---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



---



(Mark one)

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



For the quarterly period ended July 4, 2004



OR



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



For the transition period from  to
.



Commission file number 000-31031



---



AIRSPAN NETWORKS INC.

(Exact name of registrant as specified in its charter)



---



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



Registrants
telephone number, including area code:

561-893-8670



---



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



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



Number of shares outstanding of the registrants common stock as of August 12, 2004: 37,055,330



---



---

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements



AIRSPAN
NETWORKS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except for share and per share data)



|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | -------- | - | ------------ | - | -------- | -
|                                                                                                                                                                                                                   |  | December 31, 2003 |          |   | July 4, 2004 |  
|                                                                                                                                                                                                                   |  |                   |          |   | (unaudited)  |  
|ASSETS                                                                                                                                                                                                             |  |                   |          |   |              |   |          |  
|Current Assets                                                                                                                                                                                                     |  |                   |          |   |              |   |          |  
|Cash and cash equivalents                                                                                                                                                                                          |  | $                 | 33,926   |   |              | $ | 22,392   |  
|Restricted cash                                                                                                                                                                                                    |  |                   | 1,588    |   |              |   | 24,873   |  
|Accounts receivable, less allowance for doubtful accounts of $5,207 at December 31, 2003 and $3,070 at July 4, 2004                                                                                                |  |                   | 12,509   |   |              |   | 9,663    |  
|Unbilled accounts receivable                                                                                                                                                                                       |  |                   | 54       |   |              |   | 415      |  
|Inventory                                                                                                                                                                                                          |  |                   | 18,215   |   |              |   | 17,298   |  
|Prepaid expenses and other current assets                                                                                                                                                                          |  |                   | 4,570    |   |              |   | 6,291    |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Total Current Assets                                                                                                                                                                                               |  |                   | 70,862   |   |              |   | 80,932   |  
|Property, plant and equipment, net                                                                                                                                                                                 |  |                   | 3,736    |   |              |   | 3,682    |  
|Goodwill                                                                                                                                                                                                           |  |                   | 3,136    |   |              |   | 789      |  
|Intangible assets, net                                                                                                                                                                                             |  |                   | 4,554    |   |              |   | 2,597    |  
|Other non-current assets                                                                                                                                                                                           |  |                   | 984      |   |              |   | 1,061    |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Total Assets                                                                                                                                                                                                       |  | $                 | 83,272   |   |              | $ | 89,061   |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                               |  |                   |          |   |              |   |          |  
|Current Liabilities                                                                                                                                                                                                |  |                   |          |   |              |   |          |  
|Accounts payable                                                                                                                                                                                                   |  | $                 | 7,751    |   |              | $ | 8,995    |  
|Accrued taxes                                                                                                                                                                                                      |  |                   | 449      |   |              |   | 592      |  
|Deferred revenue                                                                                                                                                                                                   |  |                   | 989      |   |              |   | 1,072    |  
|Customer advances                                                                                                                                                                                                  |  |                   | 15,070   |   |              |   | 30,028   |  
|Other accrued expenses                                                                                                                                                                                             |  |                   | 10,000   |   |              |   | 9,167    |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Total Current Liabilities                                                                                                                                                                                          |  |                   | 34,259   |   |              |   | 49,854   |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Stockholders Equity                                                                                                                                                                                               |  |                   |          |   |              |   |          |  
|Common stock, $0.0003 par value; 50,000,000 shares authorized at December 31, 2003 and 100,000,000 shares authorized at July 4, 2004:
36,314,410 issued at December 31, 2003 and 37,042,699 issued at July 4, 2004 |  |                   | 11       |   |              |   | 11       |  
|Note receivable  stockholder                                                                                                                                                                                      |  |                   | (130     | ) |              |   | (130     | )
|Additional paid in capital                                                                                                                                                                                         |  |                   | 215,209  |   |              |   | 216,003  |  
|Treasury stock: 834,560 shares held at December 31, 2003 and at July 4, 2004                                                                                                                                       |  |                   | (797     | ) |              |   | (797     | )
|Accumulated other comprehensive income                                                                                                                                                                             |  |                   | 1,839    |   |              |   | 1,032    |  
|Accumulated deficit                                                                                                                                                                                                |  |                   | (167,119 | ) |              |   | (176,912 | )
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Total Stockholders Equity                                                                                                                                                                                         |  |                   | 49,013   |   |              |   | 39,207   |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  
|Total Liabilities and Stockholders Equity                                                                                                                                                                         |  | $                 | 83,272   |   |              | $ | 89,061   |  
|                                                                                                                                                                                                                   |  |                   |          |   |              |   |          |  



---

AIRSPAN NETWORKS INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands except for share and per share data)



|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|------------------------------------------------------ |  | ------------- | ---------- | - | ------------ | - | ---------- | ------------- |  | - | ------------ | - |  | - | ---------- | -
|                                                       |  | Quarter Ended |            |   | Year-to-Date |  
|                                                       |  | June 29, 2003 |            |   | July 4, 2004 |   |            | June 29, 2003 |  |   | July 4, 2004 |  
|                                                       |  | (unaudited)   |            |   | (unaudited)  |  
|Revenue                                                |  | $             | 7,524      |   |              | $ | 18,252     |               |  | $ | 15,335       |   |  | $ | 30,672     |  
|Cost of revenue                                        |  |               | (5,704     | ) |              |   | (12,182    | )             |  |   | (10,957      | ) |  |   | (20,875    | )
|Inventory Provision                                    |  |               | (4,398     | ) |              |   |           |               |  |   | (4,398       | ) |  |   |           |  
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Gross Profit                                           |  |               | (2,578     | ) |              |   | 6,070      |               |  |   | (20          | ) |  |   | 9,797      |  
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Operating expenses:                                    |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Research and development                               |  |               | 3,670      |   |              |   | 4,743      |               |  |   | 7,389        |   |  |   | 9,789      |  
|Sales and marketing                                    |  |               | 2,656      |   |              |   | 2,752      |               |  |   | 5,260        |   |  |   | 5,312      |  
|Bad debt provision                                     |  |               |           |   |              |   | 300        |               |  |   |             |   |  |   | 300        |  
|General and administrative                             |  |               | 2,252      |   |              |   | 2,828      |               |  |   | 4,638        |   |  |   | 4,879      |  
|Amortization of intangibles                            |  |               | 44         |   |              |   | 158        |               |  |   | 87           |   |  |   | 404        |  
|Restructuring provision                                |  |               | 273        |   |              |   | 397        |               |  |   | 273          |   |  |   | 397        |  
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Total operating expenses                               |  |               | 8,895      |   |              |   | 11,178     |               |  |   | 17,647       |   |  |   | 21,081     |  
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Loss from operations                                   |  |               | (11,473    | ) |              |   | (5,108     | )             |  |   | (17,667      | ) |  |   | (11,284    | )
|Interest expense                                       |  |               |           |   |              |   |           |               |  |   | (38          | ) |  |   |           |  
|Interest and other income                              |  |               | 1,070      |   |              |   | 686        |               |  |   | 1,715        |   |  |   | 1,493      |  
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Loss before income taxes                               |  |               | (10,403    | ) |              |   | (4,422     | )             |  |   | (15,990      | ) |  |   | (9,791     | )
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Income tax (charge)/credit                             |  |               | (4         | ) |              |   | 14         |               |  |   | (4           | ) |  |   | (2         | )
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Net loss                                               |  | $             | (10,407    | ) |              | $ | (4,408     | )             |  | $ | (15,994      | ) |  | $ | (9,793     | )
|                                                       |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Net loss per share - basic and diluted                 |  | $             | (0.30      | ) |              | $ | (0.12      | )             |  | $ | (0.46        | ) |  | $ | (0.27      | )
|                                                       |  |               |            |  
|Weighted average shares outstanding- basic and diluted |  |               | 34,734,726 |   |              |   | 36,174,346 |               |  |   | 34,856,524   |   |  |   | 36,034,043 |  



