NOTES
TO UNAUDITED CONDENSED Consolidated FINANCIAL STATEMENTS
On
August 13, 2021 (the “Closing”), Airspan Networks Holdings Inc. (formerly New Beginnings Acquisition Corp.) (the
“Company”) consummated its previously announced business combination transaction (the “Business Combination”)
pursuant to the business combination agreement (the “Business Combination Agreement”), dated March 8, 2021, by
and among the Company, Artemis Merger Sub Corp., a Delaware corporation and wholly-owned direct subsidiary of the Company (“Merger
Sub”), and Airspan Networks Inc., a Delaware corporation (“Legacy Airspan”). In connection with the Closing
of the Business Combination, the Company changed its name to Airspan Networks Holdings Inc. Unless the context otherwise requires,
references to “Airspan”, the “Company”, “us”, “we”, “our” and any
related terms prior to the Closing of the Business Combination are intended to mean Legacy Airspan and its consolidated subsidiaries,
and after the Closing of the Business Combination, Airspan Networks Holdings Inc. and its consolidated subsidiaries. In addition,
unless the context otherwise requires, references to “New Beginnings” and “NBA” are references to New
Beginnings Acquisition Corp., the Company’s name prior to the Closing.
The
Company designs and produces wireless network equipment for 4G and 5G networks for both mainstream public telecommunications service
providers and private network implementations. Airspan provides Radio Access Network (“RAN”) products based on Open
Virtualized Cloud Native Architectures that support technologies including 5G new radio (“5G NR”) and Long-Term Evolution
(“LTE”), and Fixed Wireless standards, operating in licensed, lightly-licensed and unlicensed frequencies.
The
market for the Company’s wireless systems includes mobile carriers, other public network operators and private and government
network operators for command and control in industrial and public safety applications such as smart utilities, defense, transportation,
mining and oil and gas. The Company’s strategy applies the same network technology across all addressable sectors.
The
Company’s main operations are in Slough, United Kingdom; Mumbai and Bangalore, India; Tokyo, Japan; Airport City, Israel;
Santa Clara, California; and the Company’s corporate headquarters are in the United States (“U.S.”) in Boca
Raton, Florida.
|
2. |
BASIS OF PRESENTATION
AND ACCOUNTING POLICIES |
Basis
of Presentation, Principles of Consolidation and Use of Estimates
The
accompanying condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and
Airspan IP Holdco LLC (“Holdco”) – 99.8% owned by Airspan. Non-controlling interest in the results of operations
of consolidated subsidiaries represents the minority stockholders’ share of the profit or loss of Holdco. The non-controlling
interest in net assets of this subsidiary, and the net income or loss attributable to the non-controlling interest, were not recorded
by the Company as they are considered immaterial. All significant inter-company balances and transactions have been eliminated
in consolidation. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (“GAAP”).
The
Company’s interim condensed consolidated financial statements and related notes are unaudited. In the opinion of management,
all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim financial
statements have been included. The results reported in these interim financial statements are not necessarily indicative of the
results that may be reported for the entire year. Certain information and footnote disclosures required by GAAP have been condensed
or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements
and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31,
2021.
The
preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
Liquidity
The
Company has historically incurred losses from operations. In the past, these losses have been financed through cash on hand or
capital raising activities including borrowings or the sale of newly issued shares.
The
Company had $133.6 million of current assets and $71.9 million of current liabilities as of March 31, 2022. During the three
months ended March 31, 2022, the Company used $14.9 million in cash flow from operating activities. The Company is investing
heavily in 5G research and development and the Company expects to continue to use cash from operations during the remainder of
2022 and through the first half of 2023. Cash on hand and borrowing capacity under our Assignment Agreement, Resignation and Assignment
Agreement and Credit Agreement (the “Fortress Credit Agreement”) with DBFIP ANI LLC (“Fortress”) (see
Notes 7 and 9) may not allow the Company to reasonably expect to meet its forecasted cash requirements.
In
order to address the need to satisfy the Company’s continuing obligations and realize its long-term strategy, management
has taken several steps and is considering additional actions to improve its operating and financial results, which the Company
expects will be sufficient to meet the prospective covenants of the Company’s senior secured convertible notes and senior
term loan and provide the ability to continue as a going concern, including the following:
| ● | focusing
the Company’s efforts to increase sales in additional geographic markets; |
| ● | continuing
to develop 5G product offerings that will expand the market for the Company’s products; and |
| ● | continuing
to evaluate and implement cost reduction initiatives to reduce non-strategic costs in operations and expand the Company’s labor
force in lower cost geographies. |
COVID-19
Update
The
spread of COVID-19, a novel strain of coronavirus, has and continues to alter the behavior of business and people in a manner
that is having negative effects on local, regional and global economies. The COVID-19 pandemic continues to have an impact with
short-term disruptions on our supply chains, as governments take robust actions to minimize the spread of localized COVID-19 outbreaks.
