could ask the
        district court to certify a more narrow class than the one that was
        rejected.
  Prior
        to
        the Second Circuit’s December 5, 2006 ruling, the majority of issuers, including
        Airspan, and their insurers had submitted a settlement agreement to the District
        Court for approval. In light of the Second Circuit opinion, the parties agreed
        that the settlement could no longer be approved because the defined settlement
        class, like the litigation class, cannot be certified. On June 25, 2007,
        the
        District Court approved a stipulation filed by the plaintiffs and the issuers
        which terminated the proposed settlement. The plaintiffs now plan to replead
        their complaints and move for class certification again. 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.
  We
        received a letter dated November 9, 2006 from Wi-LAN Inc. raising various
        patent infringement claims relating to certain of the Company’s WiMAX products
        and offering us a license of various Wi-LAN patents. After reviewing Wi-LAN’s
        claims, on February 1, 2007, we sent a
        letter
        to Wi-LAN notifying them that we did not believe that we require a license
        from
        Wi-LAN. On May 29, 2007 we received a follow up letter and materials from
        Wi-LAN which continued to assert those claims. The Company is currently
        reviewing this matter in consultation with its patent counsel. Since the
        matter
        is still being evaluated, no estimate of damages, if any, can be made at
        this
        time.
  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.
   **STOCK
        COMPENSATION**
  At
        July
        1, 2007, we had three stock option plans as well as the 2004 Omnibus Equity
        Compensation plan and the 2000 Employee Stock Purchase Plan (“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 have 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
        July
        1, 2007, the Company had remaining a total of 8,814,235 shares authorized
        but
        unissued under the above plans.
  6
 The
        following table summarizes share-based compensation expense under SFAS 123(R)
        for the three and six months ended July 1, 2007 and July 2, 2006, which was
        allocated as follows (in thousands):
  Three
                  Months Ended
                July
                  2, 2006
              
              Three
                  Months Ended
                July
                  1, 2007
              
              Six
                  Months Ended
                July
                  2,
                2006
              
              Six
                  Months Ended
                July
                  1,
                2007Research
                  and development
              $
                  155
              
              $
                  159
              
              
              $
                  366
              
              
              $
                  324Sales
                  and marketing
              203
              
              
              218
              
              
              464
              
              
              396General
                  and administrative
              273
              
              
              261
              
              
              402
              
              
              515Stock-based
                  compensation expense included in operating expense
              631
              
              
              638
              
              
              1,232
              
              
              1,235Cost
                  of sales
              4
              
              
              10
              
              
              26
              
              
              17Total
                  stock-based compensation
              $
                  635
              
              
              $
                  648
              
              $
                  1,258
              
              
              $
                  1,252
  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.
  The
        summary of the
        changes in stock options outstanding under the Company’s stock based
        compensation plans during
        the six months ended July 1, 2007 is presented below:
  **Weighted****Average****Number
                  of**
              
              **Exercise****Shares**
              
              **Price**Outstanding,
                  beginning of period
              
              
              5,570,009
              
              $
              4.10Granted
              
              
              783,000
              
              
              4.17Forfeited
              
              
              (537,570
              )
              
              3.79Exercised
              
              
              (457,606
              )
              
              2.43Outstanding,
                  end of period
              
              
              5,357,833
              
              
              4.28Exercisable,
                  end of period
              
              
              3,296,440
              
              $
              4.21
  7
 The following table
        summarizes the ranges of the exercise prices of outstanding and exercisable
        options as of July 1, 2007:
  **Outstanding
                  Options**
              
              **Options
                  Exercisable****Weighted**
              
              
              
              
              
              **Weighted****Number
                  of**
              
              **Average**
              
              **Remaining**
              
              **Number
                  of**
              
              **Average****Outstanding**
              
              **Exercise**
              
              **Contractual**
              
              **Exercisable**
              
              **Exercise****Exercise
                  Price Ranges**
              
              **Options**
              
              **Price**
              
              **Life
                  in Years**
              
              **Options**
              
              **Price**$0.30
                  - 1.95
              
              893,604
              
              $
                  1.07
              
              4.15
              
              893,604
              
              $
                  1.072.00-3.67
              
              915,993
              
              2.76
              
              7.54
              
              373,266
              
              2.703.84-4.28
              
              945,696
              
              4.23
              
              8.93
              
              190,532
              
              4.124.37-4.94
              
              945,004
              
              4.55
              
              5.42
              
              778,072
              
              4.474.97-6.00
              
              1,052,052
              
              5.57
              
              5.61
              
              680,754
              
              5.516.01-15.00
              
              605,484
              
              8.73
              
              6.00
              
              380,212
              
              10.255,357,833
              
              $
                  4.28
              
              6.29
              
              3,296,440
              
              $
                  4.21
  As
        of
        July 1, 2007, the weighted average remaining contractual life of options
        exercisable was 4.96 years and their aggregate intrinsic value was $2,635.
        The
        total intrinsic value of options exercised during the six months ended July
        1,
        2007 was $1,680. Cash received from stock option exercises for the six
        months ended July 1, 2007 was $1,111. Because we maintained a full valuation
        allowance on our U.S. deferred tax assets, we did not recognize any tax benefit
        related to stock based compensation expense
        for the six months ended July 1, 2007.
  During
        the first six months of 2007, a total of 56,000 restricted shares were granted
        to employees, all of which vest based on the passage of time. A total expense
        of
        $49 was recorded for the six months ended July 1, 2007 related to these
        shares and those issued in prior years. No expense has been recognized for
        performance based shares given management’s assessment of the probability of
        reaching the performance conditions. The summary of the changes in restricted
        stock outstanding during the six months ended July 1, 2007 is presented
        below:
  8
 
 **Six
                  Months Ended**
                **July
                  1, 2007****Number of**
                **Shares**
              
              
              **Weighted-Average**
                **Grant Date
                  Fair Value**Nonvested
                  balance at beginning of period
              
              105,592
              
              
              
              $
                  4.54Granted
              
              56,000
              
              
              
              4.69Forfeited
              
              (27,245)
              
              
              
              3.87Vested
              
              (1,000)
              
              
              
              2.20Nonvested
                  balance at end of period
              
              133,347
              
              
              
              $
                  4.75
  As
        of
        July 1, 2007, $4,381 of total unrecognized compensation expense, net of
        estimated forfeitures, related to stock options will be recognized over the
        weighted average period of 2.61 years. Also, as of July 1, 2007, there was
        $298
        of total unrecognized compensation expense related to restricted stock awards
        that will be recognized over the weighted average period of 2.61 years. A
        total of 133,347 nonvested restricted shares are scheduled to vest based
        on
        passage of time and up to an additional 84,000 of restricted shares will
        be
        issued in the beginning of 2008 if certain performance conditions are
        achieved.
  Under
        our
        ESPP, eligible employees may purchase shares of common stock through payroll
        deductions. No shares were issued during the six months ended July 1,
        2007.
  *Fair
        Value and Assumptions Used to Calculate Fair Value under SFAS
        123(R)*
  The
        weighted average fair value of each restricted stock share granted under
        our
        equity compensation plans for the first six months of fiscal 2006 was $6.15
        and
        for the first six months of 2007 was $4.69. The fair value of each restricted
        stock award is estimated on the date of grant using the intrinsic value
        method.
  The
        weighted average fair value of each option granted during the first six months
        of fiscal 2006 and the first six months of fiscal 2007 was $4.03 and $2.83,
        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 for the first six months of fiscal 2006 and of fiscal
        2007:
  Six
                  Months EndedJuly
                  2,
                2006
              
              July
                  1,
                2007Expected
                  volatility
              77%
              
              81%Risk-free
                  interest rate
              4.64%
              
              4.73%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.
  9
 **INVENTORY**
  Inventory
        consists of the following:
  **December
                  31,**
              
              **July
                  1,****2006**
              
              **2007****(audited)**
              
              **(unaudited)**Purchased
                  parts and materials
              
              $
              14,826
              
              $
              10,938Work
                  in progress
              
              
              1,329
              
              
              1,177Finished
                  goods and consumables
              
              
              21,413
              
              
              21,064Inventory
                  reserve
              
              
              (13,944
              )
              
              (16,714
              )$
              23,624
              
              $
              16,465
  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:
  ·
            Raw
                materials, consumables and finished goods — average cost ·
            Work
                in progress— cost of direct materials and
                labor.  **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
        relates 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. During the second
        quarter of 2005, we recognized an additional restructuring charge of $1.2
        million for additional costs expected to be incurred related to certain facility
        charges in respect of buildings in the UK. We became aware subsequent to
        the end
        of the second quarter that the lessor has already completed renovations and
        incurred actual costs for approximately $0.8 million, which it is expecting
        the
        Company to pay. Although there may be some opportunity to reduce the amount
        of
        our ultimate liability, we believe $1.0 million, including legal and other
        fees
        we expect to incur, is now the most likely scenario. For this reason, we
        lowered
        the restructuring reserve at the end of the second quarter by $0.5 million.
        All
        cash outflows in connection with this restructuring are expected to occur
        by the
        end of 2007.
  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 $0.3 million of cash outlays in the first half of 2007 related
        to
        amounts accrued in 2006. All cash outlays related to this program were completed
        in the second quarter of 2007.
  10
 
 **Total
                  expected**
                **to
                  be**
                **incurred**
              
              **Incurred
                  during the six months ended July 1,**
                **2007**
              
              **Cumulative
                  incurred at July 1, 2007****(unaudited)**
              
              **(unaudited)**
              
              **(unaudited)**One
                  time termination benefits
              
              $
              2,124
              
              $
              37
              
              $
              2,124Contract
                  termination costs
              
              
              1,440
              
              
              3
              
              
              1,440Other
                  associated costs
              
              
              50
              
              
              —
              
              
              50$
              3,614
              
              $
              40
              
              $
              3,614
 
 **Balance
                  at**
              
              
              
              
              
              **Balance
                  at****Beginning**
              
              **Restructuring**
              
              
              
              **End****of
                  Period**
              
              **Charge**
              
              **Utilized**
              
              **of
                  Period****Six
                  months ended July 1, 2007 (unaudited)**One
                  time termination benefits
              
              $
              375
              
              $
              —
              
              
              ($375
              )
              $
              —Contract
                  termination costs
              
              
              1,437
              
              
              (437
              )
              
              —
              
              
              1,000Other
                  associated costs
              
              
              50
              
              
              (50
              )
              
              —
              
              
              —$
              1,862
              
              
              ($487
              )
              
              ($375
              )
              $
              1,000**Year
                  ended December 31, 2006 (audited)**One
                  time termination benefits
              
              $
              —
              
              $
              2,183
              
              
              ($1,808
              )
              $
              375Contract
                  termination costs
              
              
              1,436
              
              
              163
              
              
              (162
              )
              
              1,437Other
                  associated costs
              
              
              50
              
              
              
              
              
              
              
              
              50$
              1,486
              
              $
              2,346
              
              
              ($1,970
              )
              $
              1,862
  **GEOGRAPHIC
        INFORMATION**
  As
        a
        developer and supplier of broadband wireless communications access systems
        and
        solutions, Airspan 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 our revenue is generated from products manufactured
        in
        the United Kingdom, Mexico, Israel and Finland, with minor additional revenue
        generated from sales of equipment manufactured by other vendors.
  A n
        analysis of revenue by location of the customer is given below:
  **Quarter
                  End**
              
