**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K**


**(Mark
      one)**




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




**For
      the fiscal year ended December 31, 2007**




**OR**




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




**For
      the transition period _________________ 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 310**
              **Boca
                Raton, FL**
            
            **33431***(Address
                of principal executive offices)*
            
            *(Zip
                Code)*




**(561)
      893-8670**


(Registrant’s
      telephone number, including area code)





**Securities
      registered pursuant to Section 12(b) of the Act:**





Title
                of each class
            
            Name
                of each exchange on which registeredCommon
                Stock, $.0003 par value per share
            
            The
                NASDAQ Stock Market LLC





**Securities
      registered pursuant to Section 12(g) of the Act: None**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
oNo
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act.


Yes
oNo
x




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


Yes
xNo
o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. o




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




Large
                accelerated filer  oAccelerated
                filer  xNon-accelerated
                filer  oSmaller
                reporting company o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).    Yes o No x.




As
      of
      July 1, 2007, the aggregate market value of the registrant’s common stock held
      by non-affiliates of the registrant was $144,892,503 based
      on
      the closing sale price as reported on the NASDAQ Global Market. This calculation
      has been performed under the assumption that all directors, officers and
      stockholders who own more than 10% of the registrant’s outstanding voting
      securities are affiliates of the registrant.





As
      of
      March 7, 2008, the number of shares of the registrant's common stock was
      58,657,798.




**DOCUMENTS
      INCORPORATED BY REFERENCE:**




Part
      III
      incorporates by reference portions of the registrant's definitive proxy
      statement relating to its 2008 Annual Meeting of Shareholders, which definitive
      proxy statement is expected to be filed with the Securities and Exchange
      Commission ("SEC") within 120 days after the registrant's fiscal year ended
      December 31, 2007.







**AIRSPAN
      NETWORKS INC.**




**FORM
      10-K**




**For
      the Year Ended**




**December
      31, 2007**





**TABLE
      OF CONTENTS**




**ITEM**
            
            
            
            **Page
                No.****PART
                I**
            
            11
            
            Business
            
            11A
            
            Risk
                Factors
            
            191B
            
            Unresolved
                Staff Comments
            
            332
            
            Properties
            
            333
            
            Legal
                Proceedings
            
            334
            
            Submission
                of Matters to a Vote of Security Holders
            
            35**PART
                II**
            
            355
            
            MMarket
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            
            356
            
            Selected
                Financial Data
            
            377
            
            MManagement’s
                Discussion and Analysis of Financial Condition and Results of Operations
            
            397A
            
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            548
            
            Financial
                Statements and Supplementary Data
            
            569
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            569A
            
            Controls
                and Procedures
            
            569B
            
            Other
                Information
            
            59**PART
                III**
            
            5910
            
            Directors,
                Executive Officers and Corporate Governance
            
            5911
            
            Executive
                Compensation
            
            5912
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            5913
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            6014
            
            Principal
                Accountant Fees and Services
            
            61**PART
                IV**
            
            6215
            
            Exhibits,
                Financial Statement Schedules
            
            62**SIGNATURES**
            
            65







**CAUTIONARY
      STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSEOF THE SAFE
      HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
      1995**




Some
      of
      the discussion under the captions “Risk Factors”, “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations” and “Business” and
      elsewhere in this Form 10-K may include certain “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended
      and
      Section 21E of the Securities Exchange Act of 1934, as amended, including,
      without limitation, statements with respect to anticipated future operations
      and
      financial performance, growth and acquisition opportunity and other similar
      forecasts and statements of expectation. These statements involve known and
      unknown risks and uncertainties, such as our plans, objectives, expectations
      and
      intentions, and other factors that may cause our, or our industry’s, actual
      results, levels of activity, performance or achievements to be materially
      different from any future results, levels of activity, performance or
      achievements expressed or implied by the forward-looking statements. These
      factors are listed under “Risk Factors” and elsewhere in this Form 10-K.




In
      some
      cases, you can identify forward-looking statements by terminology such as
“expects”, “anticipates”, “intends”, “may”, “should”, “plans”, “believes”,
“seeks”, “estimates” or other comparable terminology.




Although
      we believe that the expectations reflected in these forward-looking statements
      are reasonable, we do not guarantee future results, levels of activity,
      performance or achievements. Our actual results and the timing of certain events
      could differ materially from those anticipated in these forward-looking
      statements. We disclaim any obligation to update or review any forward-looking
      statements based on the occurrence of future events, the receipt of new
      information or otherwise.





As
      used
      in this Annual Report on Form 10-K, the terms "we", "us", "our", "Airspan",
      and
      "the Company" mean Airspan Networks Inc., unless otherwise indicated. AIRSPAN,
      HiperMAX, MacroMAX, MicroMAX, MacroMAXe, EasyST, EasyST-Wi-Fi, ProST,
      ProST-Wi-Fi, Netspan, AS.TONE, iTONE, AS.NET, FlexNET, ViaNET, AS3010, AS3030,
      AS3030 PTP, AS4000, AS4020, AS4030, WipLL, Sitespan, WipManage, AirspanAccess,
      Netspan and Proximity are trademarks or registered trademarks of Airspan. All
      other trademarks and trade names appearing in this Annual Report are owned
      by
      their respective holders.









**PART
      I**




**ITEM
      1. BUSINESS**




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




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




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




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




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




Airspan's
      predecessor, Airspan Communications Corporation, was incorporated as a Delaware
      corporation on January 30, 1998. Airspan Networks Inc. was incorporated in
      1999
      as a Washington corporation and at that time merged with Airspan Communications
      Corporation. Our corporate headquarters are located in Boca Raton, Florida.
      Our
      main operations, manufacturing and product development centers are located
      in
      Uxbridge, United Kingdom, Airport City, Israel and Espoo, Finland. Our telephone
      number in Boca Raton is (561) 893-8670. Further contact details and the location
      of all Airspan’s worldwide offices may be found at *www.airspan.com* .




1




A
      copy of
      our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
      reports on Form 8-K and amendments to these reports pursuant to Section 13(a)
      or
      15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
      are available, free of charge, on our Web site, www.airspan.com ,
      as soon
      as reasonably practicable after such material is electronically filed with
      the
      SEC. The information found on our website is not part of this or any other
      report we file with or furnish to the SEC.




**Industry
      Overview**




***The
      WiMAX Market***





WiMAX
      is
      an essential element in achieving the wireless communications industry’s aim of
      providing economic broadband access to both fixed and mobile customers over
      a
      wide geographic area. This market is the product of two parts of the
      telecommunications markets that have converged over time:




·
            the
                market for fixed broadband “last mile” access (“Fixed WiMAX Market”) where
                high speed data, voice, and video services are provided to stationary
                locations from a central base station, and;




·
            the
                market for mobile broadband (“Mobile WiMAX Market”) where high-speed
                broadband data access connectivity is available to mobile users across
                a
                broad geographic coverage range.




The
      market for fixed broadband equipment has existed for several years, and we
      have
      participated as a supplier to this market since our inception in 1998. Before
      2005, the market reflected operator deployments of various network
      architectures, developed to their proprietary specifications by Airspan and
      other suppliers.





The
      introduction of WiMAX compliant products in 2005 created additional deployment
      opportunities for broadband wireless systems. WiMAX is a standards-based
      technology enabling the delivery of wireless broadband access as an alternative
      to cable and DSL. WiMAX provides fixed, nomadic, portable and mobile wireless
      broadband connectivity without the need for a direct line-of-sight connection
      to
      a base station. According to the WiMAX Forum®, in a typical cell radius
      deployment of three to 10 kilometers, WiMAX systems can be expected to deliver
      capacity of up to 40 Mbps per channel for fixed and portable access
      applications. This is sufficient bandwidth to simultaneously support hundreds
      of
      businesses with T-1 speed connectivity and thousands of residences with DSL
      speed connectivity. WiMAX therefore has become a viable alternative to
      fiber-based networks that would be too uneconomical to deploy in the area
      covered by a WiMAX cell. Mobile WiMAX network deployments are expected to
      provide downstream IP services up to 30 Mbps within a typical cell radius
      deployment of up to three kilometers. These data rates are much higher than
      those offered by the current generation of cellular network technologies. During
      2008, we expect to introduce broadband wireless products that will also allow
      network operators to provide customers with mobile access solutions as well.





Many
      carriers envision operating two distinct service types in their network, a
      fixed
      component equivalent to existing wireline services and a mobile component to
      address the broadband needs of mobile subscribers. Airspan’s products are
      particularly well-designed for carriers who plan to implement this mode of
      operation, sometimes referred to as “fixed — mobile convergence” or
“FMC.”





Semiconductor
      vendors, including Intel Corporation, also support WiMAX and are promoting
      its
      use worldwide. Similarly, device manufacturers are using WiMAX standards to
      develop innovative customer equipment and other end-user devices like PCMCIA
      cards and handheld devices. System integrators are active market participants
      who work with manufacturers to deploy WiMAX technology and ensure the high
      service levels that the market demands.





Wi-Fi
      technology was designed and optimized for Local Area Networks (“LAN”), whereas
      WiMAX was designed and optimized for Metropolitan Area Networks (“MANs”).
      Typically, WiMAX is not considered a replacement for Wi-Fi. Rather, WiMAX
      complements Wi-Fi by extending the reach and providing a “Wi-Fi like” user
      experience for WiMAX subscribers on a larger geographical scale. In the future,
      we expect that WiMAX will deliver wireless connectivity directly to end-user
      devices, including laptops and PDAs.




2





Broadband
      wireless technologies are viable economic and technological solutions for
      operators seeking to fill gaps in their networks where wired technologies are
      incapable of providing broadband access, or for extending the reach of wired
      networks where it becomes uneconomical to use wired technologies.





***Market
      Drivers***





***The
      Global Need for Broadband Access***




The
      worldwide market for broadband wireless equipment has been accelerated by the
      availability of WiMAX technologies, and is expected to grow from $1.1 billion
      in
      2007 to $5.1 billion in 2012, with approximately $4.6 billion of the market
      in
      2012 expected to be derived from WiMAX certified products (source Skylight
      Research). Over the past five years there has been continued growth in the
      number of broadband wireless equipment end-users throughout the world. At the
      end of September 2007, the number of broadband Internet users was estimated
      to
      be 328 million, up from 263 million at the end of September 2006 (source: Point
      Topic Ltd). Additionally growth in broadband end-users has occurred in
      developing countries with a historically limited supply and penetration of
      telecom services, including broadband access. Although mobile operators are
      often chosen to satisfy the demand for basic telephony in low tele-density
      regions, broadband wireless systems are often alternatively selected in many
      areas to provide broadband access solutions due to superior features such as
      higher data speeds and availability of frequencies not serviced by traditional
      cellular networks.




***Global
      Deregulation and the Need for Reliable, Cost-Effective and Rapid Network
      Deployments***





The
      worldwide deregulation of the telecommunications industry in the past 20 years
      has created the opportunity for many new competitors, including CLECs, ISPs
      and
      WISPs to provide local access connections that were historically only offered
      by
      ILECs. Many of these CLECs and ISPs are now striving to differentiate their
      service offerings on the basis of their range of services, quality and
      reliability, customer service, provisioning and pricing.





CLECs,
      ISPs and WISPs have also expanded their focus beyond large business customers
      to
      serving small and medium-sized businesses, high-end residential and
      small-office/home-office customers as well as providing services outside of
      the
      major urban areas. To serve these markets, CLECs, ISPs and WISPs require more
      cost-effective network deployment solutions to compensate for lower than average
      customer spending on communications services and larger coverage area
      requirements.





We
      believe that the introduction of high-capacity WiMAX broadband wireless systems
      will make it possible for CLECs and ISPs to offer combinations of voice, data
      and video services to customers to match the bundled service offerings of their
      ILEC competitors. WiMAX may also give those ISPs and CLECs the ability in many
      instances to bypass entirely the wired networks of their ILEC competitors,
      eliminating the problems and risks of shared facilities encountered in the
      past
      by such service providers.





Enterprises
      have found private broadband wireless networks can be more cost-effective or
      secure for their own corporate communications networks than public networks.
      In
      addition, utility companies, for example, have been able to create additional
      sources of revenue using broadband wireless equipment linked to their existing
      transmission and access networks.





Many
      countries in the developing world have existing networks that are unable to
      provide reliable data, voice and fax services while other countries lack the
      network infrastructure to make basic telephone services broadly available.
      Both
      ILECs and CLECs in these markets need cost-effective, rapidly deployable
      alternatives to traditional copper based networks.





***Increased
      Availability of Licensed, Unlicensed (or License-exempt) Spectrum***





With
      the
      global proliferation of the Internet and the related growth in demand for
      broadband connectivity, government competition policy and other political
      pressures to make broadband available in underserved areas has led to the
      allocation of new spectrums for broadband wireless, both licensed and
      unlicensed, in many countries. Historically, most of the licensed spectrums
      have
      been made available globally in the 3.5 GHz band; however, more recently,
      governments have committed to make frequency available in the
      2.3 - 2.5 GHz bands, specifically to support mobile services over
      WiMAX networks. During 2007, 3.5 GHz spectrums were licensed for the first
      time
      in several countries. In addition, plans are underway for the allocation of
      additional spectrums at 2.3 - 2.5 GHz in other countries, as are
      allocations of other frequencies for broadband wireless applications.
      Frequencies are also being licensed in other sub 6 GHz spectrums, particularly
      700 MHz in the United States, and in the 3.3 GHz band in India.




3




Additional
      frequencies for unlicensed applications were added recently in 3.65 GHz in
      the
      United States. The greater availability of license-exempt spectrums has been
      of
      particular benefit to many smaller carriers and ISPs, where a significant market
      has developed around the deployment of broadband in rural communities using
      license-exempt wireless access systems. We believe the increasing availability
      of licensed and unlicensed spectrums will increase the demand for WiMAX
      solutions.




***Our
      Strategy***





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





We
      have
      transitioned our company over the last three years to focus on WiMAX product
      development and sales and marketing. As a result, a substantial majority of
      our
      resources are now dedicated to WiMAX-based products. As new mobile broadband
      technologies drive growth in the wireless market and enable communications
      carriers to offer additional services, we expect the overall market for
      broadband wireless equipment to expand dramatically.




We
      plan
      to capture as much of this market growth as possible with our WiMAX product
      line
      based on three key strategic differentiators:




·
            First,
                we intend to exploit our early mover advantage as a technology leader.




We
      have
      developed a robust portfolio of WiMAX products over the past four years and
      have
      been selected by major carriers to provide their next generation broadband
      wireless capability. We are a charter member of the WiMAX Forum®, which has
      grown to more than 300 members. The WiMAX Forum® continues to work together with
      the Institute of Electrical and Electronics Engineers, Inc. (“IEEE”) to
      establish and develop WiMAX standards, including the IEEE 802.16-2004 standard
      (the “802.16d standard”) for fixed and some nomadic applications and, more
      recently, the IEEE 802.16-2005 standard (the “802.16e standard”) for mobile and
      some nomadic and portable applications. Compliance with standards promulgated
      by
      the WiMAX Forum® assures interoperability of products with any other vendor’s
      WiMAX-certified products.




·
            Second,
                we will provide a full range of WiMAX products to allow flexible
                and
                cost-effective deployment, service and delivery options for our customers.





Many
      carriers focus on radio coverage which allows them to minimize the number of
      base station sites that they require. Our product architecture supports high
      performance operations using methods, including MIMO transmission techniques,
      diversity of radio signal transmission (transmit and receive diversity) and
      other extensions of basic radio transmission, to maximize the coverage footprint
      from a single base station site. Our potential customers often test and compare
      the coverage capabilities of various equipment suppliers and we focus on
      differentiating our performance in this critical benchmark metric. By deploying
      superior coverage solutions, operators can reach a broader customer base in
      their available radio spectrum with lower capital expenditures. In particular,
      our HiperMAX product has been designed for customers that require high coverage
      performance.




4





Our
      MicroMAX product line provides a smaller, lower cost base station that enables
      operators to deploy WiMAX in geographic areas where the population of potential
      subscribers is less dense. As a result, the operator can deliver wireless
      broadband service to these markets cost-effectively and with a minimum
      commitment of capital while still achieving network economies of scale.




Since
      the
      number of target applications for WiMAX is broad, we have recognized that a
      single type of subscriber receiving unit will not fit the needs of all end-user
      applications. Our strategy is to offer these three types of basic WiMAX
      subscriber units to support the large number of additional devices expected
      to
      be made available to consumers as the WiMAX ecosystem expands, including WiMAX
      enabled cell phones. Our EasyST is a small unit that can be installed directly
      by the end customer in attractive home packaging. Our ProST, a subscriber unit
      aimed at the outdoor installation market combines superior radio performance
      with a number of data networking and powering options. We have also developed
      a
      portable device for laptop applications in a USB form factor (MiMAX) that works
      across a wide range of radio frequencies running mobile WiMAX. Furthermore,
      we
      provide product packaging that includes optional integrated Wi-Fi access
      capability and Voice Service support for the EasyST and the ProST.




·
            Third,
                we offer products that address the primary radio frequencies being
                made
                available for WiMAX, thereby allowing us to address numerous licensed
                and
                unlicensed customer opportunities.




Carriers
      around the world have access to a wide range of different radio spectrums.
      Many
      carriers planning to launch WiMAX networks have different specific radio bands
      so the addressable market is broadest for equipment providers with the widest
      range of frequencies supported by their equipment. A licensed spectrum is
      typically leased from a government agency. Some carriers do not have access
      to
      licensed radio spectrums at all and we provide products that can be used by
      these carriers also. We provide products in both licensed and unlicensed, or
      license-exempt, frequencies allowing our customers to make the most of the
      available spectrum in the areas in which they operate.





Our
      primary target customers are communications service providers and other network
      operators that deploy fixed and mobile WiMAX networks in licensed and unlicensed
      (license-exempt) spectrums worldwide. Our strategy is to sell our systems and
      solutions through our direct sales force, independent agents, resellers and
      OEM
      partners. Our direct sales force targets network operators, ISPs and enterprises
      in both developed and developing markets. In markets where we do not have a
      direct sales presence, we also sell through independent agents, resellers and
      system integrators who target network operators and other customers. In
      addition, we also sell our products to OEMs who may sell our products under
      their names.





To
      ensure
      that our products can be used in the broadest possible customer base, we have
      created versions of the basic products across a wide range of frequencies up
      to
      6 GHz, so that as many operators as possible can deploy WiMAX. In addition,
      the
      company has developed both Frequency Division Duplex (“FDD”) and Time Division
      Duplex (“TDD”) variants of the products to meet the specific needs of individual
      operators.





Furthermore,
      as mobile WiMAX operating in TDD bands is added to the FDD operations of many
      existing carriers, the need for multiple transmission techniques in the same
      product architecture is provided through our architecture, allowing carriers
      to
      operate both fixed and mobile services in the same basic spectrum and through
      the same platform.





***Customers***




Our
      customers are principally network operators, who provide their customers with
      fixed, nomadic and portable broadband access solutions, as well as backhaul
      and
      bridging solutions. Beginning in the first half of 2008, we expect to introduce
      broadband wireless products that will also allow network operators to provide
      customers with mobile access solutions as well. Our customers today can
      generally be described as follows:




·
            Fixed
                and mobile carriers looking to provide high speed personal broadband
                to a
                wide customer base;




5




·
            Enterprise
                and data centric carriers where high speed connectivity is required
                between locations with a variety of private networking capabilities;




·
            Military
                and public safety network operators providing wireless connectivity
                across
                a broad range of applications;




·
            Wireless
                ISPs that operate in areas where other carriers cannot offer broadband
                access services; and




·
            Operators
                of Wi-Fi-based hot zones and networks, such as
                municipalities.




We
      began
      shipping our products in 1996. By the end of December 2007, we had shipped
      to
      over 500 customers in more than 100 countries. Our customers include large
      fixed
      wireless access carriers such as Axtel S.A. de C.V., Mexico (“Axtel”). Axtel has
      more than 800,000 subscribers and operates the world’s largest broadband fixed
      wireless network that is not based on mobile technology.





Our
      contracts with our customers typically provide for delivery of product and
      services, including and sometimes include training and maintenance provided
      by
      Airspan and sometimes include installation and commissioning, which are
      generally provided by subcontractors. In addition, we generally also agree
      to
      provide warranty for the equipment and software for a limited period of
      time.





We
      currently derive, and expect to continue to derive, a substantial percentage
      of
      our net sales from fewer than ten customers. In 2007, approximately 65% of
      our
      revenues were derived from our top ten customers, including revenues from Axtel
      for approximately 15% of our revenues, Yozan for approximately 12% of revenues
      and Deutsche Breitband Dienste GmbH (“DBD”) for approximately 10%. They were the
      only customers that individually accounted for more than 10% of our 2007 annual
      revenue. In fiscal 2008, we expect lower revenue from Axtel and minimal revenue
      from Yozan and DBD. As discussed further in “ITEM 3. LEGAL PROCEEDINGS”, we may
      commence legal action against DBD and therefore the amount of 2008 sales to
      DBD
      is uncertain at this time.





Our
      contracts are generally non-exclusive and may contain provisions allowing our
      customers to terminate the agreement without significant penalties. Our
      contracts also may specify the achievement of shipment, delivery and service
      commitments. We are generally able to meet these commitments or negotiate
      extensions with our customers.




***Products***




Our
      product offerings are comprised of a range of products based on available WiMAX
      standards and proprietary wireless technologies as well as VoIP and Wi-Fi
      products. Where we refer in this document to “WiMAX” products, we are referring
      to both WiMAX Forum Certified TM products
      (those products that have been certified as meeting the standards established
      by
      the WiMAX Forum®) and non-certified products that we believe we have
      manufactured according to those standards but which may or may not become WiMAX
      Forum Certified TM products
      in the future.





6




***WiMAX
      Product Portfolio***




We
      are
      developing a line of WiMAX products for the WiMAX/IEEE 802.16 mobile and fixed
      markets. WiMAX products are based on an air interface that employs Orthogonal
      Frequency Division Multiplexing (“OFDM”) and Orthogonal Frequency Division
      Multiple Access (“OFDMA”). This interface has characteristics that permit
      broadband wireless signals to penetrate objects more effectively than the
      interfaces used in our earlier products, and thereby creates significant
      opportunity for the installation of customer equipment in non-line of sight
      (“NLOS”) environments. Airspan’s first WiMAX products (MacroMAX and EasyST)
      became generally available for commercial sale in the fourth quarter of 2005
      for
      the 3.5 GHz FDD band. As of February 2008, our WiMAX portfolio was comprised
      of
      the following products:




**Product**
            
            **Description**
            
            **Available
                Frequencies*****Base
                Stations***•  
                HiperMAX
            
            HiperMAX
                Base Station is optimized to support the IEEE 802.16e-2005 specification
                for WiMAX. Both 256 OFDM and scalable OFDMA physical layers are supported
                within the overall design.
            
            3.4-3.6
                GHz TDD, 3.4-3.6 GHz FDD, 3.6-3.8 GHz TDD,
              4.9-5.0
                GHz TDD**
            
            HiperMAX-Micro
                is an all-outdoor Base Station based on the same technology as HiperMAX
                and is available in all of the same frequencies.•  
                MicroMAX
            
            MicroMAX
                base station shares the same system architecture as our tried-and-tested
                WipLL product line. The base station is highly modular in design
                and is
                composed of two main components: the all-outdoor Base Station Radios
                (BSR)
                and the indoor Base Station Distribution Unit (BSDU). Each base station
                could contain up to 12 BSRs, depending on the amount of available
                spectrums.
            
            FDD
                (1.5 GHz, 3.4-3.6 GHz; 3.6-3.8 GHz) TDD (1.5 GHz, 3.3-3.5 GHz; 3.4-3.6
                GHz; 3.6-3.8 GHz; 4.9-5.0 GHz; 5.15-5.35 GHz; 5.47-5.725 GHz; 5.725-5.875
                GHz; 5.85-5.95 GHz)•  
                MacroMAX
            
            The
                MacroMAX product has been developed for urban, high-density deployment
                situations. MacroMAX architecture utilizes an indoor radio unit,
                with
                external feeders to appropriate mast installed antennae.
            
            3.4-3.6
                GHz FDD




7




***Subscriber
                Terminals/Customer Equipment***•  
                EasyST
            
            The
                EasyST is designed to be installed by the end-user. EasyST supports
                different deployment options to optimize performance depending on
                the
                actual location. EasyST can also be deployed with the optional EasyST-WiFi
                unit thus providing combined WiMAX and Wi-Fi functionality in the
                same
                unit. When combined with the EasyWiFi base, the EasyST creates a
                unique
                combined WiMAX / Wi-Fi terminal that can be an instant public hotspot
                or
                Indoor Metro-Zone Wi-Fi node. The EasyST overall design supports
                both 256
                OFDM (TDD & FDD) and scalable OFDMA (TDD) physical layers offering
                operators a flexible choice of fixed or mobile WiMAX air interface,
                which
                complements the capabilities of Airspan's HiperMAX Base Station
            
            FDD
                (3.4-3.6 GHz;
              3.6-3.8
                GHz) TDD
              (1.5
                GHz, 3.3-3.5 GHz;
              3.4-3.6
                GHz; 3.6-3.8 GHz;
              4.9-5.0
                GHz; 5.725-5.875 GHz)•  
                ProST
            
            The
                ProST and ProST-WiFi are designed for rapid and simple external
                deployment, to be fitted by trained personnel in less than one hour.
                The
                unit is ideal when a specific service-level agreement needs to be
                guaranteed. The ProST ensures high service availability at enhanced
                ranges, operating in both LOS and NLOS propagation environments.
                The
                ProST-WiFi is a unique combination terminal that integrates WiMAX
                with an
                outdoor Wi-Fi access point to create instant public hotspots or outdoor
                Wi-Fi Metro-Zone nodes. The ProST design supports both 256 OFDM (TDD
&
                FDD) and scalable OFDMA (TDD) physical layers offering operators
                a
                flexible choice of fixed or mobile WiMAX air interface, which complements
                the capabilities of Airspan's HiperMAX Base Station.
            
            FDD
                (3.4-3.6 GHz; 3.6-3.8 GHz)
              TDD
                (3.3-3.5 GHz; 3.4-3.6 GHz;
              4.9-5.0
                GHz; 5.15-5.35 GHz; 5.47-5.725 GHz; 5.8 GHz; 5.85-5.95 GHz)




8




MacroMAX,
      MicroMAX, EasyST and ProST are all WiMAX certified for the 3.4-3.6 GHz FDD
      band.
      Further development is now underway to introduce new base station and subscriber
      terminal variants, to develop a wide portfolio of frequency bands to support
      the
      802.16 mobile standards.





On
      February 6, 2008, we announced a four year cooperation agreement with Fujitsu
      Limited of Japan to jointly build a leading-class Mobile WiMAX base station
      (MacroMAXe) for carriers in the 2.5 and 2.3 GHz frequency bands.





MiMAX
      is
      a family of Mobile WiMAX user devices incorporating Quad Band radio frequency
      technology. The four bands supported are in line with core worldwide Mobile
      WiMAX spectrum allocations allowing an operator to offer a WiMAX solution with
      global roaming capabilities. MiMAX devices support the full Mobile WiMAX Wave
      2
      Certication Profiles including Interoperable MIMO and Beam Forming techniques
      as
      defines by the IEEE802.16 standard. The MiMAX-USB is the first MiMAX form factor
      that will be available from Airspan mid-2008.




Through
      our participation in the WiMAX Forum®, we contribute to the development of the
      IEEE 802.16 standards and WiMAX Forum® technical activities. As a part of our
      development of the WiMAX portfolio, we are working closely with key technology
      partners. These include:




·
            Intel
                Corporation — Application Specific Integrated Circuits for
                customer equipment;




·
            picoChip
                Designs Limited — High performance parallel processors for SDR
                base stations;




·
            SEQUANS
                Communications — Systems on a Chip for integrated Micro base
                stations; and




·
            Starent
                Networks — Access Service Network (ASN) enabling roaming on
                mobile WiMAX networks.




We
      are
      also investing in the development of technologies and techniques that will
      provide further performance benefits. These include the development of
      multi-channel radio transceivers and smart antenna technology.





***Wi-Fi
      Product Portfolio***





Airspan’s
      AS.Net products are based on the IEEE 802.11a/b/g standards. Through our
      membership in the Wi-Fi Alliance, a global, non-profit industry trade
      association devoted to the growth of wireless Local Area Networks (WLAN),
      Airspan participates with more than 200 companies in delivering interoperable
      Wi-Fi solutions and ensuring a positive user experience through the Alliance’s
      WiFi Certified TM program.
      Airspan’s membership in the Wi-Fi Alliance and its acquisition of Radionet
      reiterate Airspan’s belief that a combination of WiMAX and Wi-Fi technologies
      will provide the most flexible combination of wireless-based broadband
      connectivity solutions in enterprise and carrier networks.




9





In
      November 2005, we acquired Radionet, a leading provider of municipal wireless
      hot zones, community networks, mobile broadband solutions for industrial
      applications, such as ports, mines and public transport, and link solutions
      for
      wireless backhaul and enterprises. Radionet’s environmentally-robust product
      portfolio, operating in unlicensed frequency bands using IEEE 802.11 a/b/g
      Wi-Fi
      standards, delivers high performance connectivity with built-in bandwidth
      management and advanced security features. The Radionet product architecture
      includes network and subscriber management capabilities and Radionet’s patented
“MageIP” TM technology allows roaming within Hotzones, offering seamless mobility between
      access points and subnets in a wireless network. The acquisition added to our
      product portfolio wireless products that operate according to the IEEE 802.11
      standard for wireless local area networks (also known as Wi-Fi). Radionet
      products are now being sold under the “AS.NET” name.





***Products
      Based Upon Proprietary Technologies***




Our
      earliest 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 broadband wireless equipment
      market with the acquisition of the WipLL business from Marconi, which we renamed
      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 the Internet, using the Internet Protocol.




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





In
      December 2003, we acquired Proximity, whose products enable operators to provide
      carrier class circuit switched voice and data services using Time Division
      Multiple Access technology.





***Voice
      Over Internet Protocol Products***





In
      June
      2005, we acquired all of the outstanding shares of capital stock of ArelNet,
      a
      pioneer in VoIP network infrastructure equipment and solutions, including soft
      switches and gateways supporting all major VoIP standards. The ArelNet product
      portfolio (“AS.TONE”) gives us the ability to sell VoIP products on a
      stand-alone basis or in combination with our WiMAX products to operators wishing
      to offer voice services over their IP-based networks.





***Network
      Management Systems***





Our
      product platforms are supported by network management systems (“NMS”) that
      perform configuration, alarm, test and performance management activities that
      help ensure that the services provided over a network are uninterrupted and
      of
      high quality. All of our NMS are flexible and can be expanded to suit a range
      of
      different networks. They permit network operators to manage remotely a
      geographically dispersed set of network elements. They also all feature
      intuitive graphical user interfaces, and allow remote maintenance for all
      deployed equipment. Our NMS are marketed under the names AS8100 (Sitespan),
      AS8200 (Netspan), AS8300 (AirspanAccess) REM (Remote Element Manager) and
      WipManage.




10





***Radio
      Planning and Installation Tools***





Our
      sophisticated planning and configuration tools enable operators to plan and
      deploy our wireless systems. The tools provide a powerful prediction engine
      that
      can generate coverage maps for multiple scenarios until the best-case scenario
      is found.




Our
      installation tools are designed to assist our customers with installation or
      troubleshooting of customer premises equipment installations in an efficient
      and
      effective manner.




**Research
      and Development**




As
      of
      March 1, 2008, we had 100 full time employees and contractors engaged in
      research and development located in Uxbridge (U.K.) Airport City (Israel) and
      elsewhere. Our wireless technologies have been under continuous development
      since 1992, deliver high performance and are resilient in a very wide range
      of
      deployment conditions.





**Intellectual
      Property**





We
      rely
      on a combination of patent, trademark, copyright, trade secret law and
      confidentiality or license agreements to protect our proprietary rights in
      products, services, know-how and information. Intellectual property laws afford
      limited protection. Certain rights held by us and our subsidiaries provide
      us
      with a competitive advantage, even though not all of these rights are protected
      under intellectual property laws. It may be possible for a third party to copy
      our products and services or otherwise obtain and use our proprietary
      information without our permission.





During
      the development of our products, we have generated a significant patent
      portfolio. As of February 4, 2008, our development efforts have resulted in
      over
      30 separate U.S. patents granted (some with various foreign counterparts),
      with
      a further three currently pending U.S. applications. In connection with our
      acquisition of the Radionet business, we acquired two U.S. patents. For these
      technologies we do not pay significant royalties to any other companies. To
      improve system performance and reduce costs, we have developed custom integrated
      circuits that incorporate much of our IP, and which are the key elements of
      our
      wireless solutions.





In
      connection with our acquisition of the Proximity business from Nortel Networks
      (“Nortel”), Nortel assigned to us all of its rights, title and interest in the
      Proximity trademarks and service marks and certain of its copyrights used
      exclusively with the Proximity products. In addition, Nortel has granted us
      a
      non-exclusive, world-wide license to use its U.S. patents that relate to the
      Proximity products for the term of the patents. Nortel has also granted us
      a
      non-exclusive worldwide license to use certain of its copyrights, which were
      not
      assigned to us and its trade secrets relating to the Proximity products. The
      copyright and trade secrets licenses are perpetual.





U.S.
      patents are currently granted for a term of 20 years from the date a patent
      application is filed. Our U.S. patents have in the past given us competitive
      advantages in the marketplace, including a number of patents for wireless
      transmission techniques and antenna technologies.





U.S.
      trademark registrations are for a term of 10 years and are renewable every
      10
      years as long as the trademarks are used in the regular course of trade. We
      register our trademarks in a number of other countries where we do business.
      We
      maintain a portfolio of trademarks representing substantial goodwill in our
      businesses.




We
      and
      other WiMAX manufacturers have received letters from Wi-LAN raising various
      patent infringement claims and offering licenses of various Wi-LAN patents.
      We
      received a letter, dated November 9, 2006, offering us licenses of various
      Wi-LAN patents. After reviewing Wi-LAN’s claims, on February 1, 2007, we sent a
      letter to Wi-LAN notifying them that we did not believe that we require a
      license from Wi-LAN. On May 29, 2007, we received a follow up letter and
      materials from Wi-LAN which continued to assert those claims.  We also
      received an e-mail relating to this matter on November 21, 2007.  
Once again the Company has carefully reviewed this matter, and in consultation
      with its patent counsel sent a further letter on January 30, 2008 declining
      Wi-LAN’s offer to license their patents. However, there can be no assurance as
      to the ultimate outcome of this matter.




11




**Extensive
      Testing and Integration Facilities**





The
      performance and coverage area of a broadband wireless system is dependent on
      a
      number of factors including: the strength of the radio signal transmitted;
      the
      sensitivity of the radio receiving apparatus; the radio frequency used; and
      the
      clutter (natural terrain features and man-made obstructions). The ability of
      an
      operator to use a broadband wireless system is predominantly dependent on the
      environment in which the broadband wireless system is deployed and base stations
      and customer premise equipment are installed. Our process of radio planning
      considers these important factors to maximize performance, coverage and
      availability.




The
      Company has extensive lab-based Integration and Test facilities at the R&D
      facilities in Uxbridge, United Kingdom and in Airport City, Israel. Lab-based
      testing is insufficient to fully test the systems that we design. Therefore
      we
      operate live multi-cell WiMAX test networks in and around the town of
      Stratford-upon-Avon, United Kingdom, and in the vicinity of Airport City,
      Israel. These systems permit us to empirically investigate radio transmission
      and reception and interference behavior for existing and emerging products
      in a
      real-world environment.




**Sales,
      Marketing and Customer Service**




We
      sell
      our systems and solutions primarily through our direct sales force and through,
      independent agents, resellers and OEM partners. Our direct sales force targets
      network operators, ISPs and enterprises in both developed and developing
      markets. In markets where we do not have a direct sales presence, we also sell
      through independent agents, resellers and system integrators who target network
      operators and other customers. We also sell our products to OEMs who may sell
      our products under their names.





Our
      marketing efforts are focused on network operators and ISPs that provide voice
      and data or data-only communications services to their customers, and on
      enterprises. Through our marketing activities we provide technical and strategic
      sales support including in-depth product presentations, network design and
      analysis, bid preparation, contract negotiation and support, technical manuals,
      sales tools, pricing, marketing communications, marketing research, trademark
      administration and other support functions.





A
      high
      level of ongoing service and support is critical to our objective of developing
      long-term customer relationships. To facilitate the deployment of our systems,
      we offer our customers a wide range of implementation and support services
      including spectrum planning and optimization, post-sales support, training,
      helpline and a variety of other support services.





Our
      subcontractors, who have the expertise and ability to professionally install
      our
      products, perform most major installations and commissioning. This enables
      us to
      efficiently manage fluctuations in volume of installation work.




As
      of
      March 1, 2008, we had 122 full time employees and contractors dedicated to
      sales, marketing and customer service.




**Manufacturing**




We
      subcontract all of our manufacturing to third-party subcontract manufacturing
      service providers. These providers offer full service manufacturing solutions,
      including assembly, integration, test, prototyping and new product introduction.
      The following is an overview of where our products are manufactured.




·
            WiMAX
                baseband infrastructure & Proximity customer premise equipment are
                manufactured by Solectron Corporation in Guadalajara, Mexico.




12




·
            WiMAX
                masthead infrastructure, Proximity base station equipment and AS.NET
                products are manufactured by Syntech Technologies in the United Kingdom.




·
            WiMAX
                customer premise equipment and the smaller WiMAX base stations are
                manufactured by Flextronics in various locations. WiMAX customer
                premise
                equipment is manufactured in volume by ASUSTek (Taiwan)
                Inc.




·
            WipLL
                base stations and customer premise equipment are manufactured by
                Racamtech
                Limited in Israel.




Our
      agreements with these manufacturing subcontractors are all non-exclusive and
      may
      be terminated by either party with six months’ notice without significant
      penalty. Other than component liability as a consequence of authorized forecasts
      provided by Airspan, we do not have any agreements with our manufacturing
      subcontractors to purchase any minimum volumes.





Our
      manufacturing support activities consist primarily of prototype development,
      new
      product introduction, materials planning and procurement and quality control.





With
      the
      exception of Proximity customer premise equipment, all products are routed
      to
      customers via one of our two third party logistics partners, Agility Logistics
      Ltd. in the United Kingdom and Mexico and Flying Cargo in Israel.




Some
      of
      the key components of our products are purchased from single vendors for which
      alternative sources are generally not readily available in the short to medium
      term. If these vendors fail to supply us with components because they do not
      have them in stock when we need them, if they reduce or eliminate their
      manufacturing capacity for these components or if they enter into exclusive
      relationships with other parties which prevents them from selling to us, we
      could experience and have experienced significant delays in shipping our
      products while we seek other sources. See “Item 1A. RISK FACTORS — Our
      dependence on key suppliers and contract manufacturers may result in product
      delivery delays if they do not have components in stock or terminate their
      non-exclusive arrangements with us.”