---

AIRSPAN NETWORKS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                            |  |               |         |   |             |   |         |  
|--------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------- | - | ------- | -
|                                                                            |  | Year-to-date  |        
|                                                                            |  | June 29, 2003 |         |   | July 4,2004 |  
|                                                                            |  | (unaudited)   |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |               |         |   |             |   |         |  
|Net loss                                                                    |  | $             | (15,994 | ) |             | $ | (9,793  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |               |         |   |             |   |         |  
|Depreciation and amortization                                               |  |               | 1,557   |   |             |   | 1,337   |  
|Gain on settlement of long term debt                                        |  |               | (125    | ) |             |   |        |  
|Change in operating assets and liabilities:                                 |  |               |         |   |             |   |         |  
|Decrease in receivables                                                     |  |               | 1,101   |   |             |   | 2,846   |  
|Decrease in inventories                                                     |  |               | 5,109   |   |             |   | 4,852   |  
|Decrease/(Increase) in other current assets                                 |  |               | 760     |   |             |   | (2,889  | )
|(Decrease)/Increase in accounts payable                                     |  |               | (3,048  | ) |             |   | 1,244   |  
|(Decrease)/Increase in deferred revenue                                     |  |               | (402    | ) |             |   | 83      |  
|Increase in customer advances                                               |  |               |        |   |             |   | 14,958  |  
|Decrease in accrued expenses                                                |  |               | (646    | ) |             |   | (565    | )
|Increase in other non current assets                                        |  |               | (30     | ) |             |   | (77     | )
|                                                                            |  |               |         |   |             |   |         |  
|Net cash (used in)/from operating activities                                |  |               | (11,718 | ) |             |   | 11,996  |  
|                                                                            |  |               |         |   |             |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |               |         |   |             |   |         |  
|Purchase of property and equipment                                          |  |               | (1,091  | ) |             |   | (1,039  | )
|Proceeds from the sale of investment securities                             |  |               | 4,074   |   |             |   |        |  
|                                                                            |  |               |         |   |             |   |         |  
|Net cash from/(used in) investing activities                                |  |               | 2,983   |   |             |   | (1,039  | )
|                                                                            |  |               |         |   |             |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |  |               |         |   |             |   |         |  
|Purchase of treasury stock                                                  |  |               | (392    | ) |             |   |        |  
|Payment of long term debt                                                   |  |               | (2,375  | ) |             |   |        |  
|Exercise of stock options                                                   |  |               | 11      |   |             |   | 794     |  
|Restricted cash movement                                                    |  |               | 528     |   |             |   | (23,285 | )
|                                                                            |  |               |         |   |             |   |         |  
|Net cash used in financing activities                                       |  |               | (2,228  | ) |             |   | (22,491 | )
|                                                                            |  |               |         |   |             |   |         |  
|Decrease in cash and cash equivalents                                       |  |               | (10,963 | ) |             |   | (11,534 | )
|Cash and cash equivalents, beginning of period                              |  |               | 48,167  |   |             |   | 33,926  |  
|                                                                            |  |               |         |   |             |   |         |  
|Cash and cash equivalents, end of period                                    |  | $             | 37,204  |   |             | $ | 22,392  |  
|                                                                            |  |               |         |   |             |   |         |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                           |  |               |         |   |             |   |         |  
|Interest paid                                                               |  | $             | 26      |   |             | $ | 2       |  
|                                                                            |  |               |         |   |             |   |         |  





---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS

(in thousands, except for share and per share data)



BUSINESS



We are a global supplier of
broadband fixed wireless access (BWA) equipment that allows communications service providers (often referred to as local exchange carriers, or simply telephone companies), internet service providers (often referred to as
ISPs) and other telecommunications users, such as utilities and enterprises, to cost effectively deliver high-speed data and voice services using radio frequencies rather than wires. We call this transmission method Wireless
Broadband. The primary market for our systems is a subset of the fixed wireless access systems market, which is the fixed point-to-multipoint market in radio frequencies below 6.0GHz. Each of our fixed wireless access systems utilizes digital
wireless techniques, which provide wide area coverage, security and resistance to fading. Our systems can be deployed rapidly and cost effectively, providing an attractive alternative or complement to traditional copper wire, cable, or fiber-optic
communications access networks. Our products also include software tools that optimize geographic coverage of our systems and provide ongoing network management. To facilitate the deployment and operation of our systems, we also offer network
installation, training and support services. A more complete description of our various wireless access systems is provided below. Our BWA systems (the Airspan BWA Solutions) have been installed by more than 200 network operators in more
than 70 countries and are being tested by numerous other service providers.



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



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



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



In December 2003, we completed an agreement with Nortel Networks
to acquire the fixed wireless access business of Nortel Networks known as Proximity. The acquired Proximity products and services provide carrier class circuit switched voice and data, based on a Time Division Multiple Access
(TDMA) technology.



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



BASIS OF
PRESENTATION



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



The balance sheet at December 31, 2003 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, 2003.



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



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



CONTINGENCIES



Warranty



The Company
provides a limited warranty for periods, usually ranging from twelve to twenty-four months, to all purchasers of its new equipment. Warranty expense is accrued at the date revenue is recognized on the sale of equipment and is recognized as a cost of
revenue. The expense is estimated based on analysis of historic costs and is amortized over the warranty period. Management believes that the amounts provided for are sufficient for all future warranty costs on equipment sold through July 4, 2004
but if actual product failure rates, material usage or service delivery costs differ from estimates, revisions to the estimated warranty liability would be required.



Information regarding the changes in the Companys product warranty liabilities was as follows for the six months ended
July 4, 2004.



|                              |  |                               |     |                                                |   |                                                                              |  |   |                                                       |   |  |                         |      |   |  |   |    
|----------------------------- |  | ----------------------------- | --- | ---------------------------------------------- | - | ---------------------------------------------------------------------------- |  | - | ----------------------------------------------------- | - |  | ----------------------- | ---- | - |  | - | ---
|                              |  | Balance atbeginning of period |     | Accrual for warrantiesissued during the period |   | Accruals related to pre-existing warranties (including changes in
estimates) |  |   | Settlements made(in cash or inkind) during the period |   |  | Balance at endof period
|Six months ended July 4, 2004 |  |                               |     |                                                |   |                                                                              |  |   |                                                       |   |  |                         |      |   |  |   |    
|Product warranty liability    |  | $                             | 652 |                                                | $ | 502                                                                          |  | $ | (257                                                  | ) |  | $                       | (302 | ) |  | $ | 595
|                              |  |                               |     |                                                |   |                                                                              |  |   |                                                       |   |  |                         |      |   |  |   |    



Other guarantees



The Company had delivered to its landlords and customers bank guarantees
aggregating to $1,435 at December 31, 2003 and $24,468 at July 4, 2004. The foregoing figures represent the maximum potential amount of future payments the Company could be required to make under these guarantees. The guarantees secure payment or
performance obligations of the Company under contracts. The Company has pledged cash to the banks as collateral for the guarantees in the same amounts as the guarantees. These pledges have been classified as restricted cash. The Company has not
recognized any liability for these guarantees as in managements opinion the likelihood of having to make payments under the guarantees is remote.



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, Eric D. Stonestrom (our President and Chief Executive Officer), Joseph J. Caffarelli (our former Senior Vice President and Chief Financial Officer), Matthew Desch (our Chairman) and Jonathan Paget (our Executive Vice President
and Chief Operating Officer) together with certain underwriters of our July 2000 initial public offering. A Consolidated Amended Complaint, which is now the operative complaint, was filed on April 19, 2002. The complaint alleges violations of
Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading information and failed to
disclose material information. In particular, Plaintiffs allege that the underwriter-defendants agreed to allocate stock in our initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by
those investors to make additional purchases of stock in the aftermarket at pre-determined prices. The action seeks damages in an unspecified amount.



This action is being coordinated with approximately three hundred other nearly identical actions filed against other companies. On July 15, 2002, the
Company moved to dismiss all claims against it and the Individual Defendants. On October 9, 2002, the Court dismissed the Individual Defendants from the case without prejudice based upon Stipulations of Dismissal filed by the plaintiffs and the
Individual Defendants. This dismissal disposed of the Section 15 and 20(a) control person claims without prejudice, since these claims were asserted only against the Individual Defendants. On February 19, 2003, the Court dismissed the Section 10b
claim against us, but allowed the Section 11 claim to proceed. Airspan has approved the terms of a settlement agreement (the Settlement Agreement) and related agreements which set forth the terms and conditions of a settlement between
Airspan, the Individual Defendants, the plaintiff class and the vast majority of the other approximately 300 issuer defendants and the individual defendants currently or formerly associated with those companies. Among other provisions, the
Settlement Agreement provides for a release of Airspan and the Individual Defendants for the conduct alleged in the action to be wrongful. Pursuant to the terms of the Settlement Agreement, Airspan will agree to undertake certain responsibilities,
including agreeing to assign away, not assert, or release certain potential claims Airspan may have against its underwriters. Accordingly, Airspan does not expect that the settlement will involve any payment by Airspan. The Settlement Agreement,
which has not yet been executed, has been submitted to Court for approval. Approval by the Court cannot be assured. We cannot opine as to whether or when a settlement will occur or be finalized and are unable at this time to determine whether the
outcome of the litigation will have a material impact on our results of operations or financial condition in any future period.



