<PAGE>

                    STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark one)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   Act of 1934

                For the quarterly period ended September 30, 2001

                                       OR

     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              Exchange Act of 1934

              For the transition period from _________to__________.

                        Commission file number 000-31031

                              AIRSPAN NETWORKS INC.
             (Exact name of registrant as specified in its charter)

          Washington                                    75-2743995
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

 13450 West Sunrise Boulevard                             33323
         Sunrise, FL                                   (Zip Code)

                    (Address of principal executive offices)

               Registrant's telephone number, including area code:
                                 (954) 851-1660

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                    COMMON STOCK, PAR VALUE $0.0003 PER SHARE

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

Number of shares outstanding of the registrant's common stock as of September
30, 2001: 35,096,847
<PAGE>

PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements

                              AIRSPAN NETWORKS INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 December 31,     September 30,
                                                                     2000              2001
                                                                     ----              ----
                              ASSETS                                               (unaudited)
<S>                                                                 <C>              <C>
Current Assets
Cash and cash equivalents                                           $115,340         $ 75,177
Restricted cash                                                        7,207            3,259
Accounts receivable, less allowance for doubtful accounts
    of $1,371 in 2000 and $2,042 at September 30, 2001                14,482           19,840
Unbilled accounts receivable                                             349              119
Inventory                                                              8,166           13,590
Prepaid expenses and other current assets                              3,481            4,102
                                                                    --------         --------
    Total Current Assets                                             149,025          116,087

Property, plant and equipment, net                                     6,800            6,879
Intangible assets, net                                                 1,209              890
Accounts receivable greater than one year                                  -              648
Other non-current assets                                                 300              155
                                                                    --------         --------
    Total Assets                                                    $157,334         $124,659
                                                                    ========         ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                    $  6,038         $  5,641
Short term debt                                                          849                -
Accrued taxes                                                            351              270
Deferred revenue                                                       1,210              674
Other accrued expenses                                                 3,720            5,255
Current portion of capital lease obligations                              34                -
Current portion of long-term debt                                      5,723              241
                                                                    --------         --------
    Total Current Liabilities                                         17,925           12,081
                                                                    --------         --------

Non current liabilities
Long-term portion of note payable to DSC Telcom L.P.                  12,983                -
Other long-term debt                                                   2,500            2,500
Accrued interest on long-term debt                                       271                -
                                                                    --------         --------
                                                                      15,754            2,500
                                                                    --------         --------

Stockholders' equity
Preferred Stock, $0.01 par value, 81,000,000 shares authorized
    and none issued in 2000 and 2001
Common Stock, $0.0003 par value; 50,000,000 shares authorized and
    34,692,331 issued in 2000 and 50,000,000 shares authorized and
    35,096,847 issued in 2001                                             51               51
Note receivable-stockholder                                             (180)            (180)
Additional paid in capital                                           214,025          214,393
Accumulated other comprehensive income                                   441              310
Accumulated Deficit                                                  (90,682)        (104,496)
                                                                    --------         --------
Total Stockholders' Equity                                           123,655          110,078
                                                                    --------         --------
Total Liabilities and Stockholders' Equity                          $157,334         $124,659
                                                                    ========         ========
</TABLE>

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


                                        2
<PAGE>

                              AIRSPAN NETWORKS INC.
                        CONSOLIDATED STATEMENTS OF INCOME
               (in thousands except for share and per share data)

<TABLE>
<CAPTION>
                                                       Three months ended              Nine months ended
                                                   October 1,     September 30,    October 1,    September 30,
                                                      2000            2001            2000            2001
                                                     -------        --------        -------         --------
                                                          (unaudited)                     (unaudited)
<S>                                                 <C>             <C>             <C>             <C>
Revenue                                                 $8,801          $8,597         $21,324         $27,266
Cost of revenue                                         (5,546)         (5,028)        (13,545)        (16,675)
Inventory provision                                          -          (1,417)              -          (1,417)
                                                  ------------    ------------    ------------    ------------

Gross Profit                                             3,255           2,152           7,779           9,174
                                                  ------------    ------------    ------------    ------------

Operating expenses:

Research and development                                 4,355           3,672          12,748          11,619
Sales and marketing                                      3,443           3,530           9,760          12,422
Bad debt provision                                          57           1,040             213             649
General and administration                               2,330           2,668           6,678           8,394
Amortization of intangibles                                108             106             489             318
Restructuring provision                                      -           1,235               -           1,235
                                                  ------------    ------------    ------------    ------------
Total operating expenses                                10,293          12,251          29,888          34,637
                                                  ------------    ------------    ------------    ------------

Loss from operations                                    (7,038)        (10,099)        (22,109)        (25,463)

Interest expense                                          (407)            (54)         (1,279)           (324)