              **Year-to-Date****July
                  2, 2006**
              
              **July
                  1, 2007**
              
              **July
                  2, 2006**
              
              **July
                  1,**
                **2007****(unaudited)**
              
              **(unaudited)**USA
                  and Canada
              
              $
              1,950
              
              $
              2,238
              
              $
              3,877
              
              $
              4,936Asia
              
              
              21,711
              
              
              5,194
              
              
              24,314
              
              
              14,143Europe
              
              
              10,165
              
              
              8,737
              
              
              14,410
              
              
              15,607Africa
                  and the Middle East
              
              
              566
              
              
              94
              
              
              1,505
              
              
              1,127Latin
                  America and Caribbean
              
              
              11,043
              
              
              5,810
              
              
              25,129
              
              
              12,920$
              45,435
              
              $
              22,073
              
              $
              69,235
              
              $
              48,733
   11
 **COMPREHENSIVE
        LOSS**
  Total
        comprehensive loss was ($7,674) for the quarter ended July 2, 2006 and ($11,676)
        for the quarter ended July 1, 2007 comprising:
 **Quarter
                    End**
                
                **Year-to-Date****July
                    2,**
                  **2006**
                
                **July
                    1,**
                  **2007**
                
                **July
                    2,**
                  **2006**
                
                **July
                    1,**
                  **2007****(unaudited)**
                
                **(unaudited)**Net
                    loss
                
                
                ($7,674
                )
                
                ($11,676
                )
                
                ($15,961
                )
                
                ($16,804
                )Other
                    comprehensive income/(loss):-
                    reclassification of adjustment for gainsrealized
                    in net loss
                
                
                —
                
                
                —
                
                
                130
                
                
                —Comprehensive
                    loss
                
                
                ($7,674
                )
                
                ($11,676
                
                
                ($15,831
                )
                
                ($16,804
                )
  **NET
        LOSS PER SHARE**
  Net
        loss
        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 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
                    End**
                
                **Year-to-Date****July
                    2,**
                  **2006**
                
                **July
                    1,**
                  **2007**
                
                **July
                    2,**
                  **2006**
                
                **July
                    1,**
                  **2007****(unaudited)**
                
                **(unaudited)**Numerator:Net
                    loss
                
                
                ($7,674
                )
                
                ($11,676
                )
                
                ($15,961
                )
                
                ($16,804
                )Denominator:Weighted
                    average common shares outstanding basic and diluted
                
                
                39,902,699
                
                
                40,820,968
                
                
                39,817,995
                
                
                40,674,533Net
                    loss per share- basic and diluted
                
                
                ($0.19
                )
                
                ($0.29
                )
                
                ($0.40
                )
                
                ($0.41
                )
  There
        were 5,426,436 stock options outstanding at July 2, 2006 and 5,357,833 stock
        options outstanding at July 1, 2007 that were excluded from the computation
        of
        diluted net loss per share as their effect was antidilutive. 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 73,000 shares of convertible
        preferred stock at July 2, 2006 and 200,690 shares at July 1, 2007 that were
        also excluded from the computation of diluted net loss per share as their
        effect
        was antidilutive. There were 138,250 nonvested shares of restricted stock
        at
        July 2, 2006 and 133,347 nonvested shares at July 1, 2007 that were excluded
        from the computation of diluted net loss per share as their effect was
        antidilutive.
   **RECENT
        ACCOUNTING PRONOUNCEMENTS**
  The
        Company adopted the provisions of Financial Accounting Standards Board (FASB)
        Interpretation Number 48 (FIN 48), “ *Accounting
        for Uncertainty in Income Taxes* ”,
        on
        January 1, 2007. Previously, the Company had accounted for tax contingencies
        in
        accordance with Statement of Financial Accounting Standards 5, “Accounting for
        Contingencies”. As required by FIN 48, which clarifies FASB Statement 109,
“Accounting for Income Taxes”, the first step is to evaluate the tax position
        for recognition by determining if the weight of available evidence indicates
        it
        is more likely than not that the position will be sustained on audit, including
        resolution of related appeals or litigation processes, if any. The second
        step
        is to measure the tax benefit as the largest amount which is more than 50%
        likely of being realized upon ultimate settlement. At the adoption date,
        the
        Company applied FIN 48 to all tax positions for which the statute of limitations
        remained open.  As a
        result of the implementation, the Company did not have to recognize any
        liability for unrecognized tax benefits. In
        May
        2007, the FASB issued FASB Staff Position (FSP) 48-1, which provides guidance
        on
        how an enterprise should determine whether a tax position is effectively
        settled
        for the purpose of recognizing previously unrecognized tax benefits. FSP
        48-1
        did not impact the adoption of FIN 48.
  12
 The
        Company is subject to federal and various state income taxes in the US as
        well
        as income taxes in certain foreign jurisdictions. Tax regulations within
        each
        jurisdiction are subject to the interpretation of the related tax laws and
        regulations and require significant judgment to apply. The Company is no
        longer
        subject to US federal tax examinations for years prior to 2003. In addition,
        the
        statute of limitations for years through 2004 in the UK and 2002 in Israel
        has
        expired.
  The
        Company recognizes interest accrued related to unrecognized tax benefits
        in
        interest expense and penalties in operating expenses. There were no such
        amounts
        recorded at January 1, 2007.
  In
        June 2006, the Emerging Issues Task Force (“EITF”) issued EITF Issue
        No. 06-3, “How Taxes Collected from Customers and Remitted to Government
        Authorities Should Be Presented in the Income Statement (That Is, Gross Versus
        Net Presentation)” (“EITF 06-3”), which is effective for interim and annual
        reporting periods beginning after December 15, 2006. EITF 06-3 addresses
        which taxes assessed by a government authority should be considered and how
        these taxes should be presented in the income statement (i.e., gross versus
        net). This EITF was effective for the first quarter of 2007 and did not have
        a
        material impact on the Company’s financial position or results of
        operations.
  In
        September 2006, the FASB issued SFAS No. 157,
        “Fair Value Measurements” (“SFAS No. 157”),
        which defines fair value of certain assets and liabilities, establishes a
        framework for measuring fair value, and expands disclosures about fair value
        measurements.  This statement does not require any new fair value
        measurements, but may change current practice for certain entities.  This
        statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007, and interim periods within those years.
        We
        are currently assessing the impact of SFAS No. 157
        on
        our consolidated financial statements.
  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. SFAS
        159
        is effective for fiscal years beginning after November 15, 2007, and early
        application is allowed under certain circumstances. We are currently evaluating
        the impact SFAS 159 will have on our consolidated financial
        position.
  **SUBSEQUENT
        EVENT**
 
 On
        August
        7, 2007, we and our wholly-owned subsidiary, Airspan Communications Limited,
        entered into an amendment to our August 1, 2006 Loan and Security Agreement
        (the
“Loan and Security Agreement”) with Silicon Valley Bank (“SVB”), with respect to
        a revolving credit line. The amendment increased the maximum facility available
        to Airspan from $10 million to $20 million, for the term of the credit line,
        which expires on December 31, 2008. We may, subject to certain adjustments,
        borrow up to the lesser of (i) $20 million and (ii) 80% of eligible accounts
        receivable. At the end of the second quarter we had drawn down $7.5 million
        under this facility and 80% of our eligible receivables as at July 1, 2007
        amounted to approximately $13 million.
 
 In
        addition, our covenant related to the “minimum tangible net worth” to be
        maintained by the Company, with effect from the end of the second quarter
        2007,
        was reduced from $41.5 million to $28 million, with such required amount
        to be
        increased for each fiscal quarter after our second fiscal quarter of 2007
        by 50%
        of (i) our positive net income, (ii) proceeds of stock issuances, and (iii)
        proceeds of indebtedness which is subordinated to our obligations to SVB.
        on a
        go forward basis. Interest on the loan is charged at various rates, determined
        in accordance with Silicon Valley Bank’s Prime rate as announced from time to
        time (“Prime”), of between Prime and Prime plus 1.75%.
  Our
        ability to borrow under the credit facility is a function of, among other
        things, our base of eligible accounts receivable and the rate at which advances
        are made against eligible receivables (the “Advance Rate”). The credit facility
        requires us to satisfy certain financial covenants and the credit facility
        also
        contains various provisions that restrict our use of cash and operating
        flexibility. The Loan and Security Agreement is secured by collateral, including
        our all of 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. (See Risk Factors: Our
        use
        of the Credit Facility from Silicon Valley Bank presents certain
        risks.)
  13
 
 
 **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, 2006, 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 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 Axtel,
        S.A. de C.V. (“Axtel”), Yozan Inc. (“Yozan”), and other 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
        under “Part II -- Item 1A. Risk Factors” in this quarterly report on Form 10-Q
        for the quarter ended July 1, 2007.**
   *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.
  Our
        business before WiMAX addressed the traditional incumbent telephone company
        that
        uses fixed, non-WiMAX wireless infrastructure to deliver service in those
        parts
        of their service areas that are difficult 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 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 substantial majority
        of our
        resources are now dedicated to WiMAX-based products.
  Our
        revenues for the last three years and the first half of 2006 and 2007, shown
        below, detail the transition of our revenue base as our WiMAX revenues trend
        upwards and our non-WiMAX revenues trend down over the periods. This
        transition from our legacy to our WiMAX businesses has caused significant
        shifts
        in our revenue stream and quarterly fluctuations in revenues as the relative
        contribution of our WiMAX business increases. Our total revenues have declined
        each quarter since the fourth quarter of 2006 as revenues from our non-WiMAX
        businesses declined more quickly than the growth of our WiMAX sales. In
        addition, one large WiMAX customer, Yozan accounted for 63% of our WiMAX
        sales
        in the first half of 2006. Yozan will not be a significant customer in future
        periods and the wind down of this contract has slowed the growth of our WiMAX
        revenues in the first half of 2007. In addition, the sales cycle for new
        WiMAX
        customers is somewhat longer than for our legacy business, resulting in longer
        periods before revenues can be recognized from new WiMAX customers. Overall
        margins in the first six months of 2007 were also adversely affected by an
        inventory provision relating to the wind down of our legacy
        products.
  14
 *Consolidated
                  statement of operations data:*
              
              **Year
                  ended December 31,**
              
              **Six
                  months to July 1,**($
                  in thousands except per share data)
              
              **2004**
              
              **2005**
              
              **2006**
              
              **2007****(unaudited)**Revenue
                  - WiMAX
              
              $
              -
              
              $
              4,489
              
              $
              45,753
              
              $
              28,827Revenue
                  - Non-WiMAX
              
              
              94,647
              
              
              106,477
              
              
              82,059
              
              
              19,906Total
                  Revenue
              
              
              94,647
              
              
              110,966
              
              
              127,812
              
              
              48,733Cost
                  of revenue
              
              
              (67,243
              )
              
              (79,467
              )
              
              (94,948
              )
              
              (38,631
              )Gross
                  profit
              
              
              27,404
              
              
              31,499
              
              
              32,864
              
              
              10,102Margin
              
              
              29
              %
              
              28
              %
              
              26
              %
              
              21
              %Total
                  operating expenses
              
              
              42,534
              
              
              48,510
              
              
              63,539
              
              
              27,369Loss
                  from operations
              
              
              (15,130
              )
              
              (17,011
              )
              
              (30,675
              )
              
              (17,267
              )Net
                  interest and other income
              
              
              3,217
              
              
              1,388
              
              
              1,227
              
              
              500Loss
                  before income taxes
              
              
              (11,913
              )
              
              (15,623
              )
              
              (29,448
              )
              
              (16,767
              )Income
                  tax credits/(charge)
              
              
              1,938
              
              
              546
              
              
              246
              
              
              (37
              )Net
                  loss
              
              
              (9,975
              )
              
              (15,077
              )
              
              (29,202
              )
              
              (16,804
              )Deemed
                  dividend associated withbeneficial
                  conversion of preferred stock
              
              
              (10,439
              )
              
              -
              
              
              (9,179
              )
              
              -Net
                  loss attributable to common stockholders
              
              
              ($20,414
              )
              
              ($15,077
              )
              
              ($38,381
              )
              
              ($16,804
              )Net
                  loss per share attributable to commonstockholders
                  - basic and diluted
              