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



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 4, 2004, the Company had three stock option employee
compensation plans and the 2000 Employee Stock Purchase Plan (ESPP). The Company accounts for these plans under the recognition and measurement principles of APB Opinion No.25 Accounting for Stock issued to Employees, and related
interpretations. In all periods shown the Company has valued stock-based employee compensation using the intrinsic value method. There was no stock-based compensation cost reflected in net income in either 2003 or 2004. All options granted under
these plans had an exercise price equal to the market value of the underlying common stock on the date of grant.



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



|                                                                                                                                                                                             |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                                                                                                                                             |  | Quarter Ended |         |   | Year-to-Date |  
|                                                                                                                                                                                             |  | June 29,2003  |         |   | July 4,2004  |   |        | June 29, 2003 |  |   | July 4, 2004 |  
|                                                                                                                                                                                             |  | (unaudited)   |         |   | (unaudited)  |  
|Net loss, as reported                                                                                                                                                                        |  | $             | (10,407 | ) |              | $ | (4,408 | )             |  | $ | (15,994      | ) |  | $ | (9,793  | )
|Add back:                                                                                                                                                                                    |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Stock-based employee compensation cost, net of related tax effects, included in the determination of net income as reported                                                                  |  |               |        |   |              |   |       |               |  |   |             |   |  |   |        |  
|Deduct:                                                                                                                                                                                      |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income if the
fair value method had been applied to all awards |  |               | (519    | ) |              |   | (496   | )             |  |   | (1,032       | ) |  |   | (997    | )
|                                                                                                                                                                                             |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Pro forma net loss                                                                                                                                                                           |  | $             | (10,926 | ) |              | $ | (4,904 | )             |  | $ | (17,026      | ) |  | $ | (10,790 | )
|                                                                                                                                                                                             |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Net loss per share - basic and diluted                                                                                                                                                       |  | $             | (0.30   | ) |              | $ | (0.12  | )             |  | $ | (0.46        | ) |  | $ | (0.27   | )
|                                                                                                                                                                                             |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Pro forma net loss per share - basic and diluted                                                                                                                                             |  | $             | (0.31   | ) |              | $ | (0.14  | )             |  | $ | (0.49        | ) |  | $ | (0.30   | )
|                                                                                                                                                                                             |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  



ACQUISITIONS



On December 23, 2003, the Company completed an agreement with Nortel Networks to acquire the
fixed wireless access business of Nortel Networks known as Proximity. As part of the transaction, Airspan acquired Nortel Networks inventory relating to Proximity. The initial allocation of the purchase price was preliminary.
During the quarter ended July 4, 2004 the Company finalised its estimates of the fair values allocated to certain assets and liabilities acquired in the Proximity transaction. Given the availability of more accurate information on the acquired
Proximity inventory, the Company has increased its valuation of the acquired inventory by $3.9 million. The Company also reduced acquisition accruals by $0.1 million. The adjustments to the fair values gave rise to negative goodwill of $1.7 million
which has been allocated, on a pro rata basis, against purchased long term assets.



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



The following table shows the preliminary purchase price allocation along with the revisions made to this during the quarter ended July 4, 2004.



Calculation of purchase price:



|                           |  |                   |        |               |   |                                   |  |   |       |   |  |   |       
|-------------------------- |  | ----------------- | ------ | ------------- | - | --------------------------------- |  | - | ----- | - |  | - | ------
|                           |  | CashConsideration |        | Accrued costs |   | Revisions tooriginal accruedcosts |  |   | Total
|Initial purchase price     |  | $                 | 12,850 |               |   |                                  |  |   |      |   |  | $ | 12,850
|Working capital adjustment |  |                   | 241    |               |   |                                  |  |   |      |   |  |   | 241   
|Acquisition costs          |  |                   |       |               | $ | 800                               |  | $ | (41   | ) |  |   | 759   
|                           |  |                   |        |               |   |                                   |  |   |       |   |  |   |       
|Total purchase price       |  | $                 | 13,091 |               | $ | 800                               |  | $ | (41   | ) |  | $ | 13,850
|                           |  |                   |        |               |   |                                   |  |   |       |   |  |   |       



Allocation of purchase price



|                                          |  |                      |         |   |                                                          |   |        |                                                                        |  |   |                               |   |  |            |   |  |   |         |  
|----------------------------------------- |  | -------------------- | ------- | - | -------------------------------------------------------- | - | ------ | ---------------------------------------------------------------------- |  | - | ----------------------------- | - |  | ---------- | - |  | - | ------- | -
|                                          |  | Historicalbook value |         |   | Preliminarypurchase priceallocation/fairvalueadjustments |   |        | Revisions topreliminary purchaseprice allocation/fairvalue adjustments |  |   | Allocation ofnegativegoodwill |   |  | Fair value |  
|Cash                                      |  | $                    | 14,946  |   |                                                          |   |       |                                                                        |  |   |                              |   |  |           |   |  | $ | 14,946  |  
|Inventory                                 |  |                      |        |   |                                                          | $ | 8,550  |                                                                        |  | $ | 3,935                         |   |  |           |   |  |   | 12,485  |  
|Prepaid expenses and other current assets |  |                      | 393     |   |                                                          |   |       |                                                                        |  |   |                              |   |  |           |   |  |   | 393     |  
|Property, plant and equipment, net        |  |                      |        |   |                                                          |   | 419    |                                                                        |  |   |                              |   |  | (159       | ) |  |   | 260     |  
|Intangible assets, net:                   |  |                      |         |   |                                                          |   |        |                                                                        |  |   |                               |   |  |            |   |  |   |         |  
|Patents                                   |  |                      |        |   |                                                          |   | 1,500  |                                                                        |  |   |                              |   |  | (566       | ) |  |   | 934     |  
|Customer contracts                        |  |                      |        |   |                                                          |   | 2,600  |                                                                        |  |   |                              |   |  | (982       | ) |  |   | 1,618   |  
|Accounts payable                          |  |                      | (8      | ) |                                                          |   |       |                                                                        |  |   |                              |   |  |           |   |  |   | (8      | )
|Deferred revenue                          |  |                      | (93     | ) |                                                          |   |       |                                                                        |  |   |                              |   |  |           |   |  |   | (93     | )
|Customer advances                         |  |                      | (14,946 | ) |                                                          |   |       |                                                                        |  |   |                              |   |  |           |   |  |   | (14,946 | )
|Other accrued expenses                    |  |                      |        |   |                                                          |   | (1,822 | )                                                                      |  |   | 83                            |   |  |           |   |  |   | (1,739  | )
|Goodwill                                  |  |                      |        |   |                                                          |   | 2,352  |                                                                        |  |   | (4,059                        | ) |  | 1,707      |   |  |   |        |  
|                                          |  |                      |         |   |                                                          |   |        |                                                                        |  |   |                               |   |  |            |   |  |   |         |  
|                                          |  | $                    | 292     |   |                                                          | $ | 13,599 |                                                                        |  | $ | (41                           | ) |  |           |   |  | $ | 13,850  |  
|                                          |  |                      |         |   |                                                          |   |        |                                                                        |  |   |                               |   |  |            |   |  |   |         |  



INVENTORY



Inventory consists of the following:



|                               |  |                  |        |             |   |       
|------------------------------ |  | ---------------- | ------ | ----------- | - | ------
|                               |  | December 31,2003 |        | July 4,2004
|                               |  |                  |        | (unaudited)
|Purchased parts and materials  |  | $                | 10,688 |             | $ | 4,231 
|Work in progress               |  |                  | 1,084  |             |   | 1,207 
|Finished goods and consumables |  |                  | 6,443  |             |   | 11,860
|                               |  |                  |        |             |   |       
|                               |  | $                | 18,215 |             | $ | 17,298
|                               |  |                  |        |             |   |       



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



ACCRUED RESTRUCTURING CHARGES



In the third quarter of 2002, a restructuring program was initiated to reduce operating expenses. A charge of $278 was recorded in the quarter. Included in this charge
were costs related to the write off of tradeshow equipment and severance payments. The total number of employees terminated as part of this restructuring program was 19 and all severance payments were made by the end of the second quarter of 2003.