**Backlog**





Our
      backlog at December 31, 2007 and 2006 was $27.6 million and $29.4 million,
      respectively. Subject to the fulfillment by our customers of their contractual
      obligations, including payments, we anticipate that substantially all of the
      year-end 2007 backlog will be filled in 2008. We believe that backlog is not
      necessarily a reliable indicator of our future sales as our customers generally
      do not make significant firm commitments to purchase our products more than
      a
      quarter in advance.





**Competition**




We
      compete in a relatively new, rapidly evolving and highly competitive and
      fragmented market. We compete with companies that are producing access systems
      for fixed and mobile wireless networks, cellular networks, wired DSL networks,
      cable networks and occasionally fiber optic cable and satellite networks. We
      also compete with companies that have VoIP switching solutions.




We
      believe the primary competitive challenges our business faces include:




·
            competing
                with established, traditional wired network equipment providers and
                their
                wired solutions;·
            encountering
                competition as more suppliers develop and introduce products that
                comply
                with mobile and fixed WiMAX standards;




·
            competing
                with the growth of cellular mobile networks that are capable of providing
                broadband access at high speeds; and




·
            convincing
                service providers that our solutions are superior to competing wired
                and
                wireless solutions that may be offered by substantially larger companies.




13




We
      face,
      or believe that we will face, competition from various other providers of
      wireless communications products and services and, while we believe our industry
      to be competitive, we do not believe there is a single dominant competitor.
      Competitors vary in size and scope, in terms of products and services offered.
      With respect to the broadband fixed wireless solutions we offer today, we
      believe we compete directly with Alcatel-Lucent, Alvarion, Aperto Networks,
      Axxcelera Broadband Wireless, Cisco Networks, Huawei, Motorola, Nortel Networks,
      Nokia Siemens, Redline Communications, Samsung, Terabeam, Inc. and ZTE
      Corporation, and with a number of smaller privately-held companies. Several
      large OEM suppliers of wireless access equipment, including Samsung,
      Alcatel-Lucent, Nortel and Nokia Siemens, are offering WiMAX products and
      pursuing advanced WiMAX development programs. In certain cases, these OEM
      suppliers are partnering with specialized WiMAX equipment vendors, such as
      Airspan, for critical elements of their product programs. Although the large
      suppliers represent significant potential competition to smaller, WiMAX-focused
      participants, certain of these specialized WiMAX companies, including Airspan,
      have significantly differentiated their market and technology positions by
      leveraging OEM relationships. Airspan believes that its strategic and commercial
      OEM relationships with Fujitsu, Ericsson, and Nortel have provided the Company
      with technical and market advantages that create meaningful differentiation
      both
      with respect to large OEM competitors and with respect to those smaller WiMAX
      participants that have not achieved similar strategic collaborations. We expect
      to face competition from these and other suppliers that introduce and develop
      products that comply with mobile WiMAX standards.





***Competing
      Technologies***





Today,
      broadband connections can be provided with or without voice services by a number
      of competing access technologies. While the communications transport network
      and
      Internet backbone are capable of transporting data at extremely high speeds,
      data can only be delivered from those parts of the network through the access
      portion to the end-user as fast as the end-user’s connection to the network will
      permit. Many traditional access connections that use copper wires are inadequate
      to address the rapidly expanding bandwidth requirements. To address these
      requirements a number of alternative solutions have emerged. Below we have
      identified those solutions that are perceived, for a variety of technological
      and economic reasons, to have competed most directly with the broadband wireless
      solutions we offer.





Mobile
      wireless networks are now capable of delivering both voice and broadband data
      connectivity to fixed, nomadic, portable and mobile applications. Low-cost
      cellular networks may provide a competitive solution in markets where the
      operator is seeking to offer low-quality voice and limited data rates at a
      low
      cost. In developed markets, cellular technologies now also support the growing
      demand for high-quality broadband and voice communications.





In
      addition, our technology competes with other high-speed solutions, such as
      wired
      DSL, cable networks, and occasionally fiber optic cable and satellite
      technologies. The performance and coverage area of our wireless systems are
      dependent on some factors that are outside of our control, including features
      of
      the environment in which the systems are deployed such as the amount of clutter
      (natural terrain features and man-made obstructions) and the radio frequency
      available. Any inability to overcome these obstacles may make our technology
      less competitive in comparison with other technologies and make other
      technologies less expensive or more suitable. Our business may also compete
      in
      the future with products and services based on other wireless technologies
      and
      other technologies that have yet to be developed.




14





*Wired
      Digital Subscriber Lines.* Broadband
      access is provided today by wired technologies using both copper and fiber.
      Copper is used most often in residential broadband access systems.




Digital
      subscriber line (“DSL”) technology improves the data transmission rate of
      existing copper networks. DSL transmission rates and service availability,
      however, are limited in all networks by both the quality of the available
      copper, which for many providers is a large percentage of their copper network
      and by the maximum transmission distance (approximately 5 kilometers from the
      subscriber to the service provider’s switching equipment in many instances) of
      wired DSL technology. In many instances, a substantial portion of an operator’s
      copper network is unsuitable for DSL transmission.




Fiber
      technology allows an operator to deliver video, voice and data capabilities
      over
      an optical fiber medium that can deliver very high capacity to end-users.
      Because of the high costs associated with its deployment, fiber is used
      primarily for broadband access for businesses. It is most economically deployed
      in urban and suburban environments where business and residents create very
      high
      demand for services over broadband, and end-users can afford the relatively
      high
      tariffs charged by operators to provide fiber-based connectivity.





*Cable
      Networks.* Two-way
      cable modems using coaxial cable enable data services to be delivered over
      a
      network originally designed to provide television service to residential
      subscribers. Coaxial cable has greater transmission capacity than copper wires,
      but is often costly to upgrade for two-way data services. The data rate
      available to each subscriber on a cable link decreases as the number of
      subscribers using the link increases. Cable coverage, which is not available
      in
      many countries, may limit the growth of this segment as a broadband access
      medium.




*Satellite
      Networks.* For
      a variety of technological and economic reasons, we do not believe that
      satellite technologies have presented the most direct competitive challenge
      to
      the fixed wireless access systems offered by us.




Many
      of
      our competitors are substantially larger than we are and have significantly
      greater financial, sales and marketing, technical, manufacturing and other
      resources and more established distribution channels. These competitors may
      be
      able to respond more rapidly to new or emerging technologies and changes in
      customer requirements or to devote greater resources to the development,
      promotion, sale and financing of their products than we can. Furthermore, some
      of our competitors may make strategic acquisitions or establish cooperative
      relationships among themselves. See “Item 1A. RISK FACTORS — An inability to
      overcome competition from alternative communications systems could adversely
      affect our results of operations.”




**Employees**




As
      of
      March 1 2008, we had a total of 295 full-time employees, including contract
      personnel, of which 89 were based in the U.K., 96 were based in Israel, 32
      were
      based in the United States and 78 were based in other locations. No employees
      are presently represented by a labor union. We have not experienced any work
      stoppages and consider our relations with our employees to be good.





**Executive
      Officers and Directors**




The
      names, ages and positions of our executive officers and directors as of March
      10, 2008 are listed below along with their business experience during the past
      five years.




**Name**
            
            **Age**
            
            **Title**Matthew
                J. Desch
            
            50
            
            Chairman
                of the Board of DirectorsEric
                D. Stonestrom
            
            46
            
            President
                and Chief Executive Officer, DirectorDavid
                Brant
            
            44
            
            Senior
                Vice President and Chief Financial OfficerHenrik
                Smith-Petersen
            
            44
            
            President,
                Asia PacificArthur
                Levine
            
            50
            
            Vice
                President, Finance and ControllerPaul
                Senior
            
            43
            
            Senior
                Vice President and Chief Technology OfficerUzi
                Shalev
            
            50
            
            Vice
                President and General Manager, Airspan IsraelPadraig
                Byrne
            
            41
            
            Chief
                Marketing OfficerJulianne
                M. Biagini
            
            45
            
            DirectorBandel
                L. Carano
            
            46
            
            DirectorMichael
                T. Flynn
            
            59
            
            DirectorFrederick
                R. Fromm
            
            58
            
            DirectorGuillermo
                Heredia
            
            66
            
            DirectorThomas
                S. Huseby
            
            60
            
            DirectorDavid
                A. Twyver
            
            61
            
            Director





15




***Matthew
      J. Desch*** became
      Chairman of the Board of Directors of Airspan on July 1, 2000. Since September
      2006, Mr. Desch has served as Chairman and Chief Executive Officer of Iridium
      Satellite LLC, a global supplier of mobile satellite communications services.
      Prior to joining Iridium, Mr. Desch served as the Chief Executive Officer of
      Telcordia Technologies, a private communications software and services supplier
      from July 2002 until October 2005. He is currently a member of the board of
      directors of Starent Networks. From 1987 through May 2000, Mr. Desch served
      in a
      variety of management positions with Nortel Networks, a global supplier of
      networking solutions and services. From 1996 through 2000, he served as
      Executive Vice President and President of Nortel’s Wireless Networks division,
      responsible for Nortel’s global wireless infrastructure business. Mr. Desch has
      a B.S. from Ohio State University and an M.B.A. from the University of Chicago.





***Eric
      D. Stonestrom*** joined
      Airspan as Executive Vice President and Chief Operating Officer in January
      1998.
      In May 1998, he was named President and Chief Executive Officer, as well as
      a
      member of the Board of Directors. From 1995 to January 1998, Mr. Stonestrom
      was
      employed by DSC Communications Corporation, a provider of telecommunications
      equipment and services (“DSC”), as a Vice President of operating divisions,
      including the Airspan product line. From 1984 until 1995, Mr. Stonestrom worked
      at telecommunications corporations Bell Laboratories and AT&T in a variety
      of positions. He received B.S., M.S. and M. Eng. degrees in 1982, 1983 and
      1984,
      respectively, from the College of Engineering at the University of California
      at
      Berkeley.





***David
      Brant*** joined
      Airspan in January 1998 as Finance Director. He became Senior Vice President
      and
      Chief Financial Officer in January 2007. Between July 2000 and December 2005
      Mr.
      Brant served as Vice President Finance and Controller. In December 2005 the
      Company transferred its Finance function to the United States, and he assumed
      an
      operating role leading the Company’s AS.NET division, broadening his experience
      across the operational functions of the Company. From 1990 to 1998, Mr. Brant
      was employed by DSC in various financial roles, the last post as Director of
      European Accounting. He received a B.A. in Mathematical Economics in 1984 from
      Essex University and is a Fellow of the Association of Chartered Certified
      Accountants.




***Henrik
      Smith-Petersen*** joined
      Airspan in February 1998 as Senior Director in Sales. He became Regional Vice
      President for Asia Pacific in April 2000 and in February 2001 became President,
      Asia Pacific. Prior to joining Airspan, from July 1997 he was with DSC as
      Director of Business Development. In DSC he gained extensive experience
      developing new business and partnerships worldwide in the wireless
      telecommunication market. Before joining DSC, he worked for four years for
      AT&T’s Network Systems Group in Italy, where he developed AT&T’s
      operation systems business and later became Key Account Manager for Italtel,
      AT&T’s local partner in Milan, developing the Telecom Italia business. He
      received his B.Sc. in Business Economics degree from Copenhagen School of
      Economics in Denmark in 1990, and a M.B.A. from SDA BOCCONI University in Milan
      in 1992.




***Arthur
      Levine*** joined
      Airspan in October 2005 as Director of Finance and, in January 2006, he was
      named Airspan’s Vice President, Finance and Controller. From February 2003 to
      March 2005, Mr. Levine was Director of Finance of DentaQuest Ventures, Inc.,
      a
      privately held third party administrator and insurer of dental benefits. From
      September 1995 to February 2003, at Scitex Corporation Ltd., a publicly-traded
      manufacturer of digital printing equipment, Mr. Levine served in various
      financial roles, the last of which was Vice President and Corporate Controller.
      Mr. Levine worked at Ernst & Young from 1984 to 1995. He holds a B.S. degree
      from the Wharton School of the University of Pennsylvania and is a Certified
      Public Accountant.




16





***Paul
      Senior*** joined
      the Airspan in January of 1998 and has served as Head of Airspan’s Radio
      Planning Team, Director of Customer Services, Senior Director of Operations
      and
      Sales, Asia Pacific, as Vice President, Marketing and Product Management and
      since May 2007 as Airspan’s Senior Vice President and Chief Technology Officer.
      Mr. Senior is an industry veteran, with over 22 years experience in the radio
      telecommunication industry. Mr. Senior started his career at GEC Telecoms and
      worked in research at Plessey Research, Nortel’s BNR, Alcatel and DSC
      Communications. In late 2002, Mr. Senior participated in the creation of today’s
      WiMAX Forum®, alongside other industry visionaries. Paul is very active within
      the WiMAX Forum® and is one of its most vocal evangelists. Paul is a Charter
      Board member of the WiMAX Forum®.




***Uzi
      Shalev*** is  Vice
      President and General Manager of Airspan Israel and is responsible for research
      and development and the supply chain for all Airspan’s products. Mr. Shalev
      joined Marconi in January 2001 as Vice President of Engineering and was
      appointed as VP & General Manager of Airspan Israel at the acquisition in
      2002. Prior to joining the company, he served as Senior VP
      Engineering  with RADVision, developing Voice and Video over
      IP products. From 1985 until 1993, Mr. Shalev worked in various projects in
      the
      Israel Aircraft Industries. He has 23 years of experience in telecommunications,
      wireless products, in managerial and technical roles. Mr. Shalev holds a BSc.
      degree in Mathematics and Computer science from the Hebrew University of
      Jerusalem.




***Padraig
      Byrne*** joined
      Airspan in February 2008, as the Chief Marketing Officer. Mr. Byrne served
      as
      Director of Business Development of AT&T from April 2000 to February 2002,
      with global responsibility for developing and managing international and
      domestic alliance efforts. In addition, Mr. Byrne played a significant role
      in
      the spin off of AT&T Wireless from AT&T. Following AT&T Wireless’
divestiture of its broadband wireless division, Mr. Byrne served as the Director
      of Strategic Sales of Netro Corporation, a telecommunications company, from
      February 2002 to July 2003, where he was in charge of business development
      and
      strategic sales. Subsequent to Netro’s merger with SR Telecom, a Canadian
      broadband wireless company, Mr. Byrne was the Vice President of SR Telecom
      from
      July 2003 to November 2006 and was in charge of Europe, Middle East and Africa
      sales. From February 2007 until joining the Company, Mr. Byrne served as the
      Vice President of Sales and Marketing of PureWave Networks, Inc., an advanced
      antenna beamforming technology company in Silicon Valley. Mr. Byrne brings
      extensive sales, business development, strategy, channel management and revenue
      generation experience to the Company. Mr. Byrne spent ten years as a United
      States diplomat working abroad for the United States Foreign Service and holds
      a
      B.A. from the University of San Francisco.




***Julianne
      M. Biagini*** has
      served as a director of Airspan since August 2006. Ms. Biagini has been employed
      by Crossbow Technology, Inc. since February 2008, as their Chief Financial
      Officer. Crossbow is a private company focused on the wireless sensor industry.
      From 1994 through 2007, she served in a number of executive positions at Endwave
      Corporation, a supplier of RF subsystems for millimeterwave, broadband wireless
      access systems. During her tenure, Ms. Biagini also served for five years as
      Chief Financial Officer of Endwave from May 2001 through April 2006. From 1992
      until 1994, Ms. Biagini was the manager of Accounting and Tax at Exponent,
      Inc.,
      an engineering and scientific consulting firm. Prior to 1992, Ms. Biagini worked
      at KPMG as a tax specialist. Ms. Biagini is a Certified Public Accountant with
      a
      B.S. in business administration from San Jose State University and an M.B.A.
      from Santa Clara University.




***Bandel
        L. Carano*** joined
        the Board of Directors of Airspan in September 2006. Mr. Carano, who was
        a
        member of the Company’s Board of Directors from January 1998 to February 2001,
        has been a general partner of Oak Investment Partners, a multi-stage venture
        capital firm, since 1987. Mr. Carano also serves on the Investment Advisory
        Board of the Stanford Engineering Venture Fund, the Board of Directors of
        Kratos
        Defense and Security Solutions, Inc. and FiberTower Corporation, the Supervisory
        Board of Tele Atlas N.V. and the Board of Directors of numerous private
        companies. Mr. Carano holds a B.S. and an M.S. in Electrical Engineering
        from
        Stanford University.




17





***Michael
      T. Flynn*** has
      served as a director of Airspan since July 2001. From June 1994 until March
      31,
      2004, Mr. Flynn served as an officer of ALLTEL Corporation, an integrated
      telecommunications provider of wireless, local telephone, long-distance,
      competitive local exchange, Internet and high-speed data services. From May
      2003
      until April 2004, he held the position of Assistant to the Chief Executive
      Officer. From April 1997 to May 2003, Mr. Flynn served as Group President of
      Communications at ALLTEL. From June 1994 to April 1997, Mr. Flynn was President
      of the Telephone Group of ALLTEL. Since January 2004, Mr. Flynn has served
      on
      the Board of Directors, the Audit Committee and the Compensation Committee
      of
      WebEx Communications, a publicly-traded company providing real time web
      collaboration and conferencing services. He also serves as a member of the
      Board
      of Directors of several private companies including: Calix, a leading provider
      of next generation, integrated voice, data and video, loop and transport access
      technology; and GENBAND a provider of access and trunking media gateway
      solutions for VoIP and signaling applications. Mr. Flynn earned his B.S. degree
      in Industrial Engineering from Texas A&M University in 1970. He attended the
      Dartmouth Institute in 1986 and the Harvard Advanced Management Program in
      1988.





***Frederick
      R. Fromm*** joined
      the Airspan Board of Directors in June 2006. Mr. Fromm has served for more
      than
      30 years in the telecommunications industry, where he has held a variety of
      senior executive positions with a broad range of companies. Since January 2006,
      Mr. Fromm has served as the Chairman of the Board and Chief Executive Officer
      of
      nexVortex, Inc., a privately-held business-grade VoIP services provider. From
      July 2004 until September 2005, Mr. Fromm served as the President and Chief
      Executive Officer and as a director of Mobeon AB, a Swedish based telecom
      software manufacturer and supplier of specialized messaging software components
      to tier-one telecom network equipment vendors. From May 2003 to February 2004,
      Mr. Fromm was President and Chief Executive Officer and a director of Gluon
      Networks, Inc., a private telecommunications equipment company. From July 2000
      to October 2001, he was President, and from November 2001 to October 2002 he
      was
      also a director and Chief Executive Officer of Oplink Communications, Inc.,
      an
      optical components company that completed its initial public offering during
      Mr.
      Fromm’s tenure with the Company. Between June 2001 and July 2006, Mr. Fromm
      served as a director of Wave Wireless Corporation, a public wireless telecom
      equipment company. Mr. Fromm received B.S. and M.S. degrees in Engineering
      from
      the University of Wisconsin-Milwaukee and an M.B.A. from Florida Atlantic
      University.




***Guillermo
      Heredia*** joined
      the Board of Directors of Airspan in January 2001. Since September 2005, Mr.
      Heredia has served as President and CEO of AeroLineas MesoAmericanas, a new
      low
      cost airline carrier operating within Mexico. From 1999 to 2005, Mr. Heredia
      served as the managing partner of Consultores en Inversiones Aeronauticas,
      a
      provider of consulting services to airline operators and investors. Mr. Heredia
      has served in the senior management of three major Mexican corporations: as
      President and Chief Operating Officer of Aeromexico from 1989 to 1992, as
      President and Chief Operating Officer of Grupo Iusacell, Mexico’s number two
      wireless carrier from 1992 to 1994, and as President and Chief Executive Officer
      of Previnter, a joint venture of AIG, Bank Boston and Bank of Nova Scotia from
      1995 to 1999. Mr. Heredia currently serves as a member of the board of directors
      for W.L. Comunicaciones, a private telecommunications company involved in
      developing a wide band fiber optic network in Mexico City and throughout Mexico
      and for Jalisco Tequilana Internacional, a private distiller and distributor
      of
      Tequila. Mr. Heredia holds a degree in Mechanical Engineering from the
      Universidad de las Americas and in Business Administration from Universidad
      Iberoamericana.


***Thomas
        S. Huseby*** has
        served as a Director of Airspan since January 1998, serving as Chairman of
        the
        Board from January 1998 until July 2000. Since August 1997, Mr. Huseby has
        served as the Managing Partner of SeaPoint Ventures, a venture capital fund
        focused on communications infrastructure. Mr. Huseby has also served as an
        advisor to Oak Investment Partners since August 1997 and from 2007 as a
        strategic partner to Hunt Ventures and Voyager Capital. Prior to his employment
        with SeaPoint Ventures, from 1994 to 1997, Mr. Huseby was the Chairman and
        Chief
        Executive Officer of Metawave Communications, a previously public corporation
        which manufactured cellular infrastructure equipment. Previously, he was
        President and Chief Executive Officer of Innova Corporation, a previously
        public
        manufacturer of millimeter wave radios. Mr. Huseby is currently Chairman
        of the
        Board of three privately held companies, Ontela Inc. that provides a platform
        that brings image services to mobile phone handsets; SnapIn Software, Inc.
        that
        develops handset-based wireless customer care and diagnostic products for
        mobile
        network operators; and Zumobi Inc. that allows innovative mobile access,
        retrieval and sharing of web-based content. He is also a board member of
        the
        following privately held corporations: Hubspan, Kineto Wireless, Modiv Media,
        Mojix, Trumba and SinglePoint. Mr. Huseby has a Bachelor’s degree in Economics
        and a B.S.I.E. from Columbia University and an M.B.A. from Stanford University.


18





***David
      A. Twyver*** joined
      the Board of Directors of Airspan in May 1999. Mr. Twyver served as the
      President and Chief Executive Officer of Ensemble Communications Inc., a
      supplier of LMDS wireless equipment, from January 2000 until September, 2002.
      From 1996 to 1997, Mr. Twyver served as Chief Executive Officer of Teledesic
      Corporation, a satellite telecommunications company. From 1974 to 1996, Mr.
      Twyver served in several management positions at Nortel Networks Limited, a
      leading global supplier of data and telephone network solutions and services,
      most recently as president of Nortel Wireless Networks from 1993 to 1996. Mr.
      Twyver served as a director of Metawave Communications, Inc, a manufacturer
      of
      cellular infrastructure equipment, from March 1998 until February 2003 and
      as a
      member of Metawave Communications, Inc.’s Audit Committee from June 2000 until
      February 2003. Mr. Twyver also served as Chairman of the Board of Directors
      of
      Ensemble from January 2002 until December 2003 and as a director until April
      2004. He received his B.S. in Mathematics and Physics from the University of
      Saskatchewan.




**ITEM
      1A. RISK FACTORS**




*In
      addition to other information in this Form 10-K, the following risk factors
      should be carefully considered in evaluating the Company and its business.*




***We
      may continue to incur substantial losses and negative operating cash flows
      and
      may not succeed in achieving or maintaining profitability in the
      future.***




We
      have
      incurred net losses and negative cash flows since we became an independent
      company, and as of December 31, 2007, we had an accumulated deficit of $276
      million. We anticipate that we will continue to experience negative cash flows
      and net losses through 2008. Our operating losses have been due in part to
      the
      commitment of significant resources to our research and development and sales
      and marketing departments. We expect to continue to devote resources to these
      areas and, as a result, we will need to increase substantially our quarterly
      revenues to achieve and maintain profitability. We cannot be certain that we
      will achieve sufficient revenues for profitability. If we do achieve
      profitability, we cannot be certain that we can sustain or increase
      profitability on a quarterly or annual basis in the future. Continuous cash
      outflows can lead to the need for new financing, which may not be available
      on
      favorable terms, or at all.




***If
      we are unable to develop and successfully sell WiMAX certified mobile products
      in a timely fashion, our business will be materially adversely
      affected.***




Certification
      for mobile WiMAX products based on the IEEE-2005 (referred to hereinafter as
      “802.16e”) standards is currently expected to be available in the first half of
      2008, and we expect that carriers will begin to deploy this standard soon
      thereafter. If our mobile WiMAX products are not certified soon after
      certification is available, if our products do not operate with the products
      of
      other suppliers or if the development of those products is otherwise delayed,
      there would be a material adverse affect on our business. We would be at a
      significant disadvantage in the marketplace if we are not able to launch
      certified mobile WiMAX products at the time carriers begin to deploy the
      anticipated new mobile standard. Even if our products are available and
      certified, we cannot provide any assurance that we will be able to sell our
      products or to develop relationships with system integrators and OEMs in order
      to sell our products.




19




***Any
      reduction in expenditures by communications service providers could have a
      negative impact on our results of operations.***




Our
      products are sold to telecommunications carriers and service providers. A
      decline in their capital spending may reduce our sales, increase the need for
      inventory write-offs and increase our losses and our requirements for additional
      working capital, which may not be readily available to us. This could result
      in
      downward pressure on the price of our products, all of which would have a
      material adverse effect on our results of operations and stock price. Further,
      the number of carriers and service providers that are our potential customers
      may not grow or may decline as a result of, among other things, the substantial
      capital requirements needed to establish networks and the limited number of
      licenses granted in each country.




***Since
      our revenues may vary from quarter to quarter and a significant percentage
      of
      our expenses are fixed and do not vary with revenues, our quarterly operating
      results are volatile and difficult to predict, which may negatively affect
      our
      stock price.***




Our
      quarterly and annual operating results have fluctuated in the past and will
      likely vary in the future for a variety of reasons, many of which are outside
      of
      our control, including the following:




·
            changes
                in the mix of our products sold, including the growth of sales of
                our
                WiMAX products offset by declines in sales of our legacy products
                and the
                wind down in sales under our contract with Yozan and
                DBD




·
            fluctuations
                in the size and timing of orders, as our customers are not typically
                required to purchase a specific number of our products in any given
                quarter;




·
            the
                budget cycles of our customers and the timing of purchases by our
                customers and end-users of our
                products;




·
            the
                size and timing of major deployments of our
                products;




·
            delays
                in shipments or payment due to our customers inability to obtain
                licenses
                or for other reasons;




·
            the
                loss of a major customer;




·
            the
                adoption of new standards in our
                industry;




·
            the
                fulfillment of criteria necessary for us to recognize revenue;




·
            the
                development of competing technology, products or service, which may
                cause
                us to lose customers;




·
            our
                ability to attract and retain technical and other
                talent;




·
            the
                inability of our suppliers or manufacturers to fulfill our orders
                as a
                result of a shortage of key
                components;




·
            mergers
                or acquisitions by us, our customers or our competitors;




·
            general
                economic conditions worldwide and in the United States; and




·
            some
                degree of seasonality in which the first calendar quarter generally
                has
                lower sales than the final quarter of the preceding
                year.




We
      incur
      expenses in significant part based on our expectations of future revenue, and
      we
      expect our operating expense, in particular salaries and lease payments, to
      be
      relatively fixed in the short run. Accordingly, any decline in revenue for
      a
      particular quarter could have an immediate negative effect on results for that
      quarter, possibly resulting in a change in financial estimates or investment
      recommendations by securities analysts, which could result in a fall in our
      stock price. Because of the fluctuations we have experienced in our quarterly
      results, we do not consider quarter-to-quarter comparisons of our results of
      operations to be necessarily meaningful, and you should not rely on results
      in
      any particular quarter or quarters as an indication of future
      performance.




20




***If
      we are not able to implement a program to reduce product costs over time,
      introduce new products or increase sales volume to respond to declines in the
      average selling prices of our products, our gross margin may
      decline.***




We
      expect
      the average selling prices of our products to decline due to a number of
      factors, including competitive pricing pressures, rapid technological change,
      industry standardization and volume sales discounts. Accordingly, to maintain
      or
      increase our gross margin, we must develop and introduce new products or product
      enhancements with higher gross margins and implement product cost reductions.
      If
      our average selling prices continue to decline and we are not able to maintain
      or increase our gross margin, our results of operations could be harmed. In
      addition, when carriers begin to deploy systems using mobile WiMAX standards,
      which we expect will begin in 2008, our competitors may offer their products
      at
      relatively low prices in an effort to achieve early market acceptance.
      Accordingly, we may experience downward pricing pressure on our products, which
      would have an adverse affect on our margins.




***If
      we are unable to compensate for declining sales of obsolescent products with
      sales of new WiMAX products, our revenues will continue to
      decline.***




As
      certain of our current products become obsolete, growth in sales of our new
      WiMAX products will be needed to compensate for this decline in revenues. As
      WiMAX is now regarded as likely to become a principal standard for the broadband
      wireless industry, we are facing the risk of obsolescence of our non-WiMAX
      products. As a result, we expect our sales to continue to be materially
      adversely affected until increasing sales of WiMAX products compensate for
      the
      decline in sales of non-WiMAX products. While our WiMAX sales have been
      increasing, those increases have not yet been sufficient to offset the decline
      in sales of our non-WiMAX products. In the course of committing to research
      and
      development, enhancing our existing products and developing the WiMAX product
      line, we have made projections and assumptions about the potential demand for
      our various product lines. If our projections or assumptions are incorrect
      for
      any reason, and our product lines do not sell as projected, our results of
      operations will be materially adversely affected.




***Since
      we incur most of our operating expenses and a portion of our cost of goods
      sold
      in foreign currencies, fluctuations in the values of foreign currencies could
      have a negative impact on our profitability.***




Although
      82% and 87% of our sales in 2007 and 2006, respectively, were denominated in
      U.S. dollars, and a majority of our cost of goods sold were denominated in
      U.S.
      dollars, we incur most of our operating expenses and a portion of our cost
      of
      goods in British pounds and, to a lesser extent, New Israeli Shekels and euros.
      In the years ended December 31, 2007 and 2006, approximately 12% and 24%,
      respectively, of our combined operating expenses and cost of goods sold were
      denominated in British pounds. We expect these percentages to fluctuate over
      time. Fluctuations in the value of foreign currencies could have a negative
      impact on the profitability of our global operations and our business and our
      currency hedging activities may not limit these risks. The value of foreign
      currency fluctuations against the U.S. dollar may also affect the
      competitiveness of our pricing compared to local products because we typically
      bill in U.S. dollars.




***Rapid
      technological changes and evolving industry standards, frequent new product
      introductions and short product life cycles may adversely affect our results
      of
      operations.***




The
      markets for our products have been characterized by rapidly changing
      technologies, evolving industry standards, frequent new product introductions
      and short product life cycles. Our success depends, in substantial part, on
      the
      timely and successful introduction of high quality new products and upgrades,
      as
      well as cost reductions on current products to address the operational speed,
      bandwidth, efficiency and cost requirements of our customers. With the adoption
      by the wireless broadband industry of the IEEE 802.16 and ETSI HiperMAN wireless
      MAN standards, our success will also depend on our ability to comply with these
      and other emerging industry standards and to operate with products of other
      suppliers.




21




With
      our
      WiMAX products, we are focused on delivering Internet Protocol (“IP”) based
      operating systems. The development of new, technologically advanced IP-optimized
      networking solutions and products is a complex and uncertain process requiring
      high levels of innovation, as well as the anticipation of technological and
      market trends. Our commitment to develop and refine our IP based operating
      systems may result in our expenses growing at a faster rate than our revenues,
      particularly since the initial investment to bring a new or enhanced product
      to
      market may be high. We may not be successful in targeting new market
      opportunities, in developing and commercializing new products in a timely manner
      or in achieving market acceptance for our new products. As a result, we may
      expend research and development and other resources on projections that do
      not
      result in significant sales.




The
      success of new or enhanced products depends on a number of other factors,
      including the timely introduction of those products, market acceptance of new
      technologies and industry standards, the perceived quality and robustness of
      new
      or enhanced products, competing product offerings, the pricing and marketing
      of
      our products and the availability of funding for those networks. Products and
      technologies developed by our competitors or by us may render certain of our
      products obsolete. If we fail to respond in a timely and effective manner to
      unanticipated changes in one or more of the technologies affecting
      telecommunications and data networking or our new products or product
      enhancements fail to achieve market acceptance, our ability to compete
      effectively in our industry, and our sales, market share and customer
      relationships could be materially and adversely affected.




***The
      adoption of open standards in the broadband wireless communications industry
      has
      resulted in increased competition.***




With
      the
      adoption of WiMAX as the new industry standard for BWA and the setting of
      standards by the WiMAX Forum, our focus is increasingly on selling WiMAX
      products, and on introducing mobile WiMAX products, that are WiMAX Forum
      certified or that meet WiMAX standards. We anticipate that other BWA equipment
      suppliers will also increasingly sell products that are WiMAX Forum Certified
      or
      that meet WiMAX standards. As we bring WiMAX-based systems to market, we may
      face increased competition from a number of other manufacturers who are no
      longer restricted by our intellectual property rights from building competing
      products. To remain competitive, we believe we must continue to invest
      significant resources in research and development, sales and marketing and
      customer support for WiMAX. We cannot be certain that we will have sufficient
      resources to make these investments or that we will be able to make the
      technological advances necessary to remain competitive. In developing products
      that conform to WiMAX Forum standards, we recognize that, by diminishing product
      differentiation, standardization may lower the barriers to entry by other
      manufacturers in the markets in which we seek to sell our products. If companies
      with greater resources than us manufacture any standards-based products to
      compete with us, their relative size, resources, marketing skills and financial
      incentives may prove to be more important to customers than product
      differentiation alone. Standardization is also likely to result in lower average
      selling prices. If we are unable to maintain our position as a technology leader
      in this market of open standards and broader competition, we may suffer
      reductions in revenues and margins and loss of market share, revenues and
      operating margins.




***If
      we are not able to implement a program to conform our products to industry
      standards, our revenues may decline*** .




We
      have
      developed and continue to develop certain of our products in accordance with
      existing, emerging and anticipated wireless-industry standards. In particular,
      we developed our WiMAX wireless products and product features to conform to
      IEEE
      802.16-2004 and IEEE 802.16e standards. If our products fail to comply with
      these standards, we may not be able to sell them. Industry standards are subject
      to change from time to time by their regulatory bodies. In addition, our
      competitors may attempt to influence the adoption of standards that are not
      compatible with our products, and we may not have the resources or ability
      to
      influence such adoption ourselves. If, as a result of any changes, the products
      we have developed fail to meet or are delayed in meeting then-applicable
      industry standards, we may not be able to sell such products.




22




Our
      future success also depends in part on the acceptance by our customers of
      products that meet these industry standards. If the WiMAX Forum does not adopt
      these standards or if our customers are unable to successfully deploy products
      based on these standards, we will not be successful selling these products.
      In
      addition, potential customers may delay orders in anticipation of the
      introduction of new products that are designed to comply with anticipated future
      standards.




***Competition
      from larger, better-capitalized or emerging competitors could result in price
      reductions, reduced gross margins and loss of or diminished growth of market
      share.***




We
      compete in a relatively new, rapidly evolving, highly competitive and fragmented
      market. We now compete with companies that are producing both mobile and fixed
      wireless communications systems, wired DSL, cable networks, fiber optic cable,
      certain satellite technologies and other new entrants to this industry, as
      well
      as traditional communications companies. The recent adoption of WiMAX standards
      and the expected increased capital spending on WiMAX applications is likely
      to
      result in new competitors entering the markets in which we sell our
      products.




Competitors
      vary in size and resources and in products and services offered. With
      respect to the broadband fixed wireless solutions we offer today, we believe
      we
      compete directly with Alcatel-Lucent, Alvarion, Aperto Networks, Axxcelera
      Broadband Wireless, Cisco Networks, Huawei, Motorola, Nortel Networks, Nokia
      Siemens, Redline Communications, Samsung, Terabeam, Inc. and ZTE Corporation,
      and with a number of smaller privately-held companies. In addition, some
      of the entities to which we currently sell our products may develop the capacity
      to manufacture their own products.




Many
      of
      our competitors are substantially larger than we are and have significantly
      greater financial, sales and marketing, technical, manufacturing and other
      resources as well as more established distribution channels and greater name
      recognition. These competitors may be able to respond more rapidly to new or
      emerging technologies such as mobile WiMAX and changes in customer requirements
      than we can and can devote greater resources to attempting to influence the
      composition of future WiMAX standards. They may also be able to devote greater
      resources to the development, promotion, sale and financing of their products
      than we can. Furthermore, some of our competitors have made or may make
      strategic acquisitions or establish cooperative relationships among themselves
      or with third parties to increase their ability to gain customer market share
      rapidly. These competitors may enter our existing or future markets with systems
      that may be less expensive, provide higher performance or contain additional
      features. In addition, large customers are sometimes reluctant to base an
      important line of business on equipment purchased from a smaller vendor such
      as
      Airspan. In addition, both larger and smaller communications service providers
      may also decide to wait to see how a new technology develops before committing
      any significant resources to deploying equipment from a particular supplier.
      We
      believe this tendency to “wait and see” with respect to new technology is
      already affecting the market place, resulting in increased customer caution
      on
      WiMAX purchases in advance of the introduction of WiMAX mobile
      standards.




We
      expect
      our competitors to continue to improve the performance of their current products
      and to introduce new products or new technologies that may supplant or provide
      lower-cost alternatives to our systems. This and other factors could result
      in
      lower revenues or a loss of market shares, which could cause our stock price
      to
      fall.




***An
      inability to overcome competition from alternative communication systems could
      adversely affect our results of operations.***




We
      already face, and may increasingly encounter, competition from competing
      wireless technologies, such as cellular technology, that are constantly
      improving. Cellular networks are now capable of delivering both voice and
      broadband data connectivity to fixed, mobile, nomadic and portable applications.
      These technologies, such as 1XRTT and EVDO, have the ability to provide for
      multiple voice channels and rate data services at transmission rates of 512Kbps
      on the uplink and 2.4 Mbps on the down link. Their data rates speeds continue
      to
      improve as they are modified. In addition, our technology competes with other
      high-speed solutions, such as wired DSL, cable networks, fiber optic cable
      and
      occasionally satellite technologies. Our products compete with alternative
      communications systems on the basis of reliability, price and functionality.
      For
      example, the performance and coverage area of our wireless systems are dependent
      on certain factors that are outside of our control, including features of the
      environment in which the systems are deployed, such as the amount of clutter
      (natural terrain features and man-made obstructions) and the radio frequency
      available. Depending on specific customer needs, these obstacles may make our
      technology less competitive in comparison with other technologies and make
      other
      technologies less expensive or more suitable. Our business may also compete
      in
      the future with products and services based on other wireless technologies
      and
      other technologies that have yet to be developed.