              
              ($0.56
              )
              
              ($0.39
              )
              
              ($0.96
              )
              
              ($0.41
              )
   During
        the first half of 2007, WiMAX continued to gain market acceptance. During
        the
        first half, we announced the introduction of new WiMAX products and frequencies.
        Since the beginning of 2007 we have seen growth in the number of our WiMAX
        customers. During the 2007 first half, more than 100 customers purchased
        WiMAX
        equipment compared with 50 customers during the first half of 2006.
  We
        announced contract awards from the Vodafone group, a leading mobile carrier,
        who
        selected our products for fixed applications in their Malta network, which
        we
        have provided in conjunction with our partner Ericsson. We secured a large
        project with ICE, the incumbent carrier in Costa Rica and we also secured
        projects with PIPEX in the UK and in Poland with several operators. These
        projects were awarded based on our superior product performance and economics,
        and typically involved a bid and trial evaluation phase where we were able
        to
        illustrate significant differentiation from our competitors. We recently
        announced a win in Australia for our unlicensed 5.8GHz WiMAX product, which
        opens up a new market for Airspan in the less regulated unlicensed
        frequency.
  Geographically
        in the first half of 2007, 29% of our revenue was derived from customers
        in
        Asia, 26% from customers in Latin America and the Caribbean, and 32% from
        customers in Europe. Customers in the United States and Canada, and Africa
        and
        the Middle East accounted for 10% and 3% of revenues, respectively.
  Our
        gross
        profit is tied primarily to revenue except for period operating costs related
        to
        manufacturing and customer service. We incur certain costs on a quarterly
        basis
        related to the management of our supply chain and product distribution, and
        to
        customer maintenance activities regardless of the level of revenue that we
        record. Our gross margin varies to the extent of the overall revenue we record,
        the mix of products we deliver, and the composition of base station revenue,
        that usually attracts a higher margin, over lower margin customer premise
        equipment. A large proportion of our non-WiMAX revenues was customer premise
        equipment to Axtel that was recorded at a lower than average gross margin.
        As
        the concentration decreases of these lower margin sales, we expect the overall
        gross margin to improve over the next four quarters as our non-WiMAX revenue
        is
        replaced with higher margin WiMAX sales.
  15
 Our
        operating expenses increased until the second quarter of 2006 as a result
        of
        acquisitions made in the second half of 2005 and increasing expenses of WiMAX
        development and marketing. In the second half of 2006, we commenced a
        company-wide expense reduction and restructuring program to reduce primarily
        expenses relating to our non-WiMAX products. In addition, we recorded a
        $5.9 million inventory provision in the second quarter of 2007 related to
        the wind down of our legacy businesses. We will continue to invest in our
        WiMAX
        products and expect our operating expenses to increase over the next four
        quarters as we invest in Mobile WiMAX technology and marketing
        activities.
  Our
        strategy is to capture as much of the growing WiMAX market as we can through
        three key differentiation points.
  ·
            By
                leveraging our strong radio systems background as a WiMAX technology
                leader. ·
            By
                providing a broad range of products to allow flexible and cost effective
                deployment options and service deliveries for our
                customers. ·
            By
                covering a broad range of radio frequencies to allow us to target
                the
                numerous licensed and unlicensed customer opportunities through
                appropriate direct sales and other distribution
                channels.  ***Comparison
        of the Six Months Ended July 1, 2007 to the Six Months Ended July 2,
        2006***
   *Revenue*
  Revenues
        for the six months ended July 1, 2007 totaled $48.7 million representing a
        30% decrease from the $69.2 million reported for the six months ended
        July 2, 2006. The year over year decrease in revenues was attributable
        primarily to expected lower sales of our Proximity and WipLL products offset
        in
        part by increased sales of the WiMAX product line. WiMAX sales in the first
        half
        of 2007 reached a record $28.8 million of revenue compared to WiMAX sales
        of
        $26.8 million in the first half of 2006. Yozan represented 63% of our WiMAX
        revenue in the first half of 2006 compared with 34% of our WiMAX revenue
        in the
        first half of 2007. Non-WiMAX revenues decreased at a higher rate than
        originally anticipated, from $42.4 million in the six months ended July 2,
        2006 to $19.9 million in the six months ended July 1, 2007, a reduction of
        53%.
   *Cost
        of Revenue*
  Cost
        of
        revenue decreased 29% to $38.6 million in the six months ended July 1, 2007
        from
        $54.1 million in the six months ended July 2, 2006 primarily as a result
        of
        lower revenues. The cost of revenue for the first six months of 2007 included
        a
        charge of $6.3 million for inventory provisions, recorded as a result of
        the
        decline of our non-WiMAX revenues in 2007 from 2006 levels and a subsequent
        reduced outlook for revenues of these products. In the second quarter of
        2006,
        we recorded a provision of approximately $4.3 million related to the reduction
        of certain deliveries under our contract with Yozan. Gross profit for the
        first
        half of 2007 was $10.1 million or 21% of revenues, compared to $15.2 million
        or
        22% of revenues for the first half of 2006.
  *Research
        and Development Expenses*
  Research
        and development expenses decreased 11% to $11.4 million in the six months
        ended
        July 1, 2007 from $12.8 million in the six months ended July 2, 2006. The
        year-over-year decrease was due primarily to headcount reductions from the
        restructuring activity the Company commenced in July 2006 to focus development
        activity on the WiMAX. The Company intends to continue to invest in the further
        development and enhancement of WiMAX products, in particular products that
        will
        support both fixed and mobile connectivity.
  *Sales
        and Marketing Expenses*
  Sales
        and
        marketing expenses decreased to $6.9 million for the first six months of
        2007,
        down from $9.5 million for the first six months of 2006. The decrease of
        27% for
        the first half of 2007 relative to the first half of 2006 is primarily
        attributable fewer employees and lower travel costs as a result of our
        restructuring program, lower agents commissions paid on sales revenues and
        an
        increase of funded trial activity of products and services.
   *Bad
        Debt Provision*
  In
        the
        first six months of 2007, we recorded bad debt provisions of $1.0 million
        relating to customer accounts for which management has determined that full
        recovery was unlikely. We recorded bad debt provisions of $1.3 million in
        the
        corresponding period of 2006.
   16
 *General
        and Administrative Expenses*
  General
        and administrative expenses remained relatively flat at $8.2 million in the
        six
        months ended July 1, 2007 as compared to $8.1 million in the six months
        ended July 2, 2006.
   *Amortization
        of Intangibles*
  We
        recorded an expense of $0.5 million for the amortization of intangible assets
        in
        the first six months of 2007 compared with an expense of $0.6 million for
        the
        first six months of 2006.
   *Restructuring*
  We
        recorded a credit for restructuring in the six months ended July 1, 2007
        of $0.5
        million relating to the reduction of a provision held for certain liabilities
        related to a leased property in the UK. There was no restructuring charge
        for
        the six months ended July 2, 2006.
   *Interest
        Expense and Interest and Other Income*
  At
        April
        1, 2007, the outstanding principal and accrued interest payable on loans
        made to
        us by the Finnish Funding Agency for Technology and Innovation, (the “Tekes
        Loans”) was $1.8 million. At July 1, 2007, we had borrowed $7.5 million
        under the Silicon Valley Bank Loan and Security Agreement. In the first half
        of
        2007, we incurred interest expense of $0.1 million compared to a total interest
        expense of $0.1 million in the first half of 2006. Total interest and other
        income decreased to $0.5 million for the first 6 months of 2007 compared
        to $0.9
        million for the first half of 2006 primarily due to a reversal of the foreign
        exchange gains arising from the revaluation of cash balances in the second
        quarter of 2006.
   *Income
        Taxes*
  We
        were
        not subject to material income taxes charges in either periods of 2006 or
        2007
        as a result of the loss for the periods and the brought forward losses from
        prior periods. In the first six months of 2006 we recorded an income tax
        credit
        of $0.3 million obtained from the U.K tax authorities in lieu of carrying
        forward tax losses related to research and development costs. We are no longer
        eligible to receive tax credits from the U.K. taxing authorities in lieu
        of our
        carry-forward of tax losses and therefore do not expect any further credits.
        There was no income tax credit in the first half of 2007.
   *Net
        Loss*
  For
        the
        reasons described above, we incurred a net loss of $16.8 million, or $0.41
        per
        share, in the six months ended July 1, 2007 compared to a net loss of $16.0
        million, or $0.40 per share, for the six months ended July 2, 2006, an increase
        of $0.8 million, or 5%. Comparing the first six months of 2007 and 2006,
        the
        decrease in gross profit of $5.0 million, net interest and other income of
        $0.3
        million and the increase in income tax of $0.3 million, was partially offset
        by
        the decrease in operating expenses of $4.8 million.
   ***Comparison
        of the quarter ended July 1, 2007 to the quarter ended July 2,
        2006***
   *Revenue*
  Revenue
        totaled $22.1 million for the quarter ended July 1, 2007, representing a
        51%
        decrease from the $45.4 million reported for the quarter ended July 2, 2006
        and
        a 17% decrease from the first quarter of 2007. The year over year decrease
        in
        revenues was attributable to lower non-WiMAX revenues that decreased from
        $20.7
        million in the quarter ending July 2, 2006 to $7.8 million in the quarter
        ending
        July 1, 2007. In addition WiMAX revenues decreased from $24.7 million in
        the
        second quarter of 2006 to $14.1 million in the second quarter 2007 due to
        decreased shipments to Yozan in the more recent quarter. In the second quarter
        2006 we recorded WiMAX revenue of $16.8 million related to deliveries to
        Yozan
        which included, $5.8 million of revenue deferred from previous quarters.
        In the
        second quarter of 2007, more than 65 customers purchased WiMAX products
        compared to 31 customers in the second quarter of 2006.
  In
        the
        second quarter of 2007, WiMAX continued to gain market acceptance. In July
        2007
        we announced that Pipex Wireless had awarded us a contract to supply our
        WiMAX
        solution for the city of Manchester, England. Pipex Wireless intends to expand
        the WiMAX solution to other cities in the center of England. We were also
        awarded a contract with Guyana Telephone and Telegraph, Guyana’s largest
        telecommunications carrier that has awarded Airspan a $4.5 million contract
        to
        upgrade its Broadband Wireless Access network.
  17
 Geographically
        in the second quarter of 2007, 23% of our revenue was derived from customers
        in
        Asia, 26% from customers in Latin America and the Caribbean, and 40% from
        customers in Europe. Customers in the United States and Canada, and Africa
        and
        the Middle East accounted for 10% and 1% of revenues, respectively.
   *Cost
        of Revenue*
  Cost
        of
        revenue decreased 45% to $20.2 million in the quarter ended July 1, 2007
        from
        $36.7 million in the quarter ended July 2, 2006 as a result of lower revenues.
        The gross profit for the second quarter of 2007 was $1.9 million (8% of revenue)
        compared to a gross profit of $8.7 million (19% of revenue) for the second
        quarter of 2006. During the quarter we recorded an inventory provision of
        $5.9
        million as a result of the decline of our non-WiMAX revenues in 2007 from
        2006
        levels and a subsequent reduced outlook for revenues of these products. In
        the
        second quarter of 2006, we recorded a provision of approximately $4.3 million
        related to the reduction of certain deliveries under our contract with Yozan.
        The gross margin excluding inventory provision was 35% of revenue in the
        quarter
        ended July 1, 2007, an increase of 9%, as compared to the gross profit for
        the
        second quarter of 2006 of 29% of revenue. The increase in gross margin before
        provisions is primarily attributable to a favorable product mix and a
        reduction of period related charges included in cost of sales.
   *Research
        and Development Expenses*
  Research
        and development expenses decreased 13% to $5.8 million in the quarter ended
        July
        1, 2007 from $6.7 million in the quarter ended July 2, 2006. The year-over-year
        decrease was due primarily to the reductions in headcount achieved through
        the
        restructuring activity commenced in July 2006.
   *Sales
        and Marketing Expenses*
  Sales
        and
        marketing expenses decreased 30% to $3.5 million in the quarter ended July
        1,
        2007 from $5.0 million in the quarter ended July 2, 2006. The decrease as
        compared to the second quarter of 2006 is primarily attributable to a lower
        level of agent commissions and reduced travel costs.
   *Bad
        Debt Provision*
  In
        the
        second quarter of 2007, we recorded bad debt provisions of $0.7 million relating
        to customer accounts for which management has determined that full recovery
        was
        unlikely. We recorded bad debt provisions of $0.7 million in the second quarter
        of 2006.
   *General
        and Administrative Expenses*
  General
        and administrative expenses decreased 7% to $4.0 million in the quarter ended
        July 1, 2007 from $4.3 million in the quarter ended July 2 2006. The decrease
        primarily relates to lower headcount related costs and a reduction in foreign
        exchange losses arising from the revaluation of non-cash foreign currency
        balances.
   *Amortization
        of Intangibles*
  We
        recorded amortization of intangibles expense of $0.2 million in the second
        quarter of 2007 compared with amortization of intangibles expense of $0.3
        million for the second quarter of 2006. The amortization expense arises
        primarily as a result of our acquisition of intangible assets in connection
        with
        the acquisition of the Proximity business from Nortel in 2003, and the
        acquisitions of ArelNet Limited and Airspan Networks (Finland) OY acquisitions
        in June and November 2005, respectively.
   *Restructuring*
  We
        recorded a credit for restructuring in the second quarter 2007 of $0.5 million
        relating to the reduction of a provision held for certain liabilities related
        to
        a leased property in the UK. There was no restructuring charge or credit
        for the
        second quarter 2006.
   18
 *Interest
        Expense and Interest and Other Income*
  At
        July
        1, 2007, the outstanding principal and accrued interest payable on loans
        made to
        us by the Finnish Funding Agency for Technology and Innovation, (the “Tekes
        Loans”) was $1.8 million. During the second quarter of 2007, we increased our
        borrowing under the Silicon Valley Bank Loan and Security Agreement to $7.5
        million. Interest expense for the second quarter of 2007 was $48 thousand
        compared to $72 thousand in the second quarter of 2006. Interest and other
        income for the second quarter of 2007 decreased to $0.2 million from $0.7
        million primarily due to a reversal of the foreign exchange gains arising
        from
        the revaluation of cash balances in the second quarter of 2006. .
   *Income
        Taxes*
  The
        income tax credit for the second quarter of 2007 was $2 thousand compared
        to a
        $5 thousand charge in the second quarter of 2006.
   *Net
        Loss*
  For
        the
        reasons described above, we incurred a net loss of $11.7 million, or $(0.29)
        per
        share, in the quarter ended July 1, 2007, compared to a net loss of $7.7
        million, or $(0.19) per share, for the quarter ended July 2,
        2006.
   **Liquidity
        and Capital Resources**
  We
        have
        incurred net losses and negative cash flows since we became an independent
        company, and as of July 1, 2007, we had an accumulated deficit of $258 million.
        Since inception, we have financed our operations through private sales of
        convertible preferred stock, an initial public offering of common stock and
        a
        secured bank line of credit. We
        have
        used the proceeds of the sale of all securities for working capital and other
        general corporate purposes.
  On
        August
        7, 2007, we and our wholly-owned subsidiary, Airspan Communications Limited,
        entered into an amendment to our August 1, 2006 Loan and Security Agreement
        (the
“Loan and Security Agreement”) with Silicon Valley Bank (“SVB”), with respect to
        a revolving credit line. For the term of the credit line, which expires on
        December 31, 2008, we may, subject to certain adjustments, borrow up to the
        lesser of (i) $20 million and (ii) 80% of eligible accounts receivable. We
        are
        currently using the credit line, and we expect to continue to use it in 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 the rate at which
        advances are made against eligible receivables (the “Advance Rate”). If the
        amount or quality of our accounts receivable 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 defined in
        the
        Agreement) of at least $28 million at the end of our second fiscal quarter
        of 2007, with such required amount to be increased for each fiscal quarter
        after
        our second fiscal quarter of 2007 by 50% of (i) our positive net income,
        (ii)
        proceeds of stock issuances, and (iii) proceeds of indebtedness which is
        subordinated to our obligations to SVB. There is no assurance the Company
        will
        be able to meet this covenant as required by the Loan and Security Agreement.
        As
        a result, 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 our all of
        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.
  19
 As
        of
        July 1, 2007 we had cash, cash equivalents, short-term investments and current
        restricted cash of $24.4 million, as compared to $27.2 million at December
        31,
        2006. This consisted of cash and cash equivalents totaling $13.3 million,
        short-term investments totaling $10.5 million and $0.6 million of restricted
        cash in current assets. In addition, we had restricted cash of $1.2 million
        in
        other non-current assets.
  For
        the
        six months ended July 1, 2007, we used $9.7 million of cash for operating
        activities, compared with a cash outflow of $30.2 million for the six months
        ended July 2, 2006. The operating cash outflow for the first six months of
        2007
        was primarily a result of the:
  ·
            net
                loss of $16.8 million; ·
            decrease
                of $4.2 million in accounts payable; ·
            decrease
                of $2.9 million in deferred revenue; and ·
            decrease
                of $2.9 million in other accrued
                expenses.  The
        cash
        outflow was partially offset by:
  ·
            decrease
                of $4.6 million in receivables; and ·
            decrease
                of $7.2 million in inventories.  Days
        sales outstanding were at 96 days at the end of the second quarter of 2007,
        up
        from 80 days at the end of the first quarter of 2007. The change reflects
        the
        lower revenue level in the more recent period and the lengthening of payment
        terms for certain customers. Inventory turns were 4.9 for the second quarter
        of
        2007, compared with 3.2 for the first quarter of 2007. The change in inventory
        turns is primarily attributable to the lower inventory balance following
        the
        $5.9 million inventory write down in the second quarter of 2007.
  The
        net
        cash used in investing activities for the six months ended July 1, 2007 was
        $1.6
        million. The investing cash outflow for the first six months of 2007 resulted
        from $0.3 million net purchases of investment securities and $1.3 million
        of
        fixed asset purchases.
  The
        net
        cash provided by financing activities for the six months ended July 1, 2007
        was
        $8.6 million, consisting of $7.5 million in borrowings under the line of
        credit
        and $1.1 million from the exercise of stock options.
  As
        of
        July 1, 2007, 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 $27.0 million at July 1, 2007. We have no material capital
        commitments.
  We
        anticipate that we will continue to experience negative cash flows over the
        remainder of 2007. Our operating losses have been due in part to the commitment
        of significant resources to our research and development and other operating
        expenses. We expect to continue to devote resources to these areas and, as
        a
        result, we will need to increase substantially our quarterly revenues to
        achieve
        and maintain profitability. We cannot be certain that we will achieve sufficient
        revenues for profitability. If we do achieve profitability, we cannot be
        certain
        that we can sustain or increase profitability on a quarterly or annual basis
        in
        the future. Continuous cash outflows can lead to the need for new financing,
        which may not be available on favorable terms, or at all.
  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, 2006 and this Form 10-Q for the
        quarter ended July 1, 2007. There can be no assurances that our efforts 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
        filed a shelf registration statement on Form S-3 with the Securities and
        Exchange Commission for a potential share offering of up to $50
        million. As of
        the date of this report, we have not entered into any definitive financing
        arrangements other than those described above. W e
        have
        recently increased the available facility from SVB for borrowings under this
        SVB
        agreement, capped by eligible collateral, to $20 million. 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.
  20
 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 equity 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.
  