Interest and other income                                1,508             714           3,369           2,729
                                                  ------------    ------------    ------------    ------------

Loss before income taxes and extraordinary item         (5,937)         (9,439)        (20,019)        (23,058)

Income tax (charge) / credit                                16               -               -           2,773
                                                  ------------    ------------    ------------    ------------
Net loss before extraordinary item                      (5,921)         (9,439)        (20,019)        (20,285)

Extraordinary item
    Gain on extinguishment of debt                           -               -               -           9,244
    Income tax charge                                        -               -               -          (2,773)
                                                  ------------    ------------    ------------    ------------

    Gain after tax                                           -               -               -           6,471
                                                  ------------    ------------    ------------    ------------

Net loss                                               $(5,921)        $(9,439)       $(20,019)       $(13,814)
                                                  ============    ============    ============    ============

Net loss per share
    - basic and diluted
    Loss before extraordinary item                      $(0.17)         $(0.27)         $(1.64)         $(0.58)
    Extraordinary item, net of taxes                         -               -               -           $0.18
    Net loss per share                                  $(0.17)         $(0.27)         $(1.64)         $(0.40)

Weighted average shares outstanding
    - basic and diluted                             34,457,325      34,902,639      12,225,677      34,724,723

Pro forma net loss per share
    - basic and diluted                                 $(0.17)         $(0.27)         $(0.67)         $(0.40)

Pro forma weighted average shares
outstanding - basic and diluted                     34,457,325      34,902,639      30,046,576      34,724,723
</TABLE>

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


                                        3
<PAGE>

                              AIRSPAN NETWORKS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                     Nine months ended
                                                                 October 1,   September 30,
                                                                   2000            2001
                                                                (unaudited)    (unaudited)
                                                                -----------    -----------
<S>                                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                          $(20,019)      $(13,814)
Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation and amortization                                       2,770          3,193
 Gain on settlement of long-term debt                                    -         (9,252)
 Stock compensation                                                     65              -
 Other comprehensive income                                              -           (131)
 Accretion of interest on notes payable                                917            109
Changes in operating assets and liabilities:
 Increase in receivables                                            (7,619)        (5,861)
 Decrease / (increase) in inventories                                1,052         (5,424)
 (Increase) / decrease in other current assets                        (271)          (391)
 Increase / (decrease) in accounts payable                             510           (397)
 Decrease in deferred revenue                                         (437)          (536)
 Increase in accrued expenses                                        2,466          1,454
                                                                 ---------      ---------

Net cash used in operating activities                              (20,566)       (31,050)
                                                                 ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment                                  (2,469)        (2,953)
Proceeds from the sale of property and equipment                        18              -
                                                                 ---------      ---------

Net cash used in investing activities                               (2,451)        (2,953)
                                                                 ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred stock                        5,447              -
Net proceeds from issuance of common stock                               -            247
Net proceeds from IPO                                               86,092              -
Net proceeds from the issuance of short term debt                    1,320              -
Payment of short-term debt                                            (117)          (849)
Payment on long-term debt, including capital lease obligations      (1,228)        (9,627)
Exercise of stock options                                               30            121
Restricted cash movement                                              1151          3,948
                                                                 ---------      ---------

Net cash provided / (used) by financing activities                  92,695         (6,160)
                                                                 ---------      ---------

Increase / (decrease) in cash and cash equivalents                  69,678        (40,163)
Cash and cash equivalents, beginning of period                      58,828        115,340
                                                                 ---------      ---------

Cash and cash equivalents, end of period                          $128,506        $75,177
                                                                 =========      =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest paid                                                         $348           $324
                                                                 =========      =========
</TABLE>

The accompanying notes are an integral part of these financial statements


                                        4
<PAGE>

                             AIRSPAN NETWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

BUSINESS

We are a global supplier of broadband Fixed Wireless Access (FWA) systems that
allow network operators (communications service providers) to cost effectively
deliver integrated high-speed data and voice services (what we call "Wireless
DSL"). Our systems are based on Direct Sequence - Code Division Multiple Access,
or DS-CDMA, a digital wireless technique that provides wide area coverage,
security and resistance to fading. Our systems can be deployed rapidly and cost
effectively, providing an attractive alternative or complement to traditional
copper wire, cable, or fiber communications access networks. Our products also
include software tools that optimize geographic coverage of our systems and
provide ongoing network management. To facilitate the deployment and operation
of our systems, we also offer network installation, training and support
services. We began shipping our products during 1996, and these were among the
first fixed point-to-multipoint wireless systems to be commercially deployed.
Our systems have been installed by over 60 network operators in approximately 40
countries and are being tested by numerous other service providers. Our primary
operations, manufacturing and product development centers are located in
Uxbridge, U.K., with our corporate headquarters in Sunrise, Florida. Our
telephone number in Sunrise Florida is (954) 851-1660. 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 financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal recurring nature. The
interim operating results are not necessarily indicative of operating results
expected in subsequent periods or for the year as a whole.