23




***We
      currently depend on a few key customers for substantially all of our sales.
      A
      loss of one or more of those customers could cause a significant decrease in
      our
      net revenue.***




We
      currently derive, and expect to continue to derive, a substantial percentage
      of
      our net sales from fewer than ten customers.




In
      2007,
      approximately 63% of our revenues were derived from our top ten customers,
      including approximately 15% of our revenues from Axtel, approximately 12% of
      revenues from Yozan and approximately 10% from DBD. They were the only customers
      that individually accounted for 10% or more of our 2007 annual revenue. In
      fiscal 2008, we expect lower revenue from Axtel and minimal revenue from Yozan.
      As discussed further in “ITEM 3. LEGAL PROCEEDINGS”, we may commence legal
      action against DBD and therefore the amount of 2008 sales to DBD is uncertain
      at
      this time. We believe that there are certain economies of scale inherent in
      our
      business. Accordingly, if we are unable to replace the revenue previously
      generated by Axtel, Yozan and DBD with revenue from other significant customers
      or if we lose other large customers, our gross profit margins, profitability
      and
      efforts to preserve cash resources could be negatively affected.




The
      amount of revenue we derive from a specific customer is likely to vary from
      period to period, and a major customer in one period may not produce significant
      additional revenue in a subsequent period. We anticipate that our operating
      results will continue to depend on sales to a small number of key customers
      in
      the foreseeable future. In general, our contracts with our larger customers
      involve major deployments that require several months to fulfill, so our results
      may depend on the same major customers for consecutive quarters. We cannot
      assure you that, once a contract is fulfilled, the customer will purchase new
      products or services from us. We must, therefore, continually seek new customers
      in order to increase our revenue, and there can be no assurance that we will
      be
      successful in doing so.




***Many
      of our customers execute short-term purchase orders or contracts that allow
      our
      customers to terminate without significant penalties.***




Our
      contracts and purchase orders are separately negotiated with each of our
      customers and the terms vary widely. A majority of our customers execute only
      short-term purchase orders for a single system or a small number of systems
      at
      one time instead of long-term contracts for large-scale deployment of our
      systems. These contracts and purchase orders do not ensure that they will
      purchase any additional products beyond those specifically listed in the
      order.




Moreover,
      since we often believe that these purchase orders may represent the early
      portion of longer-term customer programs, we often expend significant financial,
      personnel and operational resources to fulfill these orders. If our customers
      fail to purchase additional products to fulfill their programs, we may be unable
      to recover the costs we incur and our margins could suffer.




In
      addition, our typical contracts are generally non-exclusive and contain
      provisions allowing our customers to terminate the agreement without significant
      penalties. Our contracts also may require certain shipment, delivery and
      installation commitments on our part. If we fail to meet these commitments,
      our
      customer contracts typically permit the customer to terminate the contract
      or
      impose monetary penalties on us.




24




***Changes
      in telecommunications regulation or delays in receiving licenses could adversely
      affect many of our customers and may lead to lower
      sales.***




Many
      of
      our customers are subject to extensive regulation as communications service
      providers, including with respect to the availability of radio frequencies
      for
      two-way broadband communications. Each country has different regulations and
      regulatory processes for wireless communications equipment and for the uses
      of
      radio frequencies. Some of our products operate in license-exempt bands, while
      others operate in licensed bands in different jurisdictions. In addition,
      changes in laws or regulations that adversely affect existing and potential
      customers could lead them to delay, reduce or cancel expenditures on
      communications access systems, which actions would harm our business. In the
      past, anticipated customer orders have been postponed because of regulatory
      issues in various countries. The resolution of those issues can be lengthy
      and
      the outcome can be unpredictable. Some of the orders we receive from customers
      are contingent upon their receipt of licenses from regulators, the timing of
      which can often be uncertain. Depending on the jurisdiction, the receipt of
      licenses by our customers may occur, if at all, a year or more after they
      initially seek those licenses.




At
      present there are few laws or regulations that specifically address our business
      of providing communications access equipment. However, future regulation may
      include access or settlement charges or tariffs that could impose economic
      burdens on our customers and us. We are unable to predict the impact, if any,
      that future legislation, judicial decisions or regulations in the countries
      in
      which we do business will have on our business.




***Our
      sales cycle is typically long and unpredictable, making it difficult to
      accurately predict inventory requirements, forecast revenues and control
      expenses.***




Our
      sales
      cycle can range from one month to two years and varies by customer. The length
      of the sales cycle with a particular customer may be influenced by a number
      of
      factors, including the commitment of significant cash and other resources
      associated with the purchase, lengthy testing and evaluations, and regulatory
      and licensing requirements on the part of the customer. In addition, the
      emerging and evolving nature of the communication access market may cause
      prospective customers to delay their purchase decisions as they evaluate new
      and/or competing technologies or, wait for new products or technologies to
      come
      to market. We expect that our sales cycles will continue to be long and
      unpredictable, and, as the average order size for our products increases, our
      customers’ processes for approving purchases may become more complex and lead to
      an even longer sales cycle. For example, we have found that the length of our
      sales cycle has increased as an increasing percentage of our revenues comes
      from
      WiMAX products. Accordingly, it is difficult for us to anticipate the quarter
      in
      which particular sales may occur, to determine product shipment schedules and
      to
      provide our manufacturers and suppliers with accurate lead-time to ensure that
      they have sufficient inventory on hand to meet our orders. Therefore, our sales
      cycle impairs our ability to recognize and forecast revenues and control
      expenses.




In
      addition, particularly with our WiMAX products, we may enter into contracts
      that
      involve multiple deliveries of different elements over more than one quarter.
      The requirements in these contracts can affect the timing of revenue recognition
      under generally accepted accounting principles (“GAAP”). These requirements may
      include customer acceptance, guarantees of coverage, guarantees of certification
      or delivery of products not yet available. GAAP may preclude us from recognizing
      revenue under such contracts until these requirements have been
      met.




***We
      make estimates relating to customer demand and errors in our estimates may
      have
      negative effects on our inventory levels, revenues and results of
      operations.***




We
      have
      historically been required to place firm orders or binding forecasts for
      products and components with our suppliers to ensure that we are able to meet
      our customers’ demands. These commitments to our suppliers may be placed up to
      six months prior to the anticipated delivery date based on our existing customer
      purchase commitments and our forecasts of future customer demand. Our sales
      process requires us to make multiple forecast assumptions relating to expected
      customer demand, each of which may introduce error into our estimates, causing
      excess inventory to accumulate or a lack of product supply when needed. If
      we
      overestimate customer demand, we may allocate resources to manufacturing
      products that we may not be able to sell when we expect or at all. As a result,
      we have sometimes had excess inventory, which has increased our net losses.
      For
      example, in the second quarter of 2007 we recorded an inventory write down
      of
      $5.9 million as a result of reduced demand for our non-WiMAX revenues.
      Conversely, if we underestimate customer demand or if insufficient manufacturing
      capacity were available, we may lose revenue opportunities and market share
      and
      may damage our customer relationships.




25




***Our
      international sales may be difficult and costly as a result of the political,
      economic and regulatory risks in those regions.***




Sales
      to
      customers based outside the U.S. have historically accounted for a substantial
      majority of our revenues. In the year ended 2007 and 2006, our international
      sales (sales to customers located outside the U.S. which includes a small
      percentage of U.S. customers where the final destination of the equipment is
      outside of the U.S.) accounted for approximately 91% and 92% of our total
      revenue. In 2007, 40% of our revenue was derived from customers in North and
      South America, 39% from customers in Europe, Africa and the Middle East, with
      Asia accounting for 21% of revenues. In many international markets,
      long-standing relationships between potential customers and their local
      suppliers and protective regulations, including local content requirements
      and
      type approvals, create barriers to entry. In addition, pursuing international
      opportunities may require significant investments for an extended period before
      returns on such investments, if any, are realized and such investments may
      result in expenses growing at a faster rate than revenues. The following risks
      inherent in international business could reduce the international demand for
      our
      products, decrease the prices at which we can sell our products internationally
      or disrupt our international operations, which could adversely affect our
      operations:




·
            the
                imposition of tariffs, duties, price controls or other restrictions
                on
                foreign currencies or trade barriers imposed by foreign
                countries;


·
            import
                or export controls, including licensing or product-certification
                requirements;


·
            unexpected
                changes in government policies or regulatory requirements in the
                United
                States or in foreign governments and delays in receiving licenses
                to
                operate;


·
            political
                instability and acts of war or terrorism;


·
            economic
                instability, including the impact of economic
                recessions;


·
            difficulty
                in staffing and managing geographically diverse operations, including
                our
                reluctance to staff and manage foreign operations as a result of
                political
                unrest even though we have business opportunities in a
                country;


·
            any
                limitation on our ability to enforce intellectual property rights
                or
                agreements in regions where the judicial legal systems may be less
                developed or less protective of intellectual property or contractual
                rights;


·
            capital
                and exchange control programs;


·
            challenges
                caused by distance, language and cultural
                differences;


·
            fluctuations
                in currency exchange rates;


·
            labor
                unrest;


·
            restrictions
                on the repatriation of cash;


·
            the
                nationalization of local industry;
                and


·
            potentially
                adverse tax consequences.




***We
      may not be able to establish or expand our relationships with major system
      integrators and telecommunications equipment OEMs, which would harm our ability
      to generate revenue.***





We
      believe that our future success, particularly with respect to WiMAX, will
      increasingly depend upon our ability to establish and expand our relationships
      with major system integrators and telecommunications equipment OEMs. Some of
      our
      products are sold to and through system integrators for integration into their
      systems, rather than directly to carriers. As a result, the level of our sales
      depends on the success, quality and market acceptance of the products of these
      system integrators and OEMs, as well as their sales and marketing efforts,
      all
      of which are not within our control. Adverse events affecting these system
      integrators and OEMs, such as financial difficulties or technical problems
      with
      their products could have a material adverse effect on our results of
      operations. In addition, the termination of any existing or future relationships
      with systems integrators or OEMs could result in our selling fewer products.
      Furthermore, systems integrators and OEMs may choose to integrate, market and
      sell the products of competitors or to use competing technologies instead of
      or
      in addition to our products. If we are not able to establish and expand
      relationships with system integrators and OEMs to market and sell our products
      over competing products and technologies, there may be a material adverse effect
      on our ability to generate revenue.




26




***Our
      operations in Israel may be disrupted by political and military tensions in
      Israel and the Middle East.***




We
      conduct various activities related to our WipLL, WiMAX and AS.TONE products
      in
      Israel, including research and development; design; raw material procurement;
      and manufacturing through manufacturing subcontractors based in Israel. Our
      operations could be negatively affected by the political and military tensions
      in Israel and the Middle East.




Israel
      has been involved in a number of armed conflicts with its neighbors since 1948
      and a state of hostility, varying in degree and intensity, has led to security
      and economic problems in Israel. Since September 2000, a continuous armed
      conflict with the Palestinian Authority has been taking place. Conditions in
      Israel could, in the future, disrupt the development, manufacture and/or
      distribution of our products.




***Our
      dependence on key suppliers may result in product delivery delays if they do
      not
      have components in stock or terminate their non-exclusive arrangements with
      us.***




Some
      of
      the key components of our products are purchased from single vendors, including
      printed circuit board assemblies, application specific integrated circuits
      and
      radio frequency filters, for which alternative sources are generally not readily
      available in the short to medium term. If our vendors fail to supply us with
      components because they fail to remain in business, fail to meet our quality
      or
      production requirements, do not have the components in stock when we need them,
      or if the supply of the components in the market is limited, or if our vendors
      reduce or eliminate their manufacturing capacity for these components or enter
      into exclusive relationships with other parties which prevent them from selling
      to us, we could experience significant delays in shipping our products while
      we
      seek other supply sources. Delays in shipping could result in our customers
      claiming damages, increased costs, and damage to our reputation and loss of
      future business. At times we have been forced to purchase these components
      from
      distributors instead of from the manufacturers, which has significantly
      increased our costs. During the second quarter of 2007, as a result of a
      temporary shortage of a component, we had difficulty manufacturing enough WiMAX
      products to meet certain existing orders in a timely manner. We do not have
      long-term contracts with all of our suppliers. Instead, we execute purchase
      orders approximately three to six months in advance of when we believe we may
      need the components. In those instances in which we do not have a long-term
      contract with a supplier, the supplier may terminate our relationship upon
      six
      months’ prior notice. In addition, we may not be able to replace, or may
      experience increased costs if we are required to replace, an existing
      supplier.




***Our
      dependence on contract manufacturers may result in a material adverse effect
      on
      our business if they are unable to fill our orders on a timely basis or if
      they
      terminate their non-exclusive agreements with us.***




We
      generally outsource the manufacturing of our products to subcontractors. These
      contract manufacturers have limited manufacturing capacity, and we cannot be
      sure that they will at all times have the capacity that we require to fill
      our
      customers’ orders. In addition, our reliance on contract manufacturers subjects
      us to a number of other risks, including risks related to limited control of
      delivery schedules, manufacturing yields and production costs, and quality
      assurance and control. Our contracts with our major manufacturing subcontractors
      are non-exclusive and most contracts may be terminated with six months notice
      by
      either party without significant penalty. The process of replacing any of our
      contract manufacturers would likely take at least six months, and any related
      delay could cause a material interruption in our ability to deliver products
      to
      our customers.




We
      rely
      on our forecasts of future orders to make purchasing and manufacturing decisions
      and provide our contract manufacturers with orders well in advance of the time
      that we expect to sell those products. If a forecast turns out to be inaccurate,
      it may lead either to excess inventory that would increase our costs or a
      shortage of components that would delay shipments of our systems.




27




***If
      we lose Eric Stonestrom, our Chief Executive Officer, or any of our other
      executive officers, we may encounter difficulty replacing their expertise,
      which
      could impair our ability to implement our business plan
      successfully.***




We
      believe that our ability to implement our business strategy and our future
      success depends on the continued employment of our senior management team,
      in
      particular our president and chief executive officer, Eric Stonestrom. Our
      senior management team, who have extensive experience in our industry and are
      vital to maintaining some of our major customer relationships, may be difficult
      to replace. The loss of the technical knowledge and management and industry
      expertise of these key employees could make it difficult for us to execute
      our
      business plan effectively, could result in delays in new products being
      developed, lost customers and diversion of resources while we seek
      replacements.




***We
      may not have adequate protection for our intellectual property, which may make
      it easier for others to misappropriate our technology and enable our competitors
      to sell competing products at lower prices and harm our business.***




Our
      success has historically relied in part on proprietary technology. We have
      used
      a combination of patent, copyright, trademark and trade secret laws and
      contractual restrictions on disclosure to protect our intellectual property
      rights associated with our products other than our WiMAX products. Despite
      our
      efforts to protect our proprietary rights, we cannot be certain that the steps
      we have taken will prevent misappropriation of our technology, and we may not
      be
      able to detect unauthorized use or take appropriate steps to enforce our
      intellectual property rights. The laws of some foreign countries, particularly
      in Asia, do not protect our proprietary rights to the same extent as the laws
      of
      the U.S. and the United Kingdom, and we may encounter substantial infringement
      problems in those countries. In addition, we do not file for patent protection
      in every country where we conduct business. In some countries where we do file
      for patent protection, we may choose not to maintain patent protection. In
      addition, we may not file for or maintain patent protection in a country from
      which we derive significant revenue. In instances where we have licensed
      intellectual property from third parties, we may have limited rights to
      institute actions against third parties for infringement of the licensed
      intellectual property or to defend any suit that challenges the validity of
      the
      licensed intellectual property. If we fail to protect adequately our
      intellectual property rights, or fail to do so under applicable law, it would
      be
      easier for our competitors to copy our products and sell competing products
      at
      lower prices, which would harm our business.




***Our
      products may infringe on the intellectual property rights of third parties,
      which may result in lawsuits that could be costly to defend and prohibit us
      from
      selling our products.***




Third
      parties could assert exclusive patent, copyright, trademark and other
      intellectual property infringement claims against us, our products or the
      technologies that are important to us. If any inquiry from a third party
      relating to patents or trademarks leads to a proceeding against us and we are
      unable to defend ourselves successfully, our ability to sell our products may
      be
      adversely affected and our business would be harmed. In addition, third parties
      may assert claims, or initiate litigation against us or our manufacturers,
      suppliers or customers with respect to existing or future products, trademarks
      or other proprietary rights. Any claims against us, or customers that we
      indemnify against intellectual property claims, with or without merit, may:




·
            be
                time-consuming, costly to defend and harm our reputation;




·
            divert
                management’s attention and resources;




·
            cause
                delays in the delivery of our products;




28




·
            require
                the payment of monetary damages;




·
            result
                in an injunction, which would prohibit us from using these technologies
                and require us to stop shipping our systems until they could be
                redesigned, if possible; and




·
            require
                us to enter into license or royalty agreements, which may not be
                available
                on acceptable terms or require payment of substantial sums.




The
      status of intellectual property directed to or covering WiMAX technology is
      currently unclear and developing. It is difficult to determine what parties,
      if
      any, hold patents or other rights with respect to intellectual property that
      is
      used in WiMAX products, including ours. In addition, Mobile WiMAX technology
      is
      a new technology with greater uncertainty regarding the status of relevant
      intellectual property and could involve greater patent licensing issues and
      more
      potential for intellectual property disputes than fixed WiMAX technology. A
      September 2006 patent survey commissioned by the WiMAX Forum® suggest that there
      are more than 1,550 existing patents that may be deemed to cover some portion
      of
      WiMAX technology. We believe that the number of patents that may be deemed
      to
      cover WiMAX technology is increasing. We cannot be certain that holders of
      some
      of these patents or other patent holders will not assert claims against us
      in
      the future, including after we begin to sell mobile WiMAX products. From time
      to
      time, we have received, and expect to continue to receive, correspondence from
      various other parties offering licenses to patents or providing notice of claims
      of infringement, misappropriation or misuse of other parties’ proprietary
      rights. Some of these claims may lead to litigation.




For
      example, we and other WiMAX manufacturers have received letters from Wi-LAN
      raising various patent infringement claims and offering licenses of various
      Wi-LAN patents. We received a letter, dated November 9, 2006, offering us
      licenses of various Wi-LAN patents. After reviewing Wi-LAN’s claims, on February
      1, 2007, we sent a letter to Wi-LAN notifying them that we did not believe
      that
      we require a license from Wi-LAN. On May 29, 2007, we received a follow up
      letter and materials from Wi-LAN which continued to assert those claims. 
We also received an e-mail relating to this matter on November 21,
      2007.   Once again the Company has carefully reviewed this matter, and
      in consultation with its patent counsel sent a further letter on January 30,
      2008 declining Wi-LAN’s offer to license their patents. If Wi-LAN decides to
      pursue claims against us for patent infringement, there can be no assurance
      as
      to the ultimate outcome of this matter. Even if we were to prevail in such
      litigation, the associated costs could deplete our financial resources, and
      our
      management’s attention and resources could be diverted. Alternatively, we may be
      required to seek a license to use certain technology from Wi-LAN. We cannot
      be
      certain that Wi-LAN would provide such a license or, if it did, what the
      economic or other terms of the license would be. Such a license could require
      us
      to make significant payments with respect to past and/or future sales of our
      products, and such payments might significantly reduce the margins on sales
      of
      our products.




***A
      material defect in our products that either delays the commencement of services
      or affects customer networks could seriously harm our credibility and our
      business, and we may not have sufficient insurance to cover any potential
      liability.***




Fixed
      wireless devices are highly complex and frequently contain undetected software
      or hardware errors when first introduced or as new versions are released. We
      have detected and are likely to continue to detect errors and product defects
      in
      connection with new product releases and product upgrades. In the past, some
      of
      our products have contained defects that delayed the commencement of service
      by
      our customers.




If
      our
      hardware or software contains undetected errors, we could
      experience:




·
            delayed
                or lost revenues and reduced market share due to adverse customer
                reactions;


·
            higher
                warranty costs and other costs and expenses due to the need to provide
                additional products and services to a customer at a reduced charge
                or at
                no charge;




29




·
            claims
                for substantial damages against us, regardless of our responsibility
                for
                any failure, which may lead to increased insurance
                costs;


·
            diversion
                of research and development resources to fix errors in the
                field;


·
            negative
                publicity regarding us and our products, which could adversely affect
                our
                ability to attract new customers;


·
            increased
                insurance costs; and


·
            diversion
                of management and development time and
                resources.




Our
      general liability insurance coverage may not continue to be available on
      reasonable terms or in sufficient amounts to cover one or more large claims
      or
      our insurer may disclaim coverage as to any future claim. In addition, our
      products are often integrated with other network components. Incompatibilities
      between our products and these components could result in material harm to
      the
      service provider or its subscribers. These problems could adversely affect
      our
      cash position or our reputation and competitive position.




***We
      have made, and may continue to make, strategic acquisitions or enter into joint
      ventures. If we are not successful in operating or integrating these
      acquisitions or joint ventures, our business, results of operations and
      financial condition may be materially and adversely
      affected.***




In
      the
      past, we have acquired companies that we believed would enhance the expansion
      of
      our business and products, and we may do so in the future. Acquisitions involve
      significant risks and uncertainties, including:




·
            the
                industry may develop in a different direction than anticipated and
                the
                technologies we acquire may not prove to be those we
                need;


·
            the
                future valuations of acquired businesses may decrease from the market
                price we paid for these acquisitions;


·
            the
                revenues of acquired businesses may not offset increased operating
                expenses associated with these
                acquisitions;


·
            potential
                difficulties in integrating new products, personnel, technology,
                software,
                businesses and operations in an efficient and effective
                manner;


·
            significant
                write-offs;


·
            our
                customers or customers of the acquired businesses may defer purchase
                decisions as they evaluate the impact of the acquisitions on our
                future
                product strategy;


·
            potential
                loss of key employees of the acquired
                businesses;


·
            diversion
                of the attention of our senior management from the operation of our
                daily
                business;


·
            entering
                new markets in which we have limited experience and where competitors
                may
                have a stronger market presence;


·
            the
                potential adverse effect on our cash position as a result of all
                or a
                portion of an acquisition purchase price being paid in
                cash;


·
            potential
                issuance of securities that are superior to the rights of holders
                of our
                common stock, or that would dilute our shareholders’ percentage
                ownership;


·
            potential
                assumption and/or incurrence of liabilities and the increased risk
                of
                costly and time-consuming litigation, including stockholder lawsuits;
                and


·
            the
                potential assumption of significant amounts of
                debt.




Our
      inability to successfully operate and integrate newly acquired businesses in
      a
      timely manner could have a material adverse effect on our ability to take
      advantage of further growth in demand for IP-optimized network solutions, if
      any, and other advances in technologies and ultimately our results of operations
      and/or financial condition. Acquisitions are inherently risky, and no assurance
      can be given that our previous or future acquisitions will be successful and
      will not materially adversely affect our business, operating results, or
      financial condition.




30




***Our
      use of the Credit Facility from Silicon Valley Bank presents certain
      risks.***




On
      August
      7, 2007, we and our wholly-owned subsidiary, Airspan Communications Limited,
      entered into an amendment to our August 1, 2006 Loan and Security Agreement
      (the
“Loan and Security Agreement”) with SVB, with respect to a revolving credit
      line. For the term of the credit line, which expires on December 31, 2008,
      we
      may, subject to certain adjustments, borrow up to the lesser of (i) $20 million
      and (ii) 80% of eligible accounts receivable. We are currently drawing on the
      credit line, and we expect to continue to use it in 2008. Although we believe
      the credit facility will increase our financial resources and financial
      flexibility, our use of the credit facility does present certain risks. Our
      ability to borrow under the credit facility is a function of, among other
      things, our base of eligible accounts receivable and the rate at which advances
      are made against eligible receivables (the “Advance Rate”). If the amount or
      quality of our accounts receivable deteriorates or the Advance Rate or
      eligibility criteria are adjusted adversely by SVB, our ability to borrow under
      the credit facility will be directly, negatively affected. If there is an
      adverse adjustment in the borrowing base at a time when we are unable to, within
      three business days, repay SVB the amount by which the borrowing base has been
      decreased, we will likely be in default under the Loan and Security Agreement.
      In addition, the credit facility requires us to satisfy certain financial
      covenants, including the maintenance of tangible net worth (as defined in the
      Agreement) of at least $44 million at December 31, 2007, with such required
      amount to be increased for each fiscal quarter thereafter by 50% of (i) our
      positive net income (ii) proceeds of stock issuances, and (iii) proceeds of
      indebtedness which is subordinated to our obligations to SVB. There is no
      assurance the Company will be able to meet this covenant in future quarters
      as
      required by the Loan and Security Agreement. In the event the Company is unable
      to meet this test in the future, we would plan to seek an amendment or waiver
      of
      this covenant. There can be no assurance that any such waiver or amendment
      would
      be granted. As a result, we cannot provide any assurance that we will be able
      to
      borrow under the Loan and Security Agreement at a time when we most need money
      to fund working capital or other needs and prohibit us from paying dividends
      on
      our capital stock. The credit facility also contains various provisions that
      restrict our use of cash and operating flexibility. These provisions could
      have
      important consequences for us, including (i) causing us to use a portion of
      our
      cash flow from operations for debt repayment and/or service rather than other
      perceived needs, (ii) precluding us from incurring additional debt financing
      for
      future working capital or capital expenditures and (iii) impacting our ability
      to take advantage of significant, perceived business opportunities, such as
      acquisition opportunities or to react to market conditions. Our failure to
      meet
      financial and other covenants could give rise to a default under the Loan and
      Security Agreement. In the event of an uncured default, the Loan and Security
      Agreement provides that all amounts owed to SVB are immediately due and payable
      and that SVB has the right to enforce its security interest in our assets.
      The
      Loan and Security Agreement is secured by collateral, including all of
      our rights and interests in substantially all of our personal property,
      including accounts receivable, inventory, equipment, general intangibles,
      intellectual property, books and records, contract rights and proceeds of the
      above items.




***If
      our stock price falls below $1.00 per share, our common stock may be de-listed
      from the NASDAQ Global Market.***





The
      National Association of Securities Dealers, Inc. has established certain
      standards for the continued listing of a security on the NASDAQ Global Market.
      These standards require, among other things, that the minimum bid price for
      a
      listed security be at least $1.00 per share. Under NASDAQ’s listing maintenance
      standards, if the closing bid price of our common stock remains below $1.00
      per
      share for 30 consecutive trading days, NASDAQ will issue a deficiency notice
      to
      us. If the closing bid price subsequently does not reach $1.00 per share or
      higher for a minimum of ten consecutive trading days during the 180 calendar
      days following the issuance of the deficiency notice from NASDAQ, NASDAQ may
      de-list our common stock from trading on the NASDAQ Global Market.





If
      our
      common stock is to be de-listed from the NASDAQ Global Market, we may apply
      to
      have our common stock listed on the NASDAQ Capital Market. In the event that
      such application is accepted, of which there can be no assurance, we anticipate
      the change in listings may result in a reduction in some or all of the
      following, each of which could have a material adverse effect on our investors:




·
            the
                liquidity of our common stock;




·
            the
                market price of our common stock;




·
            the
                number of institutional investors that will consider investing in
                our
                common stock;




31




·
            the
                number of investors in general that will consider investing in our
                common
                stock;




·
            the
                number of market makers in our common stock;




·
            the
                availability of information concerning the trading prices and volume
                of
                our common stock;




·
            the
                number of broker-dealers willing to execute trades in shares of our
                common
                stock; and




·
            our
                ability to obtain financing for the continuation of our operations.




Should
      our application to the NASDAQ Capital Market be rejected or if we fail to
      continue to satisfy the NASDAQ Capital Market’s continued listing requirements,
      our common stock could be delisted entirely or relegated to trading on the
      over-the-counter-market.




***Our
      projected demand for capital in future periods may increase and our ability
      to
      access capital on acceptable terms could decrease significantly and may
      adversely affect our results of operations and/or business prospects.***





We
      recognize that our projected demand for capital in future periods may increase
      due to a variety of factors, estimates and assumptions. If our projected demand
      for capital materially increases and our then current and/or projected cash
      resources have not increased a comparable amount, we may need to modify our
      existing business plan or seek new capital which may be available only on terms
      that may not be acceptable to the Company. If we are compelled to adopt measures
      to conserve cash resources due to the lack of availability of capital, such
      measures may adversely affect our results of operations and our short term
      and/or long term prospects for growth and profitability.




***Our
      projected demand for capital in future periods may change quickly and may
      adversely affect our results of operations and/or
      prospects.***




We
      recognize that our projected demand for capital in future periods may change
      quickly due to a variety of factors, estimates and assumptions. If our projected
      demand for capital materially increases and our then current and/or projected
      cash resources have not increased a comparable amount, we may need to modify
      our
      existing business plan. If we are ever compelled to adopt measures to conserve
      cash resources, such measures may adversely affect our results of operations
      and
      our short term and/or long term prospects for growth and
      profitability.




***We
      have a significant shareholder whose interests may conflict with other
      shareholders of the Company.***




As
      of the
      date of this report, it is our understanding that Oak Investment Partners XI,
      Limited Partnership (“Oak”) owns all of the outstanding shares of the Company’s
      Series B Preferred Stock (the “Series B Shares”). Based upon our capitalization
      as of December 31, 2007, the Series B Shares are initially convertible into
      a
      total of approximately 27% of our common stock (without giving effect to the
      exercise or conversion of any other outstanding options, warrants or convertible
      securities) and represent approximately 23% of the voting power
      outstanding.




Because
      Oak has the ability to own a significant percentage of our voting power, it
      may
      have considerable influence in determining the outcome of any corporate
      transaction or other matter submitted to our shareholders for approval,
      including the election of directors and approval of mergers, consolidations
      and
      the sale of all or substantially all of our assets. In addition, for as long
      as
      Oak is the holder of at least a majority of the issued and outstanding shares
      of
      Series B Preferred Stock and the number of shares of common stock into which
      the
      then outstanding shares of Series B Preferred Stock are convertible
      represents at least fifteen percent of the total issued and outstanding shares
      of our common stock, Oak will be entitled to elect one member of our Board
      of
      Directors. Mr. Bandel L. Carano, one of our directors has been designated
      by Oak as Oak’s appointee to the Board.




32




So
      long
      as the Series B Preferred Stock is outstanding, we have agreed to refrain from
      taking certain actions without the approval of the holders of a majority of
      the
      then outstanding Series B Preferred Stock voting separately as a class. The
      rights and privileges of the Series B Preferred Stock may have an effect on
      our
      conduct of operations, financing or investing.




In
      addition, upon any liquidation of the Company, certain mergers, reorganizations
      and/or consolidations of the Company into or with another corporation, the
      sale
      by us of all or substantially all of our assets or any transaction or series
      of
      related transactions in which a person, entity or group acquires 50% or more
      of
      the combined voting power of our then outstanding securities, the holders of
      the
      Series B Preferred Stock will have a claim against our assets senior to the
      claim of the holders of common stock in an amount equal to $290.00 per share
      of
      Series B Stock (as appropriately adjusted for any combinations, divisions,
      or
      similar recapitalizations affecting the Series B Preferred Stock after
      issuance).




**ITEM
      1B. UNRESOLVED STAFF COMMENTS**




None.




**ITEM
      2. PROPERTIES**




Our
      corporate headquarters are located in Boca Raton, Florida. This office consists
      of approximately 5,400 square feet of space leased pursuant to a lease that
      will
      expire in March 2011.




Our
      primary locations of operations and product development are in Uxbridge in
      the
      United Kingdom and in Airport City in Israel. In Uxbridge, we lease two
      facilities of approximately 17,000 and 12,000 square feet. These leases expire
      in 2010. In Israel we lease two facilities of approximately 13,800 and 10,300
      square feet. The lease for 13,800 square feet expires in July 2008 and the
      one
      for 10,300 square feet will continue until we move into a new facility later
      in
      2008, when we will combine our Israel location into one office that will contain
      approximately 35,500 square feet.





**ITEM
      3. LEGAL PROCEEDINGS**





Beginning
      in July 2001, the Company, its President and Chief Executive Officer Eric D.
      Stonestrom, its former Senior Vice President and Chief Financial Officer, its
      Chairman Matthew Desch and its former Executive Vice President and Chief
      Operating Officer (the "Individual Defendants") were named as defendants in
      a
      class action complaint alleging violations of the federal securities laws in
      the
      United States District Court for the Southern District of New York. A
      Consolidated Amended Complaint, which is now the operative complaint, was filed
      on April 19, 2002.




The
      purported class action alleges violations of Sections 11 and 15 of the
      Securities Act of 1933 (the "1933 Act") and Sections 10(b) and 20(a) of the
      Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated
      thereunder. The essence of the complaint is that defendants issued and sold
      the
      Company's common stock pursuant to the Registration Statement for the July
      20,
      2000 Initial Public Offering ("IPO") without disclosing to investors that
      certain underwriters in the offering had solicited and received excessive and
      undisclosed commissions from certain investors. The complaint also alleges
      that
      the Registration Statement for the IPO failed to disclose
      that the underwriters allocated Company shares in the IPO to customers in
      exchange for the customers' promises to purchase additional shares in the
      aftermarket at pre-determined prices above the IPO price, thereby maintaining,
      distorting and/or inflating the market price for the shares in the aftermarket.
      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. This dismissal disposed of the Section 15 and 20(a) control person
      claims without prejudice, since these claims were asserted only against the
      Individual Defendants. On February 19, 2003, the Court dismissed the Section
      10(b) claim against the Company, but denied the motion to dismiss the Section
      11
      claim. On October 13, 2004, the Court certified a class in six of the
      approximately 309 other nearly identical actions that are part of the
      consolidated litigation. These six cases are the class certification "focus
      cases." The Plaintiffs selected these six cases, which do not include Airspan.
      On December 5, 2006, the Second Circuit vacated an order by the district court
      granting class certification in the six focus cases. On April 6, 2007, the
      Second Circuit denied a petition for rehearing filed by Plaintiffs, but noted
      that Plaintiffs could ask the District Court to certify more narrow classes
      than
      those that were rejected.




33





Prior
      to
      the Second Circuit's December 5, 2006 ruling, a majority of the issuers,
      including the Company, and their insurers, had submitted a settlement agreement
      to the Court for approval. In light of the Second Circuit opinion, the parties
      agreed that the settlement could not be approved. On June 25, 2007, the district
      court approved a stipulation filed by the plaintiffs and the issuers which
      terminated the proposed settlement. On August 14, 2007, the plaintiffs filed
      amended complaints in the six focus cases. The amended complaints include a
      number of changes, such as changes to the definition of the purported class
      of
      investors, and the elimination of the individual defendants as defendants.
      The
      six focus case issuers and the underwriters named as defendants in the focus
      cases filed motions to dismiss the amended complaints against them on November
      14, 2007. On September 27, 2007, the plaintiffs filed a motion for class
      certification in the six focus cases. On December 21, 2007, the issuers and
      the
      underwriters filed papers opposing plaintiffs' class certification motion,
      and
      plaintiffs filed an opposition to defendants' motions to dismiss. On January
      28,
      2008, the issuers and the underwriters filed reply briefs in further support
      of
      their motions to dismiss the amended complaints. Due to the inherent
      uncertainties of litigation, we cannot accurately predict the outcome of this
      matter. We cannot predict whether we will be able to renegotiate a settlement
      that complies with the Second Circuit's mandate, nor can we predict the amount
      of any such settlement and whether that amount would be greater than the
      Company's insurance coverage. If Airspan is found liable, the Company is unable
      to estimate or predict the potential damages that might be awarded, whether
      such
      damages would be greater than Airspan's insurance coverage, and whether such
      damages would have a material impact on its results of operations or financial
      condition in any future period.




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




We
      and
      other WiMAX manufacturers have received letters from Wi-LAN raising various
      patent infringement claims and offering licenses of various Wi-LAN patents.
      We
      received a letter, dated November 9, 2006, offering us licenses of various
      Wi-LAN patents. After reviewing Wi-LAN’s claims, on February 1, 2007, we sent a
      letter to Wi-LAN notifying them that we did not believe that we require a
      license from Wi-LAN. On May 29, 2007, we received a follow up letter and
      materials from Wi-LAN which continued to assert those claims.  We also
      received an e-mail relating to this matter on November 21, 2007.  
Once again the Company has carefully reviewed this matter, and in consultation
      with its patent counsel sent a further letter on January 30, 2008 declining
      Wi-LAN’s offer to license their patents. However, there can be no assurance as
      to the ultimate outcome of this matter.




The
      Company has been dealing with its customer Deutsche Breitband Dienste GmbH
      (“DBD”) since 2005. DBD recently advised the Company that as a result of a
      strategic change in their business undertaken at the direction of their board,
      DBD would not accept future deliveries of WiMAX units. The referenced WiMAX
      units have a value of approximately $4.6 million in accordance with the terms
      of
      a purchase order, which has a total value of approximately $10.8 million. The
      Company has acquired or made commitments to suppliers for inventory related
      to
      this contract in the amount of $2.1 million. At December 31, 2007 the accounts
      receivable balance due from DBD to Airspan under its agreements with DBD was
      $4.7 million payable over the first three quarters of 2008. In January 2008,
      DBD
      also advised the Company that they intend to offset $1 million related to
      returns of products under the Company’s warranty procedure. The Company
      continues to repair and return units under the warranty procedure. The Company
      does not agree with DBD’s position on either the cancellation of the purchase
      order commitment or its attempted unilateral reduction of the accounts
      receivable balance. On February 1, 2008, the Company sent a letter before action
      to DBD warning that court proceedings would be commenced if the Company’s
      demands were not met. While the outcome of litigation cannot be predicted with
      certainty, the Company believes that there is a strong likelihood that Airspan
      would be able to recover judgment in the English courts for the full amount
      of
      the outstanding accounts receivable balance, together with an amount for
      damages.




34




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




None




**PART
      II**




**ITEM
      5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES**




Our
      common stock is traded on the NASDAQ Global Market under the symbol “AIRN”. The
      price range per share, reflected in the table below, is the highest and lowest
      closing price for our stock as reported by the NASDAQ Global Market during
      each
      quarter of the last two fiscal years.





**High**
            
            **Low****2007**Fourth
                quarter
            
            $
            2.77
            
            $
            1.57Third
                quarter
            
            
            3.73
            
            
            2.01Second
                quarter
            
            
            4.05
            
            
            3.15First
                quarter
            
            
            5.03
            
            
            3.51**2006**Fourth
                quarter
            
            $
            3.90
            
            $
            2.61Third
                quarter
            
            
            3.17
            
            
            1.76Second
                quarter
            
            
            6.77
            
            
            2.42First
                quarter
            
            
            6.75
            
            
            5.39





At
      March
      7, 2008, the closing price per share of our common stock was $1.04 and, based
      upon the number of record holders, we believe we had approximately 11,500
      beneficial shareholders at that date.