 21
 **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 July 1, 2007
        and December 31, 2006, we had cash, cash equivalents, short term investments
        and
        restricted cash of $24.4 million and $27.2 million, respectively. These amounts
        consisted of highly liquid investments, with more than 90% having purchase
        to
        maturity terms of less than 90 days. The balance has maturity terms of between
        90 to 360 days. These investments are exposed to interest rate risk, but
        a
        hypothetical increase or decrease in market interest rates by two percentage
        points from July 1, 2007 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 July 1, 2007, 71% of our sales were denominated in U.S.
        dollars, 23% were denominated in euros, 5% were denominated in pounds sterling
        and 1% were denominated in Australian dollars. Comparatively, for the three
        months ended July 2, 2006, 79% of our sales were denominated in U.S. dollars,
        19% were denominated in euros and 2% were denominated in Australian dollars.
        Our
        total euros denominated sales for the three months ended July 1, 2007 were
        $5.2
        million, which were recorded at an average exchange rate of $1US = €0.7399. Our
        total pounds sterling denominated sales for the three months ended July 1,
        2007
        were $1.1 million, which were recorded at an average exchange rate of $1US
        = GBP
£0.50157. Our total Australian dollar denominated sales for the three months
        ended July 1, 2007 were $0.1 million, which were recorded at an average exchange
        rate of $1US = AUS$1.19757. If the average exchange rates used had been higher
        or lower during the three month period ended July 1, 2007 by 10%, they would
        have decreased or increased the total pounds sterling, Australian dollar
        and
        euros-denominated sales value by a total of $0.6 million. We expect the
        proportions of sales in pounds sterling, euros 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.
  For
        the
        three months ended July 1, 2007, 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 three months ended July 1, 2007, we paid expenses in local currency of
        approximately 4.1 million pounds sterling, at an average rate of $1US = GBP
        £0.50157. During the three months ended July 1, 2007, we paid expenses in
        local
        currency of approximately 16.4 million Israeli Shekels, at an average rate
        of
        $1US = 4.10663 Shekels. If the average exchange rates for pounds sterling
        and
        Israeli Shekels had been higher or lower for the three month period ended
        July
        1, 2007 by 10%, the total pounds sterling and Israeli Shekel denominated
        operating expenses would have decreased or increased by $0.74 million and
        $0.4
        million respectively.
  To
        manage
        our pound foreign currency risk we have, at various times from 2004 through
        2006, forecast our likely net spending in non US dollars and, based on these
        forecasts, we have entered into forward exchange contracts to cover a percentage
        of the projected exposure. At December 31, 2006 we had no forward exchange
        contracts outstanding and we did not enter into any new contracts during
        the six
        month period ended July 1, 2007.
  We
        expect
        the proportions of operating expenses paid in pounds sterling and Israeli
        Shekels to fluctuate over time.
  We
        do not
        enter into any currency hedging activities for speculative purposes.
   *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.
  22
  *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 Section 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
        as
        amended). Based on that evaluation, and the similar evaluation undertaken
        at the
        end of 2006, the Chief Executive Officer and Chief Financial Officer concluded
        that as of July 1, 2007, our disclosure controls and procedures were
        effective.
  There
        have been no significant changes in Airspan’s internal controls over financial
        reporting that occurred during Airspan’s second quarter of 2007 that have
        materially affected or are reasonably likely to materially affect, Airspan’s
        internal control over financial reporting.
  23
 **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 former Executive
        Vice President and Chief Operating Officer) (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 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, 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 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 (the “focus cases”). The underwriter defendants
        appealed the decision and the Second Circuit vacated the District Court’s
        decision granting class certification in the focus cases on December 5, 2006.
        Plaintiffs filed a petition for rehearing. On January 5, 2007, the Second
        Circuit denied the petition, but noted that the plaintiffs could ask the
        district court to certify a more narrow class than the one that was rejected.
  Prior
        to
        the Second Circuit’s December 5, 2006 ruling, the majority of issuers, including
        Airspan, and their insurers had submitted a settlement agreement to the District
        Court for approval. In light of the Second Circuit opinion, the parties agreed
        that the settlement could no longer be approved because the defined settlement
        class, like the litigation class, cannot be certified. On June 25, 2007,
        the
        District Court approved a stipulation filed by the plaintiffs and the issuers
        which terminated the proposed settlement. The plaintiffs now plan to replead
        their complaints and move for class certification again. 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.
  We
        received a letter dated November 9, 2006 from Wi-LAN Inc. raising various
        patent infringement claims relating to certain of the Company's WiMAX products
        and offering us a license of various Wi-LAN patents. After reviewing Wi-LAN’s
        claims, on February 1, 2007, we sent a letter to Wi-LAN notifying them that
        we did not believe that we require a license from Wi-LAN. On May 29, 2007
        we received a follow up letter and materials from Wi-LAN which continued
        to
        assert those claims. The Company is currently reviewing this matter in
        consultation with its patent counsel. Since
        the
        matter is still being evaluated, no estimate of damages, if any, can be made
        at
        this time.
  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.
  24
 **Item
        1A.**  **RISK
        FACTORS**
   *Investment
        in our securities involves a high degree of risk. You should consider carefully
        the following risk factors as well as other information in this prospectus
        supplement and the documents incorporated by reference herein or therein,
        before
        purchasing any of our securities. If any of the following risks actually
        occur,
        our business, operating results and financial condition could be adversely
        affected. This could cause the market price of our common stock to decline,
        and
        you may lose all or part of your investment. The following risk factors update
        and replace the risk factors included in the Company’s Annual Report on Form
        10-K for the fiscal year ended December 31, 2006.*
   ***We
        may continue to incur substantial losses and negative operating cash flows
        and
        may not succeed in achieving or maintaining profitability in the
        future.***
  We
        have
        incurred net losses and negative cash flows since we became an independent
        company, and as of July 1, 2007, we had an accumulated deficit of $258
        million. We anticipate that we will continue to experience negative cash
        flows
        over the remainder of 2007. Our operating losses have been due in part to
        the
        commitment of significant resources to our research and development and sales
        and marketing departments. We expect to continue to devote resources to these
        areas and, as a result, we will need to increase substantially our quarterly
        revenues to achieve and maintain profitability. We cannot be certain that
        we
        will achieve sufficient revenues for profitability. If we do achieve
        profitability, we cannot be certain that we can sustain or increase
        profitability on a quarterly or annual basis in the future. Continuous cash
        outflows can lead to the need for new financing, which may not be available
        on
        favorable terms, or at all.
  ***If
        we are unable to develop and successfully sell WiMAX certified mobile products
        in a timely fashion, our business will be materially adversely
        affected.***
  Certification
        for mobile WiMAX products based on the IEEE-2205 (referred to hereinafter
        as
“802.16e”) standards is currently expected to be available in the first half of
        2008, and we expect that carriers will begin to deploy this standard soon
        thereafter. If our mobile WiMAX products are not certified soon after
        certification is available, if our products do not operate with the products
        of
        other suppliers or if the development of those products is otherwise delayed,
        there would be a material adverse affect on our business. We would be at
        a
        significant disadvantage in the marketplace if we are not able to launch
        certified mobile WiMAX products at the time carriers begin to deploy the
        anticipated new mobile standard. Even if our products are available and
        certified, we cannot provide any assurance that we will be able to sell our
        products or to develop relationships with system integrators and OEMs in
        order
        to sell our products.
   ***Any
        reduction in expenditures by communications service providers could have
        a
        negative impact on our results of operations.***
  Our
        products are sold to telecommunications carriers and service providers. A
        decline in their capital spending may reduce our sales, increase the need
        for
        inventory write-offs and increase our losses and our requirements for additional
        working capital, which may not be readily available to us. This could result
        in
        downward pressure on the price of our products, all of which would have a
        material adverse effect on our results of operations and stock price. Further,
        the number of carriers and service providers that are our potential customers
        may not grow or may decline as a result of, among other things, the substantial
        capital requirements needed to establish networks and the limited number
        of
        licenses granted in each country.
   ***Since
        our revenues may vary from quarter to quarter and a significant percentage
        of
        our expenses are fixed and do not vary with revenues, our quarterly operating
        results are volatile and difficult to predict, which may negatively affect
        our
        stock price.***
  Our
        quarterly and annual operating results have fluctuated in the past and will
        likely vary in the future for a variety of reasons, many of which are outside
        of
        our control, including the following:
   ·
            changes
                in the mix of our products sold, including the growth of sales of
                our
                WiMAX products offset by declines in sales of our legacy products
                and the
                wind down in sales under our contract with
                Yozan.   ·
            fluctuations
                in the size and timing of orders, as our customers are not typically
                required to purchase a specific number of our products in any given
                quarter;   ·
            the
                budget cycles of our customers and the timing of purchases by our
                customers and end-users of our products;   25
 ·
            the
                size and timing of major deployments of our
                products;   ·
            delays
                in shipments or payment due to our customers inability to obtain
                licenses
                or for other reasons;   ·
            the
                loss of a major customer;   ·
            the
                adoption of new standards in our
                industry;   ·
            the
                development of competing technology, products or service, which may
                cause
                us to lose customers;   ·
            our
                ability to attract and retain technical and other
                talent;   ·
            the
                inability of our suppliers or manufacturers to fulfill our orders
                as a
                result of a shortage of key components;   ·
            mergers
                or acquisitions by us, our customers or our
                competitors;   ·
            the
                fulfillment of criteria necessary for us to recognize revenue;
                and   ·
            general
                economic conditions worldwide and in the United
                States.  We
        incur
        expenses in significant part based on our expectations of future revenue,
        and we
        expect our operating expense, in particular salaries and lease payments,
        to be
        relatively fixed in the short run. Accordingly, any decline in revenue for
        a
        particular quarter could have an immediate negative effect on results for
        that
        quarter, possibly resulting in a change in financial estimates or investment
        recommendations by securities analysts, which could result in a fall in our
        stock price. Because of the fluctuations we have experienced in our quarterly
        results, we do not consider quarter-to-quarter comparisons of our results
        of
        operations to be necessarily meaningful, and you should not rely on results
        in
        any particular quarter or quarters as an indication of future
        performance.
   ***If
        we are not able to implement a program to reduce product costs over time,
        introduce new products or increase sales volume to respond to declines in
        the
        average selling prices of our products, our gross margin may
        decline.***
  We
        expect
        the average selling prices of our products to decline due to a number of
        factors, including competitive pricing pressures, rapid technological change,
        industry standardization and volume sales discounts. Accordingly, to maintain
        or
        increase our gross margin, we must develop and introduce new products or
        product
        enhancements with higher gross margins and implement product cost reductions.
        If
        our average selling prices continue to decline and we are not able to maintain
        or increase our gross margin, our results of operations could be harmed.
        In
        addition, when carriers begin to deploy systems using mobile WiMAX standards,
        which we expect will begin in 2008, our competitors may offer their products
        at
        relatively low prices in an effort to achieve early market acceptance.
        Accordingly, we may experience downward pricing pressure on our products,
        which
        would have an adverse affect on our margins.
  ***If
        we are unable to compensate for declining sales of obsolescent products with
        sales of new products, our revenues will decline.***
  As
        certain of our current products become obsolescent, growth in sales of our
        new
        WiMAX products will be needed to compensate for this decline in revenues.
        As
        WiMAX is now regarded as likely to become a principal standard for the BWA
        industry, we are facing the risk of obsolescence of our non-WiMAX products.
        As a
        result, we expect our sales to continue to be materially adversely affected
        until increasing sales of WiMAX products compensate for the decline in sales
        of
        non-WiMAX products. For example, sales of our proprietary products declined
        significantly in 2006 and the first six months of 2007 and are expected to
        continue to decline. While our WiMAX sales have been increasing, those increases
        have not yet been sufficient to offset the decline in sales of our legacy
        products. In the course of committing to research and development, enhancing
        our
        existing products and developing the WiMAX product line, we have made
        projections and assumptions about the potential demand for our various product
        lines. If our projections or assumptions are incorrect for any reason, and
        our
        product lines do not sell as projected, our results of operations will be
        materially adversely affected.
   26
 ***Since
        we incur most of our operating expenses and a portion of our cost of goods
        sold