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the company's Annual Report on Form 10-K for the
year ended December 31, 2000.

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

REVENUE RECOGNITION

The Company recognizes revenue pursuant to Staff Accounting Bulletin No.101
"Revenue Recognition in Financial Statements." Accordingly, revenues are
recognized when all of the following conditions are met: an arrangement exists
with the customer; delivery has occurred or services have been rendered; the
price for the product or service is fixed and determinable; and collection of
the receivable is reasonably assured. Therefore, revenue is recognized when all
significant contractual obligations have been satisfied and the collection of
resulting revenues is reasonably assured. For most product sales, revenue
recognition occurs on shipment. For contracts with non standard terms, revenue
is recognized when these terms have been satisfied. Revenue from customer
service contracts is recognized once the services have been rendered.  Any
billings in excess of revenue recognized for products or services are
classified as deferred income or customer advances.

INVENTORY

Inventory consists of the following:

                                       December 31,   September 30,
                                          2000            2001
                                          ----            ----
                                                       (unaudited)

Purchased parts and materials            $5,713          $ 6,733
Finished goods and consumables            2,453            6,857
                                         ------          -------

                                         $8,166          $13,590
                                         ======          =======


                                        5
<PAGE>

OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following;

                                       December 31,   September 30,
                                          2000            2001
                                          ----            ----
                                                       (unaudited)

Agents commissions                       $  530          $   963
Warranty                                    546              734
Sales commissions and bonuses               329              605
Restructuring                                 -              659
Other                                     2,315            2,294
                                         ------          -------
                                         $3,720          $ 5,255
                                         ======          =======

ACCRUED RESTRUCTURING CHARGES

In the third quarter of 2001, the Company implemented a restructuring program to
reduce operating expenses and recorded a charge of $1.2 million in relation to
this program. Included in this charge are costs related to excess facilities and
severance. The Company expects to sublease the excess facility space by the end
of the first quarter of 2002. All severance payments will be made by the end of
the third quarter 2002. The total number of employees being terminated as part
of this plan is 30. As of September 30, 2001 the restructuring charge and its
utilization is summarized as follows:

                                                 Charged            Remaining
                        Restructuring            against         Restructuring
                           Charge               liability            Charge
                         (unaudited)           (unaudited)        (unaudited)

Facility related           $   551              $    210             $ 341
Severance and other            684                   366               318
                           -------              --------             -----
                           $ 1,235              $    576             $ 659
                           -------              --------             -----

Included within the third quarter 2001 facility restructuring charge is $0.2
million related to the write down of certain fixed assets. These assets will be
disposed of as part of the sublease program and will be disposed of by the end
of the first quarter of 2002.


                                        6
<PAGE>

SEGMENTAL INFORMATION

As a developer and supplier of fixed wireless communication access systems and
solutions, the Company has one reportable segment. The revenue of this single
segment is comprised primarily of revenue from products and, to a lesser extent,
services. Predominantly all of the Company's revenue is generated from the
United Kingdom operations. Substantially all of the Company's assets, other than
most of the cash and certain intangibles, which are held in the United States,
are located within the United Kingdom.

Revenue by geographical market:

<TABLE>
<CAPTION>
                                   Three months ended             Nine months ended
                               October 1,  September 30,     October 1,     September 30,
                               ----------  -------------     ----------     ----------
                                 2000          2001            2000             2001
                                 ----          ----            ----             ----
                                      (unaudited)                    (unaudited)
<S>                            <C>           <C>            <C>              <C>
USA & Canada                   $1,200        $1,517          $1,846           $3,120
Asia                            1,952         4,286           8,298           13,531
Europe                          4,925           227          10,329            4,578
Africa and the Middle East        592         2,237             694            3,559
South America                     132           330             157            2,478
                               ------        ------         -------          -------

                               $8,801        $8,597         $21,324          $27,266
                               ======        ======         =======          =======
</TABLE>

COMPREHENSIVE (LOSS) / INCOME

Total comprehensive loss was $5,921 for the three months ended October 1, 2000
and $8,231 for the three months ended September 30, 2001. For the nine months
ended October 1, 2000 and September 30, 2001, the total comprehensive loss was
$20,019 and $13,945 respectively.