**DIVIDENDS**




We
      have
      never declared or paid cash dividends on our common stock. We currently plan
      to
      retain any earnings to finance the growth of our business rather than to pay
      cash dividends on our common stock. Payments of cash dividends on our common
      stock and Series B preferred stock in the future will depend on our financial
      condition, results of operations, and capital requirements as well as other
      factors deemed relevant by our board of directors. Our current debt agreement
      with SVB prohibits us from paying dividends on our common stock and Series
      B
      preferred stock without the consent of our lenders. Our Series B preferred
      stock
      also restricts us from paying dividends on common stock.




In
      2006,
      we recognized a non-cash charge of $9.2 million for a deemed dividend to
      preferred stockholders associated with the beneficial conversion feature of
      the preferred stock issued in the third quarter 2004, comprised of $8.3 million
      related to the Series B Preferred Stock issued in respect of Oak’s exchange of
      its Series A Preferred Stock and $0.9 million related to the Series B Preferred
      Stock issued in respect of Oak’s cash investment.




35





In
      2007,
      we recognized a non-cash charge of $4.7 million for a deemed dividend to our
      Series B preferred stockholders as a result of the issuance of 17,250,000 shares
      of common stock in a public offering. As the sale price of these shares to
      the
      underwriters on a per share basis was less than $2.90 per share, there was
      an
      anti-dilution adjustment to the number of shares of common stock issuable on
      conversion of the Series B Preferred Stock.




**PERFORMANCE
      GRAPH**





The
      following graph compares the cumulative 5-year total return provided
      shareholders on Airspan Networks Inc.'s common stock relative to the cumulative
      total returns of the NASDAQ Composite index and the NASDAQ Telecommunications
      index. An investment of $100 (with reinvestment of all dividends) is assumed
      to
      have been made in our common stock and in each of the indices on December 31,
      2002 and its relative performance is tracked through December 31, 2007.










*$100
      invested on 12/31/02 in stock or index, including reinvestment of dividends.
      Fiscal year ending December 31.




36




**12/02**
            
            **12/03**
            
            **12/04**
            
            **12/05**
            
            **12/06**
            
            **12/07****Airspan
                Networks Inc.**
            
            
            **100.00**
            
            
            360.82
            
            
            559.79
            
            
            586.60
            
            
            381.44
            
            
            181.44**NASDAQ
                Composite**
            
            
            **100.00**
            
            
            150.01
            
            
            162.89
            
            
            165.13
            
            
            180.85
            
            
            198.60**NASDAQ
                Telecommunications**
            
            
            **100.00**
            
            
            168.74
            
            
            182.23
            
            
            169.09
            
            
            216.03
            
            
            235.85




*The
      stock price performance included in this graph is not necessarily indicative
      of
      future stock price performance.*




**RELATED
      SHAREHOLDER MATTERS**





**Recent
      Sales of Unregistered Securities**




In
      September 2004, the Company entered into a Preferred Stock Purchase Agreement
      with Oak Investment Partners XI Limited Partnership ("Oak") pursuant to which
      the Company sold 73,000 shares of Series A Preferred Stock to Oak for
      $29,200,000. These shares of Series A Preferred Stock were initially convertible
      into 7.3 million shares of common stock. The shares of Series A Preferred Stock
      were issued pursuant to the exemption from registration provided by Section
      4(2)
      of the Securities Act of 1933, as amended.





In
      September 2006, the Company consummated the private sale (the "Private
      Placement") of 200,690 shares of Series B Preferred Stock (the "Series B
      Shares") to Oak. Oak received 100,000 of the Series B Shares in exchange for
      a
      $29 million cash investment and 100,690 of the Series B Shares in exchange
      for
      Oak's transfer to the Company of all 73,000 shares of Series A Preferred Stock
      held by Oak prior to the closing of the Private Placement, or 1.379 of the
      Series B Shares for each share of Series A Preferred Stock transferred by Oak
      to
      the Company. The shares of Series B Preferred Stock were issued pursuant to
      the
      exemption from registration provided by Section 4(2) of the Securities Act
      of
      1933, as amended. At December 31, 2007, the Series B Preferred Stock was
      convertible into common stock at a conversion price of $2.69.





**ITEM
      6. SELECTED FINANCIAL DATA**




The
      following selected consolidated financial data should be read together with
      our
      consolidated financial statements and related notes and “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations” included
      elsewhere in this report.




**Year**
            
            **Year**
            
            **Year**
            
            **Year**
            
            **Year****Ended**
            
            **ended**
            
            **ended**
            
            **ended**
            
            **ended****December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **December
                31,****2003
                (1)**
            
            **2004**
            
            **2005
                (2)(3)**
            
            **2006**
            
            **2007**(**in
                thousands, except for per share data)****Consolidated
                Statements of Operations Data:**Revenue
            
            $
            30,651
            
            $
            94,647
            
            $
            110,966
            
            $
            127,812
            
            $
            94,970Cost
                of revenue
            
            
            27,691
            
            
            67,243
            
            
            79,467
            
            
            94,948
            
            
            70,134Gross
                profit
            
            
            2,960
            
            
            27,404
            
            
            31,499
            
            
            32,864
            
            
            24,836Research
                and development
            
            
            14,395
            
            
            18,794
            
            
            21,157
            
            
            24,797
            
            
            24,596Sales
                and marketing, including bad debts
            
            
            11,335
            
            
            11,562
            
            
            12,579
            
            
            19,460
            
            
            16,075General
                and administrative
            
            
            8,741
            
            
            11,042
            
            
            12,682
            
            
            16,039
            
            
            14,947Amortization
                of intangibles
            
            
            172
            
            
            723
            
            
            942
            
            
            1,060
            
            
            936Restructuring
                provisions
            
            
            750
            
            
            413
            
            
            1,150
            
            
            2,183
            
            
            (689
            )Total
                operating expenses
            
            
            35,393
            
            
            42,534
            
            
            48,510
            
            
            63,539
            
            
            55,865Loss
                from operations
            
            
            (32,433
            )
            
            (15,130
            )
            
            (17,011
            )
            
            (30,675
            )
            
            (31,029
            )Interest
                and other income, net
            
            
            2,983
            
            
            3,217
            
            
            1,388
            
            
            1,227
            
            
            661Loss
                before income taxes
            
            
            (29,450
            )
            
            (11,913
            )
            
            (15,623
            )
            
            (29,448
            )
            
            (30,368
            )Income
                taxes benefit/(provision)
            
            
            (5
            )
            
            1,938
            
            
            546
            
            
            246
            
            
            (94
            )Net
                loss
            
            
            (29,455
            )
            
            (9,975
            )
            
            (15,077
            )
            
            (29,202
            )
            
            (30,462
            )Deemed
                dividend associated with beneficial conversion of preferred stock
            
            
            -
            
            
            (10,439
            )
            
            -
            
            
            (9,179
            )
            
            (4,670
            )Net
                loss attributable to common stockholders
            
            $
            (29,455
            )
            $
            (20,414
            )
            $
            (15,077
            )
            $
            (38,381
            )
            $
            (35,132
            )Net
                loss attributable to common stockholders per share - basic and
                diluted
            
            $
            (0.84
            )
            $
            (0.56
            )
            $
            (0.39
            )
            $
            (0.96
            )
            $
            (0.77
            )Shares
                used to compute net loss attributable to common stockholders per
                share-basic and diluted
            
            
            35,073,315
            
            
            36,441,932
            
            
            38,736,939
            
            
            40,026,411
            
            
            45,387,386





37




**December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **December
                31,****2003
                (1)**
            
            **2004**
            
            **2005
                (2)(3)**
            
            **2006**
            
            **2007****Consolidated
                Balance Sheet Data:**
            
            **(in
                thousands)**Cash,
                cash equivalents and short-termInvestments
            
            $
            33,926
            
            $
            66,296
            
            $
            53,495
            
            $
            27,234
            
            $
            36,712Working
                capital
            
            
            36,603
            
            
            65,476
            
            
            44,196
            
            
            47,422
            
            
            54,105Total
                assets
            
            
            83,272
            
            
            115,198
            
            
            120,452
            
            
            110,554
            
            
            114,021Long-term
                debt
            
            
            -
            
            
            -
            
            
            1,349
            
            
            1,707
            
            
            1,978Stockholders'
                equity
            
            
            49,013
            
            
            73,165
            
            
            64,611
            
            
            67,702
            
            
            73,525




(1)
            On
                December 23, 2003 we acquired the fixed wireless access business
                of Nortel
                Networks (“Proximity”).





(2)
            On
                June 16, 2005 we acquired ArelNet Ltd of Israel
                (“ArelNet”).





(3)
            On
                November 9, 2005, we acquired Radionet Oy, Ltd of Finland (“Radionet”).




38




**ITEM
      7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




*The
      following discussion and analysis should be read in conjunction with our
      consolidated financial statements and the related notes included elsewhere
      in
      this report. See "Item 1A. RISK FACTORS" for further discussion of the most
      significant risks that affect our business, financial condition, results of
      operations and/or cash flows.*





**Overview**





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




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




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




Since
      1998 we have evolved from being the supplier of one line of broadband wireless
      access (“BWA”) equipment that utilized our proprietary technology to a supplier
      of a highly diversified suite of BWA equipment, including certain equipment
      that
      has been developed to conform with WiMAX and the WiFi standards. The
      diversification of our product portfolio has been the product of both internal
      research and development and targeted acquisitions. See "Item 1. BUSINESS -
      Business Overview."





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





The
      market for BWA equipment has been characterized by rapid technological
      developments and evolving industry standards. Our future success will therefore
      depend on our ability to adapt to these new standards and to successfully
      introduce new technologies that meet customer preferences. We anticipate that
      we
      will need to continue to devote considerable resources to research and
      development to maintain and/or improve upon our competitive position. See "Item
      1A. RISK FACTORS - Our industry is subject to change as a result of emerging
      new
      technologies and industry standards" and "We operate in highly dynamic and
      volatile industries....."





Since
      July 1, 2003, we have acquired three suppliers of BWA equipment. We intend
      to
      continue our strategy of expanding our business through, among other things,
      acquisitions of other businesses and technologies and joint ventures.
      Accordingly, we anticipate our future results of operation and financial
      condition may be directly or indirectly materially affected by our acquisition
      and joint venture effort. Acquisitions are inherently risky and our future
      growth may depend on our ability to successfully acquire, operate and integrate
      new businesses into our company. See "Item 1. BUSINESS - Business Overview"
      and
      "Item 1A. RISK FACTORS - We have made, and may continue to make, strategic
      acquisitions...."




39





Our
      revenue increased from $111.0 million in 2005 to $127.8 million in 2006, but
      decreased to $95.0 million in 2007. The decrease in 2007 reflected the
      significant decrease in sales of legacy products. We have incurred net losses
      attributable to common stockholders of $15.1 million, $38.4 million and $35.1
      million in 2005, 2006 and 2007, respectively. Since becoming an independent
      company, we have generated significant net losses and negative cash flow. We
      expect to continue to have negative cash flows and net losses in 2008. We had
      an
      accumulated deficit of $276 million as of December 31, 2007.





Our
      revenue from the last three years, shown below, details the transition from
      our
      legacy products to our WiMAX businesses, which has caused significant shifts
      in
      our revenue stream and fluctuations in revenues as the relative contribution
      of
      our WiMAX business increases. In addition, the sales cycle for new WiMAX
      customers is somewhat longer than for our legacy business, resulting in longer
      periods before revenues can be recognized from new WiMAX customers.





*Consolidated
                statement of operations data:*




($
                in thousands except per share data)
            
            **2005**
            
            **2006**
            
            **2007**Revenue
                - WiMAX
            
            $
            4,489
            
            $
            45,753
            
            $
            64,277Revenue
                - Non-WiMAX
            
            
            106,477
            
            
            82,059
            
            
            30,693Total
                Revenue
            
            
            110,966
            
            
            127,812
            
            
            94,970Cost
                of revenue
            
            
            (79,467
            )
            
            (94,948
            )
            
            (70,134
            )Gross
                profit
            
            
            31,499
            
            
            32,864
            
            
            24,836Margin
            
            
            28
            %
            
            26
            %
            
            26
            %Total
                operating expenses
            
            
            48,510
            
            
            63,539
            
            
            55,865Loss
                from operations
            
            
            (17,011
            )
            
            (30,675
            )
            
            (31,029
            )Net
                interest and other income
            
            
            1,388
            
            
            1,227
            
            
            661Loss
                before income taxes
            
            
            (15,623
            )
            
            (29,448
            )
            
            (30,368
            )Income
                tax benefit/(provision)
            
            
            546
            
            
            246
            
            
            (94
            )Net
                loss before deemed dividend
            
            
            (15,077
            )
            
            (29,202
            )
            
            (30,462
            )Deemed
                dividend associated withpreferred
                stock
            
            
            -
            
            
            (9,179
            )
            
            (4,670
            )Net
                loss attributable to common stockholders
            
            
            ($15,077
            )
            
            ($38,381
            )
            
            ($35,132
            )Net
                loss attributable to commonstockholders
                per share - basic and diluted
            
            
            ($0.39
            )
            
            ($0.96
            )
            
            ($0.77
            )Weighted
                average shares outstanding - basic and diluted
            
            
            38,736,939
            
            
            40,026,411
            
            
            45,387,386




40




We
      generate revenue primarily from sales of our systems and from services related
      to support activities. Revenue from services in 2007 continued to be under
      10%
      of our total revenue. See “Critical Accounting Policies and Estimates” below for
      a discussion of our revenue recognition policies.




Customer
      service contracts are generally of a short to medium term in nature, mostly
      for
      days and weeks, with a small number extending beyond a year. With larger
      customers, we may agree in specific contracts to provide technical support
      and
      repair and maintenance services for longer periods. Service contracts are
      typically sold separately from sales of our systems and typically provide
      services other than what is included in the basic warranty.




We
      sell
      our products primarily through our direct sales force and, to a lesser extent,
      through distribution channels. We also sell through independent agents and
      resellers in markets where we do not have a direct sales presence and to OEMs,
      who may sell our products under their name. Our sales cycle is typically long
      and unpredictable and typically varies from one month to two years, often
      involving extensive testing and evaluation by prospective customers, which
      makes
      it difficult for us to anticipate the quarter in which particular sales may
      occur.




Our
      top
      ten customers accounted for approximately 63%, 72% and 71% of our total revenue
      in 2007, 2006 and 2005, respectively. In the year ended December 31, 2007,
      Axtel, Yozan and DBD accounted for 15%, 12% and 10% of our revenues,
      repectively, and in 2006, Axtel, Yozan and DBD represented approximately 26%,
      19%, and 0% of our revenues, respectively.  We
      had no
      other greater than 10% customers in either 2007 or 2006.




We
      anticipate that our dependence on our ten largest customers will continue.
      In
      2008, we expect lower revenue from Axtel and minimal revenue from Yozan. As
      discussed further in “ITEM 3. LEGAL PROCEEDINGS”, we may commence legal action
      against DBD and therefore the amount of 2008 sales to DBD, if any, is uncertain
      at this time. See "Item 1A. RISK FACTORS”




Our
      non-U.S. sales accounted for 91%, 92% and 93% of our total revenue in 2007,
      2006
      and 2005, respectively. The following table identifies the percentage of our
      revenue by customer geographic region in the periods identified.





**Percentage
                of Revenue****Years
                ended December 31,****Geographic
                Area**
            
            **2005**
            
            **2006**
            
            **2007**United
                States
            
            
            7.0
            
            
            7.7
            
            
            9.0Asia
                Pacific
            
            
            10.3
            
            
            30.2
            
            
            20.4Europe
            
            
            12.9
            
            
            18.7
            
            
            29.0Africa
                and Middle East
            
            
            4.7
            
            
            3.6
            
            
            10.4South
                and Central America and the Caribbean
            
            
            65.1
            
            
            39.8
            
            
            31.2Total
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %




For
      further information on our business and geographic segments, see Note 17 to
      the
      Consolidated Financial Statements.




41





Cost
      of
      revenue consists of component and material costs, direct labor costs, warranty
      costs, royalties, overhead related to manufacture of our products and customer
      support costs. Our gross margin is affected by changes in our product mix both
      because our gross margin on base stations and related equipment is higher than
      the gross margin on subscriber terminals, and because our different product
      lines generate different margins. In addition, our gross margin is affected
      by
      changes in the average selling price of our systems and volume discounts granted
      to significant customers. We expect the average selling prices of our products
      to decline and we intend to continue to implement product cost reductions and
      develop and introduce new products or product enhancements in an effort to
      maintain or increase our gross margins. Further, we expect to derive an
      increasing proportion of our revenue from the sale of our integrated systems
      through distribution channels. Revenue derived from these sales channels
      typically carries a lower gross margin than direct sales.





Research
      and development expenses consist primarily of salaries and related costs for
      personnel and expenses for design, development, testing facilities and equipment
      depreciation. These expenses also include costs associated with product
      development efforts, including consulting fees and prototyping costs from
      initial product concept to manufacture and production as well as sub-contracted
      development work. We expect to continue to make substantial investments in
      research and development.





Sales
      and
      marketing expenses consist of salaries and related costs for personnel, sales
      commissions, consulting and agent’s fees and expenses for advertising, travel,
      technical assistance, trade shows, and promotional and demonstration materials.
      We expect to continue to incur substantial expenditures related to sales and
      marketing activities, including costs associated with the recruitment of
      additional sales and marketing personnel and the expansion of our distribution
      channels.





General
      and administrative expenses consist primarily of salaries and related expenses
      for our personnel, audit, professional and consulting fees and facilities costs.





To
      date,
      inflation has not had a material impact on the Company's business, however,
      we
      are exposed to exchange rates as discussed further below.





**Critical
      Accounting Policies and Estimates**





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our Consolidated Financial Statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      assumptions that affect the reported amounts of assets and liabilities, the
      disclosure of contingent liabilities at the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting period.
      On an
      on-going basis, we evaluate the effectiveness of our estimates and judgments,
      including those related to: revenue recognition; allowance for doubtful
      accounts, inventory reserves; warranty reserve; restructuring costs; purchase
      accounting, valuation of goodwill and other intangibles; income taxes;
      derivative instruments; legal proceedings and stock compensation.





We
      base
      our estimates and judgments on historical experience and on various other
      factors that we believe to be reasonable under the circumstances, the results
      of
      which form the basis for making judgments about the carrying values of assets
      and liabilities that are not readily apparent from other sources. Actual results
      may differ from these estimates under different assumptions or conditions and
      may change as future events occur.




We
      believe the following critical accounting policies are dependent on significant
      judgments and estimates used in the preparation of our consolidated financial
      statements.




*Revenue
      recognition*




Our
      material revenue streams are the result of a range of activities. Management
      must use significant judgment in determining how to apply the current accounting
      standards and interpretations. Our revenues may fluctuate from period to period
      based on the mix of products sold and services provided as well as the customers
      involved and the complexity of contractual terms.




42




Our
      revenue recognition policy reflects the fact that our revenue streams are
      primarily derived from (i) sales of hardware that do not require significant
      customization and (ii) services rendered (e.g. extended warranty, product
      maintenance, radio planning, consulting services, etc). In any one arrangement,
      we sometimes generate revenue from more than one revenue stream. In those
      instances, there is an added level of complexity in determining the appropriate
      method of revenue recognition. Management must apply significant judgment in
      determining how to apply the current accounting standards and interpretations
      related to revenue recognition.




Subject
      to the more specific revenue recognition policies discussed below, we recognize
      revenue when all of the following conditions are met: persuasive evidence of
      an
      arrangement with a customer exists; delivery has occurred or services have
      been
      rendered; the price for the product or service is fixed or determinable; and
      collection of the receivable is reasonably assured.





For
      new
      products, if we can reasonably and reliably estimate the amount of warranty
      obligations, we recognize revenue on sales of such products that otherwise
      meet
      the criteria for revenue recognition.





The
      following are our specific revenue recognition policies:





*Product
      Revenue:* Revenue
      from product sales, including sales to distributors and resellers, is generally
      recognized at the time the product is delivered to the customer. Revenue is
      deferred when customer acceptance is required, rights of return exist or other
      significant obligations remain that are essential to the functionality of the
      delivered products. Revenue is then recognized when these conditions have been
      satisfied. The estimated cost of any post-sale obligations, including basic
      product warranties, is accrued at the time revenue is recognized based on a
      number of factors, which include historical experience and known conditions
      that
      may impact future warranty costs. Revenue from sales to resellers and
      distributors is generally recognized only when the resellers are creditworthy
      in
      their own right or have identified creditworthy end customers for our products
      and services.





*Service
      Revenue:* Revenue
      from time-and-material service contracts is recognized once the services have
      been performed. Revenue from service contracts pursuant to which we provide
      services over a period of time is recognized ratably over the given contract
      period. Revenue is recognized on fixed-price service contracts when the services
      have been completed.





*Revenue
      Arrangements that include Multiple Elements:* In
      certain cases, we enter into agreements with customers whereby we are obligated
      to deliver multiple products and/or multiple services (multiple elements).
      In
      these transactions, we allocate the total revenue to be earned under the
      arrangement among the various elements based on their relative fair value.
      Revenue for these transactions is recognized on each element when the revenue
      recognition criteria have been met for that element.





*Applicability
      of Statement of Position 97-2, Software Revenue Recognition, (and subsequent
      modifications) “SOP 97-2”:* Since
      inception, Airspan has accounted for the sale of products principally under
      SAB
      104 and EITF 00-21. Software related to the products has been considered
      incidental to the product offering as a whole. In the future, we anticipate
      that
      some of our products may include software that is not considered incidental
      to
      our products. In those cases, we will account for those arrangements under
      the
      provisions of SOP 97-2.




*Contract
      Accounting* :
      When
      the Company performs a specific development type contract for a customer subject
      to contract accounting under SOP 81-1, we may adopt the percentage-of-completion
      method or the completed-contract method to recognize revenues under the
      contract. Alternatively, where contracts under which separate units of output
      are produced, where progress can be measured on the basis of units of work
      completed, output is used to measure results directly and is generally the
      best
      measure of progress toward completion in circumstances in which a reliable
      measure of output can be established and the agreement contains milestones
      at
      which nonrefundable payments will be made by the customer.




43





*Allowance
      for doubtful accounts*




We
      are
      required to assess the collectibility of our accounts receivable balances.
      A
      considerable amount of judgment is required in assessing the ultimate
      realization of these receivables including, but not limited to, the current
      creditworthiness of each customer. Significant changes in required reserves
      may
      occur in the future due to the market environment. Should we consider it
      necessary to increase the level of reserves required for a particular customer
      or customers, then additional charges will be recorded in the
      future.




*Inventory
      reserves*




We
      value
      inventory at the lower of cost or market value. As a result, we exercise
      judgment as to the level of provisions required for excess and obsolete
      inventory. These judgments are based on our assumptions about future demand
      and
      market conditions. During recent periods we have made provisions against
      inventory reflecting the decline in our expectations of the demand for certain
      of our products. Should we decide in the future that actual market conditions
      have become less favorable, or should our assumptions change due to market
      conditions, additional inventory provisions may be required.




*Warranty
      reserves*




Typically
      our products are covered by a warranty for periods ranging from one to two
      years. In a limited number of cases, warranties extend beyond two years. We
      accrue a warranty reserve for estimated costs to provide warranty services.
      Our
      estimate of costs required to fulfill our warranty obligations is based on
      historical experience and expectation of future conditions, as well as
      back-to-back warranty coverage that we have with our contract manufacturers.
      To
      the extent we experience increased warranty claim activity, increased costs
      or
      our assessment of future conditions change, our warranty accrual will increase,
      which will result in decreased gross profit.




*Restructuring
      costs*




During
      2005 and 2006, we recorded restructuring charges arising from our cost-reduction
      programs and established reserves which include estimates pertaining to employee
      termination costs, the loss on excess facilities and the write down of assets
      to
      be disposed of as part of the restructuring. When providing for restructuring
      charges, we make estimates as to the expected costs to be incurred. Estimates
      of
      future income from sub-letting excess facilities are made that offset expected
      future costs. Although we do not anticipate significant changes, the actual
      costs may differ from the amount of the reserves.




*Purchase
      accounting*




In
      connection with acquisitions, we assess the fair value of assets acquired and
      liabilities assumed. Items such as accounts receivable, inventories, fixed
      assets, intangible assets and accrued liabilities require a high degree of
      judgment involving assumptions and estimates including future cash flows and
      discount rates. In certain situations, where we deem necessary, we may use
      third
      parties to assist us with such valuations. We used the purchase method of
      accounting for our acquisitions, for which adjustments are made to the initial
      purchase price allocation for up to a year from the acquisition date. The
      purchase price allocation for the Arelnet acquisition was finalized in 2005,
      and
      amounts recorded for the Radionet acquisition were finalized in 2006. See Note
      2
      to the Consolidated Financial Statements for further information.





*Valuation
      of goodwill and other intangible assets*





In
      accordance with Statement of Financial Accounting Standards No. 142, *Goodwill
      and Other Intangible Assets* (“SFAS
      No. 142”), and Statement of Financial Accounting Standards No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      (“SFAS
      No. 144”), we performed our annual goodwill impairment review and the review of
      long-lived assets for impairment during the fourth quarter of 2007. The result
      of these reviews determined that no impairment of goodwill or other intangible
      or long-lived assets needed to be recorded during the year ended December 31,
      2007. In these reviews, we may make various assumptions regarding estimated
      future cash flows and other factors to determine the fair value of goodwill
      and
      other intangible and long-lived assets. If these estimates or related
      assumptions change in the future, we may be required to record an impairment
      charge that would adversely affect our results.




44




*Income
      taxes*




We
      account for income taxes in accordance with Statement of Financial Accounting
      Standard No. 109, or FAS 109, Accounting for Income Taxes, as
      clarified by FASB Interpretation No. 48, Accounting for Uncertainty in
      Income Taxes (“FIN 48”). Under this method, deferred income taxes are
      determined based on the estimated future tax effects of differences between
      the
      financial statement and tax basis of assets and liabilities given the provisions
      of enacted tax laws. Deferred income tax provisions and benefits are based
      on
      changes to the assets or liabilities from year to year. In providing for
      deferred taxes, we consider tax regulations of the jurisdictions in which we
      operate, estimates of future taxable income, and available tax planning
      strategies. If tax regulations, operating results or the ability to implement
      tax-planning strategies vary, adjustments to the carrying value of deferred
      tax
      assets and liabilities may be required. Valuation allowances are recorded
      related to deferred tax assets based on the “more likely than not” criteria of
      FAS No. 109.




FIN 48
      requires that we recognize the financial statement benefit of a tax position
      only after determining that the relevant tax authority would more likely than
      not sustain the position following an audit. For tax positions meeting the
      “more-likely-than-not” threshold, the amount recognized in the financial
      statements is the largest benefit that has a greater than 50 percent
      likelihood of being realized upon ultimate settlement with the relevant tax
      authority.




*Derivative
      instruments*




We
      are
      subject to fluctuations in the exchange rates of certain currencies to the
      U.S.
      dollar, particularly U.K. pounds sterling and New Israeli Shekels. From time
      to
      time, we have entered into forward exchange contracts as a cash flow hedge
      of a
      portion of our pounds sterling operating expenses, primarily salary and facility
      lease expenses. We make assumptions with respect to the amount and timing of
      entering into these contracts and the number of periods that we hedge, and
      we
      consider the value of our foreign currency obligations and the forecasted
      exchange rate. Should the spot rate at the maturity of the contract be more
      favorable than the forward rate, we would incur an economic loss on that
      particular contract since we would pay more for the foreign currency than we
      would have without the contract. (See "ITEM 7A. QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK").





*Legal
      proceedings*




We
      are
      subject to class action complaints related to alleged false and misleading
      information in the Registration Statement and Prospectus used in July 19, 2000
      and we may also face litigation for labor, intellectual property, contract
      and
      other matters (see “ITEM 3. LEGAL PROCEEDINGS”). We are required to assess the
      likelihood of adverse judgments or outcomes to these matters as well as
      potential ranges of probable losses. A determination of the amount of reserves
      required, if any, for these contingencies are made after careful analysis of
      each individual issue. The required reserves may change in the future due to
      changes in circumstances within each case.





*Stock
      Compensation*





Prior
      to
      January 1, 2006, we accounted for awards issued under these plans under the
      recognition and measurement principles of Accounting Principles Board (“APB”)
      Opinion No. 25, “Accounting for Stock Issued to Employees”, and related
      interpretations. In 2005, we valued stock-based employee compensation using
      the
      intrinsic value method. In December 2004, the Financial Accounting Standards
      Board (“FASB”) issued Statement No. 123R, Share-Based Payment (“SFAS 123R”).
      This Statement eliminated the use of the intrinsic value method described in
      APB
      Opinion No. 25, and requires an entity to measure the cost of employee services
      received in exchange for an award of equity instruments based on the grant-date
      fair value of the award. That cost will be recognized over the period during
      which an employee is required to provide service in exchange for the award.
      We
      adopted SFAS 123R as of January 1, 2006, using the modified prospective
      transition method. The application of SFAS 123R involves significant judgment,
      including expected term, volatility and forfeiture rate.




45





**Results
      of Operations**





The
      following table provides operating data as a percentage of revenue for the
      periods presented.




**Years
                ended December 31,****2005**
            
            **2006**
            
            **2007****%**
            
            **%**
            
            **%**Revenue
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenue
            
            
            71.6
            %
            
            74.3
            %
            
            73.8
            %Gross
                profit
            
            
            28.4
            %
            
            25.7
            %
            
            26.2
            %Operating
                expenses:Research
                and development
            
            
            19.1
            %
            
            19.4
            %
            
            25.9
            %Sales
                and marketing
            
            
            10.3
            %
            
            13.5
            %
            
            15.0
            %Bad
                debt
            
            
            1.0
            %
            
            1.8
            %
            
            1.9
            %General
                and administrative
            
            
            11.4
            %
            
            12.6
            %
            
            15.7
            %Amortization
                of intangibles
            
            
            0.8
            %
            
            0.8
            %
            
            1.0
            %Restructuring
                provision
            
            
            1.0
            %
            
            1.7
            %
            
            -0.7
            %Total
                operating expenses
            
            
            43.7
            %
            
            49.7
            %
            
            58.8
            %Loss
                from operations
            
            
            -15.3
            %
            
            -24.0
            %
            
            -32.7
            %Interest
                and other income, net
            
            
            1.3
            %
            
            1.0
            %
            
            0.7
            %Income
                taxes
            
            
            0.5
            %
            
            0.2
            %
            
            -0.1
            %Net
                loss before deemed dividend
            
            
            -13.6
            %
            
            -22.9
            %
            
            -32.1
            %Deemed
                dividend associated with issuanceof
                preferred stock
            
            
            0.0
            %
            
            -7.2
            %
            
            -4.9
            %Net
                loss attributable to common stockholders
            
            
            -13.6
            %
            
            -30.0
            %
            
            -37.0
            %




**Comparison
      of the Year Ended December 31, 2007 to the Year Ended December 31,
      2006**





*Revenue*





Revenue
      decreased 26% from $127.8 million for the year ended December 31, 2006 to $95.0
      million for the year ended December 31, 2007. The $32.8 million decrease in
      revenue is attributable to the continued decline in sales of our non-WiMAX
      products (WipLL, Proximity and other legacy products), which comprised
      approximately 32% of revenues in 2007 and 64% in 2006. Revenue from WiMAX
      products increased 40% in 2007 to $64.3 million. In 2007, we made deliveries
      of
      WiMAX systems to more than 150 customers in over 60 countries. However,
      increases in revenues from WiMAX products did not fully offset significant
      declines in sales of non-WiMAX products.




46





Geographically,
      in 2007, approximately 31% of our revenue was derived from customers in Mexico,
      Latin America and the Caribbean, 29% from customers in Europe, 21% from
      customers in Asia, 10% from customers in Africa and the Middle East and 9%
      from
      customers in the United States and Canada.





We
      are
      intensifying our focus on mobile network deployments and the new opportunities
      presented by these projects and our strong product line up. These products
      require continued R&D investment, and will not contribute significant
      revenues in the first half of 2008. In the short term, we continue to work
      closely with our longstanding customers to actively capitalize on new
      opportunities as carriers finalize their decisions to deploy WiMAX products.
      We
      expect our legacy business to continue to decline in 2008 from 2007
      levels.




*Cost
      of Revenue*





Cost
      of
      revenue decreased 26% from $94.9 million in the year ended December 31, 2006
      to
      $70.1 million in the year ended December 31, 2007. This decrease was due
      primarily to the decrease in revenue. As a percentage of revenue, our cost
      of
      revenue was 74.3% in 2006 and 73.8% in 2007.





Cost
      of
      revenue for fiscal 2007 included a charge for inventory provisions of $6.8
      million, recorded primarily as a result of the decline of our non-WiMAX revenues
      in 2007 from 2006 levels and a subsequent reduced outlook for sales of these
      products. Cost of revenue for fiscal 2006 included inventory provisions of
      $5.1
      million, of which $3.1 million related to a net charge under the Yozan
      contract.





Gross
      margin was 26% for both 2007 and 2006. Our gross profit is directly related
      to
      revenue except for period operating costs, including inventory provisions.
      Our
      gross margin varies primarily based on the mix of products we deliver and the
      composition of base station revenue that usually has a higher margin, over
      lower
      margin customer premise equipment. During 2007, the gross margins from the
      increased sales of higher-margin WiMAX products were adversely offset by the
      inventory provision described above.




*Research
      and Development Expenses*





Research
      and development expenses decreased 1% from $24.8 million in the year ended
      December 31, 2006 to $24.6 million in the year ended December 31, 2007. The
      year-over-year decrease was due primarily to headcount reductions from the
      restructuring activity the Company commenced in July 2006 to focus development
      activity on WiMAX. The Company intends to continue to invest significantly
      in
      2008 in the further development and enhancement of WiMAX products, in particular
      products that will support mobile connectivity.




*Sales
      and Marketing Expenses*





Sales
      and
      marketing expenses decreased 17% from $17.2 million in the year ended December
      31, 2006 to $14.2 million in the year ended December 31, 2007. The decrease
      of
      17% is primarily attributable to fewer employees and lower travel costs as
      a
      result of our restructuring program as well as lower agent commissions. We
      expect that sales and marketing expenses will increase in 2008 as a result
      of
      the hiring of new executives in this area in order to take advantage of the
      opportunities related to mobile WiMAX.





*Bad
      Debt Expense*





During
      2006 and 2007, we provided for receivables of $2.3 million and $1.8 million,
      respectively. The decrease in bad debt expense in 2007 was due primarily to
      fewer uncollectible accounts in Latin America.





*General
      and Administrative Expenses*





General
      and administrative expenses decreased 7% from $16.0 million in the year ended
      December 31, 2006 to $14.9 million in the year ended December 31, 2007. The
      decrease is primarily attributable to the decrease in headcount as a result
      of
      the restructuring in the second half of 2006.




47




*Amortization
      of Intangibles*





Amortization
      of intangibles expense decreased 12% from $1.1 million in the year ended
      December 31, 2006 to $0.9 million in the year ended December 31, 2007 due to
      the
      completion of the amortization of core developed technology in Israel.





*Restructuring
      Provision*





In
      the
      third quarter of 2006, the Company commenced a company-wide restructuring
      program to reduce operating expenses. As a result, in 2006 the Company recorded
      restructuring charges of $2.2 million, to reflect the total cost of this
      restructuring program. In 2007, we recorded a credit for restructuring of $0.7
      million relating to the reduction of a provision for certain liabilities related
      to a leased property in the United Kingdom.





*Interest
      and Other Expense*





Interest
      and other expense increased 81% from $0.4 million in the year ended December
      31,
      2006 to $0.7 million for the year ended December 31, 2007. The increase resulted
      primarily from an increase in borrowings under our bank line of
      credit.




*Interest
      and Other Income*





Interest
      and other income decreased 17% from $1.6 million in the year ended December
      31,
      2006 to $1.3 million for the year ended December 31, 2007. This decrease is
      primarily due to lower foreign exchange gains in 2007 of $0.4 million, partially
      offset by higher interest income of $0.1 million.




*Income
      Taxes*




A
      net
      income tax charge of $0.1 million was recorded in the year ended December 31,
      2007, compared to a credit of $0.2 million recorded in the year ended December
      31, 2006. The tax charge was related to income taxes for certain of our foreign
      subsidiaries. This tax credit was obtained from the U.K. tax authorities in
      lieu
      of carrying forward tax losses related to certain qualifying research and
      development costs. We are no longer eligible to receive tax credits from the
      U.K. taxing authorities in lieu of our carry-forward of tax losses. No other
      income tax benefit has been recorded for the tax losses generated because we
      have incurred operating losses since inception.




*Deemed
      Dividend Upon Issuance of Stock*





During
      2007, we recognized a non-cash charge of $4.7 million for a deemed dividend
      to
      our Series B preferred stockholders as a result of an anti-dilution adjustment
      to our Series B Preferred Stock following a public share offering. In 2006,
      we
      recognized a non-cash charge of $9.2 million for a deemed dividend to preferred
      stockholders associated with the beneficial conversion feature of the preferred
      stock issued in the third quarter of 2006.




*Net
      Loss Attributable to Common Stockholders*





For
      the
      reasons described above, our net loss before taxes increased 3% from $29.4
      million in 2006 to $30.4 million in 2007, and our net loss attributable to
      common stockholders decreased 9% from $38.4 million in 2006 to $35.1 million
      in
      2007.




48




**Comparison
      of the Year Ended December 31, 2006 to the Year Ended December 31,
      2005**





*Revenue*





Revenue
      increased 15% from $111.0 million for the year ended December 31, 2005 to $127.8
      million for the year ended December 31, 2006. The $16.8 million increase in
      revenue is primarily attributable to:




·
            the
                first full year of sales of our WiMAX and AS.NET products, which
                accounted
                for approximately 38% of 2006 revenues. In 2006 we made deliveries
                of
                WiMAX systems to more than 110 customers in more than
                50 countries; and




·
            the
                continued growth in sales of our WipLL products, which comprised
                approximately 25% of revenues in 2006.




Growth
      in
      revenues from WiMAX, WipLL and AS.NET products more than offset significant
      declines in sales of Proximity and ASX products. The growth in 2006 was
      attributable to a number of important contracts signed or fulfilled in 2006.
      They included deliveries of WiMAX products to Yozan in Japan, DBD in Germany,
      Pipex Wireless in the United Kingdom, MetroMAX in Samara, Russia, and SOGETEL
      in
      Canada. Tulip IT continued to deploy its WipLL network in India. Other customers
      like Last Mile Broadband in Ireland purchased both WipLL and WiMAX products
      for
      their networks.