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



In the second quarter of 2003 an additional restructuring program was initiated to further lower operating expenses. The total cost incurred as part of this restructuring
program was $298 arising from costs associated with facility closures and severance.



The costs incurred during the year ended December 31, 2003 included termination costs for 30 employees. All of these employees had left the Company by December 31, 2003.



During the first quarter of 2004 the Company revised its original restructuring programs and initiated a new program to further reduce
operating expenses. The Company did not record a restructuring charge during the first quarter of 2004. The total cost expected to be incurred as part of this restructuring program is $420 related to termination costs for 21 employees. This plan
will be completed by the end of the third quarter of 2004. During the second quarter of 2004 the company incurred $397 related to this plan.



In conjunction with the purchase of the Proximity business the Company implemented its plan to relocate the Proximity business from Maidenhead, England and Sunrise,
Florida to the Companys facilities in Uxbridge, England and Boca Raton, Florida. The Company recorded acquisition-related restructuring charges of $520, in the fourth quarter of 2003, in connection with the relocation of the Proximity
business. The estimated relocation costs were revised during the second quarter of 2004 from $520 down to $338. The adjustment formed part of the revised fair value adjustments of the Proximity acquisition. This plan is expected to be completed by
the end of the third quarter of 2004.



|                                                       |  |                             |     |              |   |      |                                             |  |   |                       |   |  |   |    
|------------------------------------------------------ |  | --------------------------- | --- | ------------ | - | ---- | ------------------------------------------- |  | - | --------------------- | - |  | - | ---
|                                                       |  | Accrued at December 31,2003 |     | Paid in 2004 |   |      | Revision topreliminary fairvalueadjustments |  |   | Accruedat July 4,2004
|Office relocation and closure  other associated costs |  | $                           | 520 |              | $ | (103 | )                                           |  | $ | (182                  | ) |  | $ | 235
|                                                       |  |                             |     |              |   |      |                                             |  |   |                       |   |  |   |    



The restructuring charges and their
utilization are summarized as follows:



|                              |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|----------------------------- |  | ------------------------------ | ----- | -------------------- | - | --------------------- |  | - | ----------- | - |  | ----------------------- | ---- | - |  | - | -----
|                              |  | Balance at beginning of period |       | Restructuring charge |   | Accrued onacquisition |  |   | Utilized    |   |  | Balance at endof period
|                              |  | (unaudited)                    |       | (unaudited)          |   | (unaudited)           |  |   | (unaudited) |   |  | (unaudited)            
|Six months ended July 4, 2004 |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|One-time termination benefits |  | $                              |      |                      | $ | 397                   |  | $ |            |   |  | $                       | (175 | ) |  | $ | 222  
|Contract termination costs    |  |                                | 947   |                      |   |                      |  |   |            |   |  |                         | (162 | ) |  |   | 785  
|Other associated costs        |  |                                | 591   |                      |   |                      |  |   | (182        | ) |  |                         | (103 | ) |  |   | 306  
|                              |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|                              |  | $                              | 1,539 |                      | $ | 397                   |  | $ | (182        | ) |  | $                       | (440 | ) |  | $ | 1,313
|                              |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|Year ended December 31, 2003  |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|One-time termination benefits |  | $                              | 79    |                      | $ | 342                   |  | $ |            |   |  | $                       | (421 | ) |  | $ |     
|Contract termination costs    |  |                                | 825   |                      |   | 397                   |  |   |            |   |  |                         | (275 | ) |  |   | 947  
|Other associated costs        |  |                                | 150   |                      |   | 11                    |  |   | 520         |   |  |                         | (89  | ) |  |   | 591  
|                              |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      
|                              |  | $                              | 1,054 |                      | $ | 750                   |  | $ | 520         |   |  | $                       | (785 | ) |  | $ | 1,539
|                              |  |                                |       |                      |   |                       |  |   |             |   |  |                         |      |   |  |   |      



All charges will result in direct cash
outlays.



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



SEGMENTAL INFORMATION



As a developer and supplier of fixed wireless communications access systems and solutions, the Company has one reportable segment. The revenue of this single segment is comprised primarily of revenue from products
and, to a lesser extent, services. The majority of the Companys revenue is generated from products manufactured in the United Kingdom, Mexico and Israel, with additional revenue generated from sales of original equipment manufacturers
(OEM) products.



An analysis of revenue by geographical market is given below:



|                            |  |               |       |              |   |               |  |              |        |  |   |       
|--------------------------- |  | ------------- | ----- | ------------ | - | ------------- |  | ------------ | ------ |  | - | ------
|                            |  | Quarter Ended |       | Year-to-Date
|                            |  | June 29, 2003 |       | July 4, 2004 |   | June 29, 2003 |  | July 4, 2004
|                            |  | (unaudited)   |       | (unaudited) 
|USA                         |  | $             | 275   |              | $ | 1,029         |  | $            | 708    |  | $ | 1,204 
|Asia                        |  |               | 2,462 |              |   | 1,820         |  |              | 7,269  |  |   | 2,908 
|Europe                      |  |               | 974   |              |   | 2,146         |  |              | 1,379  |  |   | 4,527 
|Africa and the Middle East  |  |               | 2,910 |              |   | 265           |  |              | 4,546  |  |   | 960   
|Latin America and Caribbean |  |               | 903   |              |   | 12,992        |  |              | 1,433  |  |   | 21,073
|                            |  |               |       |              |   |               |  |              |        |  |   |       
|                            |  | $             | 7,524 |              | $ | 18,252        |  | $            | 15,335 |  | $ | 30,672
|                            |  |               |       |              |   |               |  |              |        |  |   |       



COMPREHENSIVE LOSS



Total comprehensive loss was $10,074 for the quarter ended June 29, 2003 and $4,997 for
the quarter ended July 4, 2004.



Components of Comprehensive Loss



|                                                                  |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|----------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                  |  | Quarter Ended |         |   | Year-to-Date |  
|                                                                  |  | June 29, 2003 |         |   | July 4, 2004 |   |        | June 29, 2003 |  |   | July 4, 2004 |  
|                                                                  |  | (unaudited)   |         |   | (unaudited)  |  
|Net loss                                                          |  | $             | (10,407 | ) |              | $ | (4,408 | )             |  | $ | (15,994      | ) |  | $ | (9,793  | )
|Other Comprehensive Income / (Loss):                              |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Movement in the fair value of cash flow hedges                    |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|- unrealized (loss)/gain on foreign currency cash flow hedges     |  |               | 810     |   |              |   | (15    | )             |  |   | 401          |   |  |   | 229     |  
|- reclassification of adjustment for gains realized in net income |  |               | (477    | ) |              |   | (574   | )             |  |   | (1,089       | ) |  |   | (1,036  | )
|                                                                  |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  
|Comprehensive loss                                                |  | $             | (10,074 | ) |              | $ | (4,997 | )             |  | $ | (16,682      | ) |  | $ | (10,600 | )
|                                                                  |  |               |         |   |              |   |        |               |  |   |              |   |  |   |         |  



---

AIRSPAN NETWORKS INC.



NOTES TO THE FINANCIAL STATEMENTS - (Continued)

(in thousands, except for share and per share data)



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 are not included in the
calculation of diluted net loss per share as they are antidilutive.



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



|                                                             |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|------------------------------------------------------------ |  | ------------- | ---------- | - | ------------ | - | ---------- | ------------- |  | - | ------------ | - |  | - | ---------- | -
|                                                             |  | Quarter Ended |            |   | Year-to-Date |  
|                                                             |  | June 29, 2003 |            |   | July 4, 2004 |   |            | June 29, 2003 |  |   | July 4, 2004 |  
|                                                             |  | (unaudited)   |            |   | (unaudited)  |  
|Numerator:                                                   |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Net loss per share                                           |  | $             | (10,407    | ) |              | $ | (4,408     | )             |  | $ | (15,994      | ) |  | $ | (9,793     | )
|                                                             |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Denominator:                                                 |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Weighted average common shares outstanding basic and diluted |  |               | 34,734,726 |   |              |   | 36,174,346 |               |  |   | 34,856,524   |   |  |   | 36,034,043 |  
|                                                             |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  
|Net loss per share basic and diluted                        |  | $             | (0.30      | ) |              | $ | (0.12      | )             |  | $ | (0.46        | ) |  | $ | (0.27      | )
|                                                             |  |               |            |   |              |   |            |               |  |   |              |   |  |   |            |  



In 2000, the Company adopted the 2000
Employee Stock Purchase Plan (ESPP), which is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. As of July 4, 2004, there were 2,037,331 shares of common stock reserved for
issuance under the ESPP. On August 1, 2004 the Company issued 211,754 shares at $1.76 per share to employees participating in the ESPP.