Components of Comprehensive (Loss) / Income:

<TABLE>
<CAPTION>
                                       Three months ended             Nine months ended
                                   October 1,  September 30,     October 1,     September 30,
                                   ----------  -------------     ----------     -------------
                                     2000          2001            2000             2001
                                     ----          ----            ----             ----
                                        (unaudited)                     (unaudited)
<S>                                <C>           <C>               <C>             <C>
Net loss                           ($5,921)      ($9,439)          ($20,019)       ($13,814)

Other Comprehensive Income -
  unrealized gain / (loss) on
  forward exchange contracts            --         1,208                 --            (131)
                                   -------       -------           --------        --------

                                   ($5,921)      ($8,231)          ($20,019)       ($13,945)
                                   =======       =======           ========        ========
</TABLE>


                                        7
<PAGE>

NET LOSS PER SHARE

Net loss per share is computed using the weighted average number of shares of
common stock outstanding less the number of shares subject to repurchase. Shares
associated with stock options, warrants and the convertible preferred stock are
not included in the calculation of diluted net loss per share as they are
anti-dilutive. During 2000 the preferred stock converted to common stock upon
the closing of the initial public offering. Pro forma net loss per share data
has been determined as if each share of convertible preferred stock had
converted to common stock at the time of the issuance.

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

<TABLE>
<CAPTION>
                                                                    Three months ended                 Nine months ended
                                                               October 1,     September 30,        October 1,      September 30,
                                                               ----------     -------------        ----------      -------------
                                                                 2000             2001               2000              2001
                                                                 ----             ----               ----              ----
                                                                      (unaudited)                          (unaudited)
<S>                                                            <C>             <C>               <C>             <C>
Numerator:
Loss before tax and extraordinary item                           $(5,937)         $(9,439)         $(20,019)       $(23,058)
Income tax credit                                                      16               -                 -           2,773

Loss before extraordinary item                                     (5,921)         (9,439)          (20,019)        (20,285)
Extraordinary item, net of taxes                                        -               -                 -           6,471

Net loss                                                          $(5,921)        $(9,439)         $(20,019)       $(13,814)
                                                                  =======         =======          ========        ========

Denominator:
Weighted average common shares outstanding                     34,658,714      34,979,028        12,458,315      34,832,362
Less weighted average shares of restricted stock                 (201,389)        (76,389)         (232,638)       (107,639)
                                                               ----------      ----------        ----------      ----------
Denominator for basic and diluted calculations                 34,457,325      34,902,639        12,225,677      34,724,723

Weighted average pro forma conversion of
     convertible preferred stock                                        -               -        17,820,899               -
                                                               ----------      ----------        ----------      ----------
Denominator for pro forma basic and diluted calculations       34,457,325      34,902,639        30,046,576      34,724,723
                                                               ----------      ----------        ----------      ----------

Earnings per share - basic and diluted:
Loss before tax and extraordinary item                             $(0.17)         $(0.27)           $(1.64)         $(0.66)
Income tax credit                                                       -               -                 -            0.08

Loss before extraordinary item                                      (0.17)          (0.27)            (1.64)          (0.58)
Extraordinary item, net of taxes                                        -               -                 -            0.18

Net loss                                                           $(0.17)         $(0.27)           $(1.64)         $(0.40)
                                                                   ======          ======            ======          ======

Pro forma basic and diluted                                        $(0.17)         $(0.27)           $(0.67)         $(0.40)
                                                                   ======          ======            ======          ======
</TABLE>

EXTRAORDINARY GAIN

On February 14, 2001 we entered into a settlement agreement with Alcatel, which
released the Company from our $18.5 million promissory note with DSC Telcom L.P.
Under the settlement agreement the company agreed to pay $9.3 million in two
installments, the first one due in the first quarter of 2001, the second in the
second quarter of 2001, in exchange for complete forgiveness of the debt. The
extraordinary gain of $9.2 million that arose from this transaction was
partially offset by tax on the gain of $2.7 million to show an extraordinary
gain, net of taxes of $6.5 million. We recorded this extraordinary gain in the
first quarter of 2001. After careful review of the settlement agreement we now
consider that technically the promissory note was not extinguished until the
second quarter when the final payment under the settlement agreement was made.
Therefore the extraordinary gain should have been recorded in the second quarter
2001. Cumulative second quarter figures, as reported in our Form 10-Q for the
quarter ended July 1, 2001, are reported correctly.


                                        8
<PAGE>

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, 2000, as well as the
financial statements and notes thereto. This quarterly report on form 10-Q
includes forward-looking statements within the meaning of the Securities
Exchange Act of 1934 that involve risk and uncertainty. Because such statements
include risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. The words "believe",
"expect", "intend", "anticipate", variations of such words and similar
expressions identify forward-looking statements but their absence does not mean
that the statement is not forward looking. Forward-looking statements contained
in this form 10-Q include the statement relating to an intended reduction of
product costs that will affect gross margins. This statement, and the forward-
looking nature of it, depends on a variety of factors, some of which are not
under the direct control of the company. These forward-looking statements are
based on information available to the company on the date hereof. Airspan
assumes no obligation to publicize the results of any potential revision of
these forward-looking statements.