In
      2006
      we were less reliant on Axtel, as expected, and our Proximity product line
      as
      our major source of revenues. Axtel comprised approximately 26% of revenues,
      down substantially from 57% in 2005. Geographically, in 2006, approximately
      30%
      of our revenue was derived from customers in Asia, 40% from customers in Mexico,
      Latin America and the Caribbean, and 18% from customers in Europe. Customers
      in
      the United States and Canada, and Africa and the Middle East accounted for
      approximately 8% and 4% of revenues, respectively.





*Cost
      of Revenue*





Cost
      of
      revenue increased 19% from $79.5 million in the year ended December 31, 2005
      to
      $94.9 million in the year ended December 31, 2006. This increase was due
      primarily to the increase in revenue. As a percentage of revenue, our cost
      of
      revenue was 71.6% in 2005 and 74.3% in 2006.





Cost
      of
      revenue for fiscal 2006 included inventory provisions of $5.1 million, of which
      $3.1 million related to a net charge under the Yozan contract. This charge
      for
      Yozan reflects our estimate of the probable amount of excess inventories and
      purchase commitments (net of amounts that are cancellable), based on the
      expected deliveries to Yozan under the amended supply contract. Cost of revenue
      in 2005 included inventory provisions of $1.1 million, of which $0.5 million
      represented a write-off in the fourth quarter of 2005 in connection with
      inventory shortages that were identified in the physical inventory count at
      our
      Israeli subsidiary.





Gross
      margin was 26% for the 2006 fiscal year versus 28% in 2005. During 2006, the
      gross margins from the increased sales of higher-margin WipLL, WiMAX and AS.NET
      products were adversely offset by the Yozan inventory provision described above.
      Gross margins were also adversely affected in 2006 by increased freight and
      warranty expenses, which grew as a result of the change in mix of products
      sold.
      A decline in sales of Proximity, most of which is delivered at the production
      site to customers, and which has very low warranty costs given the maturity
      and
      stability of the platform, was offset by increased sales of WipLL and WiMAX
      products, which were shipped in 2006 from the United Kingdom and Israel to
      all
      parts of the world. We also incurred higher warranty expenses on the new WiMAX
      product line, because the product has not yet achieved the stability of other
      more mature products we sell.





*Research
      and Development Expenses*





Research
      and development expenses increased 17% from $21.2 million in the year ended
      December 31, 2005 to $24.8 million in the year ended December 31, 2006. The
      increase was primarily due to the additional research and development expenses
      we incurred in connection with the introduction of our new WiMAX products,
      and
      to costs incurred by ArelNet and Radionet, which were acquired in June 2005
      and
      November 2005, respectively.




49





*Sales
      and Marketing Expenses*





Sales
      and
      marketing expenses increased 50% from $11.5 million in the year ended December
      31, 2005 to $17.2 million in the year ended December 31, 2006. The increase
      in
      sales and marketing expenses is related to product marketing, commissions,
      trade
      shows and travel, largely attributable to introduction of our new WiMAX
      products.





*Bad
      Debt Expense*





During
      2005 and 2006, we wrote down receivables by $1.1 million and $2.3 million,
      respectively. The increase in write downs in 2006 was due primarily to our
      concerns with our ability to collect payments from certain customers in South
      and Central America.





*General
      and Administrative Expenses*





General
      and administrative expenses increased 26% from $12.7 million in the year ended
      December 31, 2005 to $16.0 million in the year ended December 31, 2006. The
      increase in general and administrative expenses was primarily the result of
      additional payroll costs arising from our acquisitions of ArelNet and Radionet,
      and to additional fees incurred in connection with our audit and compliance
      with
      requirements of the Sarbanes-Oxley Act.





*Amortization
      of Intangibles*





Amortization
      of intangibles expense increased 13% from $0.9 million in the year ended
      December 31, 2005 to $1.1 million in the year ended December 31, 2006. The
      increase resulted from the full-year charge for the amortization of intangibles
      acquired from ArelNet and Radionet in 2005.





*Restructuring
      Provision*





During
      the second quarter of 2005, the Company recorded an additional restructuring
      charge of $1.2 million for costs related to certain facility charges in respect
      of buildings in the U.K. In the third quarter of 2006, the Company commenced
      a
      company-wide restructuring program to reduce operating expenses. As a result,
      in
      2006 the Company recorded restructuring charges of $2.2 million, to reflect
      the
      total cost of this restructuring program. For more information regarding our
      restructuring programs, see “Restructuring” above.





*Interest
      and Other Expense*





Interest
      and other expense increased from nil in the year ended December 31, 2005 to
      $0.4
      million for the year ended December 31, 2006 due to interest paid and accrued
      on
      loans to the Company from TEKES Finland and Silicon Valley Bank.





*Interest
      and Other Income*





** Interest
      and other income increased 14% from $1.4 million in the year ended December
      31,
      2005 to $1.6 million for the year ended December 31, 2006. This was primarily
      due to gains and losses on foreign currency cash balances and foreign exchange
      hedging contracts and interest earned on cash deposits with financial
      institutions. Higher interest rates earned on our investments were offset by
      increased interest expense on our debt and lower average cash
      balances.





*Income
      Taxes*




A
      net
      income tax credit of $0.2 million was recorded in the year ended December 31,
      2006, compared to a credit of $0.5 million recorded in the year ended December
      31, 2005. This tax credit was obtained from the U.K. tax authorities in lieu
      of
      carrying forward tax losses related to certain qualifying research and
      development costs. The tax credit recorded in 2005 and 2006 was partially offset
      by $21 thousand and $63 thousand, respectively, of tax charges relating to
      certain of our foreign branches and subsidiaries. As of 2005, we were no longer
      eligible to receive tax credits from the U.K. taxing authorities in lieu of
      our
      carry-forward of tax losses. No other income tax benefit has been recorded
      for
      the tax losses generated because we have incurred operating losses since
      inception.




50




*Deemed
      Dividend Upon Issuance of Stock*





In
      the
      third quarter 2006, we recognized a non-cash charge of $9.2 million for a deemed
      dividend to preferred stockholders associated with the beneficial conversion
      feature of the preferred stock issued in the third quarter 2004, comprised
      of
      $8.3 million related to the Series B Preferred Stock issued in respect of Oak’s
      exchange of its Series A Preferred Stock and $0.9 million related to the Series
      B Preferred Stock issued in respect of Oak’s cash investment. There was no
      similar expense in 2005.





*Net
      Loss Attributable to Common Stockholders*





For
      the
      reasons described above, our net loss before taxes increased 88% from $15.6
      million in 2005 to $29.4 million in 2006, and our net loss attributable to
      common stockholders increased 154% from $15.1 million in 2005 to $38.4 million
      in 2006.





**Restructuring**




In
      the
      fourth quarter of 2002, the decision was made to completely outsource all of
      our
      manufacturing. As a result, a $1.0 million restructuring charge was recorded
      for
      the closure of our Riverside, Uxbridge facility in 2003. All of this cost
      relates to the excess facility. A further $0.4 million was recognized as
      restructuring in the income statement in the fourth quarter of 2003 as we
      reassessed the ability to sublease the Riverside facility. During the second
      quarter of 2005, we recognized an additional restructuring charge of $1.2
      million for additional costs expected to be incurred related to certain facility
      charges in respect of buildings in the United Kingdom. The lessor has already
      completed renovations and incurred actual costs for approximately $0.8 million,
      which the Company agreed to pay in February 2008 in final settlement. For this
      reason, we lowered the restructuring reserve at the end of 2007 to $0.8 million.
      All cash outflows in connection with this restructuring were paid in February
      2008.





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




The
      restructuring charges and their utilization are summarized as
      follows:




**Balance
                at**
            
            
            
            
            
            **Balance
                at****Beginning**
            
            **Restructuring**
            
            
            
            **End**All
                amounts in thousands of U.S.$'s
            
            **of
                Period**
            
            **Charge**
            
            **Utilized**
            
            **of
                Period****Year
                ended December 31, 2007**One
                time termination benefits
            
            $
            375
            
            $
            -
            
            $
            (375
            )
            $
            -Contract
                termination costs
            
            
            1,437
            
            
            (639
            )
            
            (2
            )
            
            796Other
                associated costs
            
            
            50
            
            
            (50
            )
            
            -
            
            
            -$
            1,862
            
            $
            (689
            )
            $
            (377
            )
            $
            796**Year
                ended December 31, 2006**One
                time termination benefits
            
            $
            -
            
            $
            2,183
            
            $
            (1,808
            )
            $
            375Contract
                termination costs
            
            
            1,436
            
            
            163
            
            
            (162
            )
            
            1,437Other
                associated costs
            
            
            50
            
            
            -
            
            
            -
            
            
            50$
            1,486
            
            $
            2,346
            
            $
            (1,970
            )
            $
            1,862**Year
                ended December 31, 2005**One
                time termination benefits
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Contract
                termination costs
            
            
            599
            
            
            1,150
            
            
            (313
            )
            
            1,436Other
                associated costs
            
            
            61
            
            
            -
            
            
            (11
            )
            
            50$
            660
            
            $
            1,150
            
            $
            (324
            )
            $
            1,486





51




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, we had cash and cash equivalents totaling $30.8 million,
      short-term investments totaling $5.5 million and $0.4 million of restricted
      cash
      in current assets. In addition, we had restricted cash of $1.2 million in other
      non-current assets. A total of $1.3 million is held as collateral for
      performance guarantees on customer contracts and with landlords, of which $1.2
      million is for guarantees with maturities in excess of one year. The amount
      of
      $0.3 million included in restricted cash is for withholding from salaries of
      employees under our Employee Share Purchase Plan. All short-term investments
      are
      of investment grade quality and are not subject to significant market risk.
      We
      have no material capital commitments.




Since
      inception, we have financed our operations through private sales of convertible
      preferred stock, an initial public offering of common stock, which we completed
      on July 25, 2000, a secured bank line of credit and an underwritten public
      share
      offering.




In
      2006,
      we had a private sale of convertible preferred stock, which we closed in
      September 2006. We raised approximately $28.7 million (net of expenses) through
      the issuance of Series B preferred stock to Oak Investment Partners XI, Limited
      Partnership. In September and October 2007, the Company issued 17,250,000 shares
      of common stock in an underwritten public offering at a price of $2.00 per
      share. All of the shares were sold by the Company. The offering was made under
      the Company's effective shelf registration statement covering up to $50 million
      of equity securities previously filed with the Securities and Exchange
      Commission.




On
      August
      7, 2007, we and our wholly-owned subsidiary, Airspan Communications Limited,
      entered into an amendment to our August 1, 2006 Loan and Security Agreement
      (the
“Loan and Security Agreement”) with Silicon Valley Bank (“SVB”), with respect to
      a revolving credit line. For the term of the credit line, which expires on
      December 31, 2008, we may, subject to certain adjustments, borrow up to the
      lesser of (i) $20 million and (ii) 80% of eligible accounts receivable. As
      of
      December 31, 2007, $8.9 million of available credit was unused. We are currently
      using the credit line and we expect to continue to use it in 2008. Although
      we
      believe the credit facility will increase our financial resources and financial
      flexibility, our use of the credit facility does present certain risks. Our
      ability to borrow under the credit facility is a function of, among other
      things, our base of eligible accounts receivable and the rate at which advances
      are made against eligible receivables (the “Advance Rate”). If the amount or
      quality of our accounts receivable deteriorates or the Advance Rate or
      eligibility criteria are adjusted adversely by SVB, our ability to borrow under
      the credit facility will be directly, negatively affected. If there is an
      adverse adjustment in the borrowing base at a time when we are unable to, within
      three business days, repay SVB the amount by which the borrowing base has been
      decreased, we will likely be in default under the Loan and Security Agreement.
      In addition, the credit facility requires us to satisfy certain financial
      covenants, including the maintenance of tangible net worth (as defined in the
      Agreement) of at least $28.0 million with such required amount to be
      increased for each subsequent fiscal quarter after our second fiscal quarter
      of
      2007 by 50% of (i) our positive net income, (ii) proceeds of stock issuances,
      and (iii) proceeds of indebtedness which is subordinated to our obligations
      to
      SVB. As of December 31, 2007, the tangible net worth requirement was $44.0
      million as a result of the additional share issuance. The Company was in
      compliance with all of the financial covenants at December 31, 2007. There
      is no
      assurance the Company will be able to meet this covenant in future quarters
      as
      required by the Loan and Security Agreement. In the event the Company is unable
      to meet this test in the future, we would plan to seek an amendment or waiver
      of
      this covenant. There can be no assurance that any such waiver or amendment
      would
      be granted. As a result, we cannot provide any assurance that we will be able
      to
      borrow under the Loan and Security Agreement at a time when we most need money
      to fund working capital or other needs and prohibit us from paying dividends
      on
      our capital stock. The credit facility also contains various provisions that
      restrict our use of cash and operating flexibility. These provisions could
      have
      important consequences for us, including (i) causing us to use a portion of
      our
      cash flow from operations for debt repayment and/or service rather than other
      perceived needs, (ii) precluding us from incurring additional debt financing
      for
      future working capital or capital expenditures and (iii) impacting our ability
      to take advantage of significant, perceived business opportunities, such as
      acquisition opportunities or to react to market conditions. Our failure to
      meet
      financial and other covenants could give rise to a default under the Loan and
      Security Agreement. In the event of an uncured default, the Loan and Security
      Agreement provides that all amounts owed to SVB are immediately due and payable
      and that SVB has the right to enforce its security interest in our assets.
      The
      Loan and Security Agreement is secured by collateral, including all of our
      rights and interests in substantially all of our personal property, including
      accounts receivable, inventory, equipment, general intangibles, intellectual
      property, books and records, contract rights and proceeds of the above items.
      At
      December 31, 2007, $7.5 million of indebtedness was outstanding under the Loan
      and Security Agreement. Advances under the Loan and Security Agreement bear
      interest at SVB's prime rate plus a percentage ranging from 0.0% to 1.75%,
      depending on certain financial and collateral tests. The monthly interest is
      calculated based on the higher amount of outstanding borrowings or $7,500,000.
      We have issued $2.0 million of letters of credit under the facility, which
      were
      still outstanding at December 31, 2007. See Note 9 to the Financial
      Statements.




52





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




For
      the
      year ended December 31, 2007, we used $27.9 million cash in operating activities
      compared with $50.6 million for the year ended December 31, 2006. The operating
      cash outflow for fiscal 2007 was primarily a result of our net loss of $30.4
      million (excluding the deemed dividend of $4.7 million), increases in
      receivables of $2.1 million and decreases in accounts payable, other accrued
      expenses, deferred revenue and customer advances of $4.0 million, $3.8 million,
      $1.5 million and $0.8 million, respectively. The cash outflow was partially
      offset by $3.8 million of depreciation and amortization, $2.6 million of
      non-cash stock compensation and decreases in inventories of $6.9 million,
      decreases in other current assets of $0.6M and decreases in other operating
      assets of $0.6M.




The
      net
      cash provided by investing activities for the year ended December 31, 2007
      was
      $1.7 million, comprised of $4.7 million, net for the acquisition and sale of
      investment securities offset by cash used of $3.1 million for capital equipment
      purchases.




Our
      net
      cash provided by financing activities for the year ended December 31, 2007
      was
      $41.2 million. During 2007, we generated $32.0 million from proceeds of the
      public offering, $7.5 million in borrowings under the line of credit, $1.1
      million from the exercise of stock options and $0.6 million from the issuance
      of
      common stock under our Employee Share Purchase Plan (“ESPP”). We also decreased
      the amount of restricted cash by $0.7 million. Restricted cash increases when
      we
      issue guarantees 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.





On
      November 9, 2005, we completed the acquisition of Radionet. As part of the
      acquisition, we assumed outstanding loans (the “Tekes Loans”) borrowed by
      Radionet from the Finnish Funding Agency for Technology and Innovation
      (“Tekes”). Tekes is the primary public funding organization for research and
      development in Finland. At December 31, 2007, the outstanding principal and
      accrued interest payable on the Tekes Loans was $2.0 million. The Tekes Loans
      are recorded in long-term debt and current portion of long-term debt in our
      consolidated balance sheets. We have issued a guarantee to Tekes for the
      repayment of the Tekes Loans. The guarantee covers the loan principal and
      interest. See Note 10 to the Consolidated Financial Statements for further
      information on these loans.




53





*Summary
      of Contractual Obligations*





The
      impact that our contractual obligations as of December 31, 2007 are expected
      to
      have on our liquidity and cash flow in future periods is as
      follows:




**Payments
                Due by Period**All
                amounts in thousands of U.S.$'s
            
            **Total**
            
            **2008**
            
            **2009-2010**
            
            **2011-2012**Long-term
                debt (including interest)
            
            $
            9,478
            
            $
            7,500
            
            $
            1,394
            
            $
            584Operating
                lease obligations
            
            
            6,539
            
            
            2,869
            
            
            2,728
            
            
            942Purchase
                obligations (1)
            
            
            17,552
            
            
            17,552
            
            
            -
            
            
            -$
            33,569
            
            $
            27,921
            
            $
            4,122
            
            $
            1,526




(1) As
      of December 31, 2007, the Company had commitments with its main subcontract
      manufacturers under various purchase order and forecast
      arrangements.




The
      Company had bank guarantees with its landlords and customers totaling $1.3
      million at December 31, 2007. The guarantees secure payment or performance
      obligations of the Company under contracts. The Company has pledged cash to
      the
      banks as collateral for the customer guarantees in the same amounts as the
      guarantees. This pledged cash has been classified as restricted cash.





We
      have
      no material commitments other than the TEKES Loans, borrowings under the SVB
      Loan and Security Agreement, operating leases and supplier purchase commitments
      mentioned herein. See “ITEM 7A” and Note 11 to the Consolidated Financial
      Statements”.





*Off-Balance
      Sheet Arrangements*





As
      of
      December 31, 2007, we are not using off-balance sheet arrangements.





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




*Interest
      Rate Risk*




The
      Company’s earnings are affected by changes in interest rates. As of December 31,
      2006 and 2007, we had cash and cash equivalents, restricted cash and short-term
      investments of $27.2 million and $36.7 million, respectively. Of these amounts,
      in 2007, $5.5 million related to investments with a purchase to maturity date
      between 92 days and 231 days. In addition, in 2006, we included in short-term
      investments auction rate securities for a total of $6.3 million. We did not
      have
      any auction rate securities at December 31, 2007. Auction rate securities are
      long-term variable rate bonds tied to short-term interest rates that are reset
      through a “Dutch auction” process which occurs every 7 - 35 days. The holder can
      participate in the auction and liquidate the auction rate securities to
      prospective buyers through their broker/dealer. Substantially all of the
      remaining amounts as of both December 31, 2006 and December 31, 2007, consisted
      of highly liquid investments with maturities 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 December 31,
      2007 rates would cause the fair market value of these short-term investments
      to
      change by an insignificant amount. Due to the short duration of these
      investments, a short-term increase in interest rates would not have a material
      effect on our financial condition or results of operations. Declines in interest
      rates over time would, however, reduce our net 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.




54




*Foreign
      Currency Exchange Rate Risk*




The
      following table shows our revenue by currency as a percentage of our total
      revenue for the periods presented:




**Year
                ended**
              **December
                31,**
              **2005**
            
            **Year
                ended**
              **December
                31,**
              **2006**
            
            **Year
                ended**
              **December
                31,**
              **2007**U.S.
                Dollars
            
            
            94.4
            %
            
            86.9
            %
            
            81.9
            %Euros
            
            
            2.9
            
            
            10.4
            
            
            12.7Australian
                Dollars
            
            
            2.5
            
            
            2.7
            
            
            2.8Other
            
            
            0.2
            
            
            -
            
            
            2.6100.0
            %
            
            100.0
            %
            
            100.0
            %




Total
      euro denominated sales for the periods presented were:




**All
                figures in thousands**
            
            **Year
                ended**
              **December
                31,**
              **2005**
            
            **Year
                ended**
              **December
                31,**
              **2006**
            
            **Year
                ended**
              **December
                31,**
              **2007**Euros
            
            €
            2,596
            
            €
            10,552
            
            €
            12,041Average
                exchange rate of $1U.S. = €
            
            
            0.8136
            
            
            0.79678
            
            
            0.7329U.S.$
                equivalent
            
            $
            3,191
            
            $
            13,243
            
            $
            16,429If
                If the average exchange rates used had been higher or lower by 10%
                they
                would have decreased or increased the total euro denominated sale
                value
                by
            
            $
            290
            
            $
            1,192
            
            $
            1,479




Total
      Australian dollar denominated sales for the periods presented
      were:




**All
                figures in thousands**
            
            **Year
                ended**
              **December
                31,**
              **2005**
            
            **Year
                ended**
              **December
                31,**
              **2006**
            
            **Year
                ended**
              **December
                31,**
              **2007**Australian
                dollars
            
            Aus$
            3,594
            
            Aus$
            4,554
            
            Aus$
            2,614AAverage
                exchange rate of $1U.S. = Australian dollar
            
            
            1.3174
            
            
            1.32774
            
            
            1.2010U.S.
                $ equivalent
            
            $
            2,728
            
            $
            3,430
            
            $
            2,177If
                If the average exchange rates used had been higher or lower by 10%
                they
                would have decreased or increased the total euro denominated sale
                value
                by
            
            $
            248
            
            $
            309
            
            $
            196




55




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 factor in changes in sales volumes.




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




To
      manage
      our pound foreign currency risk we have, at various times in 2005 through 2006,
      forecast our likely net spending on operating expenses in non U.S. dollars
      and,
      based on these forecasts, we have entered into forward exchange contracts to
      cover a percentage of the projected exposure. At December 31, 2007, we had
      no
      forward exchange contracts outstanding.




During
      2007, we paid operating expenses in local currency of approximately 18.7 million
      pounds sterling. If during 2007 the average exchange rates had been higher
      or
      lower by 10%, the pound-sterling denominated operating expenses would have
      decreased or increased by $3.4 million. None of these expenses were
      hedged.




During
      the year ended December 31, 2007, we paid operating expenses in New Israeli
      Shekels of 56.1 million New Israeli Shekels. None of these expenses were hedged.
      If the average exchange rates had been higher or lower by 10%, the New Israeli
      Shekel operating expenses would have decreased or increased by $1.2 million
      for
      the year ended December 31, 2007.




For
      the
      years ended December 31, 2005, 2006 and 2007, we incurred the majority of our
      cost of revenue in U.S. dollars.




*Equity
      Price Risk*




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




*Commodity
      Price Risk*




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
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**




Financial
      Statements and Supplementary Data are included on pages F-1 to F-37.




**ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**




None




**ITEM
      9A. CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures*




As
      of the
      end of the period covered by this annual report, an evaluation was performed
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures (as defined
      in Section 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that
      evaluation, our Chief Executive Officer and Chief Financial Officer concluded
      that as of such date the Company’s disclosure controls and procedures were
      effective.




56




*Management's
      Annual Report on Internal Control over Financial Reporting*




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




Our
      management assessed the effectiveness of our internal control over financial
      reporting as of December 31, 2007. In making this assessment, we used the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission in Internal Control-Integrated Framework. Based upon this assessment,
      our management concluded that our internal control over financial reporting
      was
      effective as of December 31, 2007.




Our
      independent registered public accounting firm, Grant Thornton LLP, audited
      the
      consolidated financial statements included in this report and issued an
      attestation report on our internal control over financial reporting, which
      is
      included herein.




*Changes
      in Internal Control Over Financial Reporting*




There
      have been no significant changes in our internal control over financial
      reporting during our fiscal year ended December 31, 2007 that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.





*Inherent
      Limitations on Effectiveness of Controls*





Our
      management does not expect that our disclosure controls and procedures or our
      internal control over financial reporting are or will be capable of preventing
      or detecting all errors and all fraud. Any control system, no matter how well
      designed and operated, can provide only reasonable, not absolute, assurance
      that
      the control system's objectives will be met. The design of a control system
      must
      reflect the fact that there are resource constraints and the benefits of
      controls must be considered relative to their costs. Further, because of the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that misstatements due to error or fraud will not
      occur or that all control issues and instances of fraud, if any, within the
      Company have been detected. These inherent limitations include the realities
      that judgments in decision-making can be faulty and that breakdowns can occur
      because of simple error or mistake. Controls can also be circumvented by the
      individual acts of some persons, by collusion of two or more people, or by
      management override of the controls. The design of any system of controls is
      based in part on certain assumptions about the likelihood of future events,
      and
      there can be no assurance that any design will succeed in achieving its stated
      goals under all potential future conditions.




57


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




The
      Board
      of Directors and Stockholders of




Airspan
      Networks Inc.




We
      have
      audited Airspan Networks Inc. and subsidiaries’ (the "Company") internal
      control over financial reporting as of December 31, 2007, based on criteria
      established in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Airspan Networks Inc. and subsidiaries’ management is responsible for
      maintaining effective internal control over financial reporting and for its
      assessment of the effectiveness of internal control over financial reporting,
      included in the accompanying Management’s Annual Report on Internal Control over
      Financial Reporting. Our responsibility is to express an opinion on Airspan
      Networks Inc. and subsidiaries’ internal control over financial reporting based
      on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, assessing the risk that a material weakness exists, testing
      and evaluating the design and operating effectiveness of internal control based
      on the assessed risk, and performing such other procedures as we considered
      necessary in the circumstances. We believe that our audit provides a reasonable
      basis for our opinion.




A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate. In our opinion, Airspan
      Networks Inc. and subsidiaries maintained, in all material respects, effective
      internal control over financial reporting as of December 31, 2007, based on
      criteria established in *Internal
      Control—Integrated Framework* issued
      by COSO.




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Airspan
      Networks Inc. and subsidiaries as of December 31, 2007 and 2006, and the related
      consolidated statements of operations, changes in stockholders’ equity, and cash
      flows for each of the three years in the period ended December 31, 2007 and
      our
      report dated March 7, 2008 expressed an unqualified opinion on those
      consolidated financial statements.




/s/
      GRANT
      THORNTON LLP




Miami,
      Florida




March
      7,
      2008




58




**ITEM
      9B. OTHER INFORMATION**




None.





**PART
      III**





Except
      where otherwise noted, the information required by Items 10 through 14 is
      incorporated by reference from our definitive Proxy Statement, with the
      exception of the executive officers and directors section of Item 10. We will
      file our definitive Proxy Statement within 120 days after the end of our fiscal
      year ended December 31, 2007.





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**





The
      information regarding the names, ages and business experience of our executive
      officers and directors required by this Item is furnished in Part I of this
      Annual Report on Form 10-K under the caption “Executive Officers and Directors”.
      All other information required by this Item is incorporated into this Annual
      Report on Form 10-K by reference to our definitive proxy statement to be filed
      within 120 days after the end of our fiscal year ended December 31,
      2007.





**Code
      of Ethics**





We
      maintain a code of business conduct (the “Code”) that applies to our Directors,
      Chief Executive Officer, Chief Financial Officer and Controller, as well as
      to
      all of our other employees. This Code, a copy of which is available on our
      web
      site at www.airspan.com ,
      addresses, among other things: (i) honest and ethical conduct, including the
      ethical handling of actual or apparent conflicts of interest between personal
      and professional relationships; (ii) compliance with applicable governmental
      laws, rules, and regulations; (iii) the prompt internal reporting of violations
      of the Code to an appropriate person or persons identified in the Code; (iv)
      accountability for adherence to the Code; and (v) full, fair, accurate, timely
      and understandable disclosure in reports and documents that we file with or
      submit to the Commission and in other public communications we make. In the
      event we ever waive compliance by our Directors, our Chief Executive Officer,
      Chief Financial Officer, or Controller with the Code, we will disclose the
      waiver on our website at the web address provided above. (The URL above is
      intended to be an inactive textual reference only. It is not intended to be
      an
      active hyperlink to our website. The information on our website, which might
      be
      accessible through a hyperlink resulting from this URL, is not and is not to
      be
      part of this report and is not incorporated herein by reference).





**ITEM
      11. EXECUTIVE COMPENSATION**




The
      information required by this Item is incorporated into this Annual Report on
      Form 10-K by reference to our definitive proxy statement to be filed within
      120
      days after the end of our fiscal year ended December 31, 2007.




**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**




The
      information required by this Item and Item 403 of Regulation S-K is incorporated
      by reference into this Annual Report on Form 10-K to our definitive proxy
      statement to be filed within 120 days after the end of our fiscal year ended
      December 31, 2007.





**Securities
      Authorized for Issuance Under Equity Compensation Plans as of December 31,
      2007**




The
      following table sets forth information as of December 31, 2007 with respect
      to
      compensation plans under which our equity securities are authorized for
      issuance.





**Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans**E
                Equity compensation plans approved by security holders(1)
            
            
            5,446,141
            
            $
            4.14
            
            
            1,635,502E
                Equity compensation plans not approved by security holders(2)
            
            
            192,313
            
            $
            3.49
            
            
            -**Total**
            
            
            5,638,454
            
            $
            4.12
            
            
            1,635,502




(1)
      In
      1998 and 2000, the Company's shareholders approved the 1998 Employee Stock
      Option Plan and the 2000 Employee Stock Purchase Plan, respectively. In 2004,
      the Company's shareholders approved the Omnibus Equity Compensation Plan.




59




(2)
      Issued pursuant to the Company's 2001 Supplemental Stock Option Plan (the "2001
      Plan") and the Company's 2003 Supplemental Stock Option Plan (the "2003 Plan").




*The
      2001 Supplemental Stock Option Plan*




The
      2001
      Plan provides for the grant to our non-officer employees and consultants of
      non-statutory stock options. The 2001 Plan provides for the grant of options
      for
      up to 901,465 shares of common stock, all of which options have been granted
      as
      of the date hereof. The Compensation Committee of our Board of Directors
      administers the 2001 Plan. The Compensation Committee determines the terms
      of
      options granted under the 2001 Plan, including the number of shares subject
      to
      the option, exercise price, term, and exercisability. The exercise price may
      be
      equal to, more than or less than 100% of fair market value on the date the
      option is granted, as determined by the Compensation Committee. The Compensation
      Committee has the authority to amend or terminate the 2001 Plan, provided that
      shareholder approval shall be required if such approval is necessary to comply
      with any tax or regulatory requirement. If not terminated earlier, the 2001
      Plan
      will terminate February 7, 2011.




*The
      2003 Supplemental Stock Option Plan*




The
      2003
      Plan provides for the grant to our non-officer employees, new hires, and
      consultants of non-statutory stock options. The 2003 Plan provides for the
      grant
      of options for up to 241,500 shares of common stock, all of which options have
      been granted as of the date hereof. The Compensation Committee of our Board
      of
      Directors administers the 2003 Plan. The Compensation Committee determines
      the
      terms of options granted under the 2003 Plan, including the number of shares
      subject to the option, exercise price, term, and exercisability. The exercise
      price may be equal to, more than or less than 100% of fair market value on
      the
      date the option is granted, as determined by the Compensation Committee. The
      Compensation Committee has the authority to amend or terminate the 2003 Plan,
      provided that shareholder approval shall be required if such approval is
      necessary to comply with any tax or regulatory requirement. If not terminated
      earlier, the 2003 Plan will terminate September 1, 2013.




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**




The
      information required by this Item is incorporated into this Annual Report on
      Form 10-K by reference to our definitive proxy statement to be filed within
      120
      days after the end of our fiscal year ended December 31, 2007.




60




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




The
      information required by this Item is incorporated into this Annual Report on
      Form 10-K by reference to our definitive proxy statement to be filed within
      120
      days after the end of our fiscal year ended December 31, 2007.




61




**PART
      IV**




**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**




(a)  The
      following documents are filed as part of this report:




(1)  Financial
      Statements




**Page**Report
                of Independent Registered Public Accounting Firms
            
            
            F-1Consolidated
                Balance Sheets as of December 31, 2006 and 2007
            
            
            F-2Consolidated
                Statements of Operations for the years ended December 31, 2005, 2006
                and
                2007
            
            
            F-3Consolidated
                Statements of Changes in Stockholders' Equity for the years ended
                December
                31, 2005, 2006 and 2007
            
            
            F-4Consolidated
                Statements of Cash Flows for the years ended December 31, 2005, 2006
                and
                2007
            
            
            F-5Notes
                to the Financial Statements
            
            
            F-6




(2)  Financial
      Statement Schedule




Schedule
                II — Valuation and Qualifying Accounts for the years ended December 31,
                2005, 2006 and 2007
            F-39




(3)  Exhibits




Exhibit
              Number
            
            Description
                of Exhibit3.1
            
            Second
                Amended and Restated Articles of Incorporation of Airspan
                (1)3.2
            
            Articles
                of Amendment to the Articles of Incorporation of Airspan
                (2)3.3
            
            Articles
                of Amendment to the Articles of Incorporation of Airspan
                (3)3.4
            
            Amended
                and Restated Bylaws of Airspan (27)4.1
            
            Form
                of Airspan's common stock certificate (4)4.2
            
            Preferred
                Stock Purchase Agreement, dated July 28, 2006, among Airspan and
                Oak
                Investment Partners XI, Limited Partnership, including exhibits thereto
                (5)10.1
            
            1998
                Stock Option and Restricted Stock Plan (6)10.2
            
            Amended
                and Restated 2000 Employee Stock Purchase Plan (1)10.3
            
            Omnibus
                Equity Compensation Plan (1)10.3
            
            2001
                Supplemental Stock Option Plan (7)




62




10.4
            
            2003
                Supplemental Stock Option Plan (8)10.5
            
            Written
                Summary of Airspan's Non-Employee Director Compensation Plan
                (9)





10.6
            
            Airspan
                Code of Business Conduct (10)10.7
            
            Employment
                Agreement with Eric Stonestrom (11), (12)10.8
            
            Employment
                Agreement with Henrik Smith-Petersen (11), (13)10.9
            
            Employment
                Agreement between Airspan and Alastair Westgarth (11),
                (14)10.10
            
            Employment
                Agreement with Arthur Levine (10) (11)10.11
            
            Employment
                and Relocation Agreement with David Brant (11)10.12
            
            Technical
                Assistance Support Services Agreement for FWA Equipment, dated as
                of
                February 14, 2003, by and between Nortel Networks U.K. Limited and
                Axtel,
                S.A. de C.V. (15)**10.13
            
            Preferred
                Stock Purchase Agreement, dated as of September 10, 2004 among Airspan
                and
                Oak Investment Partners XI, Limited Partnership (16)10.14
            
            Amendment
                No. 1 to Preferred Stock Purchase Agreement (17)10.15
            
            Purchase
                and License Agreement, dated as of December 28, 2004, by and among
                Airspan
                Communications Limited and Axtel, S.A. de C.V. (18)**10.16
            
            Amendment
                Agreement No. 3 to FWA TASS dated as of December 28, 2004 between
                Airspan
                Communications Limited and Axtel, S.A. de C.V. (19)**10.17
            
            Purchase
                Contract, dated April 14, 2005, by and between Yozan Incorporated
                ("Yozan") and Airspan Communications Limited ("Airspan Ltd.") (10),
                (20)10.18
            
            Supplement
                to Purchase Contract, dated August 15, 2005, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.19
            
            2ndPurchase Contract, dated September 13, 2005, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.20
            
            Amendment
                of 1stand 2ndPurchase Contracts, dated October 6, 2005, by and between Yozan and
                Airspan Ltd. (10), (20)




63




10.21
            
            Amendment
                of 2ndPurchase Contracts, dated February 25, 2006, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.22
            
            Memorandum
                of Understandings, dated February 25, 2006, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.23
            
            Memorandum
                of Understandings, dated June 23, 2006, by and between Yozan and
                Airspan
                Ltd. (21), (22)10.24
            
            Loan
                and Security Agreement, dated as of August 1, 2006, by and among,
                Silicon
                Valley Bank, Airspan Networks Inc., and Airspan Communications Limited,
                including exhibits thereto (23)





10.25
            
            Memorandum
                of Understandings, dated September 8, 2006, by and between Yozan
                and
                Airspan Ltd. (24) (25)10.26
            
            First
                Amendment to Loan and Security Agreement dated as of August 7, 2007
                between Silicon Valley Bank, Airspan Networks Inc. and Airspan
                Communications, Ltd. (26)10.27
            
            Form
                of Option Agreements*10.28
            
            Employment
              Agreement with Paul Senior*10.29
            
            Employment
              Agreement
              with Uzi Shalev*10.30
            
            Employment
              Agreement
              with Padraig Byrne*21
            
            Subsidiaries
                of registrant (27)23.1
            
            Consent
                of Grant Thornton LLP, Independent Registered Public Accounting Firm
                *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





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




1
            
            Incorporated
                by reference to Airspan's Form 10-Q for the quarter ended April 4,
                20042
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 15,
                20043
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 26,
                20064
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1 (333-34514)
                filed April 11, 2000




64




5
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on August 1,
                20066
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1/A (333-34514)
                filed May 26, 20007
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                20008
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                20039
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on July 31,
                200610
            
            Incorporated
                by reference to the Company's Form 10-K for the year ended December
                31,
                200511
            
            Management
                Agreement or Compensatory Plan or Arrangement12
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1/A (333-34514)
                filed June 22, 200013
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                200214
            
            Incorporated
                by reference to Airspan's Form 10-Q for the quarter ended July 2,
                200615
            
            Incorporated
                by reference by Airspan's report on Form 8-K/A filed on July 6,
                200416
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 13,
                200417
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 27,
                200418
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on June 9,
                200519
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                200420
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on March 30, 2006 pursuant to a request for confidential treatment,
                which
                was granted21
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on June 29, 2006 pursuant to a request for confidential treatment,
                which
                was granted22
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on June 29,
                200623
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on August 7,
                200624
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on September 21, 2006 pursuant to a request for confidential treatment,
                which was granted25
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 21,
                200626
            
            Incorporated
                by reference to Airspan’s Form 10-Q for the quarter ended July 1,
                200727
            
            Incorporated
              by
              reference to Airspan’s Form 10-K for the year ended December 31,
              2006




**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


Airspan
                Networks Inc.By:
            /s/ Eric
                D. Stonestrom
              Eric
                D. Stonestrom,Date:
                  March 12, 2008
            President
                  and Chief Executive Officer




The
      undersigned directors and officers of Airspan Networks Inc. hereby constitute
      and appoint Eric D. Stonestrom and David Brant and each of them with full power
      to act without the other and with full power and substitution and
      resubstitution, our true and lawful attorneys-in-fact with full power to execute
      in our name and behalf in the capacities indicated below this Annual Report
      on
      Form 10-K for the year ended December 31, 2007 and any and all amendments
      thereto and to file the same, with all exhibits thereto and other documents
      in
      connection therewith, with the Securities and Exchange Commission and hereby
      ratify and confirm all that such attorneys-in-fact, or any of them, or their
      substitutes shall lawfully do or cause to be done by virtue hereof.




65




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of Airspan, in the capacities
      and dates indicated.