The continued impact on our supply chains has caused delayed production and fulfilment of customer orders, disruptions and delays
of logistics and increased logistic costs. As a further consequence of the COVID-19 pandemic, component lead times have extended
as demand outstrips supply on certain components, including semiconductors, and has caused the costs of components to increase.
These extended lead times have caused us to extend our forecast horizon with our contract manufacturing partners and have increased
the risk of supply delays. The Company cannot at this time accurately predict what effects, or their extent, the coronavirus outbreak
will have on the remainder of its 2022 operating results, due to uncertainties relating to the ultimate geographic spread of the
virus, the severity of the disease, the duration of the outbreak, component shortages and increased component costs, the length
of voluntary business closures, and governmental actions taken in response to the outbreak. More generally, the widespread health
crisis has and may continue to adversely affect the global economy, resulting in an economic downturn that could affect demand
for our products and therefore impact the Company’s results.
Significant
Concentrations
Financial
instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents,
restricted cash and accounts receivable. The Company places its cash and cash equivalents in highly rated financial instruments.
The Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits.
The Company has not experienced any losses on such accounts.
The
Company’s accounts receivable are derived from sales of its products and approximately 66.9% and 71.3% of product sales
were to non-U.S. customers for the three months ended March 31, 2022 and 2021, respectively. Two customers accounted for
$29.8 million or 59.8% of the net accounts receivable balance as of March 31, 2022 and two customers accounted for $17.4
million or 53.7% of the net accounts receivable balance as of March 31, 2021. The Company requires payment in advance or
payment security in the form of a letter of credit 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 73.1% and 60.7% of revenue for the three months
ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, the Company had three customers
whose revenue was greater than 10% of the three month period’s total revenue. For the three months ended March 31,
2021, the Company had one customer whose revenue was greater than 10% of the three month period’s total revenue.
The
Company received 88.1% and 95.5% of goods for resale from five suppliers in the three months ended March 31, 2022 and 2021,
respectively. The Company outsources the manufacturing of its base station products to contract manufacturers and obtains subscriber
terminals from vendors in the Asia Pacific region. In the event of a disruption to supply, the Company would be able to transfer
the manufacturing of base stations to alternate contract manufacturers and has alternate suppliers for the majority of subscriber
terminals.
Recent
Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —
Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU simplifies the accounting for certain financial
instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt
and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users.
The new standard was adopted by the Company on January 1, 2022, and it did not have a material impact on the Company’s
condensed consolidated financial statements
In
May 2021, the FASB issued ASU No. 2021-04, “Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified
Written Call Options”. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified
written call option that is not within the scope of another Topic. The new standard was adopted by the Company on January 1,
2022, and it did not have a material impact on the Company’s condensed consolidated financial statements.
In
March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting” which provides optional expedient and exceptions for applying generally
accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if
certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”)
and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference
rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible
to manipulation. This ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning
away from reference rates that are expected to be discontinued. This new standard must be adopted by the Company no later than
December 1, 2022, with early adoption permitted. The potential adoption of this standard is not expected to have a material
impact on the Company’s condensed consolidated financial statements.
In
June 2016, the FASB issued ASU No. 2016-13 (amended by ASU 2019-10), “Financial Instruments — Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial
instruments.” which replaces the incurred loss model with a current expected credit loss (“CECL”) model.
The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The
Company is required to adopt the new guidance on January 1, 2023. The Company is currently evaluating the impact this guidance
will have on the condensed consolidated financial statements.
Reclassifications
Certain
reclassifications have been made to prior-year amounts to conform with current-year presentation. These reclassifications had no effect
on the Company’s net loss or cash flows from operations.
|
3. |
THE BUSINESS
COMBINATION |
On
August 13, 2021, the Company and Legacy Airspan completed the Business Combination, with Legacy Airspan surviving the Business
Combination as a wholly-owned subsidiary of the Company, and the Company was renamed Airspan Networks Holdings Inc. Cash proceeds
from the Business Combination totaled approximately $115.5 million, which included funds held in NBA’s trust account and
the completion of the concurrent private placement (the “PIPE” or “PIPE Financing”) of shares of the Company’s
common stock (the “Common Stock”) and sale of the Company’s senior secured convertible notes (the “Convertible
Notes Financing”).