COMPARISON OF THE QUARTER ENDED SEPTEMBER 30, 2001 TO THE QUARTER ENDED
OCTOBER 1, 2000

Revenue

Revenue totaled $8.6 million for the quarter ended September 30, 2001
representing a 2% decrease from the $8.8 million reported for the comparable
2000 quarter. Sales were driven by network deployments to customers in
Indonesia, Nigeria, Sri Lanka and China. During the quarter, shipments were made
to 38 customers, including ten new customers who represented 28% of revenue.
Geographically, 50% of our revenues were derived from Asia, 26% from Africa and
the Middle East, 18% from U.S. based customers, 4% from South America, and 2%
from Europe.

Cost of Revenue

Cost of revenue decreased 9% from $5.5 million in the quarter ended October 1,
2000 to $5.0 million in the quarter ended September 30, 2001. The decrease was
as a result of the slight decrease in revenue for the quarter and lower product
costs due to a favorable product mix. During the quarter ended September 30,
2001 we decided to cease marketing certain product variants and we also
undertook a detailed review of the levels and mix of the related inventory. As a
result we wrote down inventory in the third quarter of 2001 by $1.4 million.
Excluding the inventory write down, gross margin as a percentage of revenue
totaled 42% in the third quarter of 2001 in comparison to 37% in the third
quarter of 2000. The improvement in gross margin reflected a more favorable
product mix and lower product costs. After the inventory provision, gross margin
as a percentage of revenue totaled 25% in the third quarter of 2001 or $2.2
million.

Research and Development Expenses

As part of our operating expense reduction we have re-focused our research and
development priorities to lower ongoing product development costs. From these
measures we have reduced research and development expenses by 16% from $4.4
million in the quarter ended October 1, 2000 to $3.7 million in the quarter
ended September 30, 2001.

Sales and Marketing Expenses

Sales and marketing expenses increased 3% from $3.4 million in the quarter ended
October 1, 2000 to $3.5 million in the quarter ended September 30, 2001. The
relatively flat nature of sales and marketing against the same quarter last year
represents the net effect of increases in internal and external commissions and
a reduction in the cost of trial based activity. In the third quarter of 2001 we
wrote down receivables by $1.0 million dollars due to our concerns with
customers and countries that have been most effected by economic slow down. In
the comparable quarter of 2000 we created a bad debt provision for receivables
of $0.1 million.


                                        9
<PAGE>

General and Administrative Expenses

General and administrative expenses increased 15% from $2.3 million in the
quarter ended October 1, 2000 to $2.7 million in the quarter ended September 30,
2001. The increase was due to higher facility costs and increased travel costs.

Amortization of Intangibles

Amortization of intangibles expense remained constant at $0.1 million in both
the quarter ended October 1, 2000 and the quarter ended September 30, 2001.

Restructuring Provision

In the second quarter 2001 earnings release we announced our plan to reduce
spending levels as a result of the global economic slow down in the
telecommunications sector. During the third quarter of 2001 we made a
restructuring provision of $1.2 million to cover employee termination costs and
facility closures. At the end of the third quarter 2001 the provision remaining
was $0.7 million. There was no corresponding restructuring charge in 2000.

Net Interest and Other Income

Net interest and other income decreased 40% from $1.1 million in the third
quarter 2000 to $0.7 million in the third quarter 2001. Interest and other
income decreased 53% from $1.5 million for the quarter ended October 1, 2000 to
$0.7 million in the quarter ended September 30, 2001. The decrease of $0.8
million was due to the impact of lower interest rates on our investments and a
lower average cash balance. Interest expense decreased to $0.1 million in the
quarter ended September 30, 2001 from $0.4 million in the quarter ended October
1, 2000 as a result of the repayment of the debt owed to DSC Telcom LP.

Income Taxes

No income tax liability or charge was required to be recorded for the third
quarter of either 2000, or 2001.

Net Loss

Our net loss of $9.4 million in the quarter ended September 30, 2001 compared to
a loss of $5.9 million from the third quarter 2000, an increase of 59%. Before
the inventory provision, bad debt provision and restructuring provision our net
loss was $5.7 million, or rather a 3% decrease over the comparable quarter in
2000. Before provisions, increases in gross profits of $0.3 million and
decreases in research and development costs of $0.7 million were partially
offset by increases in sales and marketing and general and administrative
expenses of $0.1 million and $0.1 million, respectively and a decrease in net
interest and other income of $0.4 million.