**Signature**
            
            **Title**
            
            **Dated**/s/
                Eric D. Stonestrom
            
            Chief
                Executive Officer and Director,
            
            March
                12, 2008Eric
                D. Stonestrom
            
            (principal
                executive officer)/s/
                David Brant
            
            Chief
                Financial Officer and Senior Vice President, Finance
            
            March
                12, 2008David
                Brant
            
            (principal financial
                and accounting Officer)/s/
                Matthew J. Desch
            
            Chairman
                of the Board of Directors
            
            March
                12, 2008Matthew
                J. Desch/s/
                Julianne Biagini
            
            Director
            
            March
                12, 2008Julianne
                Biagini/s/
                Bandel Carano
            
            Director
            
            March
                12, 2008Bandel
                Carano/s/
                Frederick Fromm
            
            Director
            
            March
                12, 2008Frederick
                Fromm/s/
                Michael T. Flynn
            
            Director
            
            March
                12, 2008Michael
                T. Flynn/s/
                Guillermo Heredia
            
            Director
            
            March
                12, 2008Guillermo
                Heredia




66




/s/
                Thomas S. Huseby
            
            Director
            
            March
                12, 2008Thomas
                S. Huseby/s/
                David Twyver
            
            Director
            
            March
                12, 2008David
                Twyver




67




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




The
      Board
      of Directors and Stockholders of




Airspan
      Networks Inc.




We
      have
      audited the accompanying consolidated balance sheets of Airspan Networks Inc.
      and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the
      related consolidated statements of operations, changes in stockholders’ equity
      and cash flows for each of the three years in the period ended December 31,
      2007. These consolidated financial statements are the responsibility of the
      Company’s management. ** Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). ** Those
      standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the consolidated financial statements are free of
      material misstatement. ** An
      audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. ** An
      audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall consolidated financial
      statement presentation. ** We
      believe that our audits provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Airspan
      Networks Inc. and subsidiaries as of December 31, 2007, 2006 and 2005, and
      the
      results of their consolidated operations and their consolidated cash flows
      for each of the three years in the period ended December 31, 2007 in conformity
      with accounting principles generally accepted in the United States of
      America.




As
      discussed in Note 1 to the consolidated financial statements, effective January
      1, 2007, the Company adopted the provisions of Financial Accounting Standards
      Board Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes* ”
and
      effective January 1, 2006, the Company changed its method of accounting for
      share-based compensation to adopt Statement of Financial Accounting Standards
      No. 123R “ *Share-Based
      Payment* ”.




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), Airspan Networks Inc.’s internal control over
      financial reporting as of December 31, 2007, based on criteria established
      in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO *)* and
      our
      report dated March 7, 2008 expressed an unqualified opinion
      thereon.




/s/
      GRANT
      THORNTON LLP




Miami,
      Florida




March
      7,
      2008




F-1





**AIRSPAN
                NETWORKS INC.****CONSOLIDATED
                BALANCE SHEETS****(in
                thousands, except for share
                data)**




**December
                  31,**
              
              **December
                  31,****2006**
              
              **2007****ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              15,890
              
              $
              30,815Restricted
                  cash
              
              
              1,111
              
              
              393Short-term
                  investments
              
              
              10,233
              
              
              5,504Accounts
                      receivable, less allowance for doubtful accounts of $5,489
                      and $2,878, at
                      2006 and 2007, respectively
              
              
              31,774
              
              
              33,853Inventory
              
              
              23,624
              
              
              16,720Prepaid
                  expenses and other current assets
              
              
              5,935
              
              
              5,338Total
                  current assets
              
              
              88,567
              
              
              92,623Property,
                  plant and equipment, net
              
              
              5,705
              
              
              5,895Goodwill
              
              
              10,231
              
              
              10,231Intangible
                  assets, net
              
              
              2,806
              
              
              1,870Other
                  non-current assets
              
              
              3,245
              
              
              3,402**Total
                  assets**
              
              $
              110,554$
              
              $
              114,021**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Accounts
                  payable
              
              $
              15,940
              
              $
              11,938Deferred
                  revenue
              
              
              6,656
              
              
              5,125Customer
                  advances
              
              
              1,665
              
              
              892Other
                  accrued expenses
              
              
              16,884
              
              
              13,063Current
                  portion of long-term debt
              
              
              -
              
              
              7,500Total
                  current liabilities
              
              
              41,145
              
              
              38,518Long-term
                  debt
              
              
              1,554
              
              
              1,787Accrued
                  interest on long-term debt
              
              
              153
              
              
              191**Total
                  liabilities**
              
              
              42,852
              
              
              40,496**Commitments
                  and contingencies (Note 11)****Stockholders'
                  equity**Preferred
                  stock, $0.0001 par value; 250,000 Series B shares authorized at
                December
                  31, 2006 and 2007200,690
                  Series B preferred shares issued at
                  December 31, 2006 and 2007Common
                  stock, $0.0003 par value; 100,000,000 shares authorized at December
                  31,
                  2006 and 2007; 40,380,910 and 58,542,517 issued and outstanding
                  at
                  December 31, 2006 and 2007, respectively
              
              
              12
              
              
              17Note
                  receivable - stockholder
              
              
              (87
              )
              
              (87
              )Additional
                  paid-in capital
              
              
              308,768
              
              
              349,718Accumulated
                  other comprehensive income
              
              
              -
              
              
              -Accumulated
                  deficit
              
              
              (240,991
              )
              
              (276,123
              )**Total
                  stockholders' equity**
              
              
              67,702
              
              
              73,525**Total
                  liabilities and stockholders' equity**
              
              $
              110,554
              
              $
              114,021





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





F-2




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


**Years
                  ended December 31,****2005**
              
              **2006**
              
              **2007**Revenue
              
              $
              110,966
              
              $
              127,812
              
              $
              94,970Cost
                  of revenue
              
              
              (79,467
              )
              
              (94,948
              )
              
              (70,134
              )Gross
                  profit
              
              
              31,499
              
              
              32,864
              
              
              24,836Operating
                  expenses:Research
                  and development
              
              
              21,157
              
              
              24,797
              
              
              24,596Sales
                  and marketing
              
              
              11,464
              
              
              17,203
              
              
              14,240Bad
                  debts
              
              
              1,115
              
              
              2,257
              
              
              1,835General
                  and administrative
              
              
              12,682
              
              
              16,039
              
              
              14,947Amortization
                  of intangibles
              
              
              942
              
              
              1,060
              
              
              936Restructuring
              
              
              1,150
              
              
              2,183
              
              
              (689
              )Total
                  operating expenses
              
              
              48,510
              
              
              63,539
              
              
              55,865Loss
                  from operations
              
              
              (17,011
              )
              
              (30,675
              )
              
              (31,029
              )Interest
                  and other expense
              
              
              (9
              )
              
              (362
              )
              
              (654
              )Interest
                  and other income
              
              
              1,397
              
              
              1,589
              
              
              1,315Loss
                  before income taxes
              
              
              (15,623
              )
              
              (29,448
              )
              
              (30,368
              )Income
                  tax benefit (provision)
              
              
              546
              
              
              246
              
              
              (94
              )Net
                  loss
              
              
              (15,077
              )
              
              (29,202
              )
              
              (30,462
              )Deemed
                  dividend associated with beneficial conversionof
                  preferred stock
              
              
              -
              
              
              (9,179
              )
              
              (4,670
              )Net
                  loss attributable to common stockholders
              
              $
              (15,077
              )
              $
              (38,381
              )
              $
              (35,132
              )Net
                  loss per share attributable to commonstockholders
                  - basic and diluted
              
              $
              (0.39
              )
              $
              (0.96
              )
              $
              (0.77
              )Weighted
                  average shares outstanding - basic and diluted
              
              
              38,736,939
              
              
              40,026,411
              
              
              45,387,386




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


F-3




**CONSOLIDATED
                STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY****(in
                thousands, except for share data)**




**Preferred
                Stock**
            
            **Common
                Stock**
            
            
            
            
            
            **Accumulated****Additional**
            
            
            
            **Note**
            
            **Other****Par**
            
            
            
            **Par**
            
            **Paid-In**
            
            **Treasury**
            
            **Receivable
                -**
            
            **Comprehensive**
            
            **Accumulated****Shares**
            
            **Value**
            
            **Shares**
            
            **Value**
            
            **Capital**
            
            **Stock**
            
            **Stockholder**
            
            **Income**
            
            **Deficit**
            
            **Total****Balance
                at January 1, 2005**
            
            
            73,000
            
            
            -
            
            
            37,644,627
            
            $
            11
            
            $
            260,356
            
            $
            -
            
            $
            (87
            )
            $
            418
            
            $
            (187,533
            )
            $
            73,165Comprehensive
                loss:Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (15,077
            )
            
            (15,077
            )Other
                comprehensive income:Movement
                in the fair value of cash flow hedges:Unrealized
                gains on foreign currency cash flow hedges
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (130
            )Less:
                reclassification of adjustment for gains realizedin
                net income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (418
            )(548
            )
            
            
            
            
            (548
            )Comprehensive
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (15,625
            )Issuance
                of common stock - employee share purchase plan
            
            
            
            
            
            
            
            
            130,630
            
            
            
            
            
            485
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            485Exercise
                of stock options
            
            
            
            
            
            
            
            
            883,390
            
            
            
            
            
            1,332
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,332Issuance
                of common stock - ArelNet acquisition
            
            
            
            
            
            
            
            
            1,001,325
            
            
            1
            
            
            4,751
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,752Stock
                compensation from the issuance of stock options -ArelNet
                acquisition
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            309
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            309Issuance
                of common stock - 401K plan
            
            
            
            
            
            
            
            
            8,299
            
            
            
            
            
            45
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            45Restricted
                stock compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            148
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            148**Balance
                at December 31, 2005**
            
            
            73,000
            
            
            -
            
            
            39,668,271
            
            $
            12
            
            $
            267,426
            
            $
            -
            
            $
            (87
            )
            $
            (130
            )
            $
            (202,610
            )
            $
            64,611Comprehensive
                loss:Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (29,202
            )
            
            (29,202
            )Other
                comprehensive income:Movement
                in the fair valueof
                cash flow hedges:Realized
                losses on foreign currency cash flow hedges
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            130
            
            
            
            
            
            130Comprehensive
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (29,072
            )Exchange
                of Series A preferred shares
            
            
            (73,000
            )
            
            
            
            
            
            
            
            
            
            
            (21,827
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            (21,827
            )Issuance
                of Series B preferred shares
            
            
            200,690
            
            
            
            
            
            
            
            
            
            
            
            50,501
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            50,501Deemed
                dividend associated with beneficial conversion ofpreferred
                stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,179
            
            
            
            
            
            
            
            
            
            
            
            (9,179
            )
            
            -Issuance
                of common stock - employee share purchase plan
            
            
            
            
            
            
            
            
            208,102
            
            
            
            
            
            332
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            332Exercise
                of stock options
            
            
            
            
            
            
            
            
            453,304
            
            
            
            
            
            657
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            657Issuance
                of common stock - 401K plan
            
            
            
            
            
            
            
            
            26,541
            
            
            
            
            
            66
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            66Vesting
                of restricted stock
            
            
            
            
            
            
            
            
            24,692Stock
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,434
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,434**Balance
                at December 31, 2006**
            
            
            200,690
            
            
            -
            
            
            40,380,910
            
            $
            12
            
            $
            308,768
            
            $
            -
            
            $
            (87
            )
            $
            -
            
            $
            (240,991
            )
            $
            67,702Comprehensive
                loss:Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (30,462
            )
            
            (30,462
            )Comprehensive
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (30,462
            )Issuance
                of shares related to underwritten public offering
            
            
            
            
            
            
            
            
            17,250,000
            
            
            5
            
            
            31,985
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            31,990Deemed
                dividend associated with beneficial conversion ofpreferred
                stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,670
            
            
            
            
            
            
            
            
            
            
            
            (4,670
            )
            
            -Issuance
                of common stock - employee share purchase plan
            
            
            
            
            
            
            
            
            358,211
            
            
            
            
            
            588
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            588Exercise
                of stock options
            
            
            
            
            
            
            
            
            511,040
            
            
            
            
            
            1,135
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,135Issuance
                of common stock - 401K plan
            
            
            
            
            
            
            
            
            17,949
            
            
            
            
            
            50
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            50Vesting
                of restricted stock
            
            
            
            
            
            
            
            
            24,407
            
            
            
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,522
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,522**Balance
                at December 31, 2007**
            
            
            200,690
            
            
            -
            
            
            58,542,517
            
            $
            17
            
            $
            349,718
            
            $
            -
            
            $
            (87
            )
            $
            -
            
            $
            (276,123
            )
            $
            73,525




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




F-4





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


**For
                  the Years Ending December 31,****2005**
              
              **2006**
              
              **2007****Cash
                  flows from operating activities**Net
                  loss
              
              $
              (15,077
              )
              $
              (29,202
              )
              $
              (30,462
              )Adjustments
                  to reconcile net loss to net cash used inoperating
                  activities:Depreciation
                  and amortization
              
              
              2,817
              
              
              3,789
              
              
              3,824Loss
                  (gain) on sale of property, plant and equipment
              
              
              57
              
              
              88
              
              
              (9
              )Accrued
                  interest on long-term debt
              
              
              -
              
              
              262
              
              
              271Non-cash
                  stock compensation
              
              
              193
              
              
              2,511
              
              
              2,591Bad
                  debts
              
              
              1,115
              
              
              2,257
              
              
              1,835Changes
                  in operating assets and liabilities:Increase
                  in receivables
              
              
              (2,931
              )
              
              (9,410
              )
              
              (3,913
              )Decrease/(increase)
                  in inventories
              
              
              (3,440
              )
              
              (6,774
              )
              
              6,904Decrease/(increase)
                  in other current assets
              
              
              1,869
              
              
              (2,213
              )
              
              597Decrease
                  in accounts payable
              
              
              (411
              )
              
              (8,738
              )
              
              (4,002
              )Increase/(decrease)
                  in deferred revenue
              
              
              867
              
              
              5,142
              
              
              (1,531
              )Increase/(decrease)
                  in customer advances
              
              
              8,760
              
              
              (12,270
              )
              
              (773
              )Increase/(decrease)
                  in other accrued expenses
              
              
              (854
              )
              
              2,615
              
              
              (3,841
              )Decrease/(increase)
                  in other operating assets
              
              
              (211
              )
              
              1,379
              
              
              562Net
                  cash used in operating activities
              
              
              (7,246
              )
              
              (50,564
              )
              
              (27,947
              )**Cash
                  flows from investing activities**Purchase
                  of property, plant and equipment
              
              
              (3,114
              )
              
              (3,136
              )
              
              (3,069
              )Purchase
                  of investment securities
              
              
              (16,669
              )
              
              (31,640
              )
              
              (17,726
              )Proceeds
                  from sale of investment securities
              
              
              10,649
              
              
              27,427
              
              
              22,454Cost
                  of acquisition, net of cash acquired
              
              
              (5,945
              )
              
              -
              
              
              -Net
                  cash (used in)/provided by investing activities
              
              
              (15,079
              )
              
              (7,349
              )
              
              1,659**Cash
                  flows from financing activities**Net
                  proceeds from issuance of common stock
              
              
              485
              
              
              -
              
              
              -Net
                  proceeds from issuance of preferred stock
              
              
              -
              
              
              28,674
              
              
              -Borrowings
                  under line of credit
              
              
              -
              
              
              2,500
              
              
              7,500Repayment
                  of borrowings under line of credit
              
              
              -
              
              
              (2,500
              )Proceeds
                  from public offering, net of issuance costs
              
              
              -
              
              
              -
              
              
              31,990Proceeds
                  from the exercise of stock options
              
              
              1,332
              
              
              657
              
              
              1,135Issuance
                  of common stock under employee share purchase plan
              
              
              -
              
              
              332
              
              
              588Restricted
                  cash movement, net
              
              
              (1,648
              )
              
              -
              
              
              -Net
                  cash provided by financing activities
              
              
              169
              
              
              29,663
              
              
              41,213Increase/(decrease)
                  in cash and cash equivalents
              
              
              (22,156
              )
              
              (28,250
              )
              
              14,925**Cash
                  and cash equivalents, beginning of year**
              
              
              66,296
              
              
              44,140
              
              
              15,890**Cash
                  and cash equivalents, end of year**
              
              $
              44,140
              
              $
              15,890
              
              $
              30,815**Supplemental
                  disclosures of cash flow information**Interest
                  paid
              
              $
              -
              
              $
              24
              
              $
              425Income
                  taxes paid
              
              $
              20
              
              $
              21
              
              $
              51**Non-cash
                  investing and financing activities**Issuance
                  of stock related to acquisitions
              
              $
              5,061
              
              $
              -
              
              $
              -**Deemed
                  dividend associated with beneficial conversion****of
                  preferred stock**
              
              $
              -
              
              $
              9,179
              
              $
              4,670




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




F-5




AIRSPAN
      NETWORKS INC.


NOTES
      TO
      THE FINANCIAL STATEMENTS


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




**1.
      THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*Business*




The
      Company is a global supplier of broadband wireless equipment and other
      technologies supporting the Worldwide Interoperability for Microwave Access
      (“WiMAX”) protocol standard, which provides a wide area telecommunication access
      network to connect end-users to telecom backbone networks. The WiMAX standard
      is
      established by the WiMAX Forum® ,
      a
      self-regulatory, industry standards-setting organization. While our main product
      focus is WiMAX, we utilize other supplemental technologies, including Wireless
      Fidelity (“Wi-Fi”) and Voice-over-Internet Protocol (“VoIP”), which allow communications
      network operators and service providers to deliver high-speed data and voice
      services cost-effectively using wireless communications rather than wired
      infrastructure. Historically, the primary market for our wireless systems has
      been fixed point to multi-point applications. Our development of new technology
      has expanded the market to include portable and mobile applications. The
      Company’s main operations are in Uxbridge, United Kingdom, and Airport City,
      Israel, with corporate headquarters in Boca Raton, Florida.




*Principles
      of consolidation*




The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries, all of which are wholly owned. All significant inter-company
      transactions and balances are eliminated on consolidation.




*Use
      of estimates*




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements and accompanying notes. Actual results could differ from those
      estimates.




*Cash
      and cash equivalents*




The
      Company considers all highly liquid investments with a maturity of three months
      or less when purchased to be cash equivalents. Cash and cash equivalents are
      all
      maintained in either bank accounts or investments that are of investment grade
      quality and are not subject to significant market risk.





*Restricted
      cash*




Restricted
      cash consists of cash pledged as collateral to secure the guarantees described
      in Note 12 and cash held on behalf of employees to purchase Airspan stock under
      our Employee Share Purchase Plan.




**Years
                ended December 31,****2006**
            
            **2007**B
                Bank guarantees - with Customers
            
            $
            999
            
            $
            122Employee
                cash held under the Employee Share Purchase Plan
            
            
            112
            
            
            271Total
            
            $
            1,111
            
            $
            393





F-6




*Short-term
      investments*





The
      Company accounts for its investments in marketable securities using Statement
      of
      Financial Accounting Standard No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities” (“SFAS 115”).




Debt
      securities with original maturities greater than three months and with current
      maturities less than one year are considered short-term investments. They are
      of
      investment grade quality and are not subject to significant market risk. In
      2007, short-term investments were classified as available for sale and are
      stated at fair value. Unrealized holding gains and losses are excluded from
      earnings and are reported as other comprehensive income, which is a separate
      component of shareholders’ equity, until realized. In 2006, short-term
      investments were classified as held to maturity when the Company had the
      positive intent and ability to hold the securities to maturity and were stated
      at amortized cost.





*Accounts
      receivable*




Accounts
      receivable represent receivables from customers in the ordinary course of
      business. These are recorded at the invoiced amount and do not bear interest.
      Receivables are recorded net of the allowance for doubtful accounts in the
      accompanying consolidated balance sheets. The Company evaluates the
      collectibility of its accounts receivable based on a combination of factors.
      The
      Company regularly analyzes its customer accounts overdue more than 90 days,
      and
      when it becomes aware of a specific customer’s inability to meet its financial
      obligations, the Company records a specific reserve to reduce the related
      receivable to the amount it reasonably believes to be collectible. When
      collection efforts cease or collection is considered remote, the account and
      related reserve are written off. If circumstances related to specific customers
      change, the Company’s estimates of the recoverability of receivables are
      adjusted. At December 31, 2007 and 2006, the allowance for doubtful accounts
      was
      $2.9 million and $5.5 million, respectively.





*Fair
      value of financial instruments*




The
      financial instruments of the Company consist mainly of cash and cash
      equivalents, restricted cash, short-term investments, accounts receivable,
      accounts payable, long-term debt and foreign currency forward contracts. The
      estimated fair values approximate amounts at which these financial instruments
      could be exchanged in a current transaction between willing parties. Therefore,
      fair values are based on estimates using present value and other techniques,
      which are significantly affected by assumptions used concerning the amount
      and
      timing of, estimated future cash flows and discount rates, which reflect varying
      degrees of risk. Accordingly, although the carrying amount of all financial
      instruments approximates fair value at December 31, 2007 and 2006, they are
      not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange in the future.




*Derivative
      financial instruments and hedging activities*




The
      Company from time to time enters into forward and option contracts to manage
      its
      exposure to fluctuations in foreign exchange rates. The Company does not hold
      any derivative instruments for trading purposes. As part of the Company’s risk
      management policy the Company assesses its foreign currency risk on each
      transaction on a case-by-case basis. The Company will only enter into forward
      and option contracts after taking into account the size of the transaction,
      expected volatility of the currency and prevailing foreign currency exchange
      rates.




Our
      foreign exchange option contracts are designated as hedging the exposure to
      changes in the fair value of a recognized asset and the gain or loss is
      recognized in income in the period of change, together with the offsetting
      loss
      or gain on the hedged item attributable to the risk being hedged. There were
      no
      outstanding option contracts at December 31, 2007 or December 31, 2006.




Our
      foreign exchange forward contracts are designated as hedging the exposure to
      variable cash flows of a forecasted transaction. The foreign exchange contracts
      are re-valued at the end of each period using current market exchange
      rates. Effectiveness is measured by comparing the changes in fair value of
      the hedge against the change in the expense being hedged arising from U.S.
      dollars to U.K. pound sterling currency fluctuations since the date of
      inception. There is no portion of the hedging instruments that have been
      excluded from the assessment of effectiveness. The effective portion of the
      derivatives gain or loss is initially reported as a component of other
      comprehensive income and subsequently reclassified into income when the forecast
      transaction affects earnings. Any ineffective portion of the derivatives gain
      or
      loss is reported in interest and other income as it arises. In the years 2005,
      2006 and 2007, there were no ineffective portions. Our cash flow hedges are
      being used to manage our pound sterling foreign currency risk, primarily on
      our
      U.K.-based employee salaries, facility costs and other U.K. expenses. Our U.K.
      salaries and expenses are accounted for each month and reclassification into
      earnings from comprehensive income will therefore occur every month.




F-7





At
      December 31, 2007 and December 31, 2006, there were no forward contracts
      outstanding.




During
      2007, 2006 and 2005, the Company recorded, after reclassification of amounts
      into net income, net unrealized losses in other comprehensive income of $nil,
      $nil, and $130, respectively, related to derivatives that were designated as
      cash flow hedging instruments. The tax effects of comprehensive income or loss
      were not considered material for the years ended December 31, 2007, 2006 and
      2005.  The change in other comprehensive income of $130 was
      attributable to the settlement during 2006 of forward contracts outstanding
      at
      December 31, 2005.




Realized
      gains and losses arising from fair value and cash flow hedges are reported
      in
      interest and other income. Unrealized gains and losses are shown in other
      comprehensive income with the other side of the transaction shown in prepayments
      for gains and accruals for losses. Changes in unrealized gains and losses are
      shown in the cash flow statement as adjustments to reconcile net loss to net
      cash used in operating activities within either other current assets or other
      accrued expenses, depending on whether the movements relate to gains or
      losses.




The
      fair
      value of foreign exchange forward and options contracts are determined using
      published rates.




*Inventories*




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




Raw
      materials, consumables and finished goods — average cost




Work
      in
      progress— cost of direct materials, labor and allocated manufacturing overhead





*Property,
      plant and equipment*




Property
      plant and equipment are stated at cost. Depreciation is provided on all tangible
      fixed assets at rates calculated to write off the cost, less estimated residual
      value, based on prices prevailing at the date of acquisition of each asset
      evenly over its expected useful life, as follows:




Leasehold
      improvements — over the lesser of the minimum lease term or the useful life




Plant,
      machinery and equipment — over 2 to 5 years




Furniture
      and fixtures — over 4 to 5 years




*Identifiable
      intangible assets*




Only
      purchased intangible assets are capitalized. The company does not capitalize
      internally generated intangible assets or goodwill. Intangible assets other
      than
      goodwill are amortized using the straight-line method over their estimated
      period of benefit, ranging from one to five years. All of the Company’s
      intangible assets other than goodwill are subject to amortization.




F-8




*Goodwill
      arising on business combinations*




Under
      Statement of Financial Accounting Standards 142, “Goodwill and Other Intangible
      Assets,” goodwill is not amortized, but is instead tested for impairment at
      least annually. In addition, the Company also tests its goodwill for impairment
      whenever events or changes in circumstances indicate that the carrying value
      of
      goodwill may not be recoverable. No impairment expense was recognized in 2007,
      2006 or 2005.




*Impairment
      of long-lived assets*




In
      accordance with Statement of Financial Accounting Standards No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets,” the Company reviews its
      long-lived assets for impairment when events or changes in circumstances
      indicate that the carrying value of such assets may not be recoverable. In
      addition, at least annually, the Company tests its identified intangible assets
      for impairment. This review consists of a comparison of the carrying value
      of
      the asset with the asset’s expected future undiscounted cash flows. Estimates of
      expected future cash flows represent management’s best estimate based on
      reasonable and supportable assumptions and projections. If the expected future
      cash flows exceed the carrying value of the asset, no impairment is recognized.
      If the carrying value of the asset exceeds the expected future cash flows,
      impairment exists and is determined by the excess of the carrying value over
      the
      fair value of the asset. Any impairment provisions recognized are permanent
      and
      may not be restored in the future. No impairment expense was recognized in
      2007,
      2006 or 2005.





*Other
      non-current assets*




Other
      non-current assets represent the value of accumulated Israel severance pay
      funds
      and bank guarantees issued to landlords.  Under Israel’s Severance Pay Law,
      Israel employees are entitled to one month of the employee's current
      salary, multiplied by the number of years of employment.  The Company’s
      liability for these employees is fully provided by monthly deposits with
      severance pay funds and by an accrual.  The value of these funds is
      recorded in other non-current assets in the Company’s balance sheet and the
      liability is recorded in other accrued expenses. The deposited funds include
      earnings accumulated up to the balance sheet date. The deposited funds may
      be
      withdrawn only upon the fulfillment of the obligation pursuant to Israel's
      Severance Pay Law or labor agreements. Israel severance pay expenses for the
      years ended December 31, 2005, 2006 and 2007, were $333, $484 and $617,
      respectively.





*Revenue
      recognition*




Our
      revenue recognition policy reflects the fact that our revenue streams are
      primarily derived from (i) sales of hardware that do not require significant
      customization and (ii) services rendered (e.g. extended warranty, product
      maintenance, radio planning, consulting services, etc). In any one arrangement,
      we sometimes generate revenue from more than one revenue stream. In those
      instances, there is an added level of complexity in determining the appropriate
      method of revenue recognition. Management must apply significant judgment in
      determining how to apply the current accounting standards and interpretations
      related to revenue recognition.




Subject
      to the more specific revenue recognition policies discussed below, we recognize
      revenue when all of the following conditions are met: persuasive evidence of
      an
      arrangement with a customer exists; delivery has occurred or services have
      been
      rendered; the price for the product or service is fixed or determinable; and
      collection of the receivable is reasonably assured.





For
      new
      products, if we can reasonably and reliably estimate the amount of warranty
      obligations, we recognize revenue on sales of such products that otherwise
      meet
      the criteria for revenue recognition.




F-9





The
      following are our specific revenue recognition policies:





*Product
      Revenue:* Revenue
      from product sales, including sales to distributors and resellers, is generally
      recognized at the time the product is delivered to the customer. Revenue is
      deferred when customer acceptance is required, rights of return exist or other
      significant obligations remain that are essential to the functionality of the
      delivered products. Revenue is then recognized when these conditions have been
      satisfied. The estimated cost of any post-sale obligations, including basic
      product warranties, is accrued at the time revenue is recognized based on a
      number of factors, which include historical experience and known conditions
      that
      may impact future warranty costs. Revenue from sales to resellers and
      distributors is generally recognized only when the resellers are creditworthy
      in
      their own right or have identified creditworthy end customers for our products
      and services.





*Service
      Revenue:* Revenue
      from time-and-material service contracts is recognized once the services have
      been performed. Revenue from service contracts pursuant to which we provide
      services over a period of time is recognized ratably over the given contract
      period. Revenue is recognized on fixed-price service contracts when the services
      have been completed.





*Revenue
      Arrangements that include Multiple Elements:* In
      certain cases, we enter into agreements with customers whereby we are obligated
      to deliver multiple products and/or multiple services (multiple elements).
      In
      these transactions, we allocate the total revenue to be earned under the
      arrangement among the various elements based on their relative fair value.
      Revenue for these transactions is recognized on each element when the revenue
      recognition criteria have been met for that element.





*Applicability
      of Statement of Position 97-2, Software Revenue Recognition, (and subsequent
      modifications) “SOP 97-2”:* Since
      inception, Airspan has accounted for the sale of products principally under
      SAB
      104 and EITF 00-21. Software related to the products has been considered
      incidental to the product offering as a whole. In the future, we anticipate
      that
      some of our products may include software that is not considered incidental
      to
      our products. In those cases, we will account for those arrangements under
      the
      provisions of SOP 97-2.




*Contract
      Accounting* :
      When
      the Company performs a specific development type contract for a customer subject
      to contract accounting under SOP 81-1, we may adopt the percentage-of-completion
      method or the completed-contract method to recognize revenues under the
      contract. Alternatively, where contracts under which separate units of output
      are produced, where progress can be measured on the basis of units of work
      completed, output is used to measure results directly and is generally the
      best
      measure of progress toward completion in circumstances in which a reliable
      measure of output can be established and the agreement contains milestones
      at
      which nonrefundable payments will be made by the customer.




*Shipping
      and handling costs*




Shipping
      and handling costs are included within cost of sales.





*Research
      and development*




All
      research and development expenditures are charged to research and development
      expense in the period incurred. The Company evaluates whether to capitalize
      or
      expense software development costs in accordance with SFAS No. 86, “Accounting
      for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.”
The Company sells products in a market that is subject to rapid technological
      change, new product development and changing customer needs; accordingly, the
      Company has concluded that technological feasibility is not established until
      the development stage of the product is nearly complete. The Company defines
      technological feasibility as the completion of a working model. The time period
      during which costs could be capitalized from the point of reaching technological
      feasibility until the time of general product release, is very short and,
      consequently, the amounts that could be capitalized are not material to the
      Company’s financial position or results of our operations. Generally, the
      Company does not develop software for resale.




F-10





*Guarantees*




FASB
      Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for
      Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”)
      elaborates on the existing disclosure requirements for most guarantees,
      including loan guarantees such as standby letters of credit. It also clarifies
      that at the time a company issues a guarantee, the company must recognize an
      initial liability for the fair value, or market value of non-contingent
      obligations it assumes under the guarantee and must disclose that information
      in
      its interim and annual financial statements. The provisions related to
      recognizing a liability at inception of the guarantee for the fair value of
      the
      guarantor’s obligations do not apply to product warranties or to guarantees
      accounted for as derivatives. No accruals were required at December 31, 2007
      or
      2006 under FIN 45.




*Warranty*




The
      Company provides a limited warranty for periods, usually ranging from 12 to
      24
      months, to all purchasers of its new equipment. Warranty expense is accrued
      on
      the sale of equipment and is recognized as a cost of revenue. The expense is
      estimated based on analysis of historic costs and other relevant
      factors.





Information
      regarding the changes in the Company’s product warranty liabilities is as
      follows for the years ended December 31, 2007, 2006 and 2005.




**Balance
                at beginning of period**
            
            **Acquired
                on Acquisition**
            
            **Accrual
                for warranties issued during the period**
            
            **Accruals
                related to pre-existing warranties (including changes in
                estimates)**
            
            **Settlements
                made (in cash or in kind) during the period**
            
            **Balance
                at end of period**Product
                warranty liability year ended
              December
                31, 2007
            
            $
            985
            
            
            -
            
            
            531
            
            
            (224
            )
            
            (282
            )
            $
            1,010Product
                warranty liability year ended
              December
                31, 2006
            
            $
            410
            
            
            -
            
            
            1,190
            
            
            284
            
            
            (899
            )
            $
            985Product
                warranty liability year ended
              December
                31, 2005
            
            $
            604
            
            
            134
            
            
            582
            
            
            (482
            )
            
            (428
            )
            $
            410





*Foreign
      currency transactions*




The
      functional currency of all companies in the group is the U.S. dollar.
      Transactions in currencies other than U.S. dollars are converted at the monthly
      average exchange rate in effect on the date of the transactions.




Monetary
      assets and liabilities denominated in currencies other than U.S. dollars are
      remeasured into U.S. dollars at the rate of exchange on the balance sheet date.
      Gains and losses arising from transactions not denominated in U.S. dollars
      are
      recognized in the consolidated statement of operations as other income or
      expense. The net value of exchange gains and losses during the year ended
      December 31, 2007 was a credit of $0.3 million.  The net
      value of exchange gains and losses during the year ended December 31, 2006
      was a
      credit of $0.2 million of which $0.1 million related to the reclassification
      of
      gains on our forward exchange contracts from other comprehensive income. The
      net
      value of exchange gains and losses during the year ended December 31, 2005
      was a
      credit of $0.1 million of which $0.4 million related to the reclassification
      of
      gains on our forward exchange contracts from other comprehensive
      income .




F-11




*Comprehensive
      income*




The
      Company reports comprehensive income or loss in accordance with the provisions
      of Statement of Financial Accounting Standards No. 130 “Reporting Comprehensive
      Income” (“SFAS No. 130”). SFAS No. 130 establishes standards for reporting
      comprehensive income and its components in financial statements. Comprehensive
      income or loss, as defined, includes all changes in equity (net assets) during
      a
      period from non-owner sources. Tax effects of other comprehensive income or
      loss
      are not considered material for any period. The Company’s sources of other
      comprehensive income are foreign exchange forward contracts and available for
      sale securities.




*Concentration
      of credit risk*




Financial
      instruments, which potentially subject Airspan to concentration of credit risk,
      consist primarily of cash and cash equivalents, restricted cash, short-term
      investments and accounts receivable. Airspan places its cash and cash
      equivalents and short-term investments only in highly rated financial
      instruments.




Airspan’s
      accounts receivable are derived from sales of its products, and approximately
      93%, 92% and 91% of product sales were to non-U.S. customers for the year ended
      December 31, 2005, 2006 and 2007, respectively. One customer in Germany
      accounted for $4.6 million of our account receivable balance at December 31,
      2007 and $4.8 million at December 31, 2006. For some customers, Airspan requires
      payment in advance or payment security in the form of an irrevocable letter
      of
      credit for the full amount of significant sales to be in place at the time
      of
      shipment, except in cases where credit risk is considered to be acceptable.  The
      Company’s top three customers accounted for 62% of revenue in 2005, 53% of
      revenue in 2006 and 37% of revenue in 2007.





*Stock
      based compensation*




Prior
      to
      January 1, 2006, we accounted for awards issued under these plans under the
      recognition and measurement principles of Accounting Principles Board (“APB”)
      Opinion No. 25, “Accounting for Stock Issued to Employees”, and related
      interpretations. In all periods shown prior to January 1, 2006, we valued
      stock-based employee compensation using the intrinsic value method. In December
      2004, the Financial Accounting Standards Board (“FASB”) issued Statement No.
      123R, Share-Based Payment (“SFAS 123R”). This Statement eliminates the use of
      the intrinsic value method described in APB Opinion No. 25, and requires an
      entity to measure the cost of employee services received in exchange for an
      award of equity instruments based on the grant-date fair value of the award.
      That cost will be recognized over the period during which an employee is
      required to provide service in exchange for the award.





We
      adopted SFAS 123R as of January 1, 2006, using the modified prospective
      transition method. Our consolidated financial statements for 2006 and 2007
      reflect the impact of SFAS 123R. The consolidated financial statements for
      2005
      have not been restated to reflect, and do not include, the impact of SFAS 123R.
      Share-based compensation expense recognized under SFAS 123R for 2006 was $2.5
      million and for 2007 was $2.6 million.





The
      following table summarizes share-based compensation expense under SFAS 123R
      for
      the years ended December 31, 2006 and 2007:




2006
            
            2007Research
                and development
            
            $
            688
            
            $
            859Sales
                and marketing
            
            
            818
            
            
            690General
                and administrative
            
            
            971
            
            
            977Stock-based
                compensation expense included in operating expense
            
            
            2,477
            
            
            2,526Cost
                of sales
            
            
            34
            
            
            65Total
                stock-based compensation
            
            $
            2,511
            
            $
            2,591





F-12




SFAS
      123R
      requires companies to estimate the fair value of share-based awards on the
      date
      of grant using an option-pricing model. The value of the portion of the award
      that is ultimately expected to vest is recognized as an expense in our
      consolidated statement of operations over the requisite service periods.
      Share-based compensation expense recognized in our consolidated statement of
      operations for 2006 and 2007 includes compensation expense for share-based
      awards granted (i) prior to, but not yet vested as of December 31, 2005, based
      on the grant date fair value estimated in accordance with the provisions of
      SFAS
      123, “Accounting for Stock Based Compensation”, and (ii) subsequent to December
      31, 2005, based on the grant date fair value estimated in accordance with the
      provisions of SFAS 123R. Compensation expense for all share-based awards is
      recognized using the straight-line single-option method. Because share-based
      compensation expense is based on awards that are ultimately expected to vest,
      share-based compensation expense has been reduced to account for estimated
      forfeitures. SFAS 123R requires forfeitures to be estimated at the time of
      grant
      and revised, if necessary, in subsequent periods if actual forfeitures differ
      from those estimates. In the Company’s pro forma information required under SFAS
      123 for 2005, the Company accounted for forfeitures as they occurred.




To
      calculate option-based compensation under SFAS 123R, we used the Black-Scholes
      option-pricing model, which we had previously used for valuation of option-based
      awards for the pro forma information required under SFAS 123 for periods prior
      to fiscal 2006. Our determination of fair value of option-based awards on the
      date of grant using the Black-Scholes model is affected by our stock price,
      as
      well as assumptions regarding a number of subjective variables. These variables
      include, but are not limited to, our expected stock price volatility over the
      term of the awards, and actual and projected employee stock option exercise
      behaviors.