In
accordance with the terms and subject to the conditions of the Business Combination Agreement, at the effective time of the Business
Combination, each share of Legacy Airspan capital stock issued and outstanding immediately prior to the Closing automatically
converted into and became the right to receive a specified number of shares of the Company’s Common Stock, warrants exercisable
to purchase one share of the Company’s Common Stock at a price of $12.50 per share (the “Post-Combination $12.50 Warrants”),
warrants exercisable to purchase one share of the Company’s Common Stock at a price of $15.00 per share (the “Post-Combination
$15.00 Warrants”) and warrants exercisable to purchase one share of the Company’s Common Stock at a price of $17.50
per share (the “Post-Combination $17.50 Warrants” and the Post-Combination $17.50 Warrants, together with the Post-Combination
$12.50 Warrants and Post-Combination $15.00 Warrants, the “Post-Combination Warrants”). The aggregate transaction
consideration paid in the Business Combination was (i) 59,426,486 shares of the Company’s Common Stock, (ii) 3,000,000 Post-Combination
$12.50 Warrants, (iii) 3,000,000 Post-Combination $15.00 Warrants, (iv) 3,000,000 Post-Combination $17.50 Warrants and (v) $17,500,000
in cash. The aggregate transaction consideration was allocated among the holders of shares of Legacy Airspan capital stock (including
holders of shares of Airspan capital stock issued pursuant to the net exercise of warrants to purchase Legacy Airspan capital
stock and holders of shares of Legacy Airspan restricted stock), holders of Legacy Airspan stock options and participants (the
“MIP Participants”) in Legacy Airspan’s Management Incentive Plan (the “MIP”).
Prior
to the Business Combination, the Company (then known as New Beginnings Acquisition Corp.) issued 11,500,000 public warrants (the
“Public Warrants”) and 545,000 private placement warrants (the “Private Placement Warrants”, and the Public
Warrants together with the Private Placement Warrants, the “Common Stock Warrants”). Following the Business Combination,
the Common Stock Warrants remain exercisable for Common Stock of the Company. All other features of the Common Stock Warrants
remained unchanged. There were no cash obligations for the Company pertaining to these Common Stock Warrants.
Prior
to the consummation of the Business Combination, holders of an aggregate of 9,997,049 shares of Common Stock sold in NBA’s
initial public offering exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding
the proceeds from NBA’s initial public offering, calculated as of two business days prior to the consummation of the Business
Combination, which was approximately $10.10 per share, or $101.0 million in the aggregate.
At
Closing, the Company filed a second amended and restated certificate of incorporation (the “Restated Certificate of Incorporation”).
Among other things, the Restated Certificate of Incorporation increased the number of shares of (a) Common Stock the Company is
authorized to issue from 100,000,000 shares to 250,000,000 shares and (b) preferred stock the Company is authorized to issue from
1,000,000 shares to 10,000,000 shares.
In
connection with the Closing of the Business Combination, certain former stockholders of Legacy Airspan (the “Legacy Airspan
Holders”) and certain NBA stockholders (the “Sponsor Holders”) entered into a registration rights and lock-up
agreement (the “Registration Rights and Lock-Up Agreement”). Subject to certain exceptions, the Registration Rights
and Lock-Up Agreement provided that 44,951,960 shares of Common Stock, as well as 2,271,026 Post-Combination $12.50 Warrants,
2,271,026 Post-Combination $15.00 Warrants and 2,271,026 Post-Combination $17.50 Warrants (and the shares of Common Stock issuable
upon exercise of such Post-Combination Warrants), in each case, held by the Legacy Airspan Holders were locked-up for a period
of six months following the Closing, while the 2,750,000 shares of Common Stock held by the Sponsor Holders will be locked-up
for a period of one year following the Closing, in each case subject to earlier release upon (i) the date on which the last reported
sale price of the Common Stock equals or exceeds $12.50 per share for any 20 trading days within any 30-day trading period or
(ii) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction after the Closing
that results in all of our stockholders having the right to exchange their shares of our Common Stock for cash, securities or
other property. The Registration Rights and Lock-Up Agreement also provided that the Private Placement Warrants and shares of
Common Stock underlying the units sold by NBA in a private placement concurrent with its initial public offering (the “Private
Placement Units”), along with any shares of Common Stock underlying the Private Placement Warrants, were locked-up for a
period of 30 days following the Closing so long as such securities were held by the initial purchasers of the Private Placement
Units or their permitted transferees.