        in foreign currencies, fluctuations in the values of foreign currencies could
        have a negative impact on our profitability.***
  Although
        76% and 81% of our sales in the six months of 2007 and for 2006, respectively,
        were denominated in U.S. dollars, and a majority of our cost of goods sold
        were
        denominated in U.S. dollars, we incur most of our operating expenses and
        a
        portion of our cost of goods in British pounds and, to a lesser extent, New
        Israeli Shekels and euros. In the six months periods ended July 1, 2007 and
        July 2, 2006, approximately 25% and 21%, respectively, of our combined
        operating expenses and cost of goods sold were denominated in British pounds.
        We
        expect these percentages to fluctuate over time. Fluctuations in the value
        of
        foreign currencies could have a negative impact on the profitability of our
        global operations and our business and our currency hedging activities may
        not
        limit these risks. The value of foreign currencies may also make our products
        more expensive than local products because we typically bill in U.S.
        dollars.
   ***Rapid
        technological changes and evolving industry standards, frequent new product
        introductions and short product life cycles may adversely affect our results
        of
        operations.***
  The
        markets for our products have been characterized by rapidly changing
        technologies, evolving industry standards, frequent new product introductions
        and short product life cycles. Our success depends, in substantial part,
        on the
        timely and successful introduction of high quality new products and upgrades,
        as
        well as cost reductions on current products to address the operational speed,
        bandwidth, efficiency and cost requirements of our customers. With the adoption
        by the wireless broadband industry of the IEEE 802.16 and ETSI HiperMAN wireless
        MAN standards, our success will also depend on our ability to comply with
        these
        and other emerging industry standards and to operate with products of other
        suppliers.
  With
        our
        WiMAX products, we are focused on delivering Internet Protocol (“IP”) based
        operating systems. The development of new, technologically advanced IP-optimized
        networking solutions and software products is a complex and uncertain process
        requiring high levels of innovation, as well as the anticipation of
        technological and market trends. Our commitment to develop and refine our
        IP
        based operating systems may result in our expenses growing at a faster rate
        than
        our revenues, particularly since the initial investment to bring a new or
        enhanced product to market may be high. We may not be successful in targeting
        new market opportunities, in developing and commercializing new products
        in a
        timely manner or in achieving market acceptance for our new products. As
        a
        result, we may expend research and development and other resources on
        projections that do not result in significant sales.
  The
        success of new or enhanced products depends on a number of other factors,
        including the timely introduction of those products, market acceptance of
        new
        technologies and industry standards, the perceived quality and robustness
        of new
        or enhanced products, competing product offerings, the pricing and marketing
        of
        our products and the availability of funding for those networks. Products
        and
        technologies developed by our competitors or by us may render certain of
        our
        products obsolete. If we fail to respond in a timely and effective manner
        to
        unanticipated changes in one or more of the technologies affecting
        telecommunications and data networking or our new products or product
        enhancements fail to achieve market acceptance, our ability to compete
        effectively in our industry, and our sales, market share and customer
        relationships could be materially and adversely affected.
   ***The
        adoption of open standards in the broadband wireless communications industry
        has
        resulted in increased competition.***
  With
        the
        adoption of WiMAX as the new industry standard for BWA and the setting of
        standards by the WiMAX Forum, our focus is increasingly on selling WiMAX
        products, and on introducing mobile WiMAX products, that are WiMAX Forum
        certified or that meet WiMAX standards. We anticipate that other BWA equipment
        suppliers will also increasingly sell products that are WiMAX Forum Certified
        or
        that meet WiMAX standards. As we bring WiMAX-based systems to market, we
        may
        face increased competition from a number of other manufacturers who are no
        longer restricted by our intellectual property rights from building competing
        products. To remain competitive, we believe we must continue to invest
        significant resources in research and development, sales and marketing and
        customer support for WiMAX. We cannot be certain that we will have sufficient
        resources to make these investments or that we will be able to make the
        technological advances necessary to remain competitive. In developing products
        that conform to WiMAX Forum standards, we recognize that, by diminishing
        product
        differentiation, standardization may lower the barriers to entry by other
        manufacturers in the markets in which we seek to sell our products. If companies
        with greater resources than us manufacture any standards-based products to
        compete with us, their relative size, resources, marketing skills and financial
        incentives may prove to be more important to customers than product
        differentiation alone. Standardization is also likely to result in lower
        average
        selling prices. If we are unable to maintain our position as a technology
        leader
        in this market of open standards and broader competition, we may suffer
        reductions in revenues and margins and loss of market share, revenues and
        operating margins.
   27
 ***If
        we are not able to implement a program to conform our products to industry
        standards, our revenues may decline*** .
  We
        have
        developed and continue to develop certain of our products in accordance with
        existing, emerging and anticipated wireless-industry standards. In particular,
        we developed our WiMAX wireless products and product features to conform
        to IEEE
        802.16-2004 and IEEE 802.16e standards. If our products fail to comply with
        these standards, we may not be able to sell them. Industry standards are
        subject
        to change from time to time by their regulatory bodies. In addition, our
        competitors may attempt to influence the adoption of standards that are not
        compatible with our products, and we may not have the resources or ability
        to
        influence such adoption ourselves. If, as a result of any changes, the products
        we have developed fail to meet or are delayed in meeting then-applicable
        industry standards, we may not be able to sell such products.
  Our
        future success also depends in part on the acceptance by our customers of
        products that meet these industry standards. If the WiMAX Forum does not
        adopt
        these standards or if our customers are unable to successfully deploy products
        based on these standards, we will not be successful selling these products.
        In
        addition, potential customers may delay orders in anticipation of the
        introduction of new products that are designed to comply with anticipated
        future
        standards.
   ***Competition
        from larger, better-capitalized or emerging competitors could result in price
        reductions, reduced gross margins and loss of or diminished growth of market
        share.***
  We
        compete in a relatively new, rapidly evolving, highly competitive and fragmented
        market. We now compete with companies that are producing both mobile and
        fixed
        wireless communications systems, wired DSL, cable networks, fiber optic cable,
        certain satellite technologies and other new entrants to this industry, as
        well
        as traditional communications companies. The recent adoption of WiMAX standards
        and the expected increased capital spending on WiMAX applications is likely
        to
        result in new competitors entering the markets in which we sell our
        products.
  Competitors
        vary in size and resources and in products and services offered. With respect
        to
        the fixed broadband wireless solutions we offer today for use with licensed
        and
        unlicensed frequencies, we believe we compete directly with Nokia Siemens
        Networks, Alcatel-Lucent, Motorola, Inc., Huawei Technologies Co., Ltd.,
        Alvarion, Ltd., and SR Telecom Inc, a number of smaller privately-held companies
        and with divisions of a number of institutional telecommunications equipment
        companies. In addition, some of the entities to which we currently sell our
        products may develop the capacity to manufacture their own
        products.
  Many
        of
        our competitors are substantially larger than we are and have significantly
        greater financial, sales and marketing, technical, manufacturing and other
        resources as well as more established distribution channels and greater name
        recognition. These competitors may be able to respond more rapidly to new
        or
        emerging technologies such as mobile WiMAX and changes in customer requirements
        than we can and can devote greater resources to attempting to influence the
        composition of future WiMAX standards. They may also be able to devote greater
        resources to the development, promotion, sale and financing of their products
        than we can. Furthermore, some of our competitors have made or may make
        strategic acquisitions or establish cooperative relationships among themselves
        or with third parties to increase their ability to gain customer market share
        rapidly. These competitors may enter our existing or future markets with
        systems
        that may be less expensive, provide higher performance or contain additional
        features. In addition, large customers are sometimes reluctant to base an
        important line of business on equipment purchased from a smaller vendor such
        as
        Airspan. In addition, both larger and smaller communications service providers
        may also decide to wait to see how a new technology develops before committing
        any significant resources to deploying equipment from a particular supplier.
        We
        believe this tendency to “wait and see” with respect to new technology is
        already affecting the market place, resulting in increased customer caution
        on
        WiMAX purchases in advance of the introduction of WiMAX mobile
        standards.
  We
        expect
        our competitors to continue to improve the performance of their current products
        and to introduce new products or new technologies that may supplant or provide
        lower-cost alternatives to our systems. This and other factors could result
        in
        lower revenues or a loss of market shares, which could cause our stock price
        to
        fall.
   28
 ***An
        inability to overcome competition from alternative communication systems
        could
        adversely affect our results of operations.***
  We
        already face, and may increasingly encounter, competition from competing
        wireless technologies, such as cellular technology, that are constantly
        improving. Cellular networks are now capable of delivering both voice and
        broadband data connectivity to fixed, mobile, nomadic and portable applications.
        These technologies, such as 1XRTT and EVDO, have the ability to provide for
        multiple voice channels and rate data services at transmission rates of 512Kbps
        on the uplink and 2.4 Mbps on the down link. Their data rates speeds continue
        to
        improve as they are modified. In addition, our technology competes with other
        high-speed solutions, such as wired DSL, cable networks, fiber optic cable
        and
        occasionally satellite technologies. Our products compete with alternative
        communications systems on the basis of reliability, price and functionality.
        For
        example, the performance and coverage area of our wireless systems are dependent
        on certain factors that are outside of our control, including features of
        the
        environment in which the systems are deployed, such as the amount of clutter
        (natural terrain features and man-made obstructions) and the radio frequency
        available. Depending on specific customer needs, these obstacles may make
        our
        technology less competitive in comparison with other technologies and make
        other
        technologies less expensive or more suitable. Our business may also compete
        in
        the future with products and services based on other wireless technologies
        and
        other technologies that have yet to be developed.
   ***We
        currently depend on a few key customers for substantially all of our sales.
        A
        loss of one or more of those customers could cause a significant decrease
        in our
        net revenue.***
  We
        currently derive, and expect to continue to derive, a substantial percentage
        of
        our net sales from fewer than ten customers. For the six months ended
        July 1, 2007 and in fiscal 2006, 70% and 72%, respectively, of our revenue
        was derived from our top ten customers. In addition, in 2006, Axtel and Yozan
        accounted for 26% and 19%, respectively, of our revenues. For the six months
        ended July 1, 2007, however, Axtel and Yozan accounted for only 20% and
        22%, respectively, of our revenues, and we expect that revenue from Axtel
        and
        Yozan will continue to decline during second half of 2007 and thereafter.
        We
        believe that there are certain economies of scale inherent in our industry.
        Accordingly, if we are unable to replace the revenue previously generated
        by
        Axtel and Yozan with revenue from other significant customers or if we lose
        other large customers, our gross profit margins, profitability and efforts
        to
        preserve cash resources could be negatively affected.
  The
        amount of revenue we derive from a specific customer is likely to vary from
        period to period, and a major customer in one period may not produce significant
        additional revenue in a subsequent period. We anticipate that our operating
        results will continue to depend on sales to a small number of key customers
        in
        the foreseeable future. In general, our contracts with our larger customers
        involve major deployments that require several months to fulfill, so our
        results
        may depend on the same major customers for consecutive quarters. We cannot
        assure you that, once a contract is fulfilled, the customer will purchase
        upgrades, new products or services from us. We must, therefore, continually
        seek
        new customers in order to increase our revenue, and there can be no assurance
        that we will be successful in doing so.
   ***Many
        of our customers execute short-term purchase orders or contracts that allow
        our
        customers to terminate without significant penalties.***
  Our
        contracts and purchase orders are separately negotiated with each of our
        customers and the terms vary widely. A majority of our customers execute
        only
        short-term purchase orders for a single system or a small number of systems
        at
        one time instead of long-term contracts for large-scale deployment of our
        systems. These contracts and purchase orders do not ensure that they will
        purchase any additional products beyond those specifically listed in the
        order.
  Moreover,
        since we often believe that these purchase orders may represent the early
        portion of longer-term customer programs, we often expend significant financial,
        personnel and operational resources to fulfill these orders. If our customers
        fail to purchase additional products to fulfill their programs, we may be
        unable
        to recover the costs we incur and our margins could suffer.
  In
        addition, our typical contracts are generally non-exclusive and contain
        provisions allowing our customers to terminate the agreement without significant
        penalties. Our contracts also may require certain shipment, delivery and
        installation commitments on our part. If we fail to meet these commitments,
        our