Other Comprehensive Loss/Income

Other comprehensive income for the three months ended September 30, 2001 was
$1.2 million, while there was no other comprehensive loss or income in the third
quarter of 2000. The loss related to the change in fair value of our forward
foreign exchange contracts on retranslation. These forward exchange contracts
are used to hedge our UK expenses through to April 2002.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2001 TO THE NINE MONTHS ENDED
OCTOBER 1, 2000

Revenue

Revenue totaled $27.3 million for the nine-month period ended September 30, 2001
representing a 28% increase from the $21.3 million reported for the comparable
nine-month period in 2000. Higher sales were driven by network deployments to
customers in the Philippines, Indonesia, USA, Sir Lanka, Nigeria, Russia, China
and Peru. During the first nine months of 2001, shipments were made to 58
customers, including 23 new customers who represented 37% of revenue.
Geographically, 50% of our revenues were derived from Asia, 17% from Europe,
13% from Africa and the Middle East, 11% from U.S. based customers, of which 4%,
of total revenue, was shipped to destinations outside of the U.S, and 9% from
South America.

Cost of Revenue


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<PAGE>

Cost of revenue increased 23% from $13.5 million in the nine months ended
October 1, 2000 to $16.7 million in the nine months ended September 30, 2001 as
a result of the increase in revenue. During the quarter ended September 30, 2001
we decided to cease marketing certain product variants and we also undertook a
detailed review of the levels and mix of the related inventory. As a result we
wrote down inventory in the third quarter of 2001 by $1.4 million. Excluding the
inventory write down, gross margin as a percentage of revenue totaled 39% in the
first nine months of 2001 against 36% in the first nine months of 2000. The
improvement in gross margin reflected a more favorable product mix. After the
inventory write down, gross margin as a percentage of revenue totaled 34% in the
first nine months 2001 or $9.2 million.

Research and Development Expenses

Research and development expenses decreased by 9% from $12.7 million in the nine
months ended October 1, 2000 to $11.6 million in the nine months ended September
30, 2001. The decrease was due to the timing of projects relating to new product
development and cost reduction. Additionally, as part of our operating expense
reduction program, we have re-focused our research and development priorities to
lower product development costs.

Sales and Marketing Expenses

Sales and marketing expenses increased 27% from $9.8 million in the nine months
ended October 1, 2000 to $12.4 million in the nine months ended September 30,
2001. The increase represents a higher headcount, the expansion of our sales and
marketing activities, including additional trade show and user conference
activity, customer trial costs and the impact of internal and external
commissions based on higher sales. In the third quarter of 2001 we wrote down
receivables by $1.0 million dollars due to our concerns with customers and
countries that have been most effected by economic slow down. The net charge for
bad debts for the nine months ended September 30, 2001 was $0.6 million compared
to $0.2 million for the nine months ended October 1, 2000.

General and Administrative Expenses

General and administrative expenses increased 26% from $6.7 million in the nine
months to October 1, 2000 to $8.4 million in the nine month period ended
September 30, 2001. The increase was due to a higher headcount supporting our
expanding operations, increased facility costs, and the costs of compliance with
reporting and other requirements of being a public company.

Amortization of Intangibles

Amortization of intangibles expense decreased 35% to $0.3 million for the nine
month period ended September 30, 2001 from $0.5 million for the nine month
period ended October 1, 2000 reflecting the full write off of developed
technology, purchased sales contracts and patents in previous periods.

Restructuring Provision

In the second quarter 2001 earnings release we announced our plan to reduce
spending levels as a result of the global economic slow down in the
telecommunications sector. During the third quarter of 2001, we made a
restructuring provision of $1.2 million to cover employee termination costs and
facility closures. At the end of the third quarter 2001, the provision remaining
was $0.7 million. There was no corresponding restructuring charge in 2000.

Net Interest and Other Income

Net interest and other income increased 15% from $2.1 million for the nine-month
period ended October 1, 2000 to $2.4 million in the nine-month period ended
September 30, 2001. Interest and other income decreased 19% from $3.4 million
for the nine-month period ended October 1, 2000 to $2.7 million in the
nine-month period ended September 30, 2001. The decrease of $0.7 million was a
result of reduced interest income of $0.4 million earned on cash deposits with
financial institutions and by foreign exchange losses on the retranslation of
non-U.S. dollar cash balances of $0.3 million. Interest expense decreased to
$0.3 million in the nine months ended September 30, 2001 from $1.3 million in
the nine months ended October 1, 2000 as a result of the repayment of the debt
owed to DSC Telcom LP.

Income Taxes

We recorded an income tax credit, in the first nine months of 2001, derived from
the tax losses generated in the U.K. to offset the income tax expense recorded
on our extraordinary gain.

Extraordinary Gain


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<PAGE>

The Company negotiated a settlement of its $18.5 million promissory note with
DSC Telcom L.P. in the first nine months of 2001. Under the settlement
agreement, the Company agreed to pay $9.3 million in 2001, in exchange for
complete forgiveness of the debt owed by the Company that was originally
repayable over 36 equal installments over three years starting February 1, 2001.
In addition, the Company and DSC Telcom L.P. mutually released each other from
certain claims made by the parties relating to the formation of Airspan in
January 1998. The extraordinary gain of $9.2 million that arose from this
transaction was partially offset by tax on the gain of $2.7 million, resulting
in an extraordinary gain, net of taxes, of $6.5 million.