During the six months ended July 4, 2004 728,289 options granted pursuant to the 1998 stock option plan were exercised at an average exercise price of $1.07.



---

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, 2003, AS WELL AS THE FINANCIAL STATEMENTS AND NOTES THERETO. EXCEPT FOR HISTORICAL MATTERS CONTAINED HEREIN, STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q ARE FORWARD-LOOKING AND ARE MADE
PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS MAY, WILL, TO, PLAN, EXPECT,
BELIEVE, ANTICIPATE, INTEND, COULD, WOULD, ESTIMATE, OR CONTINUE OR THE NEGATIVE OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. INVESTORS AND OTHERS ARE CAUTIONED THAT A VARIETY OF FACTORS, INCLUDING CERTAIN RISKS, MAY AFFECT OUR BUSINESS AND CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. THESE
RISK FACTORS INCLUDE, WITHOUT LIMITATION, (I) A SLOWDOWN OF EXPENDITURES BY COMMUNICATION SERVICE PROVIDERS; (II) INCREASED COMPETITION FROM ALTERNATIVE COMMUNICATION SYSTEMS; (III) THE FAILURE OF OUR EXISTING OR PROSPECTIVE CUSTOMERS TO PURCHASE
PRODUCTS AS PROJECTED; (IV) OUR INABILITY TO SUCCESSFULLY IMPLEMENT COST REDUCTION OR CONTAINMENT PROGRAMS; (V) A LOSS OF ANY OF OUR KEY CUSTOMERS; (VI) OUR ABILITY TO RETAIN THE LARGEST EXISTING CUSTOMER OF NORTEL NETWORKS FIXED WIRELESS
BUSINESS; AND (VII) OUR ABILITY TO CONTINUE TO SELL THE EXISTING INVENTORY OF NORTEL NETWORKS FIXED WIRELESS BUSINESS ON PURCHASE TERMS AND CONDITIONS COMPARABLE TO THOSE CURRENTLY UTILIZED. THE COMPANY IS ALSO SUBJECT TO THE RISKS AND
UNCERTAINTIES DESCRIBED IN ITS FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003.



COMPARISON OF THE QUARTER ENDED JULY 4, 2004 TO THE QUARTER ENDED JUNE 29, 2003



Revenue



Revenue totaled $18.3 million for the quarter ended July 4, 2004 representing a 143%
increase from the $7.5 million reported for the comparable 2003 quarter. The increase in revenues was primarily attributable to the Proximity acquisition in the fourth quarter of 2004. In addition, revenue for the second quarter of 2004 was 47%
higher than for the first quarter of 2004. During the quarter, revenue was derived from 95 customers in 51 countries. Geographically, 71% of our revenues were derived from customers in Latin America and the Caribbean, 12% from Europe and 10% from
Asia. North American customers and Africa and Middle Eastern customers accounted for 6% and 1% of revenues, respectively. In the second quarter 2004, sales to customers in Latin America and Caribbean increased by $12.1 million compared to the second
quarter of 2003, primarily as a result of the acquisition of the Proximity business from Nortel Networks. During the quarter ended July 4, 2004, the Company made sales across all product lines to 30 customers in the Americas region, which is a
record for the region.



Cost of Revenue



Cost of revenue increased 114% to $12.2 million in the quarter ended July 4,
2004 from $5.7 million in the quarter ended June 29, 2003 as a result of the increase in revenue. During the second quarter 2003 an inventory provision of $4.4 million was recorded. There was no comparable charge in the second quarter 2004. The
gross profit for the second quarter of 2004 was $6.1 million (33% of revenue) compared to a gross loss of $2.6 million (negative 34% of revenue) for the second quarter 2003. The increase in gross margin in the second quarter 2004 was due primarily
to the $4.4 million inventory provision in the second quarter of 2003 and variations in the percentage of sales of lower margin subscriber terminals and higher margin infrastructure equipment. The increase in gross margin was also partly
attributable to comparable amounts of period costs being spread over a larger quarterly revenue base.



Research and Development Expenses



Research and development expenses increased 29% to $4.7 million in the quarter ended July 4, 2004 from $3.7 million in the quarter ended June 29, 2003. The increase arose
from the purchase of the Proximity business in the fourth quarter of 2003, which was partially offset by expense reductions arising from headcount and expense reduction programs. During the second quarter of 2004, continued research and development
with respect to the WiMAX product resulted in the Company being ahead of schedule with respect to prototype hardware.



---

Sales and Marketing Expenses



Sales and marketing expenses increased slightly to $2.8 million in the second quarter 2004
from $2.7 million in the second quarter 2003 as a result of changes in sales focus, commission and trade shows across the regions of the company.



Bad Debt Provision



In the second quarter 2004, the Company recorded a bad debt provision of $0.3 million relating to customer accounts for which management has determined that full recovery was unlikely. No provisions were made for bad
debts in the corresponding quarter of 2003.



General and Administrative
Expenses



General and administrative expenses increased 26% to $2.8 million in
the quarter ended July 4, 2004 from $2.3 million in the quarter ended June 29, 2003. The increase is primarily due to an increase in legal and professional expenditures, including costs related to compliance with the Sarbanes Oxley Act 2002, an
increase in the foreign exchange rate of certain sterling denominated charges and additional expense incurred in connection with the purchase of the Proximity business in the fourth quarter of 2004.



Amortization of Intangibles



The Company recorded an expense of $0.16 million in the second quarter 2004 compared with an expense of $0.04 million for the second quarter
2003. The increase in amortization expense relates to intangibles acquired as part of the Proximity purchase in the fourth quarter of 2003. These intangibles are expected to be fully amortized by the end of 2008. During the quarter the Company
finalised its estimates of fair values allocated to certain assets and liabilities acquired in the Proximity purchase. Pursuant to this process, the amortization charge was decreased on a quarterly basis by $0.08 million.



Restructuring Provision



During the second quarter 2004 the Company reduced operating expenses in accordance with a revised restructuring program initiated in the
first quarter 2004. The Company recorded a restructuring charge during the second quarter 2004 of $0.4 million. The total cost expected to be incurred as part of this restructuring program is $0.4 million related to termination costs associated with
employees. This restructuring program is expected to be completed by the end of the third quarter of 2004. The Company recorded a restructuring provision of $0.3 million in the second quarter 2003.



Interest Expense and Interest and Other Income



Interest expense was $0 in the second quarter of 2004 and second quarter of 2003 as a result
of the settlement of all of our long-term debt in the second quarter of 2003. Interest and other income decreased to $0.7 million for the quarter ended July 4, 2004 compared to $1.1 million in the quarter ended June 29, 2003. The decrease was due
primarily to lower foreign exchange gains of $0.5 million recorded in the second quarter of 2004 as compared to the $0.8 million recorded in the comparable period of 2003. Interest income was $0.1 million lower in the second quarter 2004 than in the
second quarter 2003 due to lower average cash balances and lower interest rates during the quarter ended July 4, 2004 as compared to the comparable period of 2003. The foreign exchange gains in 2004 and 2003 are primarily a result of the
Companys liquidation of certain currency hedging contracts entered into by the Company to protect itself against a strengthening of the British Pound against the US Dollar.



Income Taxes



We did not have a material income tax charge in either the second quarter of 2004 or 2003.



Net Loss



Our net loss of $4.4 million, or $0.12 per share, in the quarter ended July 4, 2004 compares to a net loss of $10.4 million, or $0.30 per share, in the quarter ended June
29, 2003, a decrease of 58%. The net loss attributable to common stockholders for the second quarter of 2004 is $0.03 per share lower than the net loss attributable to common stockholders for the first quarter of 2004. The increase in gross profit
of $8.6 million was partially offset by higher operating expenses of $2.2 million and a decrease in interest and other income of $0.4 million.



Other Comprehensive Loss



Other comprehensive loss for the quarter ended July 4, 2004 arose from the decrease in fair value of our forward foreign exchange contracts on retranslation of $0.02 million and the reclassification of gains realized
in net income of $0.6 million. These forward exchange contracts are used to hedge our UK expenses through to December 2004. Other comprehensive gain for the quarter ended June 29, 2003 was $0.3 million.