        customer contracts typically permit the customer to terminate the contract
        or
        impose monetary penalties on us.
  29
  ***Changes
        in telecommunications regulation or delays in receiving licenses could adversely
        affect many of our customers and may lead to lower
        sales.***
  Many
        of
        our customers are subject to extensive regulation as communications service
        providers, including with respect to the availability of radio frequencies
        for
        two-way broadband communications. Each country has different regulations
        and
        regulatory processes for wireless communications equipment and for the uses
        of
        radio frequencies. Some of our products operate in license-exempt bands,
        while
        others operate in licensed bands in different jurisdictions. In addition,
        changes in laws or regulations that adversely affect existing and potential
        customers could lead them to delay, reduce or cancel expenditures on
        communications access systems, which actions would harm our business. In
        the
        past, anticipated customer orders have been postponed because of regulatory
        issues in various countries. The resolution of those issues can be lengthy
        and
        the outcome can be unpredictable. Some of the orders we receive from customers
        are contingent upon their receipt of licenses from regulators, the timing
        of
        which can often be uncertain. Depending on the jurisdiction, the receipt
        of
        licenses by our customers may occur, if at all, a year or more after they
        initially seek those licenses.
  At
        present there are few laws or regulations that specifically address our business
        of providing communications access equipment. However, future regulation
        may
        include access or settlement charges or tariffs that could impose economic
        burdens on our customers and us. We are unable to predict the impact, if
        any,
        that future legislation, judicial decisions or regulations in the countries
        in
        which we do business will have on our business.
   ***Our
        sales cycle is typically long and unpredictable, making it difficult to
        accurately predict inventory requirements, forecast revenues and control
        expenses.***
  Typically
        our sales cycle can range from one month to two years and varies by customer.
        The length of the sales cycle with a particular customer may be influenced
        by a
        number of factors, including the commitment of significant cash and other
        resources associated with the purchase, lengthy testing and evaluations,
        and
        regulatory and licensing requirements on the part of the customer. In addition,
        the emerging and evolving nature of the communication access market may cause
        prospective customers to delay their purchase decisions as they evaluate
        new
        and/or competing technologies or, wait for new products or technologies to
        come
        to market. We expect that our sales cycles will continue to be long and
        unpredictable, and, as the average order size for our products increases,
        our
        customers’ processes for approving purchases may become more complex and lead to
        an even longer sales cycle. For example, we have found that the length of
        our
        sales cycle has increased as an increasing percentage of our revenues comes
        from
        WiMAX products. Accordingly, it is difficult for us to anticipate the quarter
        in
        which particular sales may occur, to determine product shipment schedules
        and to
        provide our manufacturers and suppliers with accurate lead-time to ensure
        that
        they have sufficient inventory on hand to meet our orders. Therefore, our
        sales
        cycle impairs our ability to recognize and forecast revenues and control
        expenses.
  In
        addition, particularly with our WiMAX products, we may enter into contracts
        that
        involve multiple deliveries of different elements and are sometimes of a
        turn
        key nature. The requirements in these contracts can affect the timing of
        revenue
        recognition under generally accepted accounting principles (“GAAP”). These
        requirements include customer acceptance requirements, guarantees of coverage,
        guarantees of upgrades and guarantees of certification. GAAP may preclude
        us
        from recognizing revenue under such contracts until these milestones have
        been
        met.
   ***We
        make estimates relating to customer demand and errors in our estimates may
        have
        negative effects on our inventory levels, revenues and results of
        operations.***
  We
        have
        historically been required to place firm orders or binding forecasts for
        products and components with our suppliers to ensure that we are able to
        meet
        our customers’ demands. These commitments to our suppliers may be placed up to
        six months prior to the anticipated delivery date based on our existing customer
        purchase commitments and our forecasts of future customer demand. Our sales
        process requires us to make multiple forecast assumptions relating to expected
        customer demand, each of which may introduce error into our estimates, causing
        excess inventory to accumulate or a lack of product supply when needed. If
        we
        overestimate customer demand, we may allocate resources to manufacturing
        products that we may not be able to sell when we expect or at all. As a result,
        we have sometimes had excess inventory, which has increased our net losses.
        For
        example, in the second quarter of 2007 we recorded an inventory write down
        of
        $5.9 million as a result of reduced demand for out non-WiMAX revenues.
        Conversely, if we underestimate customer demand or if insufficient manufacturing
        capacity were available, we may lose revenue opportunities and market share
        and
        may damage our customer relationships.
   30
 ***Our
        international sales may be difficult and costly as a result of the political,
        economic and regulatory risks in those regions.***
  Sales
        to
        customers based outside the U.S. have historically accounted for a substantial
        majority of our revenues. In the six months ended July 1, 2007 and July 2,
        2006, our international sales (sales to customers located outside the U.S.
        which
        includes a small percentage of U.S. customers where the final destination
        of the
        equipment is outside of the U.S.) accounted for approximately 90% and 94%
        of our
        total revenue. In the first six months of 2007, 37% of our revenue was derived
        from customers in North and South America, 34% from customers in Europe,
        Africa
        and the Middle East, with Asia accounting for 29% of revenues. In many
        international markets, long-standing relationships between potential customers
        and their local suppliers and protective regulations, including local content
        requirements and type approvals, create barriers to entry. In addition, pursuing
        international opportunities may require significant investments for an extended
        period before returns on such investments, if any, are realized and such
        investments may result in expenses growing at a faster rate than revenues.
        The
        following risks inherent in international business could reduce the
        international demand for our products, decrease the prices at which we can
        sell
        our products internationally or disrupt our international operations, which
        could adversely affect our operations:
  ·
            the
                imposition of tariffs, duties, price controls or other restrictions
                on
                foreign currencies or trade barriers imposed by foreign
                countries; ·
            import
                or export controls, including licensing or product-certification
                requirements; ·
            unexpected
                changes in government policies or regulatory requirements in the
                Unites
                States or in foreign governments and delays in receiving licenses
                to
                operate; ·
            political
                instability and acts of war or terrorism; ·
            economic
                instability, including the impact of economic
                recessions; ·
            difficulty
                in staffing and managing geographically diverse operations, including
                our
                reluctance to staff and manage foreign operations as a result of
                political
                unrest even though we have business opportunities in a
                country; ·
            any
                limitation on our ability to enforce intellectual property rights
                or
                agreements in regions where the judicial legal systems may be less
                developed or less protective of intellectual property or contractual
                rights; ·
            capital
                and exchange control programs; ·
            challenges
                caused by distance, language and cultural
                differences; ·
            fluctuations
                in currency exchange rates; ·
            labor
                unrest; ·
            restrictions
                on the repatriation of cash; ·
            the
                nationalization of local industry; and ·
            potentially
                adverse tax consequences.  ***We
        may not be able to establish or expand our relationships with major system
        integrators and telecommunications equipment OEMs, which would harm our ability
        to generate revenue.***
  We
        believe that our future success, particularly with respect to WiMAX, will
        increasingly depend upon our ability to establish and expand our relationships
        with major system integrators and telecommunications equipment OEMs.  A
        significant amount of our products are sold to and through systems integrators
        for integration into their systems, rather than directly to carriers. As
        a
        result, the level of our sales depends on the success the quality and market
        acceptance of the products of these systems integrators and OEMs, as well
        as
        their sales and marketing efforts, all of which are not within our control.
        Adverse events affecting these systems integrators and OEMs, such as financial
        difficulties or technical problems with their products could have a material
        adverse effect on our results of operations. In addition, the termination
        of any
        existing or future relationships with systems integrators or OEMs could result
        in our selling fewer products.
   ***Our
        operations in Israel may be disrupted by political and military tensions
        in
        Israel and the Middle East.***
  We
        conduct various activities related to our WipLL, WiMAX and AS.TONE products
        in
        Israel, including research and development; design; raw material procurement;
        and manufacturing through manufacturing subcontractors based in Israel. Our
        operations could be negatively affected by the political and military tensions
        in Israel and the Middle East.
  Israel
        has been involved in a number of armed conflicts with its neighbors since
        1948
        and a state of hostility, varying in degree and intensity, has led to security
        and economic problems in Israel. Since September 2000, a continuous armed
        conflict with the Palestinian Authority has been taking place. Conditions
        in
        Israel could, in the future, disrupt the development, manufacture and/or
        distribution of our products.
  31
  ***Our
        dependence on key suppliers may result in product delivery delays if they
        do not
        have components in stock or terminate their non-exclusive arrangements with
        us.***
  Some
        of
        the key components of our products are purchased from single vendors, including
        printed circuit board assemblies, application specific integrated circuits
        and
        radio frequency filters, for which alternative sources are generally not
        readily
        available in the short to medium term. If our vendors fail to supply us with
        components because they fail to remain in business, fail to meet our quality
        or
        production requirements, do not have the components in stock when we need
        them,
        or if the supply of the components in the market is limited, or if our vendors
        reduce or eliminate their manufacturing capacity for these components or
        enter
        into exclusive relationships with other parties which prevent them from selling
        to us, we could experience significant delays in shipping our products while
        we
        seek other supply sources. Delays in shipping could result in our customers
        claiming damages, increased costs, and damage to our reputation and loss
        of
        future business. At times we have been forced to purchase these components
        from
        distributors instead of from the manufacturers, which has significantly
        increased our costs. During the second quarter of 2007, as a result of a
        temporary shortage of a component, we had difficulty manufacturing enough
        WiMAX
        products to meet certain existing orders in a timely manner. We do not have
        long-term contracts with all of our suppliers. Instead, we execute purchase
        orders approximately three to six months in advance of when we believe we
        may
        need the components. In those instances in which we do not have a long-term
        contract with a supplier, the supplier may terminate our relationship upon
        six
        months’ prior notice. In addition, we may not be able to replace, or may
        experience increased costs if we are required to replace, an existing
        supplier.
   ***Our
        dependence on contract manufacturers may result in a material adverse effect
        on
        our business if they are unable to fill our orders on a timely basis or if
        they
        terminate their non-exclusive agreements with us***
  We
        generally outsource the manufacturing of our products to subcontractors.
        These
        contract manufacturers have limited manufacturing capacity, and we cannot
        be
        sure that they will at all times have the capacity that we require to fill
        our
        customers’ orders. In addition, our reliance on contract manufacturers subjects
        us to a number of other risks, including risks related to limited control
        of
        delivery schedules, manufacturing yields and production costs, and quality
        assurance and control. Our contracts with our major manufacturing subcontractors
        are non-exclusive and most contracts may be terminated with six months notice
        by
        either party without significant penalty. The process of replacing any of
        our
        contract manufacturers would likely take at least six months, and any related
        delay could cause a material interruption in our ability to deliver products
        to
        our customers.
  We
        rely
        on our forecasts of future orders to make purchasing and manufacturing decisions
        and provide our contract manufacturers with orders well in advance of the
        time
        that we expect to sell those products. If a forecast turns out to be inaccurate,
        it may lead either to excess inventory that would increase our costs or a
        shortage of components that would delay shipments of our systems.
   ***If
        we lose Eric Stonestrom or any of our other executive officers, we may encounter
        difficulty replacing their expertise, which could impair our ability to
        implement our business plan successfully.***
  We
        believe that our ability to implement our business strategy and our future
        success depends on the continued employment of our senior management team,
        in
        particular our president and chief executive officer, Eric Stonestrom. Our
        senior management team, who have extensive experience in our industry and
        are
        vital to maintaining some of our major customer relationships, may be difficult
        to replace. The loss of the technical knowledge and management and industry
        expertise of these key employees could make it difficult for us to execute
        our
        business plan effectively, could result in delays in new products being
        developed, lost customers and diversion of resources while we seek
        replacements.
   ***We
        may not have adequate protection for our intellectual property, which may
        make
        it easier for others to misappropriate our technology and enable our competitors
        to sell competing products at lower prices and harm our