Net Income/Loss

Our net loss of $13.8 million for the nine months ended September 30, 2001
compared to a loss of $20.0 million for the nine months ended October 1, 2000, a
decrease of 45%. Before the inventory provision, third quarter bad debt
provision, restructuring provision and the extraordinary gain we had a net loss
of $19.4 million in the nine months to September 30, 2001. This represented a 3%
decrease over the comparable nine months for 2000. Before third quarter 2001
provisions, increases in gross profits of $2.8 million, decreases in research
and development costs, bad debt provision and amortization of intangibles of
costs of $1.1 million, $0.6 million and $0.2 million, respectively, and an
increase in net interest and other income of $0.3 million were partially offset
by increases in sales and marketing and general and administrative expenses of
$2.7 million and $1.7 million, respectively.

Other Comprehensive Loss/Income

Other comprehensive gain for the nine months ended September 30, 2001 was $0.3
million. There was no other comprehensive loss or income in the first nine
months of 2000. The gain related to the change in fair value of our forward
foreign exchange contracts on retranslation. These forward exchange contracts
are used to hedge our UK expenses through to April 2002.

LIQUIDITY AND CAPITAL RESOURCES

Between inception and July 2000, we financed our operations primarily through
private sales of convertible preferred stock, which totaled $117.3 million (net
of transaction expenses). On July 25, 2000, we completed an initial public
offering of common stock for approximately $86.0 million in cash (net of
underwriting discounts, commissions and other expenses).

As of September 30, 2001, we had cash and cash equivalents totaling $75.2
million, as well as $3.3 million of restricted cash that is held as collateral
for performance guarantees on customer and supplier contracts and with
landlords. We do not have a line of credit or similar borrowing facility, nor do
we have any material capital commitments

At September 30, 2001, we had outstanding long-term debt of $2.7 million. This
balance is owed entirely to Comdisco Inc.

For the nine months ended September 30, 2001, we used $31.1 million cash in
operating activities compared with $20.6 million for the nine months ended
October 1, 2000. The cash used in operations was primarily as a result of the
operating loss and changes in working capital.

The net cash used in investing activities in the nine months to September 30,
2001 and October 1, 2000, of $3.0 million and $2.5 million respectively,
primarily related to capital equipment.

Our financing cash flows for the nine months ended September 30, 2001 were $6.2
million negative. The outflows arose from the repayment of long and short-term
debt in the amount of $10.5 million, partially offset by the proceeds from the
issuance of common stock on the exercise of stock options of $0.1 million and a
$3.9 million reduction in restricted cash. For the nine months ended October 1,
2000, our financing cash inflows were $92.7 million. The inflows arose from the
proceeds of our initial public offering of $86.0 million, from the issuances of
$5.4 million of preferred stock and of $1.3 million of short term debt and from
a $1.1 million reduction in restricted cash, partially offset by the repayment
of long and short-term debt in the amount of $1.3 million.

The Company has no material commitments other than obligations on long-term
debt, operating and capital leases and the forward exchange contracts mentioned
below.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

INTEREST RATE RISK

The Company's earnings are affected by changes in interest rates. As of December
31, 2000 and September 30, 2001 we had cash


                                       12
<PAGE>

and cash equivalents and restricted cash of $122.5 million and $78.4 million,
respectively. Substantially all of these amounts consisted of liquid investments
with remaining maturities at the date of purchase of less than 365 days; $57.8
million had maturities at less than 90 days; $8.7 million had maturities of
between 91 and 365 days. These investments are exposed to interest rate risk and
will decrease in value if market interest rates increase. A hypothetical
increase or decrease in market interest rates of 2 percent from September 30,
2001 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

FOREIGN CURRENCY EXCHANGE RATE RISK

For the nine months ended September 30, 2001, 97.5% of our sales were
denominated in US dollars with the remaining 2.5% predominantly denominated in
euros. For the nine months ended October 1, 2000, 23.7% of our sales were
denominated in euros and the remaining 76.3% were denominated in U.S. dollars.
Our total euro denominated sales for the nine months ended September 30, 2001
were 0.8 million euros, which were recorded at an average exchange rate of $1US
= 1.1026 euros. If the average exchange rate used had been higher or lower by
10% it would have decreased or increased the euro-denominated sales value by
$0.07 million. We expect the proportions of sales in euros to fluctuate over
time. The Company's sensitivity analysis for changes in foreign currency
exchange rates does not factor in changes in sales volumes.