---

COMPARISON OF THE SIX MONTHS ENDED JULY 4, 2004 TO THE SIX MONTHS ENDED JUNE 29, 2003



Revenue



Revenue totaled $30.7 million for the six months ended July 4, 2004 representing a 100%
increase from the $15.3 million reported for the comparable 2003 period. The increase in revenues was primarily attributable to the Proximity acquisition in the fourth quarter of 2004. During the six month period, revenue was derived from over 130
customers in over 60 countries. Geographically, 69% of our revenues were derived from customers in Latin America and the Caribbean, 15% from Europe and 9% from Asia. North American customers and Africa and Middle Eastern customers accounted for 4%
and 3% of revenues, respectively. In the six months ended July 4, 2004, sales to customers in Latin America and the Caribbean increased by $19.3 million compared to the corresponding 2003 period, primarily as a result of the acquisition of the
Proximity business from Nortel Networks.



Cost of Revenue



Cost of revenue increased 91% to $20.9 million in the six months ended July 4, 2004 from
$11.0 million in the six months ended June 29, 2003 as a result of the increase in revenue. During the first two quarters of 2003 an inventory provision of $4.4 million was recorded. There was no inventory provision recorded in the first six months
of quarter 2004. The gross profit for the first six months of 2004 was $9.8 million (32% of revenue) compared to a gross loss of $0.02 million (0% of revenue) for the first half of 2003. The increase in gross margin was due primarily to the $4.4
million inventory provision recorded in the first six months of 2003 and variations in the percentage of sales of lower margin subscriber terminals and higher margin infrastructure equipment. The increase in gross margin was also partly attributable
to comparable amounts of period costs being spread over a larger quarterly revenue base.



Research and Development Expenses



Research
and development expenses increased 32% to $9.8 million in the six months ended July 4, 2004 from $7.4 million in the six months ended June 29, 2003. The increase arose from the purchase of the Proximity business in the fourth quarter of 2003, which
was partially offset by expense reductions arising from headcount and expense reduction programs.



Sales and Marketing Expenses



Sales and
marketing expenses remained consistent for the first six months of 2003 and 2004 at $5.3 million.



Bad Debt Provision



In the first half of 2004,
the Company recorded a bad debt provision of $0.3 million. This provision related to customer accounts for which management determined that full recovery was unlikely. No provisions were made for bad debts in the corresponding 2003 period.



General and Administrative Expenses



General and administrative expenses increased 5% to $4.9 million in the six months ended
July 4, 2004 from $4.6 million in the six months ended June 29, 2003. The increase is primarily due to an increase in legal and professional expenditures, including costs related to compliance with the Sarbanes Oxley Act 2002, an increase in the
foreign exchange rate of certain sterling denominated charges and additional expense incurred in connection with the purchase of the Proximity business in the fourth quarter of 2004, partially offset by expense and headcount reduction programs.



Amortization of Intangibles



The Company recorded an expense of $0.4 million in the first six months of 2004 compared
with an expense of $0.1 million for the corresponding 2003 period. The increase in amortization expense relates to intangibles acquired as part of the Proximity purchase in the fourth quarter of 2003.



---

Restructuring Provision



During the first half of 2004 the Company reduced operating expenses in accordance with a revised restructuring program initiated in the first quarter 2004. The Company
recorded a restructuring charge during the period of $0.4 million. The total cost expected to be incurred as part of this restructuring program is $0.4 million related to termination costs associated with employees. This restructuring program is
expected to be completed by the end of the third quarter of 2004. The Company recorded a restructuring provision of $0.3 million in the first half of 2003.



Interest Expense and Interest and Other Income



Interest expense was $0 in the first half of 2004 and first half of 2003 as a result of the settlement of all of our long-term debt in the second quarter of 2003.
Interest and other income decreased to $1.5 million for the first half of 2004 compared to $1.7 million for the corresponding 2003 period primarily due to lower foreign exchange gains of $0.1 million and lower interest received of $0.1 million for
the six month period ended July 4, 2004 as compared to the six month period ended June 29, 2003. The foreign exchange gains in 2004 and 2003 are primarily attributable to the Companys liquidation of certain currency hedging contracts entered
into by the Company to protect itself against a strengthening of the British Pound against the US Dollar.



Income Taxes



We did not have a material
income tax charge in either the first half of 2004 or 2003.



Net Loss



Our net loss of $9.8 million in the six months ended July 4, 2004 compares to
a net loss of $16.0 million in the six months ended June 29, 2003, a decrease of 39%. The increase in gross profit of $9.8 million was partially offset by higher operating expenses of $3.4 million and a decrease in interest and other income of $0.2
million.



Other Comprehensive Loss



Other comprehensive loss for the six months ended July 4, 2004 arose from the increase in
fair value of our forward foreign exchange contracts on retranslation of $0.2 million and the reclassification of gains realized in net income of $1.0 million. These forward exchange contracts are used to hedge our UK expenses through to December
2004. Other comprehensive loss for the six months ended June 29, 2003 was $0.7 million.



Restructuring



In the third quarter of 2002, a restructuring
program was initiated to reduce operating expenses. A charge of $0.3 million was recorded in the quarter. Included in this charge were costs related to the write off of tradeshow equipment and severance payments. The total number of employees
terminated as part of this restructuring program was 19 and all severance payments were made by the end of the second quarter of 2003.



In the fourth quarter of 2002 the decision was made to completely outsource all our manufacturing. As a result we recorded a $1.0 million restructuring charge 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 the Company reassessed the ability
to sublease the Riverside facility.



In the second quarter of 2003 an
additional restructuring program was initiated to further lower operating expenses. The total cost incurred as part of this restructuring program was $0.3 million arising from costs associated with facility closures and severance.



The costs incurred during the year ended December 31, 2003 included termination costs for 30
employees. All of these employees had left the Company by December 31, 2003.



During the first quarter of 2004 the Company revised its original restructuring programs and initiated a new program to further reduce operating expenses. The Company did not record a restructuring charge during the first quarter of 2004.
The total cost expected to be incurred as part of this restructuring program is $0.4 million related to termination costs for 21 employees. This plan is will be completed by the end of the third quarter of 2004. During the second quarter of 2004 the
company incurred cost of $0.4 million related to this plan



In conjunction with
the purchase of the Proximity business the Company implemented its plan to relocate the Proximity business from Maidenhead, England and Sunrise, Florida to the Companys facilities in Uxbridge, England and Boca Raton, Florida. The Company
recorded acquisition-related restructuring charges of $0.5 million, in the fourth quarter of 2003, in connection with the relocation of the



---

Proximity business. The estimated relocation costs were revised during the second quarter of 2004 from $0.5 million down
to $0.4 million. The adjustment formed part of the revised fair value adjustments of the Proximity acquisition. This plan is expected to be completed by the end of the third quarter of 2004.



|                                                       |  |                              |     |              |   |      |                                          |  |   |                       |   |  |   |    
|------------------------------------------------------ |  | ---------------------------- | --- | ------------ | - | ---- | ---------------------------------------- |  | - | --------------------- | - |  | - | ---
|in thousands                                           |  | Accrued at December 31, 2003 |     | Paid in 2004 |   |      | Revision tooriginal fairvalueadjustments |  |   | Accruedat July 4,2004
|Office relocation and closure  other associated costs |  | $                            | 520 |              | $ | (103 | )                                        |  | $ | (182                  | ) |  | $ | 235
|                                                       |  |                              |     |              |   |      |                                          |  |   |                       |   |  |   |    



The restructuring charges and their
utilization are summarized as follows:



|                              |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|----------------------------- |  | ------------------------------ | ----- | -------------------- | - | ---------------------- |  | - | ----------- | - |  | ------------------------ | ---- | - |  | - | -----
|                              |  | Balance at beginning of period |       | Restructuring charge |   | Accrued on acquisition |  |   | Utilized    |   |  | Balance at end of period
|in thousands                  |  | (unaudited)                    |       | (unaudited)          |   | (unaudited)            |  |   | (unaudited) |   |  | (unaudited)             
|Six months ended July 4, 2004 |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|One-time termination benefits |  | $                              |      |                      | $ | 397                    |  | $ |            |   |  | $                        | (175 | ) |  | $ | 222  
|Contract termination costs    |  |                                | 947   |                      |   |                       |  |   |            |   |  |                          | (162 | ) |  |   | 785  
|Other associated costs        |  |                                | 591   |                      |   |                       |  |   | (182        | ) |  |                          | (103 | ) |  |   | 306  
|                              |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|                              |  | $                              | 1,539 |                      | $ | 397                    |  | $ | (182        | ) |  | $                        | (440 | ) |  | $ | 1,313
|                              |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|Year ended December 31, 2003  |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|One-time termination benefits |  | $                              | 79    |                      | $ | 342                    |  | $ |            |   |  | $                        | (421 | ) |  | $ |     
|Contract termination costs    |  |                                | 825   |                      |   | 397                    |  |   |            |   |  |                          | (275 | ) |  |   | 947  
|Other associated costs        |  |                                | 150   |                      |   | 11                     |  |   | 520         |   |  |                          | (89  | ) |  |   | 591  
|                              |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      
|                              |  | $                              | 1,054 |                      | $ | 750                    |  | $ | 520         |   |  | $                        | (785 | ) |  | $ | 1,539
|                              |  |                                |       |                      |   |                        |  |   |             |   |  |                          |      |   |  |   |      



All charges will result in direct cash
outlays.