The
Company accounted for the Business Combination as a reverse recapitalization, which is the equivalent of Legacy Airspan issuing
stock for the net assets of New Beginnings, accompanied by a recapitalization, with New Beginnings treated as the acquired company
for accounting purposes. The determination of New Beginnings as the “acquired” company for accounting purposes was
primarily based on the fact that subsequent to the Business Combination, Legacy Airspan comprised all of the ongoing operations
of the combined entity, a majority of the governing body of the combined company and Legacy Airspan’s senior management
comprised all of the senior management of the combined company. The net assets of New Beginnings were stated at historical cost
with no goodwill or other intangible assets recorded. Reported results from operations included herein prior to the Business Combination
are those of Legacy Airspan. The shares and corresponding capital amounts and loss per share related to Legacy Airspan’s
outstanding convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to
reflect the conversion ratio established pursuant to the Business Combination Agreement.
In
connection with the Business Combination, the Company incurred underwriting fees and other costs considered direct and incremental
to the transaction totaling $27.0 million, consisting of legal, accounting, financial advisory and other professional fees. These
amounts are reflected within additional paid-in capital in the condensed consolidated balance sheets as of March 31, 2022
and December 31, 2021.
PIPE
Financing
Concurrent
with the execution of the Business Combination, the Company entered into subscription agreements with certain investors (the “PIPE
Investors”) pursuant to which the PIPE Investors subscribed for and purchased an aggregate of 7,500,000 shares of Common
Stock for an aggregate purchase price of $75.0 million.
Convertible
Notes Financing
Concurrent
with the execution of the Business Combination, the Company issued $50,000,000 aggregate principal amount of senior secured convertible
notes (the “Convertible Notes”). The Convertible Notes bear interest at a rate equal to 7.0% per annum, payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on September 30,
2021. The Convertible Notes mature on December 30, 2024, unless earlier accelerated, converted, redeemed or repurchased.
The Convertible Notes are pari passu in right of payment and lien priority and are secured by a security interest in (a)
all of the real, personal and mixed property in which liens are granted or purported to be granted pursuant to any of the collateral
documents as security for the obligations, (b) all products, proceeds, rents and profits of such property, (c) all of each loan
party’s book and records and (d) all of the foregoing whether now owned or existing, in each case excluding certain excluded
assets.
At
Closing, each Convertible Note, together with all accrued but unpaid interest, was convertible, in whole or in part, at the option
of the holder, at any time prior to the payment in full of the principal amount (together with all accrued but unpaid interest
thereon), into shares of Common Stock at a conversion price equal to $12.50 per share (see Note10).
Summary
of Net Proceeds
The
following table summarizes the elements of the net proceeds from the Business Combination as of December 31, 2021:
Schedule of business combination | |
| | |
Cash—Trust Account (net of redemptions of $101 million) | |
$ | 15,184,107 | |
Cash—Convertible Notes financing | |
| 48,669,322 | |
Cash—PIPE Financing | |
| 75,000,000 | |
| |
| | |
Less: Underwriting fees and other issuance costs paid at Closing | |
| (23,353,127 | ) |
Cash proceeds from the Business Combination | |
$ | 115,500,302 | |
| |
| | |
Less: Non-cash net liabilities assumed from New Beginnings | |
| (38,216 | ) |
Add: Non-cash net assets assumed from New Beginnings | |
| 3,684,000 | |
Less: Non-cash fair value of Common Stock Warrants | |
| (13,176,450 | ) |
Less: Non-cash fair value of Post-Combination Warrants | |
| (1,980,000 | ) |
Less: Non-cash fair value of Convertible Notes issued | |
| (48,273,641 | ) |
Less: Other issuance costs included in accounts payable and accrued liabilities | |
| (3,618,792 | ) |
| |
| | |
Additional paid-in-capital from Business Combination, net of issuance costs paid | |
$ | 52,097,203 | |
Summary
of Shares Issued
The
following table summarizes the number of shares of Common Stock outstanding immediately following the consummation of the Business
Combination:
Schedule of number of shares Common Stock outstanding | |
| | |
New Beginnings shares of Common Stock outstanding prior to the Business Combination | |
| 14,795,000 | |
Less: redemption of New Beginnings shares of Common Stock | |
| (9,997,049 | ) |
Shares of Common Stock issued pursuant to the PIPE | |
| 7,500,000 | |
Outstanding New Beginnings shares of Common Stock prior to the Business Combination, plus shares of Common Stock issued in PIPE Financing | |
| 12,297,951 | |
| |
| | |
Conversion of Legacy Airspan preferred stock | |
| 56,857,492 | |
Conversion of Legacy Airspan common stock | |
| 1,182,912 | |
Conversion of Legacy Airspan restricted common stock | |
| 339,134 | |
Conversion of Legacy Airspan Class B common stock | |
| 1,340,611 | |
Conversion of Legacy Airspan restricted Class B common stock | |
| 6,337 | |
Total shares of Company Common Stock outstanding immediately following the Business Combination | |
| 72,024,437 | |
The
5,815,796 Common Stock options exchanged for options to purchase Legacy Airspan Common Stock and Legacy Airspan Class B Common
Stock, the restricted stock units (“RSUs”) with respect to 1,750,000 shares of Common Stock issued to the MIP Participants,
and 4,257,718 shares of Common Stock reserved for issuance with future grants under the Company’s 2021 Stock Incentive Plan
(the “2021 Plan”) are not issued shares and are not included in the table above.