Since May 2000, we have entered in currency hedging contracts that lock in
minimum exchange rates for payments due to us under some of our sales contracts
where those payments are to be made in currencies other than US dollars. Prior
to 2000 we had not entered into any foreign currency forward or option contracts
to hedge those payments. We do not enter into any currency hedging activities
for speculative purposes. The costs of these contracts are included under
interest and other income in our financial statements. There were no euro hedges
outstanding at September 30, 2001. We will continue to monitor our foreign
currency exposures and may modify our hedging strategies, as we deem prudent.

Our operating results are affected by moves in foreign currency exchange rates,
particularly the rate between US dollars and Great Britain pounds sterling. This
is because most of our operating expenses are incurred in pounds sterling.
During the nine months ended September 30, 2001, we paid expenses in local
currency of approximately 17.2 million pounds sterling, at an average rate of
$1US = 0.6946 pounds sterling. If the average exchange rates had been higher or
lower by 10%, the pounds sterling denominated operating expenses would have
decreased or increased by $2.5 million. We expect the proportions of operating
expenses paid in pounds sterling to fluctuate over time.

To manage our pound sterling foreign currency risk we have entered into the
following forward exchange contracts:

In November 2000 we entered into a forward exchange contract to purchase 24.0
million pounds sterling at an average exchange rate of $1US = 0.6793 pounds
sterling in sixteen equal amounts from that date to February 2002. At September
30, 2001 there were five payments outstanding at an average exchange rate of
$1US = 0.6777 pounds sterling.

In May 2001 we entered into a forward exchange contract to purchase 5.5 million
pounds sterling at an average exchange rate of $1US = 0.7038 pounds sterling in
eleven equal amounts from June 2001 to April 2002. At September 30, 2001 there
were seven payments outstanding at an average exchange rate of $1US = 0.7049
pounds sterling.

In May 2001 we entered into a forward exchange contract to purchase 3.0 million
pounds sterling at an average exchange rate of $1US = 0.7096 pounds sterling in
two equal amounts, one in March 2002, the other in April 2002. At September 30,
2001 there were two payments outstanding at an average exchange rate of $1US =
0.7096 pounds sterling

If the future average exchange rates over the remaining life of the above
contracts were higher or lower than the contracted rates by 10%, our financial
results would be impacted, negatively or positively respectively, by $2.0
million.

During 2000 we incurred the majority of our cost of revenue in Swedish Krona.
With the move of our printed circuit board sub-contracted production from Sweden
to Scotland at the beginning of 2001, we eliminated the Krona payments, and for
the nine months ended September 30, 2001 we incurred the majority of our cost of
revenue in U.S. dollars.

EQUITY PRICE RISK

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


                                       13
<PAGE>

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.

PART II OTHER INFORMATION

Item 1. Legal Proceeding

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, Eric D. Stonestrom (the Company's President and Chief
Executive Officer), Joseph J. Caffarelli (the Company's former Senior Vice
President and Chief Financial Officer), Matthew Desch (the Company's Chairman)
and Jonathan Paget (the Company's Executive Vice President and Chief Operating
Officer) together with certain underwriters of the Company's July 2000 initial
public offering. The complaint alleges violations of the Securities Act of 1933
and the Securities Exchange Act of 1934 for issuing a Registration Statement and
Prospectus that contained materially false and misleading information and failed
to disclose material information. In particular, Plaintiffs allege that the
underwriter defendants agreed to allocate stock in the Company's 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. Plaintiffs allege that the
Prospectus for the Company's initial public offering was false and misleading in
violation of the securities laws because it did not disclose these arrangements.
The actions seek damages in an unspecified amount. The complaints have been
consolidated into a single action. The Company is not required to respond to
Plaintiffs' claims before a consolidated complaint is filed. The Company intends
to vigorously defend itself against this and any other similar lawsuits.

Item 2. Change in Securities and use of Proceeds

During the three months ended September 30, 2001 we granted stock options to
purchase an aggregate 112,600 shares of our common stock at an average exercise
price of $2.07 per share to employees and directors under our 1998 Stock Option
and Restricted Stock Plan and our 2001 Supplemental Stock Option Plan. During
the three months ended September 30, 2001 employees exercised options for
125,985 shares of common stock for aggregate consideration of $56,852.

During the three months ended September 30, 2001 we issued 157,094 shares of
common stock at a price of $1.57 per share to employees under our 2000 Employee
Stock Purchase Plan.

Item 3. Defaults Upon Senior Securities.

None

Item 4 Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 Amended and Restated Articles of Incorporation


                                       14
<PAGE>

10.1  Supply contract with Monarch Communications Limited *

* Confidential treatment requested for portions of this Exhibit

(b) Reports on Form 8-K:

None


                                       15
<PAGE>

                                   SIGNATURES

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


November 14, 2001


                               AIRSPAN NETWORKS INC.


                               By: /s/ PETER ARONSTAM
                                   ------------------

                               Peter Aronstam
                               Senior Vice President and Chief Financial Officer


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