Pro
      Forma
      Share-Based Compensation under SFAS 123 for 2005:




Had
      (i) compensation expense for our stock option plans been determined based
      on the Black-Scholes valuation method and (ii) the fair value at the grant
      date
      for awards in 2005 been determined consistent with the provisions of SFAS 123,
      as amended by SFAS 148, “Accounting for Stock Based Compensation-Transition and
      Disclosure,” our net loss and net loss per share for 2005 would have changed by
      the pro forma amounts indicated below (in thousands, except per share
      data):





**Year
                Ended****December
                31, 2005**Net
                loss applicable to common stockholders - as reported
            
            $
            (15,077
            )Deduct:
                Total stock-based employee compensation expense determined under
                fairvalue
                based method for all awards, net of related tax effects
            
            
            (2,341
            )Add:
                Stock-based compensation expense included in reported net income,
                net
                ofrelated
                tax effects
            
            
            192Net
                loss attributable to common stockholders - pro forma
            
            $
            (17,226
            )Basic
                and diluted net loss per share - as reported
            
            $
            (0.39
            )Basic
                and diluted net loss per share - pro forma
            
            $
            (0.44
            )




F-13




Fair
      Value and Assumptions Used to Calculate Fair Value under SFAS 123R and SFAS
      123:





The
      weighted average fair value of each restricted stock share granted under our
      equity compensation plans for 2005, 2006 and 2007 was $4.12, $5.23 and $4.69,
      respectively. The fair value of each restricted stock award was estimated on
      the
      date of grant using the fair market value of the stock on the date of
      grant.





The
      weighted average fair value of each option granted during 2005, 2006 and 2007
      was $3.16, $2.66 and $3.54, respectively. The fair value of each option award
      was estimated on the date of grant using the Black-Scholes Option Pricing Model,
      using the following weighted average assumptions for 2005, 2006 and
      2007:




**Years
                Ended December 31,****2005**
            
            **2006**
            
            **2007**Risk-free
                interest rate
            
            
            4.06
            %
            
            4.68
            %
            
            3.66
            %Expected
                average years until exercised
            
            
            5
            
            
            5
            
            
            5Expected
                dividend yield
            
            
            -
            
            
            -
            
            
            -Expected
                volatility
            
            
            86
            %
            
            85
            %
            
            77
            %





Assumptions
      for option-based awards under SFAS 123R:





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





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




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





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





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





Assumptions
      for option-based awards under SFAS 123:





Prior
      to
      2006, we used historical volatility of our stock price in determining expected
      volatility. The risk-free interest rate was based upon assumption of interest
      rates appropriate for the term of our employee stock options. The dividend
      yield
      assumption was based on our history and expectation of dividend payouts.
      Forfeitures prior to 2006 were accounted for as they occurred.





*Electronic
      equipment waste obligations*





In
      June
      2005, the FASB issued FSP No. 143-1, “Accounting for Electronic Equipment Waste
      Obligations” (“FSP 143-1”). FSP 143-1 provides guidance on how commercial users
      and producers of electronic equipment should recognize and measure asset
      retirement obligations associated with the European Union (“EU”) Directive
      2002/96/EC on Waste Electrical and Electronic Equipment. FSP 143-1 was
      effective as of the later of Airspan’s fiscal quarter ended October 2, 2005
      or the date of the adoption of the law by the applicable EU-member country.
      In
      the third quarter of 2005, Airspan adopted FSP 143-1 with respect to those
      EU-member countries that had adopted the directive into country specific laws
      by
      the end of the third quarter. The adoption of the FSP 143-1 did not have a
      material impact on Airspan’s 2006 or 2007 results of operations and financial
      condition. Due to the fact that certain EU-member countries have not yet enacted
      country-specific laws, Airspan cannot yet estimate the impact of applying this
      guidance in future periods.




F-14





*Segment
      reporting*




During
      the periods, the Company operated as a single segment - the development and
      supply of broadband wireless equipment and technologies.





*Income
      taxes*





The
      Company adopted the provisions of Financial Accounting Standards Board (FASB)
      Interpretation Number 48 (FIN 48), “ *Accounting
      for Uncertainty in Income Taxes* ”,
      on
      January 1, 2007. Previously, the Company had accounted for tax contingencies
      in
      accordance with Statement of Financial Accounting Standards 5, “Accounting for
      Contingencies”. As required by FIN 48, which clarifies FASB Statement 109,
“Accounting for Income Taxes”, the first step is to evaluate the tax position
      for recognition by determining if the weight of available evidence indicates
      it
      is more likely than not that the position will be sustained on audit, including
      resolution of related appeals or litigation processes, if any. The second step
      is to measure the tax benefit as the largest amount which is more than 50%
      likely of being realized upon ultimate settlement. At the adoption date, the
      Company applied FIN 48 to all tax positions for which the statute of limitations
      remained open.  As a
      result of the implementation, the Company did not have to recognize any
      liability for unrecognized tax benefits. In
      May
      2007, the FASB issued FASB Staff Position (FSP) 48-1, which provides guidance
      on
      how an enterprise should determine whether a tax position is effectively settled
      for the purpose of recognizing previously unrecognized tax benefits. FSP 48-1
      did not impact the adoption of FIN 48.




The
      Company recognizes interest accrued related to unrecognized tax benefits in
      interest expense and penalties in operating expenses.




*Advertising
      expense*





Advertising
      is expensed as incurred. Advertising expense was $0.3 million, $0.4 million
      and
      $0.3 million in 2007, 2006 and 2005, respectively.




*Other
      taxes*





Taxes
      on
      the sale of products and services to customers are collected by us as an agent
      and recorded as a liability until remitted to the respective taxing authority.
      These taxes have been presented on a net basis in the consolidated financial
      statements.




*Reclassifications*





Certain
      prior year amounts have been reclassified to be consistent with the current
      year
      presentation.





*New
      accounting pronouncements*





In
      September 2006, the FASB issued SFAS No. 157,
      “Fair Value Measurements” (“SFAS 157”),
      which defines fair value of certain assets and liabilities, establishes a
      framework for measuring fair value, and expands disclosures about fair value
      measurements.  This statement does not require any new fair value
      measurements, but may change current practice for certain entities.In
      February 2008, the FASB issued FSP 157-2 "*Partial
      Deferral of the Effective Date of Statements 157,*"
      which
      delays the effective date of FAS 157,
      for
      all non-financial assets and non-financial liabilities, except those that are
      recognized or disclosed at fair value in the financial statements on a recurring
      basis (at least annually) to fiscal years beginning after November 15,
      2008. Although we will continue to evaluate the application of SFAS 157,
      we
      do not believe adoption will have a material impacton
      our
      consolidated financial statements.




F-15




In
      February 2007, the FASB issued Statement No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159
      allows entities the option to measure eligible financial instruments at fair
      value as of specified dates. Such election, which may be applied on an
      instrument-by-instrument basis, is typically irrevocable once elected. SFAS
      159
      is effective for fiscal years beginning after November 15, 2007, and early
      application is allowed under certain circumstances. Management expects that
      SFAS
      159 will not have a material effect on our consolidated financial
      statements.




In
      June
      2007, the FASB ratified Emerging Issues Task Force 07-3, “Accounting for
      Nonrefundable Advance Payments for Goods or Services Received for Use in Future
      Research and Development Activities” (EITF 07-3). EITF 07-3 requires
      nonrefundable advance payments for research and development goods or services
      to
      be deferred and capitalized. Expense is recognized as the services are performed
      or goods are delivered. EITF 07-3 is effective for fiscal years beginning after
      December 15, 2007. Management expects that the adoption of EITF 07-3 will not
      have a material effect on our consolidated financial statements .




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




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





**2.
      ACQUISITIONS**




On
      June
      16, 2005, the Company consummated its acquisition of all of the outstanding
      shares of capital stock of ArelNet Ltd (“ArelNet”). This business combination
      has been accounted for under the purchase method and the results of operations
      of ArelNet from June 16, 2005 to December 31, 2007 are included in the
      consolidated statements of operations of the Company. ArelNet is a pioneer
      in
      VoIP network infrastructure equipment and solutions, including soft switches
      and
      gateways supporting all major VoIP standards. ArelNet has extensive experience
      worldwide, having installed network equipment with a capacity exceeding two
      billion minutes per year.




F-16





ArelNet
      was acquired primarily to enable the Company to develop carrier grade voice
      telephony using switching and gateway technologies in the Company’s WiMAX data
      platforms. The purchase price of $9.4 million was made up of $4.0 million of
      cash, 1,001,325 shares of the Company’s common stock valued at $4.8 million,
      employee stock options to purchase 100,000 shares of the Company’s common stock
      valued at $0.3 million and $0.4 million of direct acquisition costs. Of the
      total purchase price, $0.5 million was deposited in escrow with an escrow agent
      to secure the sellers’ representations and warranties under the purchase
      agreement. These funds have been released from escrow. The options issued to
      ArelNet employees were valued in accordance with FASB Statement No. 123,
“Accounting for Stock-Based Compensation” and measured at fair value using a
      Black-Scholes option-pricing model. In accordance with the FASB Emerging Issues
      Task Force (EITF) issue No. 99-12 -“Determination of the Measurement Date for
      the Market Price of Acquirer Securities Issued in a Purchase Business
      Combination” and FASB Statement No. 141, “Business Combinations”, the 1,001,325
      shares issued in connection with the transaction were valued based on market
      prices on the three days before the measurement date of June 16,
      2005.




The
      preliminary purchase price allocation made in the second quarter of 2005 (the
      “Preliminary Allocation”) was finalized in the third quarter of 2005. The
      Company engaged an independent third party to assist in the valuation of
      intangible assets.




Calculation
      of purchase price:




Cash
                consideration
            
            $
            4,000Fair
                value of shares issued
            
            
            4,752Fair
                value of options granted
            
            
            309Direct
                acquisition costs
            
            
            379Total
                purchase price
            
            $
            9,440





The
      following table shows the historical book value and the purchase price
      allocation:




**Purchase****Price****Allocation/****Historical**
            
            **Fair
                Value****Book
                Value**
            
            **Adjustments**
            
            **Fair
                Value**Allocation
                of purchase price - ArelNet:Cash
            
            $
            18
            
            $
            -
            
            $
            18Accounts
                receivable
            
            
            1,507
            
            
            (590
            )
            
            917Inventory
            
            
            1,161
            
            
            (789
            )
            
            372Prepaid
                expenses and other current assets
            
            
            581
            
            
            (19
            )
            
            562Property,
                plant and equipment, net
            
            
            110
            
            
            161
            
            
            271Other
                long-term assets
            
            
            1,037
            
            
            (64
            )
            
            973Intangible
                assets, net:Core
                developed technology
            
            
            -
            
            
            2,440
            
            
            2,440Other
                technology
            
            
            -
            
            
            65
            
            
            65Customer
                relationships
            
            
            -
            
            
            45
            
            
            45Backlog
            
            
            -
            
            
            160
            
            
            160Accounts
                payable
            
            
            (169
            )
            
            -
            
            
            (169
            )Deferred
                revenue
            
            
            (1,510
            )
            
            1,490
            
            
            (20
            )Customer
                advances
            
            
            -
            
            
            (386
            )
            
            (386
            )Accrued
                taxes
            
            
            (225
            )
            
            -
            
            
            (225
            )Other
                accrued expenses
            
            
            (2,228
            )
            
            (366
            )
            
            (2,594
            )Goodwill
            
            
            -
            
            
            7,011
            
            
            7,011Total
                purchase price
            
            $
            282
            
            $
            9,158
            
            $
            9,440




F-17




All
      intangible assets acquired, other than goodwill, are subject to amortization
      over the periods shown in the table below:





**Value**
            
            **Life
                in Years**Core
                developed technology
            
            $
            2,440
            
            
            5.0Other
                technology
            
            
            65
            
            
            5.0Customer
                relationships
            
            
            45
            
            
            3.0Backlog
            
            
            160
            
            
            0.5Total
                intangible assets and weighted averageamortization
                period
            
            $
            2,710
            
            
            4.7





The
      unaudited pro forma revenue and net loss of the Company for the period
      indicated, as if the ArelNet acquisition had occurred as of January 1, 2005,
      are
      shown in the following table.





**December
                  31,**
                **2005**Revenue
            
            $
            112,797Net
                loss
            
            $
            (15,614
            )Net
                loss per share - basic and diluted
            
            $
            (0.40
            )Weighted
                average shares outstanding -basic
                and diluted
            
            
            39,154,158





There
      were no extraordinary items or cumulative effect of accounting changes included
      in the pro forma results of operations. The unaudited pro forma results above
      have been prepared for comparative purposes only and do not purport to be
      indicative of the results of operations which actually would have resulted
      had
      the acquisition occurred at January 1, 2005, nor are they necessarily indicative
      of future operating results.




F-18





On
      November 9, 2005, the Company completed its acquisition of Radionet Oy, Ltd.
      of
      Finland (“Radionet”) in exchange for up to $1.88 million of cash. The Company
      evaluated the assets and liabilities acquired, in particular its accounts
      receivable, inventory and accrued expenses, and engaged an independent third
      party to assist in the valuation of intangible assets. The Company finalized
      the
      purchase price allocation in the second quarter of 2006.





Calculation
      of purchase price:





**Purchase****Price**Consideration
                paid
            
            $
            1,875Direct
                acquisition costs
            
            
            159Total
                purchase price
            
            $
            2,034




The
      following table shows the historical book value and the purchase price
      allocation:





**Purchase****Price****Allocation/****Historical**
            
            **Fair
                Value****Book
                Value**
            
            **Adjustments**
            
            **Fair
                Value**Allocation
                of purchase price - RadionetCash
            
            $
            450
            
            $
            -
            
            $
            450Accounts
                receivable
            
            
            502
            
            
            (139
            )
            
            363Inventory
            
            
            302
            
            
            (98
            )
            
            204Prepaid
                expenses and other current assets
            
            
            120
            
            
            (15
            )
            
            105Property,
                plant and equipment, net
            
            
            129
            
            
            (21
            )
            
            108Intangible
                assets, net:Core
                developed technology
            
            
            -
            
            
            319
            
            
            319Customer
                relationships
            
            
            -
            
            
            105
            
            
            105Accounts
                payable
            
            
            (305
            )
            
            -
            
            
            (305
            )Other
                accrued expenses
            
            
            (226
            )
            
            (50
            )
            
            (276
            )Long-term
                debt
            
            
            (1,392
            )
            
            -
            
            
            (1,392
            )Interest
                on long-term debt
            
            
            -
            
            
            (79
            )
            
            (79
            )Goodwill
            
            
            2,454
            
            
            (22
            )
            
            2,432Total
                purchase price
            
            $
            2,034
            
            $
            -
            
            $
            2,034





All
      intangible assets acquired, other than goodwill, are subject to amortization
      over the periods shown in the table below:





**Value**
            
            **Life
                in Years**Core
                developed technology
            
            $
            319
            
            
            6.0Customer
                relationships
            
            
            105
            
            
            5.0Total
                intangible assets and weighted averageamortization
                period
            
            $
            424
            
            
            5.7





F-19




The
      unaudited pro forma revenue and net loss of the Company for the period
      indicated, as if the Radionet acquisition had occurred as of January 1, 2005,
      are shown in the following table.





**For
                the year ended****December
                31,****2005**Revenue
            
            $
            112,858Net
                loss
            
            $
            (16,997
            )Net
                loss per share - basic and diluted
            
            $
            (0.44
            )Weighted
                average shares outstanding -basic
                and diluted
            
            
            38,736,939




**3.
      SHORT-TERM INVESTMENTS**





The
      following is a summary of short-term investments:





**Unrealized**
            
            **Unrealized****Cost
                basis**
            
            **Gains**
            
            **Losses**
            
            **Fair
                Value****December
                31, 2007:**Commercial
                paper
            
            $
            5,504
            
            $
            -
            
            $
            -
            
            $
            5,504**December
                31, 2006:**Commercial
                paper
            
            $
            3,962
            
            $
            2
            
            $
            -
            
            $
            3,964




There
      were $0 and $6,271 of auction rate securities at December 31, 2007 and 2006,
      respectively. Auction rate securities, which are long-term variable rate bonds
      tied to short-term interest rates that are reset through a “Dutch auction”
process which occurs every 7 - 35 days. The holder can participate in the
      auction and liquidate the auction rate securities to prospective buyers through
      their broker/dealer.





In
      2007,
      the Company accounted for short-term investments as available for sale
      securities. In 2006, short-term investments were accounted for as held to
      maturity.




F-20





The
      above
      short-term investments had maturities at December 31, 2007 of more than 90
      days
      and less than one year.




**4.
      INVENTORY**




Inventory
      consists of the following:





**December
                31,****2006**
            
            **2007**Purchased
                parts and materials
            
            $
            14,826
            
            $
            6,941Work
                in progress
            
            
            1,329
            
            
            1,283Finished
                goods and consumables
            
            
            21,413
            
            
            20,585Inventory
                provision
            
            
            (13,944
            )
            
            (12,089
            )$
            23,624
            
            $
            16,720




**5.
      PROPERTY, PLANT AND EQUIPMENT**





Property,
      plant and equipment consists of the following:





**December
                31,****2006**
            
            **2007**Plant,
                machinery and equipment
            
            $
            19,409
            
            $
            22,410Furniture
                and fixtures
            
            
            869
            
            
            845Leasehold
                improvements
            
            
            3,665
            
            
            3,71423,943
            
            
            26,969Accumulated
                depreciation
            
            
            (18,238
            )
            
            (21,074
            )$
            5,705
            
            $
            5,895





Depreciation
      expense totaled $1,876, $2,729 and $2,888 for the years ended December 31,
      2005,
      2006 and 2007, respectively.





**6.
      GOODWILL AND INTANGIBLES**




The
      Company performed its annual impairment review during the fourth quarter of
      2005, 2006 and 2007. The Company determined that it has only one operating
      segment and that its reporting unit for the purposes of evaluating goodwill
      is
      the entire company. The market capitalization of the Company, which was deemed
      the best measure of fair value, exceeded the book value as of the review
      dates and therefore no impairment of goodwill was recorded during the years
      ended December 31, 2005, 2006 and 2007.





**December
                31,****2006**
            
            **2007**Goodwill
            
            $
            10,231
            
            $
            10,231




F-21




**Weighted****December
                31, 2006**
            
            **December
                31, 2007**
            
            **Average****Gross**
            
            
            
            **Net**
            
            **Gross**
            
            
            
            **Net**
            
            **Amortization****Carrying**
            
            **Accumulated**
            
            **Book**
            
            **Carrying**
            
            **Accumulated**
            
            **Book**
            
            **Period
                in****Intangibles**
            
            **Amount**
            
            **Amortization**
            
            **Value**
            
            **Amount**
            
            **Amortization**
            
            **Value**
            
            **Years**Customer
                contracts
            
            $
            1,390
            
            $
            (849
            )
            $
            541
            
            $
            1,390
            
            $
            (1,104
            )
            $
            286
            
            
            1.13Patent/developed
                technology
            
            
            4,355
            
            
            (2,090
            )
            
            2,265
            
            
            4,355
            
            
            (2,771
            )
            
            1,584
            
            
            1.97$
            5,745
            
            $
            (2,939
            )
            $
            2,806
            
            $
            5,745
            
            $
            (3,875
            )
            $
            1,870
            
            
            1.77




Goodwill
      from business combinations represents the difference between the fair value
      of
      the identified net assets purchased and the purchase price. For each
      acquisition, a detailed review is undertaken by management, which has primary
      responsibility, to estimate the fair values and remaining economic life for
      all
      material intangible assets. In addition to this review, independent experts
      may
      be used to estimate the fair value and remaining economic life of intangible
      assets. During 2005, 2006 and 2007, there were no unamortized intangible assets
      other than goodwill.





The
      estimated amortization expense for intangibles over the next five years is
      as
      follows:




**For
                the Years Ending December 31,**2008
            
            $
            9282009
            
            
            5752010
            
            
            3222011
            
            
            45Total
            
            $
            1,870




Amortization
      of intangible assets amounted to $942, $1,060 and $936 for the years ended
      December 31, 2005, 2006 and 2007, respectively.





**7.
      OTHER ACCRUED EXPENSES**





Other
      accrued expenses consist of the following:




**December
                31,****2006**
            
            **2007**Warranty
            
            $
            985
            
            $
            1,010Restructuring
            
            
            1,862
            
            
            796Accrued
                Israeli severance pay
            
            
            2,301
            
            
            2,539Accrued
                payroll and related benefits and taxes
            
            
            1,868
            
            
            2,925Other
            
            
            9,868
            
            
            5,793$
            16,884
            
            $
            13,063




F-22




**8.
      ACCRUED RESTRUCTURING CHARGES**




In
      the
      fourth quarter of 2002, the decision was made to completely outsource all our
      manufacturing. As a result, the Company recorded a $975 restructuring charge
      for
      the closure of its Riverside, Uxbridge facility in 2003. All of this cost
      relates to the excess facility. A further $368 was recognized as restructuring
      in the income statement in the fourth quarter of 2003 as the Company reassessed
      the ability to sublease the Riverside facility. During the second quarter of
      2005, the Company recognized an additional restructuring charge of $1,150 for
      additional costs expected to be incurred related to certain facility charges
      in
      respect of buildings in the U.K. The lessor has already completed renovations
      and incurred actual costs for approximately $0.8 million, which the Company
      agreed to pay in February 2008 in final settlement. For this reason, we lowered
      the restructuring reserve at the end of 2007 to $0.8 million. All cash outflows
      in connection with this restructuring were paid in February 2008.




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




The
      restructuring charges and their utilization are summarized as follows:





**Balance
                at**
            
            
            
            
            
            **Balance
                at****Beginning**
            
            **Restructuring**
            
            
            
            **End****of
                Period**
            
            **Charge**
            
            **Utilized**
            
            **of
                Period****Year
                ended December 31, 2007**One-time
                termination benefits
            
            $
            375
            
            $
            -
            
            $
            (375
            )
            $
            -Contract
                termination costs
            
            
            1,437
            
            
            (639
            )
            
            (2
            )
            
            796Other
                associated costs
            
            
            50
            
            
            (50
            )
            
            -
            
            
            -$
            1,862
            
            $
            (689
            )
            $
            (377
            )
            
            796**Year
                ended December 31, 2006**One-time
                termination benefits
            
            
            -
            
            
            2,183
            
            
            (1,808
            )
            
            375Contract
                termination costs
            
            
            1,436
            
            
            163
            
            
            (162
            )
            
            1,437Other
                associated costs
            
            
            50
            
            
            -
            
            
            -
            
            
            50$
            1,486
            
            $
            2,346
            
            $
            (1,970
            )
            $
            1,862**Year
                ended December 31, 2005**One-time
                termination benefits
            
            
            -
            
            
            -
            
            
            -
            
            
            -Contract
                termination costs
            
            
            599
            
            
            1,150
            
            
            (313
            )
            
            1,436Other
                associated costs
            
            
            61
            
            
            -
            
            
            (11
            )
            
            50$
            660
            
            $
            1,150
            
            $
            (324
            )
            $
            1,486




**9.
      REVOLVING LINE OF CREDIT**





On
      August
      7, 2007, the Company and its wholly-owned subsidiary, Airspan Communications
      Limited, entered into an amendment to our August 1, 2006 Loan and Security
      Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”),
      with respect to a revolving credit line. For the term of the credit line, which
      expires on December 31, 2008, the Company may, subject to certain adjustments,
      borrow up to the lesser of (i) $20 million and (ii) 80% of eligible accounts
      receivable. As of December 31, 2007, $8.9 million of available credit was
      unused. In addition, the credit facility requires us to satisfy certain
      financial covenants, including the maintenance of tangible net worth (as defined
      in the Agreement). As of December 31, 2007, the tangible net worth requirement
      was $44.0 million. The Company was in compliance with all of the financial
      covenants at December 31, 2007. The credit facility also contains various
      provisions that restrict the Company’s use of cash, its operating flexibility
      and its ability to pay dividends. In the event of an uncured default, the Loan
      and Security Agreement provides that all amounts owed to SVB are immediately
      due
      and payable and that SVB has the right to enforce its security interest in
      our
      assets. The Loan and Security Agreement is secured by collateral, including
      all
      of our rights and interests in substantially all of our personal property,
      including accounts receivable, inventory, equipment, general intangibles,
      intellectual property, books and records, contract rights and proceeds of the
      above items. At December 31, 2007, $7.5 million of indebtedness was outstanding
      under the Loan and Security Agreement. The Company has issued $2.0 million
      of
      letters of credit under the facility, which were still outstanding at December
      31, 2007.




F-23




To
      secure
      its obligations under the Loan and Security Agreement, the Company has granted
      SVB a security interest in all of our assets and has established lockbox account
      for the collection of our receivables at a financial institution affiliated
      with
      SVB.





Advances
      under the Loan and Security Agreement bear interest at SVB's prime rate plus
      a
      percentage ranging from 0.0% to 1.75%, depending on certain financial and
      collateral tests. The monthly interest is calculated based on the higher amount
      of outstanding borrowings or $7,500,000. The Company has also paid or agreed
      to
      pay SVB (i) commitment fees totaling $147 thousand; (ii) 1% per year on the
      face
      amount of any issued letter of credit; and (iii) an early termination fee of
      1%
      or 0.5% of the principal amount of the credit line if the facility is terminated
      by us within the first or second year, respectively. SVB has retained the right,
      upon limited notice, to make reasonable adjustments to the definition of
      eligible receivables. SVB has also reserved its right to modify the rate (the
      "Advance Rate") at which advances are made against eligible receivables if
      the
      Bank determines, after an audit, that there are events, contingencies or risks
      that adversely affect our assets.




The
      Loan
      and Security Agreement provides that, with the exception of certain permitted
      indebtedness and liens, the Company may not incur additional indebtedness or
      liens. Permitted indebtedness is defined to include unsecured trade debt and
      currency hedges incurred in the ordinary course of business, subordinated debt
      incurred on terms acceptable to SVB, and capitalized lease and purchase money
      indebtedness not exceeding $1,000,000 in any fiscal year. Permitted Liens are
      defined to include, among other things, certain liens for taxes or assessments,
      purchase money liens on property not exceeding $1,000,000, non-exclusive
      licenses of intellectual property incurred in the ordinary course of business,
      and certain liens incurred in the ordinary course of business. The Loan and
      Security Agreement further provides that the Company may not convey, sell,
      transfer or otherwise dispose of property except for inventory in the ordinary
      course of business and other similar dispositions. In addition, the Loan and
      Security Agreement limits our right to enter into a merger or acquisition,
      or
      make investments in other entities.





**10.
      DEBT**





Debt
      consists of:





**December
                31,****2006**
            
            **2007**Finnish
                Funding Agency for Technology and Innovation ("Tekes")
            
            $
            1,707
            
            $
            1,978Silicon
                Valley Bank Loan and Security Agreement
            
            
            -
            
            
            7,5001,707
            
            
            9,478Less
                current portion
            
            
            -
            
            
            7,500Less
                accrued interest on long-term debt
            
            
            153
            
            
            191$
            1,554
            
            $
            1,787





F-24




On
      November 9, 2005, the Company completed its acquisition of Radionet Oy, Ltd.
      The
      Company assumed from Radionet four loans with Tekes, the main public funding
      organization for research and development in Finland. These loans are to be
      repaid over the next five years in varying amounts through five annual
      installments made in December of each year. These loans all accrue interest
      at
      3% per annum, payable annually once repayment of the loan principal has
      commenced.





Long
      term
      debt maturities at December 31, 2007 are as follows:





2008
            
            $
            7,5002009
            
            
            6012010
            
            
            6012011
            
            
            585$
            9,287





Interest
      expense was $0.5 million, $0.1 million and $0 in 2007, 2006 and 2005,
      respectively **.**





**11.
      COMMITMENTS AND CONTINGENCIES**




The
      Company had commitments with its main subcontract manufacturers under various
      purchase orders and forecast arrangements, for a value of $17,552 and $26,225
      at
      December 31, 2007 and 2006, respectively. All capital commitments and
      commitments with sub contract manufacturers existing at December 31, 2007 are
      expected to be completed during 2008.





The
      Company has entered into various operating lease agreements that expire at
      various times through 2012, primarily for office space, warehouse space and
      vehicles. Rent expense was $1,774 for the year ended December 31, 2005, $2,121
      for the year ended December 31, 2006, and $2,094 for the year ended December
      31,
      2007.




Future
      minimum lease payments for assets under non-cancelable operating lease
      agreements with original terms of more than one year as of December 31, 2007
      are
      as follows:





**Amounts
                Due**2008
            
            $
            2,8692009
            
            
            1,9192010
            
            
            8092011
            
            
            5142012
            
            
            428$
            6,539




F-25




The
      Company had bank guarantees with its landlords and customers totaling $2.2
      million at December 31, 2006 and $1.3 million at December 31, 2007. The
      guarantees secure payment or performance obligations of the Company under
      contracts. At December 31, 2007, the Company had pledged cash to the banks
      as
      collateral for guarantees aggregating $1.3 million, of which $0.1 million is
      recorded as restricted cash in current assets and $1.2 million is recorded
      as
      other non-current assets. The Company has also issued guarantees to customers
      under the line of credit provided by Silicon Valley Bank for a total of $2.0
      million, which does not require any related pledge of cash collateral. The
      Company has not recognized any liability for these guarantees as in management’s
      opinion the likelihood of having to make payments under the guarantees is
      remote. These guarantees will all expire before the end of 2011 with the
      majority expiring in 2009.





In
      addition to the guarantees mentioned above, the Company has issued a guarantee
      to Tekes, the main public funding organization for research and development
      in
      Finland, for the repayment of loans taken out by its fully consolidated
      subsidiary, Airspan Finland Oy. These loans total $2.0 million at December
      31,
      2007, which includes $0.2 million of accrued interest, and are recorded in
      long-term debt. This guarantee expires only when Airspan Finland Oy has
      fulfilled all its obligations to Tekes.





Beginning
      in July 2001, the Company, its President and Chief Executive Officer Eric D.
      Stonestrom, its former Senior Vice President and Chief Financial Officer, its
      Chairman Matthew Desch and its former Executive Vice President and Chief
      Operating Officer (the "Individual Defendants") were named as defendants in
      a
      class action complaint alleging violations of the federal securities laws in
      the
      United States District Court for the Southern District of New York. A
      Consolidated Amended Complaint, which is now the operative complaint, was filed
      on April 19, 2002.




The
      purported class action alleges violations of Sections 11 and 15 of the
      Securities Act of 1933 (the "1933 Act") and Sections 10(b) and 20(a) of the
      Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated
      thereunder. The essence of the complaint is that defendants issued and sold
      the
      Company's common stock pursuant to the Registration Statement for the July
      20,
      2000 Initial Public Offering ("IPO") without disclosing to investors that
      certain underwriters in the offering had solicited and received excessive and
      undisclosed commissions from certain investors. The complaint also alleges
      that
      the Registration Statement for the IPO failed to d isclose
      that the underwriters allocated Company shares in the IPO to customers in
      exchange for the customers' promises to purchase additional shares in the
      aftermarket at pre-determined prices above the IPO price, thereby maintaining,
      distorting and/or inflating the market price for the shares in the aftermarket.
      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. This dismissal disposed of the Section 15 and 20(a) control person
      claims without prejudice, since these claims were asserted only against the
      Individual Defendants. On February 19, 2003, the Court dismissed the Section
      10(b) claim against the Company, but denied the motion to dismiss the Section
      11
      claim. On October 13, 2004, the Court certified a class in six of the
      approximately 309 other nearly identical actions that are part of the
      consolidated litigation. These six cases are the class certification "focus
      cases." The Plaintiffs selected these six cases, which do not include Airspan.
      On December 5, 2006, the Second Circuit vacated an order by the district court
      granting class certification in the six focus cases. On April 6, 2007, the
      Second Circuit denied a petition for rehearing filed by Plaintiffs, but noted
      that Plaintiffs could ask the District Court to certify more narrow classes
      than
      those that were rejected.





Prior
      to
      the Second Circuit's December 5, 2006 ruling, a majority of the issuers,
      including the Company, and their insurers, had submitted a settlement agreement
      to the Court for approval. In light of the Second Circuit opinion, the parties
      agreed that the settlement could not be approved. On June 25, 2007, the district
      court approved a stipulation filed by the plaintiffs and the issuers which
      terminated the proposed settlement. On August 14, 2007, the plaintiffs filed
      amended complaints in the six focus cases. The amended complaints include a
      number of changes, such as changes to the definition of the purported class
      of
      investors, and the elimination of the individual defendants as defendants.
      The
      six focus case issuers and the underwriters named as defendants in the focus
      cases filed motions to dismiss the amended complaints against them on November
      14, 2007. On September 27, 2007, the plaintiffs filed a motion for class
      certification in the six focus cases. On December 21, 2007, the issuers and
      the
      underwriters filed papers opposing plaintiffs' class certification motion,
      and
      plaintiffs filed an opposition to defendants' motions to dismiss. On January
      28,
      2008, the issuers and the underwriters filed reply briefs in further support
      of
      their motions to dismiss the amended complaints. Due to the inherent
      uncertainties of litigation, the Company cannot accurately predict the outcome
      of this matter. The Company cannot predict whether it will be able to
      renegotiate a settlement that complies with the Second Circuit's mandate, nor
      can it predict the amount of any such settlement and whether that amount would
      be greater than the Company's insurance coverage. If Airspan is found liable,
      the Company is unable to estimate or predict the potential damages that might
      be
      awarded, whether such damages would be greater than Airspan's insurance
      coverage, and whether such damages would have a material impact on its results
      of operations or financial condition in any future period.




F-26




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




The
      Company and other WiMAX manufacturers have received letters from Wi-LAN raising
      various patent infringement claims and offering licenses of various Wi-LAN
      patents. The Company received a letter, dated November 9, 2006, offering us
      licenses of various Wi-LAN patents. After reviewing Wi-LAN’s claims, on February
      1, 2007, the Company sent a letter to Wi-LAN notifying them that it did not
      believe that it requires a license from Wi-LAN. On May 29, 2007, the Company
      received a follow up letter and materials from Wi-LAN which continued to assert
      those claims.  The Company also received an e-mail relating to this matter
      on November 21, 2007.   Once again the Company has carefully reviewed
      this matter, and in consultation with its patent counsel sent a further letter
      on January 30, 2008 declining Wi-LAN’s offer to license their
      patents.




The
      Company has been dealing with its customer Deutsche Breitband Dienste GmbH
      (“DBD”) since 2005. DBD recently advised the Company that as a result of a
      strategic change in their business undertaken at the direction of their board,
      DBD would not accept future deliveries of WiMAX units. The referenced WiMAX
      units have a value of approximately $4.6 million in accordance with the terms
      of
      a purchase order, which has a total value of approximately $10.8 million. The
      Company has acquired or made commitments to suppliers for inventory related
      to
      this contract in the amount of $2.1 million. At December 31, 2007 the accounts
      receivable balance due from DBD to Airspan under its agreements with DBD was
      $4.7 million payable over the first three quarters of 2008. In January 2008,
      DBD
      also advised the Company that they intend to offset $1 million related to
      returns of products under the Company’s warranty procedure. The Company
      continues to repair and return units under the warranty procedure. The Company
      does not agree with DBD’s position on either the cancellation of the purchase
      order commitment or its attempted unilateral reduction of the accounts
      receivable balance. On February 1, 2008, the Company sent a letter before action
      to DBD warning that court proceedings would be commenced if the Company’s
      demands were not met. While the outcome of litigation cannot be predicted with
      certainty, the Company believes that there is a strong likelihood that Airspan
      would be able to recover judgment in the English courts for the full amount
      of
      the outstanding accounts receivable balance, together with an amount for
      damages.




Except
      as
      set forth above, the Company is not currently subject to any other material
      legal proceedings. The Company may from time to time become a party to various
      other legal proceedings arising in the ordinary course of our bus iness.
      Based on consultation with our legal counsel, management is of the opinion
      that
      all of the above matters, when resolved, will not have a material adverse effect
      on the financial condition or results of operations of the Company. Accordingly,
      no provision has been recorded.




**12.
      CONVERTIBLE PREFERRED STOCK**





On
      September 25, 2006 (the “Closing Date”), in accordance with the terms of that
      certain Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”),
      dated July 28, 2006, by and between the Company and Oak, the Company issued
      200,690 shares (the “Shares”) of Series B Preferred Stock to Oak in exchange for
      $29 million of cash and Oak’s transfer to the Company of all 73,000 outstanding
      shares of Series A Preferred Stock which were held by Oak prior to the closing
      of the transaction.




F-27




The
      73,000 shares of Series A Preferred Stock transferred to Oak at closing
      represented all of the issued and outstanding Series A Preferred Stock and,
      accordingly, as of the date of this report, there are no shares of Series A
      Preferred Stock issued and outstanding.





Based
      upon the Company’s capitalization as of the Closing Date, the Shares were
      initially convertible into a total of approximately 33% of the Company’s Common
      Stock (assuming conversion of the Shares, but without giving effect to the
      exercise or conversion of any other outstanding options, warrants or convertible
      securities) and, as of the Closing Date, represented approximately 29% of the
      voting power outstanding.





The
      Company agreed, upon certain terms and conditions, to register the resale of
      the
      shares of Common Stock underlying the Series B Preferred Stock with the SEC.
      On
      February 15, 2007, a registration statement with respect to the sale of the
      shares was declared effective by the SEC. If the registration statement ceases
      to be effective as to the shares at any time thereafter for longer than 30
      days
      at any one time or 60 days during any one year, the Company may be required
      to
      pay certain liquidated damages to the Purchaser not to exceed $30 million.
      The
      Company believes that the liquidated damages are a contingent liability.
      However, since such liability is not perceived to be probable at this time,
      the
      Company has made no expense accrual for it.





In
      the
      third quarter of 2006, the Company recognized a non-cash charge of $9.2 million
      for a deemed dividend to preferred stockholders and other related costs
      associated with our issuance of Series B Preferred Stock (the “Private
      Placement”) in the quarter to Oak Investment Partners XI, Limited Partnership
      (“Oak”) in exchange for $29.0 million in cash and Oak’s transfer to us of all
      73,000 shares of Series A Preferred Stock owned by Oak as of the closing of
      the
      transaction. Of this charge, $8.3 million was related to the shares of Series
      B
      Preferred Stock issued to Oak in exchange of its Series A Preferred Stock and
      $0.9 million of this charge is related to the shares of Series B Preferred
      Stock
      issued in respect of Oak’s cash investment. $8.3 million of the charge was
      calculated by multiplying 2,769,000, the number of additional common shares
      that
      were issuable upon conversion of the 100,690 shares issued to Oak in exchange
      for the 73,000 shares of Series A Preferred Stock, by $2.99, the closing price
      of the Company’s common stock on the NASDAQ on September 25, 2006, the date of
      the closing of the Private Placement. In addition, the issuance of the 100,000
      shares of Series B Preferred Stock in respect of Oak’s cash investment with a
      conversion price of $2.90 compared to the closing price of $2.99 represents
      a
      beneficial conversion and resulted in an additional deemed dividend of $0.9
      million on the 10,000,000 common shares that are potentially issuable. The
      total
      deemed dividend was $9,179.