        business.***
  Our
        success has historically relied in part on proprietary technology. We have
        used
        a combination of patent, copyright, trademark and trade secret laws and
        contractual restrictions on disclosure to protect our intellectual property
        rights associated with our products other than our WiMAX products. Despite
        our
        efforts to protect our proprietary rights, we cannot be certain that the
        steps
        we have taken will prevent misappropriation of our technology, and we may
        not be
        able to detect unauthorized use or take appropriate steps to enforce our
        intellectual property rights. The laws of some foreign countries, particularly
        in Asia, do not protect our proprietary rights to the same extent as the
        laws of
        the U.S. and the U.K., and we may encounter substantial infringement problems
        in
        those countries. In addition, we do not file for patent protection in every
        country where we conduct business. In instances where we have licensed
        intellectual property from third parties, we may have limited rights to
        institute actions against third parties for infringement of the licensed
        intellectual property or to defend any suit that challenges the validity
        of the
        licensed intellectual property. If we fail to adequately protect our
        intellectual property rights, or fail to do so under applicable law, it would
        be
        easier for our competitors to copy our products and sell competing products
        at
        lower prices, which would harm our business.
  32
  ***Our
        products may infringe on the intellectual property rights of third parties,
        which may result in lawsuits that could be costly to defend and prohibit
        us from
        selling our products*** .
  Third
        parties could assert exclusive patent, copyright, trademark and other
        intellectual property infringement claims against the technologies that are
        important to us. If any inquiry from a third party relating to patents or
        trademarks leads to a proceeding against us and we are unable to defend
        ourselves successfully, our ability to sell our products may be adversely
        affected and our business would be harmed. In addition, third parties may
        assert
        claims, or initiate litigation against us, or our manufacturers, suppliers
        or
        customers with respect to existing or future products, trademarks or other
        proprietary rights. Any claims against us, or customers that we indemnify
        against intellectual property claims, with or without merit, may:
  ·
            be
                time-consuming, costly to defend and harm our
                reputation; ·
            divert
                management’s attention and resources; ·
            cause
                delays in the delivery of our products; ·
            require
                the payment of monetary damages; ·
            result
                in an injunction, which would prohibit us from using these technologies
                and require us to stop shipping our systems until they could be
                redesigned, if possible; and ·
            require
                us to enter into license or royalty agreements, which may not be
                available
                on acceptable terms or require payment of substantial
                sums.  The
        status of intellectual property WiMAX technology is currently unclear and
        developing. It is difficult to determine what parties, if any, hold patents
        or
        other rights with respect to intellectual property that is used in WiMAX
        products, including ours. In addition, Mobile WiMAX technology is a new
        technology with greater uncertainty regarding the status of relevant
        intellectual property and could involve greater patent licensing issues and
        more
        potential for intellectual property disputes than fixed WiMAX technology. Patent
        surveys commissioned by the WiMAX Forum suggest that there are approximately
        1,550 existing patents that may be deemed to cover some portion of WiMAX
        technology. We
        cannot
        be certain that holders of some of these patents or other patent holders
        will
        not assert claims against us in the future, including after we begin to sell
        mobile WiMAX products.
  For
        example, we received a letter dated November 9, 2006 from Wi-LAN Inc.
        raising various patent infringement claims and offering us a license of various
        Wi-LAN patents relating to technology used in our WiMAX products. After
        reviewing Wi-LAN’s Claims, on February 1, 2007, we sent a letter to Wi-LAN
        notifying them that we did not believe that we require a license from Wi-LAN.
        On
        May 29, 2007, we received a follow up letter and materials from Wi-LAN
        which continued to assert those claims. The Company is currently reviewing
        this
        matter in consultation with its patent counsel. If Wi-LAN determines to pursue
        claims against us for patent infringement, we might not be able to defend
        such
        claims successfully. Even if we were to prevail in such litigation, the
        associated costs could deplete our financial resources, and our management’s
        attention and resources could be diverted. Alternatively, we may be required
        to
        seek a license to use certain technology from Wi-LAN. We cannot be certain
        that
        Wi-LAN would provide such a license or, if it did, what the economic or other
        terms of the license would be. Such a license could require us to make
        significant payments with respect to past and/or future sales of our products,
        and such payments might significantly reduce the margins on sales of our
        products.
   ***A
        material defect in our products that either delays the commencement of services
        or affects customer networks could seriously harm our credibility and our
        business, and we may not have sufficient insurance to cover any potential
        liability.***
  Fixed
        wireless devices are highly complex and frequently contain undetected software
        or hardware errors when first introduced or as new versions are released.
        We
        have detected and are likely to continue to detect errors and product defects
        in
        connection with new product releases and product upgrades. In the past, some
        of
        our products have contained defects that delayed the commencement of service
        by
        our customers.
  33
 If
        our
        hardware or software contains undetected errors, we could
        experience:
  ·
            delayed
                or lost revenues and reduced market share due to adverse customer
                reactions; ·
            higher
                warranty costs and other costs and expenses due to the need to provide
                additional products and services to a customer at a reduced charge
                or at
                no charge; ·
            claims
                for substantial damages against us, regardless of our responsibility
                for
                any failure, which may lead to increased insurance
                costs; ·
            diversion
                of research and development resources to fix errors in the
                field; ·
            negative
                publicity regarding us and our products, which could adversely affect
                our
                ability to attract new customers; ·
            increased
                insurance costs; and ·
            diversion
                of management and development time and
                resources.  Our
        general liability insurance coverage may not continue to be available on
        reasonable terms or in sufficient amounts to cover one or more large claims
        or
        our insurer may disclaim coverage as to any future claim. In addition, our
        products are often integrated with other network components. Incompatibilities
        between our products and these components could result in material harm to
        the
        service provider or its subscribers. These problems could adversely affect
        our
        cash position or our reputation and competitive position.
   ***We
        have made, and may continue to make, strategic acquisitions or enter into
        joint
        ventures. If we are not successful in operating or integrating these
        acquisitions or joint ventures, our business, results of operations and
        financial condition may be materially and adversely
        affected.***
  In
        the
        past, we have acquired companies that we believed would enhance the expansion
        of
        our business and products, and we may do so in the future. Acquisitions involve
        significant risks and uncertainties, including:
  ·
            the
                industry may develop in a different direction than anticipated and
                the
                technologies we acquire may not prove to be those we
                need; ·
            the
                future valuations of acquired businesses may decrease from the market
                price we paid for these acquisitions; ·
            the
                revenues of acquired businesses may not offset increased operating
                expenses associated with these
                acquisitions; ·
            potential
                difficulties in integrating new products, personnel, technology,
                software,
                businesses and operations in an efficient and effective
                manner; ·
            significant
                write-offs; ·
            our
                customers or customers of the acquired businesses may defer purchase
                decisions as they evaluate the impact of the acquisitions on our
                future
                product strategy; ·
            potential
                loss of key employees of the acquired
                businesses; ·
            diversion
                of the attention of our senior management from the operation of our
                daily
                business; ·
            entering
                new markets in which we have limited experience and where competitors
                may
                have a stronger market presence; ·
            the
                potential adverse effect on our cash position as a result of all
                or a
                portion of an acquisition purchase price being paid in
                cash; ·
            potential
                issuance of securities that are superior to the rights of holders
                of our
                common stock, or that would dilute our shareholders’ percentage
                ownership; ·
            potential
                assumption and/or incurrence of liabilities and the increased risk
                of
                costly and time-consuming litigation, including stockholder lawsuits;
                and ·
            the
                potential assumption of significant amounts of
                debt.  Our
        inability to successfully operate and integrate newly acquired businesses
        in a
        timely manner could have a material adverse effect on our ability to take
        advantage of further growth in demand for IP-optimized network solutions,
        if
        any, and other advances in technologies and ultimately our results of operations
        and/or financial condition. Acquisitions are inherently risky, and no assurance
        can be given that our previous or future acquisitions will be successful
        and
        will not materially adversely affect our business, operating results, or
        financial condition.
   ***Our
        use of the Credit Facility from Silicon Valley Bank presents certain
        risks.***
  On
        August
        7, 2007, we and our wholly-owned subsidiary, Airspan Communications Limited,
        entered into an amendment to our August 1, 2006 Loan and Security Agreement
        (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, 2008,
        we
        may, subject to certain adjustments, borrow up to the lesser of (i) $20 million
        and (ii) 80% of eligible accounts receivable. We are currently drawing on
        the
        credit line, and we expect to continue to use it in 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 the rate at which advances
        are made against eligible receivables (the “Advance Rate”). If the amount or
        quality of our accounts receivable 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 defined in
        the
        Agreement) of at least $28 million at the end of our second fiscal quarter
        of 2007, with such required amount to be increased for each fiscal quarter
        after
        our second fiscal quarter of 2007 by 50% of (i) our positive net income,
        (ii)
        proceeds of stock issuances, and (iii) proceeds of indebtedness which is
        subordinated to our obligations to SVB. There is no assurance the Company
        will
        be able to meet this covenant as required by the Loan and Security Agreement.
        As
        a result, 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 our all of
        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.
  34
  ***Our
        projected demand for capital in future periods may change quickly and may
        adversely affect our results of operations and/or
        prospects.***
  We
        recognize that our projected demand for capital in future periods may change
        quickly due to a variety of factors, estimates and assumptions. If our projected
        demand for capital materially increases and our then current and/or projected
        cash resources have not increased a comparable amount, we may need to modify
        our
        existing business plan. If we are ever compelled to adopt measures to conserve
        cash resources, such measures may adversely affect our results of operations
        and
        our short term and/or long term prospects for growth and
        profitability.
   ***We
        have a significant shareholder whose interests may conflict with other
        shareholders of the Company.***
  As
        of the
        date of this report, it is our understanding that Oak Investment Partners
        XI,
        Limited Partnership (“Oak”) owns all of the outstanding shares of the Company’s
        Series B Preferred Stock (the “Series B Shares”). Based upon our capitalization
        as of June 30, 2007, the Series B Shares are initially convertible into a
        total of approximately 33% of our common stock (without giving effect to
        the
        exercise or conversion of any other outstanding options, warrants or convertible
        securities) and represent approximately 29% of the voting power
        outstanding.
  Because
        Oak has the ability to own a significant percentage of our voting power,
        it may
        have considerable influence in determining the outcome of any corporate
        transaction or other matter submitted to our shareholders for approval,
        including the election of directors and approval of mergers, consolidations
        and
        the sale of all or substantially all of our assets. In addition, for as long
        as
        Oak is the holder of at least a majority of the issued and outstanding shares
        of
        Series B Preferred Stock and the number of shares of common stock into which
        the
        then outstanding shares of Series B Preferred Stock are convertible
        represents at least fifteen percent of the total issued and outstanding shares
        of our common stock, Oak will be entitled to elect one member of our Board
        of
        Directors. Mr. Bandel L. Carano, one of our directors has been designated
        by Oak as Oak’s appointee to the Board.
  So
        long
        as the Series B Preferred Stock is outstanding, we have agreed to refrain
        from
        taking certain actions without the approval of the holders of a majority
        of the
        then outstanding Series B Preferred Stock voting separately as a class. The
        rights and privileges of the Series B Preferred Stock may have an effect
        on our
        conduct of operations, financing or investing.
  In
        addition, upon any liquidation of the Company, certain mergers, reorganizations
        and/or consolidations of the Company into or with another corporation, the
        sale
        by us of all or substantially all of our assets or any transaction or series
        of
        related transactions in which a person, entity or group acquires 50% or more
        of
        the combined voting power of our then outstanding securities, the holders
        of the
        Series B Preferred Stock will have a claim against our assets senior to the
        claim of the holders of common stock in an amount equal to $290.00 per share
        of
        Series B Stock (as appropriately adjusted for any combinations, divisions,
        or
        similar recapitalizations affecting the Series B Preferred Stock after
        issuance).
  