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, commission
and other expenses).



As of July 4, 2004, we had cash and cash equivalents
totaling $22.4 million and $24.9 million of restricted cash that is held as collateral for landlords and customers and contributions from employees in respect of the Employee Share Purchase Plan. We do not have a line of credit or similar borrowing
facility, nor do we have any material capital commitments. Our total cash and cash equivalents, including restricted cash, at the end of the second quarter 2004 is $3.2 million greater than at the end of the first quarter 2004.



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



For the six months ended July 4, 2004, we generated $12.0 million of cash from operating activities compared with a use of $11.7 million for
the six months ended June 29, 2003. The cash inflow from operations for the first six months of 2004 was primarily as a result of our net increase in customer advance payments of approximately $15.0 million in connection with contract payments made
by a customer in Latin America and the Caribbean, $4.9 million from a decrease in inventory levels and $2.8 million from a decrease in accounts receivable. The cash inflow was partially offset by a net loss of $9.8 million and a $2.9 million
increase in other current assets primarily related to amounts due from our contract manufacturer for inventories purchased from Airspan. Days sales outstanding decreased to 45 days at the end of the second quarter 2004 from 82 at the end of the
first quarter 2004.



The net cash used in investing activities in the six
months ending July 4, 2004 was $1.0 million all of which was utilized for capital equipment purchases. Net cash generated from investing activities in the six months ending June 29, 2003 was $3.0 million. Proceeds from the sale of $4.1 million in
short term investments in the first six months of 2003 were partially offset by $1.1 million of capital equipment purchases.



Our financing cash outflow for the six months ended July 4, 2004 was $22.5 million compared with an outflow of $2.2 million for the six months ended June 29, 2003. The
outflow for the first six months of 2004 is primarily attributable to a $23.3 million increase in restricted cash. This was partially offset by $0.8 million received on exercise of stock options. Restricted cash increases when the Company issues a
guarantee secured by cash collateral or additional contributions are collected from employees under the ESPP and decreases whenever such a guarantee is cancelled or shares are actually purchased under the ESPP.



---

Our contracts with our customer Axtel, require the Company to provide bank guarantees for any payments made by Axtel in
advance of product deliveries if such payments exceed $10 million. As a requirement of the bank in issuing these guarantees, the Company is required to place cash deposits as collateral with the issuing bank. The value of these guarantees and
restricted cash at the end of the second quarter 2004 was approximately $21.5 million. It is expected that by the end of the fourth quarter of 2004 these amounts will be reduced to zero.



The company has no material commitments other than obligations on operating leases, the forward exchange contracts mentioned below and
purchase commitments to our manufacturing subcontractors. Arising from the increase in customer orders, we have increased our purchase commitments to our main manufacturing subcontractors. These purchase commitments totaled $8.2 million at December
31, 2003 and at August 10, 2004 were $35.1 million.



The Company has explored
and may in the future explore and pursue other perceived opportunities to acquire fixed wireless access businesses. The Company 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, the Company is 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, 2003. There can be no assurances that the Companys efforts to acquire other businesses will be successful.



The Company has considered and may in the future seek to raise additional equity or debt capital to assist it to finance the acquisition and/or on-going operations of any
business that the Company acquires. Among other securities, the Company may seek to sell additional shares of common stock, shares of a newly designated class of preferred stock or debt securities. The Company has not, as of the date of this report,
entered into any definitive financing arrangements and anticipates that the terms of such financing, if secured, will be determined at some future date. There can be no assurances that the Company will be able to secure equity or debt capital in
amounts and on terms acceptable to the Company. Although the Company will seek to secure financing on terms and conditions favorable to the Company and its existing shareholders, the Company may seek to raise capital by issuing securities, which,
under certain circumstances, enjoy certain preferences and/or priorities relative to the common stock.



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK



Interest Rate Risk



The Companys
earnings are affected by changes in interest rates. As of July 4, 2004 and December 31, 2003 we had cash, cash equivalents and restricted cash of $47.3 million and $35.5 million, respectively. Substantially all of these amounts consisted of highly
liquid investments with purchase to maturity terms of less than 90 days. These investments are exposed to interest rate risk, but a hypothetical increase or decrease in market interest rates by two percentage points from July 4, 2004 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 six months ended July 4, 2004, 96% of our sales were denominated in
U.S. dollars, 3% were denominated in euro and 1% were denominated in Australian dollars. Comparatively, for the six months ended June 29, 2003, 96 % of our sales were denominated in US dollars, 2% were denominated in Australian dollars, and 2% were
denominated in euro. Our total euro denominated sales for the six months ended July 4, 2004 were $ 0.8 million, which were recorded at an average exchange rate of $1US =  0.8106 . Our total Australian dollar denominated sales for the six
months ended July 4, 2004 were $ 0.8 million, which were recorded at an average exchange rate of $1US = AUS$ 1.3526. If the average exchange rates used had been higher or lower during the six month period ending July 4, 2004 by 10%, they would have
decreased or increased the total Australian dollar and euro-denominated sales value by $ 0.1 million. We expect the proportions of sales in euro and Australian dollars to fluctuate over time. The Companys sensitivity analysis for changes in
foreign currency exchange rates does not take into account changes in sales volumes.



Since May 2000, we have from time to time entered into fair value currency hedging contracts that lock in minimum exchange rates for payments due to us under some of our sales contracts where those payments are to be made in currencies
other than US dollars. We do not enter into any currency hedging activities for speculative purposes. The costs of these contracts are included under interest and other income in our financial statements. There were no hedges outstanding at July 4,
2004. We will continue to monitor our foreign currency exposures and may modify hedging strategies, as we deem prudent.



We have also entered into cash flow currency hedges. Our operating results are affected by moves in foreign currency exchange rates, particularly the rate between U.S.
dollars and U.K. pounds sterling and the rate between U.S. dollars and Israeli shekels. This is



---

because most of our operating expenses, which may fluctuate over time, are incurred in pounds sterling and Israeli
shekels. During the six months ended July 4, 2004, we paid expenses in local currency of approximately 8.2 million pounds sterling, at an average rate of $1US = 0.5485 pounds sterling. During the six months ended July 4, 2004, we paid expenses in
local currency of approximately 14.5 million Israeli shekels, at an average rate of $1US = 4.504 shekels. If the expenses in pounds sterling had not been hedged and the average exchange rates for U.K. pounds sterling and Israeli shekels had been
higher or lower for the three month period ended July 4, 2004 by 10%, the total pounds sterling and Israeli shekel denominated operating expenses would have decreased or increased by $1.3 million and $0.3 million respectively.



We expect the proportions of operating expenses paid in pounds sterling and Israeli shekels
to fluctuate over time. To hedge our pound sterling foreign currency risk, we had outstanding forward exchange contracts at July 4, 2004, to purchase 3.6 million pounds sterling at an average exchange rate of $1US = 0.6489 pounds sterling in six
variable amounts up to December 2004.



Equity Price Risk



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



Commodity Price



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



Item 4. CONTROLS AND
PROCEDURES



As of the end of the period covered by this quarterly report,
an evaluation was performed under the supervision and with the participation of Airspans management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Airspans
disclosure controls and procedures (as defined in Section 13a-15(e) and 15d-15(3) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective.



This
evaluation included the Company Proximity business acquired from Nortel Networks on December 23, 2003. Prior to acquisition, the Proximity business operated as a division within Nortel Networks.



Since acquisition, the Company has focused on integrating the disclosure controls and
procedures of the Proximity business with the Companys disclosure controls and procedures. The Company performed additional procedures to substantiate the financial information related to the Proximity business included in this report and, as
a result, management, including our Chief Executive Officer and Chief Financial Officer, concluded that the 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 fiscal quarter that has
materially affected or is reasonably likely to materially affect, Airspans internal control over financial reporting.