On
      September 26, 2007, the Company issued 15,000,000 shares of common stock in
      an
      underwritten public offering at a price of $2.00 per share. All of the shares
      were sold by the Company. The offering was made under the Company's effective
      shelf registration statement covering up to $50.0 million of equity securities
      previously filed with the Securities and Exchange Commission. As the sale price
      of these shares to the underwriters on a per share basis was less than $2.90
      per
      share, there was an anti-dilution adjustment to the number of shares of common
      stock issuable on conversion of the Series B Preferred Stock. As a result of
      the
      anti-dilution adjustment, the Company recorded a deemed dividend of $4.1
      million, calculated by multiplying the number of additional shares to be
      received on conversion (1.38 million shares) by $2.99, the closing price of
      the
      Company’s common stock on the NASDAQ on September 25, 2006, the date of the
      closing of the Private Placement. The underwriters were granted a 30 day option
      to purchase up to an additional 2,250,000 shares of common stock from the
      Company to cover over-allotments, if any. On October 10, 2007, the Company
      issued 2,250,000 shares of common stock as a result of the exercise by the
      Underwriters of their over allotment provision. As the sale price of these
      shares to the underwriters on a per share basis was less than $2.90 there was
      an
      anti-dilution adjustment in the fourth quarter of 2007 to the number of shares
      of common stock issuable on conversion of the Series B Preferred Stock. As
      a
      result of this anti-dilution adjustment, the Company recorded a deemed dividend
      in the fourth quarter of approximately $0.6 million, calculated by multiplying
      the number of additional shares to be received on conversion (approximately
      0.2
      million shares) by $2.99, the closing price of the Company’s common stock on the
      NASDAQ on September 25, 2006, the date of the closing of the Private Placement.
      Net proceeds from the 17,250,000 shares issued were $32.0 million.




F-28




Holders
      of the Series B Preferred Stock may convert the stock into shares of the
      Company’s Common Stock at any time at the rate of approximately 107.8 shares of
      Common Stock for each share of Series B Preferred Stock (the “Conversion Rate”).
      After 24 months, the Series B Preferred Stock will automatically convert into
      shares of the Company’s Common Stock at the Conversion Rate if the Common Stock
      trades above $9.00 per share for 30 consecutive days. The Conversion Rate will
      be adjusted upon the occurrence of any of the following events: (i) the
      Company’s payment of Common Stock dividends or distributions, (ii) Common Stock
      splits, subdivisions or combinations and (iii) reclassification, reorganization,
      change or conversion of the Common Stock.





The
      Conversion Rate is subject to further anti-dilution adjustments pursuant to
      a
      broad-based weighted average formula for certain issuances of equity securities
      by the Company below $2.69 (as adjusted from $2.90 after the effect of the
      anti-dilution provisions related to our common stock offering in 2007). The
      Conversion Rate will not adjust due to issuances in connection with merger
      and
      acquisition activity, if any, the payment of dividends or certain fees to the
      holders of Series B Preferred Stock, or the issuance of up to 5 million of
      securities as part of the Company’s existing equity compensation
      plans.





Each
      share of Series B Preferred Stock is entitled to 81 votes on all matters
      submitted to a vote of the holders of the Company’s Common Stock. This voting
      rate will adjust upon (i) the Company’s payment of Common Stock dividends and
      distributions, (ii) Common Stock splits, subdivisions or combinations, and
      (iii)
      reclassification, reorganization, change or conversion of the Common Stock.
      The
      voting rate will not adjust due to the issuance of equity securities by the
      Company below $2.90 per share.





As
      long
      as Oak is a majority holder of the Series B Preferred Stock and the beneficial
      holder of at least 15% of the Company’s common stock, the Purchaser will be
      entitled to elect one member to the Company’s Board of Directors.




Holders
      of the Series B Preferred Stock are entitled to participate in dividends
      declared with respect to the Common Stock as if the Series B Preferred Stock
      was
      converted into the Common Stock.




The
      Company has the right, after 5 years, to buy back the Series B Preferred Stock,
      in whole or in 15% increments, at a price of $362.50 per share of Series B
      Preferred Stock. The Company may exercise its redemption right up to five (5)
      separate times.




The
      Series B Preferred Stock is identified as ranking senior and prior to the Common
      Stock and all other classes or series of capital stock with respect to payments
      upon liquidation. Upon any Liquidation, holders are entitled to receive prior
      and in preference to any distribution to holders of the Company's Common Stock,
      the greater of (i) $2.90 per share of Series B Preferred Stock (the “Original
      Issue Price”) plus all accumulated or accrued and unpaid dividends thereon or
      (ii) the amount they would receive in such transaction if they converted the
      Series B Preferred Stock into Common Stock.




**13.
      STOCK OPTIONS AND COMMON STOCK**




At
      December 31, 2007, the Company had three stock option plans (the 1998 Plan,
      the
      2001 Plan, and the 2003 Plan), the 2004 Omnibus Equity Compensation Plan, and
      the 2000 Employee Stock Purchase Plan (“ESPP”). Employee stock options granted
      under all of the plans generally vest over a four-year period and expire on
      the
      tenth anniversary of their issuance. Restricted stock is common stock that
      is
      subject to a risk of forfeiture or other restrictions that will lapse upon
      satisfaction of specified performance conditions and/or the passage of time.
      Awards of restricted stock that vest only by the passage of time will generally
      fully vest after four years from the date of grant. At December 31, 2007, the
      Company had reserved a total of 8,394,424 shares of its common stock for
      issuance under the above plans.




F-29





On
      February 1, 1998, the Board of Directors authorized the establishment of a
      non-qualified employee stock options plan (“the 1998 Plan”) whereby the Company
      may grant employees stock options to purchase up to 2,791,667 shares of common
      stock. Under subsequent amendments to the 1998 Plan, the Board of Directors
      approved an increase in the number of shares of common stock reserved under
      the
      1998 Plan from 2,791,667 to 4,591,667 in May 2000 and from 4,591,667 to
      6,091,667 in February 2001. The 1998 Plan provides for the grant to the
      Company’s employees (including officers and employee directors) of “incentive
      stock options” within the meaning of Section 422 of the Internal Revenue Code of
      1986 and for the grant of non-statutory stock options to the Company’s
      employees, officers, directors, and consultants.




On
      February 7, 2001, the Board of Directors authorized the establishment of the
      2001 supplemental stock option plan (“the 2001 Plan”). This is a non-qualified
      employee stock options plan whereby the Company may grant employees stock
      options to purchase up to 901,465 shares of common stock. Option grants under
      the 2001 Plan are limited to non-officer employees and consultants.




On
      September 1, 2003, the Board of Directors authorized the establishment of the
      2003 supplemental stock option plan (“the 2003 Plan”). This is a non-qualified
      employee stock options plan whereby the Company may grant stock options to
      purchase up to 241,500 shares of common stock. Option grants under the 2003
      Plan
      are limited to non-officer employees, new hires and consultants.




On
      January 30, 2004, the Board of Directors authorized the establishment of the
      2004 Omnibus Equity Compensation Plan (“the 2004 Plan”). The 2004 plan is
      designed for the benefit of the directors, executives and key employees of
      the
      Company (i) to attract and retain for the Company personnel of exceptional
      ability; (ii) to motivate such personnel through added incentives to make a
      maximum contribution to greater profitability; (iii) to develop and maintain
      a
      highly competent management team; and (iv) to be competitive with other
      companies with respect to executive compensation. Awards under the 2004 plan
      may
      be made to Participants in the form of (i) Incentive Stock Options; (ii)
      Nonqualified Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted
      Stock; (v) Deferred Stock; (vi) Stock Awards; (vii) Performance Shares; (viii)
      Other Stock-Based Awards; and (ix) other forms of equity-based compensation
      as
      may be provided and are permissible under the 2004 Plan and the law. The number
      of shares reserved under this plan is 5,000,000.




Under
      the
      1998, 2001, 2003 and 2004 Plans, the Compensation Committee of the Board of
      Directors is authorized to establish the terms of stock options. Under the
      1998
      Plan, the exercise price of all incentive stock options must be at least equal
      to the fair market value of our common stock on the date of the grant and the
      exercise price of all non-statutory options may be equal to, more than, or
      less
      than 100% of the fair market value of our common stock on the date of the grant.
      Under the 2001, 2003 and 2004 Plans, the exercise price of each option may
      be
      equal to, more than, or less than 100% of fair market value of our common stock
      on the date of the grant. The total number of options granted to employees
      under
      the Plans was 1,108,500 in 2005, 1,031,650 in 2006 and 1,071,200 in 2007.




Under
      the
      Plans described above, the Company also granted non-qualified common stock
      options to directors under various discrete option agreements. The number of
      non-qualified options granted to directors was 120,000, 150,000 and 135,000
      in
      2005, 2006 and 2007, respectively.





The
      following table sets forth the activity for all common stock
      options:





**Weighted****Average****Number
                of**
            
            **Exercise****Shares**
            
            **Price**Outstanding,
                December 31, 2006
            
            
            5,570,009
            
            $
            4.10Granted
            
            
            1,206,200
            
            
            3.54Forfeited
            
            
            (628,339
            )
            
            4.33Exercised
            
            
            (519,206
            )
            
            2.19Outstanding,
                December 31, 2007
            
            
            5,628,664
            
            $
            4.13Exercisable,
                December 31, 2007
            
            
            3,727,980
            
            $
            4.26




F-30




The
      following table sets forth stock options outstanding at December 31, 2007:





**Outstanding
                Options**
            
            **Options
                Exercisable****Weighted**
            
            **Remaining**
            
            
            
            **Weighted****Number
                of**
            
            **Average**
            
            **Contractual**
            
            **Number
                of**
            
            **Average****Outstanding**
            
            **Exercise**
            
            **Life
                in**
            
            **Exercisable**
            
            **Exercise****Exercise
                Price Ranges**
            
            **Options**
            
            **Price**
            
            **Years**
            
            **Options**
            
            **Price**$0.30
                - 2.06
            
            
            1,153,210
            
            $
            1.38
            
            
            4.98
            
            
            922,243
            
            $
            1.212.20 - 3.67
            
            
            1,013,791
            
            
            2.83
            
            
            7.61
            
            
            452,611
            
            
            2.773.84 - 4.37
            
            
            1,030,905
            
            
            4.24
            
            
            8.11
            
            
            330,619
            
            
            4.204.38
                - 5.08
            
            
            1,207,859
            
            
            4.72
            
            
            5.21
            
            
            1,029,049
            
            
            4.685.14 - 6.15
            
            
            975,817
            
            
            5.96
            
            
            5.47
            
            
            761,782
            
            
            5.946.18 - 15.00
            
            
            247,082
            
            
            11.65
            
            
            3.08
            
            
            231,676
            
            
            12.005,628,664
            
            $
            4.13
            
            
            6.08
            
            
            3,727,980
            
            $
            4.26





As
      of
      December 31, 2007, the weighted average remaining contractual life of options
      exercisable was 4.73 years and their aggregate intrinsic value was $564. The
      total intrinsic value of options exercised during 2007 was $1,794. Cash received
      from stock option exercises for the year ended December 31, 2007 was $1,135.
      Because the Company maintained a full valuation allowance on our U.S. deferred
      tax assets, it did not recognize any tax benefit related to stock based
      compensation expense for the year ended December 31, 2007.




The
      Company also granted 100,000, 50,596 and 56,000 shares of restricted stock
      to
      employees in 2005, 2006 and 2007, respectively. The restriction on this stock
      is
      lifted primarily on the basis of 25% after 18 months from grant, 25% after
      30
      months from grant, and 50% after 48 months from grant. A total expense of
      $106 and $111 was recorded related to these shares for the years ended December
      31, 2006 and 2007, respectively. The summary of the changes in restricted stock
      outstanding during the year ended December 31, 2007 is presented
      below:




Number
                of
            
            Weighted-Average
                  Grant DateShares
            
            Fair
                ValueNonvested
                balance at December 31, 2006
            
            
            105,592
            
            $
            4.51Granted
            
            
            56,000
            
            
            4.69Forfeited
            
            
            (27,245
            )
            
            3.87Vested
            
            
            (24,407
            )
            
            4.61Nonvested
                balance at December 31, 2007
            
            
            109,940
            
            $
            4.76




F-31




As
      of
      December 31, 2007, there was $3,482 of unrecognized compensation expense, net
      of
      estimated forfeitures, related to stock options that will be recognized over
      the
      weighted average period of 2.65 years. Also, as of December 31, 2007, there
      was
      $233 of unrecognized compensation expense related to restricted stock awards
      that will be recognized over the weighted average period of 2.26 years. A total
      of 109,940 nonvested restricted shares are scheduled to vest based on passage
      of
      time.




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. On January 30, 2004, the Board of Directors
      authorized an increase to 3,000,000 shares from 1,000,000 shares of common
      stock
      reserved for issuance under the ESPP. On August 1, 2005, the Company issued
      130,630 shares at $3.72 per share to employees participating in the ESPP. On
      August 1, 2006, the Company issued 208,102 shares at $1.60 per share to
      employees participating in the ESPP. On August 1, 2007, the Company issued
      358,211 shares at $1.64 per share to employees participating in the ESPP. As
      of
      December 31, 2007, there were 1,128,634 remaining shares of common stock
      available for issuance under the ESPP. Further offerings shall commence on
      each
      subsequent August 1 and shall last for a period of one year, and the final
      offering under this Plan shall commence on August 1, 2008 and terminate on
      July
      31, 2009.




The
      following table summarizes the remaining number of shares of common stock that
      were authorized but unissued as of December 31, 2007:





**Number****of****Plans**
            
            **Shares**2000
                Employee Stock Purchase Plan
            
            
            1,128,6341998,
                2001, 2003, and 2004 Stock Options Plans -Options
                to be granted
            
            
            1,637,126Options
                outstanding
            
            
            5,628,664Nonvested
                restricted stock
            
            
            109,940Total
            
            
            8,504,364




**14.
      DEFINED CONTRIBUTION PLAN EXPENSE**




The
      Company contributes to defined contribution plans for all eligible employees.
      The Company recorded expenses of $1.5 million, $2.1 million and $2.3 million
      in
      2005, 2006 and 2007, respectively. Employer contributions are accrued as earned
      by the employees.





F-32





**15.
      NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE**




Net
      loss
      attributable to common stockholders per share is computed using the weighted
      average number of shares of common stock outstanding less the number of shares
      subject to repurchase.




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





**Years
                Ended December 31,****2005**
            
            **2006**
            
            **2007**Numerator:Net
                loss
            
            $
            (15,077
            )
            $
            (29,202
            )
            $
            (30,462
            )Deemed
                dividend associated with beneficial conversion of preferred
                stock
            
            
            -
            
            
            (9,179
            )
            
            (4,670
            )Net
                loss attributable to common stockholders
            
            $
            (15,077
            )
            $
            (38,381
            )
            $
            (35,132
            )Denominator
                - basic and diluted:Weighted
                average common shares outstanding
            
            
            38,736,939
            
            
            40,026,411
            
            
            45,387,386Net
                loss attributable to common stockholders per share - basic and
                diluted
            
            $
            (0.39
            )
            $
            (0.96
            )
            $
            (0.77
            )




There
      were, (i) 5,291,679 stock options outstanding at December 31, 2005, 5,570,009
      options outstanding at December 31, 2006 and 5,628,664 stock options outstanding
      at December 31, 2007 that were excluded from the computation of diluted net
      loss
      per share as their effect was anti-dilutive. If the Company had reported net
      income, the calculation of these per share amounts would have included the
      dilutive effect of these common stock equivalents using the treasury stock
      method for stock options. The convertible preferred stock referred to in Note
      12
      was also excluded (21,630,856 shares on an as converted basis) from the
      computation of diluted net loss per share as its effect was anti-dilutive.
      105,592 and 109,940 nonvested shares of restricted stock were excluded from
      the
      computation of diluted net loss per share at December 31, 2006 and December
      31,
      2007, respectively, as their effect was anti-dilutive.





**16.
      TAXATION**





The
      Company is subject to federal and various state income taxes in the US as well
      as income taxes in certain foreign jurisdictions. Tax regulations within each
      jurisdiction are subject to the interpretation of the related tax laws and
      regulations. The Company is no longer subject to US federal tax examinations
      for
      years through 2003. In addition, the statute of limitations for years through
      2004 in the United Kingdom and 2002 in Israel has expired.




The
      income tax charge of $94 in the year ended December 31, 2007 related to local
      country income taxes. The tax benefits of $246 in the year ended December 31,
      2006 and $546 in the year ended December 31, 2005 related mainly to tax credits
      of $876 accrued in respect of additional research and development expenditure
      in
      the U.K. in the period January 1, 2004 to December 31, 2004. In exchange for
      the
      tax credits, the Company surrendered $3,650 of taxable losses in the U.K. which
      equated to $1,095 of deferred tax assets.




F-33




The
      loss
      before tax was $30,368 for the year ended December 31, 2007 of which $2,330
      was
      attributable to domestic U.S. operations. The loss was $29,448 for the year
      ended December 31, 2006 of which $4,045 was attributable to domestic U.S.
      operations. The loss for the year ended December 31, 2005 attributable to
      domestic operations was $1,892 out of a total loss before tax of $15,623. The
      Company did not record an income tax benefit for the remainder of the tax losses
      generated in any of the territories in which it operates because it has
      experienced operating losses since inception. At December 31, 2007, the Company
      had the following net operating loss carry-forwards:





**Net
                Operating Loss****Country**
            
            **Carryforwards**
            
            **Expiry
                Terms**UK
            
            $
            154,300
            
            
            Does
                not expireUS
            
            
            22,400
            
            
            Expires
                in 14 to 20 yearsAustralia
            
            
            5,100
            
            
            Does
                not expireIsrael
            
            
            51,700
            
            
            Does
                not expireFinland
            
            
            15,000
            
            
            Expires
                in 3 to 10 yearsOther
            
            
            2,700
            
            
            Expires
                in 1 to 5 years




Significant
      components of the Company’s deferred tax assets are as follows:





**For
                the years ended December 31,****2006**
            
            **2007**Net
                operating loss carryforwards
            
            $
            61,336
            
            $
            67,938Fixed
                assets
            
            
            4,282
            
            
            4,650Accruals
                and reserves
            
            
            2,128
            
            
            2,215Stock
                compensation
            
            
            727
            
            
            1,31868,473
            
            
            76,121Valuation
                allowance
            
            
            (68,473
            )
            
            (76,121
            )$
            -
            
            $
            -




The
      following is a reconciliation of income taxes, calculated at the effective
      U.S.
      federal income tax rate, to the income tax benefit (provision) included in
      the
      accompanying consolidated statements of operation for each of the three years:





**For
                the years ending December 31,****2005**
            
            **2006**
            
            **2007**Income
                tax benefit at U.S. rates
            
            $
            5,937
            
            $
            10,012
            
            $
            10,276Difference
                between U.S. rate and rates applicableto
                subsidiaries in other jurisdictions
            
            
            (1,390
            )
            
            (1,250
            )
            
            (2,726
            )Surrender
                of taxable losses - UK R&D tax credits
            
            
            (708
            )
            
            (386
            )
            
            -Expenditures
                not deductible for tax purposes
            
            
            (242
            )
            
            (110
            )
            
            (664
            )Other
            
            
            377
            
            
            1,386
            
            
            668Valuation
                allowance on tax benefits
            
            
            (3,995
            )
            
            (9,715
            )
            
            (7,648
            )UK
                R&D tax credits
            
            
            567
            
            
            309
            
            
            -Income
                tax benefit (provision)
            
            $
            546
            
            $
            246
            
            $
            (94
            )




F-34




Since
      the
      Company’s utilization of these deferred tax assets is dependent on future
      profits, a valuation allowance equal to the net deferred tax assets has been
      provided following the criteria under SFAS 109 as it is considered more likely
      than not that such assets will not be realized.





**17.
      GEOGRAPHICAL INFORMATION**




As
      a
      developer and supplier of broadband wireless equipment and other technologies,
      the Company has one reportable segment. The revenue of this single segment
      is
      comprised primarily of revenue from products and, to a lesser extent, services.
      In 2007, the majority of the Company’s revenue was generated from products
      manufactured in the United Kingdom, Mexico and Israel, with additional revenue
      generated from sales of an original equipment manufacturer’s ("OEM") products.




An
      analysis of revenue by geographical market is given below:





**Years
                ended December 31,****2005**
            
            **2006**
            
            **2007**United
                States
            
            $
            7,722
            
            $
            9,778
            
            $
            8,515Asia
                Pacific:
            
            
            11,389
            
            
            38,615
            
            
            19,409Europe
            
            
            14,273
            
            
            23,945
            
            
            27,512Africa
                and Middle East
            
            
            5,242
            
            
            4,609
            
            
            9,903South
                and Central America and the Caribbean:
            
            
            72,340
            
            
            50,865
            
            
            29,631$
            110,966
            
            $
            127,812
            
            $
            94,970




Revenues
      are attributed to countries based on the destination of the equipments and
      services supplied.





During
      the year ended December 31, 2007, net loss before income tax was $30.4 million.
      The net loss before income taxes that related to operations in the United States
      was $2.3 million and that from foreign operations was $28.1 million. During
      the
      same period, the net loss was $35.1 million, of which a net loss of $28.1
      million arose from foreign operations. During the year ended December 31, 2006,
      net loss before income tax was $29.4 million. The net loss before income taxes
      that related to operations in the United States was $4.0 million and that from
      foreign operations was $25.4 million. During the same period, the net loss
      was
      $38.4 million, of which a net loss of $25.2 million arose from foreign
      operations. During the year ended December 31, 2005, net loss before income
      tax
      was $15.6 million. The net loss before income taxes that related to operations
      in the United States was $1.9 million and that from foreign operations was
      $13.7
      million. During the same period, the net loss was $15.1 million, of which a
      net
      loss of $13.2 million arose from foreign operations.





For
      the
      year ended December 31, 2007, the Company had three customers whose revenue
      was
      greater than 10% of the year’s total and such customer revenues accounted for
      15%, 12% and 10% of the year’s total. For the year ended December 31, 2006, the
      Company had two customers whose revenue was greater than 10% of the year’s total
      and such customer revenues accounted for 26% and 19% of the year’s total. For
      the year ended December 31, 2005, the Company had one customer whose revenue
      was
      greater than 10% of the year’s total and such customer’s revenue accounted for
      56% of the year’s total.




F-35





In
      2007,
      the Company received 72 %
      of
      goods for resale from four suppliers .
      In
      2006, the Company received 78% of goods for resale from four suppliers. In
      2005,
      the Company received 73% of goods for resale from three suppliers.





At
      December 31, 2007, the Company had three customers whose accounts receivable
      balance was greater than 10% of the total balance at that date. Such customer
      receivables accounted for 14%, 14% and 12% of the total. At December 31, 2006,
      the Company had two customers whose accounts receivable balance was greater
      than
      10% of the total balance at that date. Such customer receivables accounted
      for
      12% % and 10% of the total.





**For
                the Years ended December 31,****Long
                lived assets by geographic region**
            
            **2006**
            
            **2007****Property,
                plant and equipment, net:**United
                States
            
            $
            190
            
            $
            133United
                Kingdom and Ireland
            
            
            3,307
            
            
            3,056Israel
            
            
            2,024
            
            
            2,517Other
            
            
            184
            
            
            189$
            5,705
            
            $
            5,895**Goodwill
                and intangible assets, net:**United
                States
            
            $
            789
            
            $
            789United
                Kingdom and Ireland
            
            
            254
            
            
            127Mexico
            
            
            437
            
            
            219Israel
            
            
            8,788
            
            
            8,271Finland
            
            
            2,769
            
            
            2,695$
            13,037
            
            $
            12,101**Other
                non-current assets and long-term receivables:**United
                Kingdom and Ireland
            
            $
            1,192
            
            $
            1,212Israel
            
            
            2,053
            
            
            2,190$
            3,245
            
            $
            3,402**Total
                long-lived assets**
            
            $
            21,987
            
            $
            21,398**Total
                assets, net:**United
                States
            
            $
            19,875
            
            $
            31,491United
                Kingdom and Ireland
            
            
            56,797
            
            
            53,319Mexico
            
            
            2,047
            
            
            308Israel
            
            
            24,618
            
            
            23,692Finland
            
            
            4,735
            
            
            3,083Other
            
            
            2,482
            
            
            2,128$
            110,554
            
            $
            114,021




F-36




**18.
      RELATED PARTY TRANSACTIONS**




On
      April
      27, 1999, Mr. Stonestrom, the Company’s President and Chief Executive Officer,
      incurred $130 of indebtedness to the Company in connection with the purchase
      of
      500,000 shares of the Company’s common stock. During the year 2004, Mr.
      Stonestrom repaid $43 leaving indebtedness at December 31, 2007 of $87. No
      interest is due on the debt.




**19.
      QUARTERLY FINANCIAL DATA (UNAUDITED)**





The
      following table represents the Company’s consolidated results for each of the
      most recent eight quarters. The information for each of these quarters is
      unaudited and has been prepared on the same basis as our audited consolidated
      financial statements. In the opinion of management, all necessary material
      adjustments have been included to present fairly the unaudited quarterly results
      when read in conjunction with the Company’s audited financial statements and
      related notes.





**Quarter
                Ended****Apr.
                2,**
            
            **Jul.
                2,**
            
            **Oct.
                1,**
            
            **Dec.
                31,**
            
            **Apr.
                1,**
            
            **Jul.
                1,**
            
            **Sept.
                30,**
            
            **Dec.
                31,****2006**
            
            **2006**
            
            **2006**
            
            **2006**
            
            **2007**
            
            **2007
                (a)**
            
            **2007**
            
            **2007**($
                in thousands, except per share data)Consolidated
                statements of operations data:Revenue
            
            $
            23,800
            
            $
            45,435
            
            $
            27,303
            
            $
            31,274
            
            $
            26,660
            
            $
            22,073
            
            $
            22,470
            
            $
            23,767Cost
                of revenue
            
            
            17,362
            
            
            36,710
            
            
            20,047
            
            
            20,829
            
            
            18,409
            
            
            20,223
            
            
            14,680
            
            
            16,822Gross
                profit
            
            
            6,438
            
            
            8,725
            
            
            7,256
            
            
            10,445
            
            
            8,251
            
            
            1,850
            
            
            7,790
            
            
            6,945Operating
                expenses:Research
                and development
            
            
            6,110
            
            
            6,675
            
            
            6,065
            
            
            5,947
            
            
            5,606
            
            
            5,781
            
            
            6,186
            
            
            7,023Sales
                and marketing
            
            
            4,505
            
            
            5,026
            
            
            4,051
            
            
            3,621
            
            
            3,362
            
            
            3,508
            
            
            3,521
            
            
            3,849Bad
                debt
            
            
            536
            
            
            715
            
            
            297
            
            
            709
            
            
            232
            
            
            723
            
            
            632
            
            
            248General
                and administrative
            
            
            3,762
            
            
            4,320
            
            
            4,072
            
            
            3,885
            
            
            4,192
            
            
            3,982
            
            
            3,010
            
            
            3,763Amortization
                of intangibles
            
            
            275
            
            
            275
            
            
            276
            
            
            234
            
            
            234
            
            
            234
            
            
            234
            
            
            234Restructuring
            
            
            -
            
            
            -
            
            
            1,528
            
            
            655
            
            
            40
            
            
            (525
            )
            
            -
            
            
            (204
            )Total
                operating expenses
            
            
            15,188
            
            
            17,011
            
            
            16,289
            
            
            15,051
            
            
            13,666
            
            
            13,703
            
            
            13,583
            
            
            14,913Loss
                from operations
            
            
            (8,750
            )
            
            (8,286
            )
            
            (9,033
            )
            
            (4,606
            )
            
            (5,415
            )
            
            (11,853
            )
            
            (5,793
            )
            
            (7,968
            )Other
                income/(expense):Interest
                and other expense
            
            
            (12
            )
            
            (72
            )
            
            (78
            )
            
            (200
            )
            
            (23
            )
            
            (48
            )
            
            (175
            )
            
            (408
            )Interest
                and other income
            
            
            191
            
            
            689
            
            
            5
            
            
            704
            
            
            349
            
            
            223
            
            
            223
            
            
            520Loss
                before income taxes
            
            
            (8,571
            )
            
            (7,669
            )
            
            (9,106
            )
            
            (4,102
            )
            
            (5,089
            )
            
            (11,678
            )
            
            (5,745
            )
            
            (7,856
            )Income
                tax benefit/(provision)
            
            
            284
            
            
            (5
            )
            
            (17
            )
            
            (16
            )
            
            (39
            )
            
            2
            
            
            (24
            )
            
            (33
            )Net
                loss before deemed dividend
            
            
            (8,287
            )
            
            (7,674
            )
            
            (9,123
            )
            
            (4,118
            )
            
            (5,128
            )
            
            (11,676
            )
            
            (5,769
            )
            
            (7,889
            )Deemed
                dividend associated withpreferred
                stock
            
            
            -
            
            
            -
            
            
            (9,179
            )
            
            -
            
            
            -
            
            
            -
            
            
            (4,138
            )
            
            (532
            )N
                Net loss attributable to common stockholders
            
            $
            (8,287
            )
            $
            (7,674
            )
            $
            (18,302
            )
            $
            (4,118
            )
            $
            (5,128
            )
            $
            (11,676
            )
            $
            (9,907
            )
            $
            (8,421
            )Net
                loss attributable to commonstockholders
                per share - basic and diluted
            
            $
            (0.21
            )
            $
            (0.19
            )
            $
            (0.46
            )
            $
            (0.10
            )
            $
            (0.13
            )
            $
            (0.29
            )
            $
            (0.24
            )
            $
            (0.14
            )




(a)
            In
                the second quarter of 2007, an inventory provision was made for $5.9
                million, recorded as a result of the decline of our non-WiMAX revenues
                in
                2007 from 2006 levels and a subsequent reduced outlook for sales
                of these
                products.





F-37




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




The
      Board
      of Directors and


Stockholders
      of Airspan Networks Inc.






We
      have
      audited in accordance with the standards of the Public Company Accounting
      Oversight Board (United States) the consolidated financial statements of Airspan
      Networks Inc. and subsidiaries (the "Company") referred to in our report dated
      March 7, 2008, which is included in Part II of this Annual Report on Form
      10-K. ** Our
      report on the consolidated financial statements includes an explanatory
      paragraph, which discusses the adoption of Financial Accounting Standards Board
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” and FAS
      123(R), “Share-Based Payment”. Our audits of the basic financial statements
      included the financial statement schedule listed in the index appearing under
      Item 15 (a)(2), ** which
      is
      the responsibility of the Company’s management. In our opinion, this financial
      statement schedule, when considered in relation to the basic financial
      statements taken as a whole, presents fairly, in all material respects, the
      information set forth therein.






/s/
      GRANT
      THORNTON LLP




Miami,
      Florida




March
      7,
      2008




F-38





**Financial
      Statement Schedules**





**Schedule
                II****Airspan
                Networks Inc.****Valuation
                and Qualifying Accounts****Additions**
            
            **Deductions****Balance
                at**
            
            **Charged**
            
            **Written**
            
            
            
            **Charge**
            
            **Balance****beginning**
            
            **to**
            
            **back
                to**
            
            **Credit
                to**
            
            **against**
            
            **at
                end of****of
                period**
            
            **expense**
            
            **provision**
            
            **expense**
            
            **provision**
            
            **Period****(in
                thousands of U.S. dollars)****Allowance
                for doubtful accounts:**Year
                ended December 31, 2007
            
            $
            5,489
            
            $
            2,998
            
            $
            491
            
            $
            (1,163
            )
            $
            (4,937
            )
            $
            2,878Year
                ended December 31, 2006
            
            $
            3,519
            
            $
            2,917
            
            $
            63
            
            $
            (660
            )
            $
            (350
            )
            $
            5,489Year
                ended December 31, 2005
            
            $
            2,814
            
            $
            1,462
            
            $
            223
            
            $
            (347
            )
            $
            (633
            )
            $
            3,519**Allowance
                for deferred tax assets:**Year
                ended December 31, 2007
            
            $
            68,473
            
            $
            7,550
            
            $
            3,361
            
            $
            (571
            )
            $
            (2,692
            )
            $
            76,121Year
                ended December 31, 2006
            
            $
            55,519
            
            $
            8,762
            
            $
            4,379
            
            $
            (110
            )
            $
            (77
            )
            $
            68,473Year
                ended December 31, 2005
            
            $
            48,769
            
            $
            4,546
            
            $
            2,755
            
            $
            (410
            )
            $
            (141
            )
            $
            55,519




F-39




**Exhibit
      Index**




Exhibit
              Number
            
            Description
                of Exhibit3.1
            
            Second
                Amended and Restated Articles of Incorporation of Airspan
                (1)3.2
            
            Articles
                of Amendment to the Articles of Incorporation of Airspan
                (2)3.3
            
            Articles
                of Amendment to the Articles of Incorporation of Airspan
                (3)3.4
            
            Amended
                and Restated Bylaws of Airspan (27)4.1
            
            Form
                of Airspan's common stock certificate (4)4.2
            
            Preferred
                Stock Purchase Agreement, dated July 28, 2006, among Airspan and
                Oak
                Investment Partners XI, Limited Partnership, including exhibits thereto
                (5)10.1
            
            1998
                Stock Option and Restricted Stock Plan (6)10.2
            
            Amended
                and Restated 2000 Employee Stock Purchase Plan (1)10.3
            
            Omnibus
                Equity Compensation Plan (1)10.3
            
            2001
                Supplemental Stock Option Plan (7)10.4
            
            2003
                Supplemental Stock Option Plan (8)10.5
            
            Written
                Summary of Airspan's Non-Employee Director Compensation Plan
                (9)





10.6
            
            Airspan
                Code of Business Conduct (10)10.7
            
            Employment
                Agreement with Eric Stonestrom (11), (12)10.8
            
            Employment
                Agreement with Henrik Smith-Petersen (11), (13)10.9
            
            Employment
                Agreement between Airspan and Alastair Westgarth (11),
                (14)




F-40




10.10
            
            Employment
                Agreement with Arthur Levine (10) (11)10.11
            
            Employment
                and Relocation Agreement with David Brant (11) *10.12
            
            Technical
                Assistance Support Services Agreement for FWA Equipment, dated as
                of
                February 14, 2003, by and between Nortel Networks U.K. Limited and
                Axtel,
                S.A. de C.V. (15)**10.13
            
            Preferred
                Stock Purchase Agreement, dated as of September 10, 2004 among Airspan
                and
                Oak Investment Partners XI, Limited Partnership (16)10.14
            
            Amendment
                No. 1 to Preferred Stock Purchase Agreement (17)10.15
            
            Purchase
                and License Agreement, dated as of December 28, 2004, by and among
                Airspan
                Communications Limited and Axtel, S.A. de C.V. (18)**10.16
            
            Amendment
                Agreement No. 3 to FWA TASS dated as of December 28, 2004 between
                Airspan
                Communications Limited and Axtel, S.A. de C.V. (19)**10.17
            
            Purchase
                Contract, dated April 14, 2005, by and between Yozan Incorporated
                ("Yozan") and Airspan Communications Limited ("Airspan Ltd.") (10),
                (20)10.18
            
            Supplement
                to Purchase Contract, dated August 15, 2005, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.19
            
            2ndPurchase Contract, dated September 13, 2005, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.20
            
            Amendment
                of 1stand 2ndPurchase Contracts, dated October 6, 2005, by and between Yozan and
                Airspan Ltd. (10), (20)10.21
            
            Amendment
                of 2ndPurchase Contracts, dated February 25, 2006, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.22
            
            Memorandum
                of Understandings, dated February 25, 2006, by and between Yozan
                and
                Airspan Ltd. (10), (20)10.23
            
            Memorandum
                of Understandings, dated June 23, 2006, by and between Yozan and
                Airspan
                Ltd. (21), (22)10.24
            
            Loan
                and Security Agreement, dated as of August 1, 2006, by and among,
                Silicon
                Valley Bank, Airspan Networks Inc., and Airspan Communications Limited,
                including exhibits thereto (23)




10.25
            
            Memorandum
                of Understandings, dated September 8, 2006, by and between Yozan
                and
                Airspan Ltd. (24) (25)10.26
            
            First
                Amendment to Loan and Security Agreement dated as of August 7, 2007
                between Silicon Valley Bank, Airspan Nrtworks Inc. and Airspan
                Communications Ltd. (26)




F-41




10.27
            
            Form
                of Option Agreements*10.28
            
            Employment
              Agreement
              with Paul Senior*10.29
            
            Employment
              Agreement
              with Uzi Shalev*10.30
            
            Employment
                Agreement with Padraig
                Byrne*21
            
            Subsidiaries
                of registrant (27)23.1
            
            Consent
                of Grant Thornton LLP, Independent Registered Public Accounting Firm
                *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





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




1
            
            Incorporated
                by reference to Airspan's Form 10-Q for the quarter ended April 4,
                20042
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 15,
                20043
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 26,
                20064
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1 (333-34514)
                filed April 11, 20005
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on August 1,
                20066
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1/A (333-34514)
                filed May 26, 20007
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                20008
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                20039
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on July 31,
                200610
            
            Incorporated
                by reference to the Company's Form 10-K for the year ended December
                31,
                200511
            
            Management
                Agreement or Compensatory Plan or Arrangement12
            
            Incorporated
                by reference to Airspan's Registration Statement on Form S-1/A (333-34514)
                filed June 22, 200013
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                200214
            
            Incorporated
                by reference to Airspan's Form 10-Q for the quarter ended July 2,
                200615
            
            Incorporated
                by reference by Airspan's report on Form 8-K/A filed on July 6,
                200416
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 13,
                200417
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 27,
                2004




F-42




18
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on June 9,
                200519
            
            Incorporated
                by reference to Airspan's Form 10-K for the year ended December 31,
                200420
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on March 30, 2006 pursuant to a request for confidential treatment,
                which
                was granted


21
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on June 29, 2006 pursuant to a request for confidential treatment,
                which
                was granted22
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on June 29,
                200623
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on August 7,
                200624
            
            Portions
                of this document have been omitted and were filed separately with
                the SEC
                on September 21, 2006 pursuant to a request for confidential treatment,
                which was granted25
            
            Incorporated
                by reference to Airspan's report on Form 8-K filed on September 21,
                200626
            
            Incorporated
                by reference to Airspan’s Form 10-Q for the quarter ended July 1,
                200727
            
            Incorporated
              by
              reference to Airspan’s Form 10-K for the year ended December 31,
              2006




F-43