 35
 **Item
        6.**  **EXHIBITS**
   
  **3.1**
              **Second
                  Amended and Restated Articles of Incorporation of Airspan
                  (1)****3.2**
              **Articles
                  of Amendment to the Articles of Incorporation of Airspan
                  (2)****3.3**
              **Articles
                  of Amendment to the Articles of Incorporation of Airspan
                  (3)****3.4**
              **Amended
                  and Restated Bylaws of Airspan (4)****4.1**
              **Form
                  of Airspan's common stock certificate (5)****4.2**
              **Preferred
                  Stock Purchase Agreement, dated July 28, 2006, among Airspan and
                  Oak
                  Investment Partners XI, Limited Partnership, including exhibits
                  thereto
                  (6)****10.1**
              **First
                  Amendment to Loan and Security Agreement dated August 7, 2007 between
                  Silicon Valley Bank, Airspan Networks Inc. and Airspan Communications
                  Limited*****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**1
              Incorporated
                  by reference to Airspan's Form 10-Q for the quarter ended April
                  4,
                  20042
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on September
                  15,
                  20043
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on September
                  26,
                  20064
              Incorporated
                  by reference to Airspan’s Form 10-K for the year ended December 31,
                  20065
              Incorporated
                  by reference to Airspan's Registration Statement on Form S-1 (333-34514)
                  filed April 11, 20006
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on August 1,
                  2006
 
 
 **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.
  **AIRSPAN
                  NETWORKS INC.**Date: August
                  10, 2007
              By:
              /s/ DAVID
                  BRANTName:  
                  David Brant
                Title:    
                  Chief Financial Officer
  36
 **EXHIBIT
        INDEX**
  **3.1**
              **Second
                  Amended and Restated Articles of Incorporation of Airspan
                  (1)****3.2**
              **Articles
                  of Amendment to the Articles of Incorporation of Airspan
                  (2)****3.3**
              **Articles
                  of Amendment to the Articles of Incorporation of Airspan
                  (3)****3.4**
              **Amended
                  and Restated Bylaws of Airspan (4)****4.1**
              **Form
                  of Airspan's common stock certificate (5)****4.2**
              **Preferred
                  Stock Purchase Agreement, dated July 28, 2006, among Airspan and
                  Oak
                  Investment Partners XI, Limited Partnership, including exhibits
                  thereto
                  (6)****10.1**
              **First
                  Amendment to Loan and Security Agreement dated August 7, 2007 between
                  Silicon Valley Bank, Airspan Networks Inc. and Airspan Communications
                  Limited*****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**1
              Incorporated
                  by reference to Airspan's Form 10-Q for the quarter ended April
                  4,
                  20042
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on September
                  15,
                  20043
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on September
                  26,
                  20064
              Incorporated
                  by reference to Airspan’s Form 10-K for the year ended December 31,
                  20065
              Incorporated
                  by reference to Airspan's Registration Statement on Form S-1 (333-34514)
                  filed April 11, 20006
              Incorporated
                  by reference to Airspan's report on Form 8-K filed on August 1,
                  2006
 
 
 37