---

Part II OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS



On and after July 23, 2001, three Class Action Complaints were filed in the United States District Court for the Southern District of New York naming as defendants
Airspan, and Eric D. Stonestrom (our President and Chief Executive Officer), Joseph J. Caffarelli (our former Senior Vice President and Chief Financial Officer), Matthew Desch (our Chairman) and Jonathan Paget (our Executive Vice President and Chief
Operating Officer) (the Individual Defendants) together with certain underwriters of our July 2000 initial public offering. A Consolidated Amended Complaint, which is now the operative complaint, was filed on April 19, 2002. The
complaint alleges violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus that contained materially false and misleading
information and failed to disclose material information. In particular, Plaintiffs allege that the underwriter-defendants agreed to allocate stock in our initial public offering to certain investors in exchange for excessive and undisclosed
commissions and agreements by those investors to make additional purchases of stock in the aftermarket at pre-determined prices. The action seeks damages in an unspecified amount.



This action is being coordinated with approximately three hundred other nearly identical actions filed against other companies. On July 15,
2002, the Company moved to dismiss all claims against it and the Individual Defendants. On October 9, 2002, the Court dismissed the Individual Defendants from the case without prejudice based upon Stipulations of Dismissal filed by the plaintiffs
and the Individual Defendants. This dismissal disposed of the Section 15 and 20(a) control person claims without prejudice, since these claims were asserted only against the Individual Defendants. On February 19, 2003, the Court dismissed the
Section 10b claim against us, but allowed the Section 11 claim to proceed. Airspan has approved the terms of a settlement agreement (the Settlement Agreement) and related agreements which set forth the terms and conditions of a
settlement between Airspan, the Individual Defendants, the plaintiff class and the vast majority of the other approximately 300 issuer defendants and the individual defendants currently or formerly associated with those companies. Among other
provisions, the Settlement Agreement provides for a release of Airspan and the Individual Defendants for the conduct alleged in the action to be wrongful. Pursuant to the terms of the Settlement Agreement, Airspan will agree to undertake certain
responsibilities, including agreeing to assign away, not assert, or release certain potential claims Airspan may have against its underwriters. Accordingly, Airspan does not expect that the settlement will involve any payment by Airspan. The
Settlement Agreement, which has not yet been executed, has been submitted to Court for approval. Approval by the Court cannot be assured. We cannot opine as to whether or when a settlement will occur or be finalized and are unable at this time to
determine whether the outcome of the litigation will have a material impact on our results of operations or financial condition in any future period.



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



Item 2. CHANGE
IN SECURITIES AND USE OF PROCEEDS



Not Applicable



Item 3. DEFAULTS UPON SENIOR SECURITIES



None



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



None



Item 5. OTHER INFORMATION



None



---

Item 6. EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibits



|      |  |                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Amended and Restated Articles of Incorporation of Airspan-(1)                                                                                                                           
|      | 
|3.2   |  | Amended and Restated Bylaws of Airspan (2)                                                                                                                                              
|      | 
|4.1   |  | Form of Airspans common stock certificate (3)                                                                                                                                          
|      | 
|10.1  |  | 1998 Stock Option and Restricted Stock Plan (3)                                                                                                                                         
|      | 
|10.2  |  | 2000 Employee Stock Purchase Plan, as amended (1)                                                                                                                                       
|      | 
|10.3  |  | Employment Agreement with Eric Stonestrom (3), (4)                                                                                                                                      
|      | 
|10.4  |  | Employment Agreement with Jonathan Paget (3), (4)                                                                                                                                       
|      | 
|10.5  |  | Employment Agreement with Peter Aronstam, as amended (5), (6)                                                                                                                           
|      | 
|10.6  |  | 2001 Supplemental Stock Option Plan (5)                                                                                                                                                 
|      | 
|10.7  |  | Employment Agreement with Henrik Smith-Petersen (4), (6)                                                                                                                                
|      | 
|10.8  |  | Employment Agreement with David Brant (4), (6)                                                                                                                                          
|      | 
|10.9  |  | 2003 Supplemental Stock Option Plan (2)                                                                                                                                                 
|      | 
|10.10 |  | Purchase and License Agreement, dated as of March 20, 2003, as amended on September 15, 2003 by and between Nortel Networks de Mexico, S.A. de C.V. and Axtel S.A. de C.V. (7)
(8)      
|      | 
|10.11 |  | Product Supply Agreement, dated as of December 23, 2003, as amended on September 15, 2003 by and between Airspan Networks, Inc. and Nortel Networks Limited (1) (9)                     
|      | 
|10.12 |  | Airspan Omnibus Equity Compensation Plan (1)                                                                                                                                            
|      | 
|10.13 |  | Amendment Agreement No. 1 to Purchase and License Agreement, dated September 15, 2003 among Nortel Networks Limited, Nortel Networks de Mexico, S.A. de C.V. and Axtel, S.A. de
C.V.(10)
|      | 
|10.14 |  | Assignment and Assumption Agreement dated December 23, 2003 among Nortel Networks Limited and certain of its subsidiaries, the Company and Airspan Communications Limited (7)           
|      | 
|10.15 |  | Amendment Agreement No. 2 to FWA PLA and FWA TASS dated as of April 20, 2004 between the Company and Axtel, S.A. de C.V. (11) (12)                                                      
|      | 
|10.16 |  | Technical Assistance Support Services Agreement for FWA Equipment, dated as of February 14, 2003, by and between Nortel Networks UK Limited and Axtel, S.A. de C.V. (13) (14)           
|      | 
|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
|- | --------------

|1 | Incorporated by reference to Airspans Form 10-Q for the quarter ended April 4, 2004.
|- | -------------------------------------------------------------------------------------

|2 | Incorporated by reference to Airspans Form 10-K for the year ended December 31, 2003.
|- | --------------------------------------------------------------------------------------

|3 | Incorporated by Reference to Airspans Registration Statement on Form S-1 (333-34514) filed July 18, 2000
|- | ---------------------------------------------------------------------------------------------------------

|4 | Management Agreement or Compensatory Plan or Arrangement
|- | --------------------------------------------------------

|5 | Incorporated by Reference to Airspans Form 10-K for the year ended December 31, 2000
|- | -------------------------------------------------------------------------------------

|6 | Incorporated by Reference to Airspans Form 10-K for the year ended December 31, 2002
|- | -------------------------------------------------------------------------------------

|7. | Incorporated by reference to the Companys report on Form 8-K filed on June 1, 2004.
|-- | ------------------------------------------------------------------------------------

|8. | Portions of this document have been omitted and were filed separately with the SEC on June 1, 2004 pursuant to a request for confidential treatment.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|9. | Portions of this document have been omitted and were filed separately with the SEC on March 30, 2004 pursuant to a request for confidential treatment.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|10 | Incorporated by reference by the Companys report on Form 8-K/A filed on July 22, 2004.
|-- | ---------------------------------------------------------------------------------------

|11. | Incorporated by reference by the Companys report on Form 8-K/A filed on August 10, 2004.
|--- | -----------------------------------------------------------------------------------------



---

|12. | Portions of this document have been omitted and were filed separately with the SEC on August 10, 2004 pursuant to a request for confidential treatment.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|13. | Incorporated by reference by the Companys report on Form 8-K/A filed on July 6, 2004.
|--- | --------------------------------------------------------------------------------------

|14. | Portions of this document have been omitted and were filed separately with the SEC on July 6, 2004 pursuant to a request for confidential treatment.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K:



The following current reports were filed on Form 8-K since the first quarter of 2004:



(1) On April 22, 2004, a Current Report was filed under Item 5 and Item 7
related to amendments to the Companys existing fixed wireless access equipment supply agreement with Axtel S.A. de C.V.



(2) On May 6, 2004, a Current Report was filed under Item 7 and Item 12 related to the Companys first quarter financial results.



(3) On June 1, 2004, a Current Report, subsequently amended on July 6, 2004,
July 22, 2004 and August 10, 2004, was filed under Item 5 and Item 7 related to filings of more complete copies of the Companys agreements with Axtel and Nortel Networks.



(4) On August 4, 2004, a Current Report was filed under Item 5 and Item 7 related to the Companys second quarter
financial results.



---

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.



Aug 18, 2004



AIRSPAN NETWORKS INC.By:

/s/ PETER ARONSTAMPeter AronstamSenior Vice President and Chief Financial Officer