The
following is a summary of revenue by category (in thousands):
Schedule of revenue | |
| | | |
| | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Products sales | |
$ | 31,646 | | |
$ | 37,782 | |
Non-recurring engineering (“NRE”) | |
| 1,156 | | |
| 2,125 | |
Product maintenance contracts | |
| 899 | | |
| 3,163 | |
Professional service contracts | |
| 1,933 | | |
| 1,904 | |
Software licenses | |
| 1,384 | | |
| 603 | |
Other | |
| 546 | | |
| 358 | |
Total revenue | |
$ | 37,564 | | |
$ | 45,935 | |
Revenue
recognized at a point in time for NRE services amounted $0.1 million for the three months ended March 31, 2021. There was
no revenue recognized at a point in time for NRE services for the three months ended March 31, 2022. For services performed
on a customer’s owned asset, since the customer controls the asset being enhanced, revenue is recognized over time as services
are rendered. Revenue recognized over time for NRE services using a cost-based input method amounted to $1.2 million and $2.0
million for the three months ended March 31, 2022 and 2021, respectively. The Company is allowed to bill for services performed
under the contract in the event the contract is terminated.
The
opening and closing balances of our contract asset and liability balances from contracts with customers as of March 31, 2022
and December 31, 2021 were as follows (in thousands):
Schedule of contracts with customers asset and liability | | |
| | | |
| | |
| | |
Contracts Assets | | |
Contracts Liabilities | |
Balance as of December 31, 2021 | | |
$ | 7,673 | | |
$ | 2,902 | |
Balance as of March 31, 2022 | | |
| 8,704 | | |
| 3,219 | |
Change | | |
$ | 1,031 | | |
$ | 317 | |
Remaining
performance obligations represent the revenue that is expected to be recognized in future periods related to performance obligations
included in a contract that are unsatisfied, or partially satisfied, as of the end of a period. As of March 31, 2022 and
December 31, 2021, deferred revenue (both current and noncurrent) of $3.2 million and $2.9 million, respectively, represents
the Company’s remaining performance obligations, of which $3.1 million and $2.5 million, respectively, is expected to be
recognized within one year, with the remainder to be recognized thereafter.
Revenues
for the three months ended March 31, 2022 and 2021, include the following (in thousands):
Schedule of revenues from contract liability | |
| | |
| |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Amounts included in the beginning of year contract liability balance | |
$ | 1,045 | | |
$ | 3,550 | |
Warranty
Liabilities
Information
regarding the changes in the Company’s product warranty liabilities for the three months ended March 31, 2022 and 2021
is as follows (in thousands):
Schedule of product warranty liabilities | | |
| | | |
| | |
| | |
Three Months Ended March 31, | |
| | |
2022 | | |
2021 | |
Balance, beginning of period | | |
$ | 1,285 | | |
$ | 1,019 | |
Accruals | | |
| 237 | | |
| 92 | |
Settlements | | |
| (181 | ) | |
| (92 | ) |
Balance, end of period | | |
$ | 1,341 | | |
$ | 1,019 | |
|
5. |
GOODWILL AND
INTANGIBLE ASSETS, NET |
The
Company had goodwill of $13.6 million as of both March 31, 2022 and December 31, 2021 resulting from a prior acquisition.
Intangible
assets, net consists of the following (in thousands):
Schedule of Intangible assets, net | |
| | | |
| | | |
| | | |
| | |
| |
Weighted | | |
March 31, 2022 | |
| |
Average Useful Life (in years) | | |
Gross
Carrying Amount | | |
Accumulated
Amortization | | |
Net
Carrying
Amount | |
Internally developed technology | |
| 10 | | |
$ | 7,810 | | |
$ | (2,603 | ) | |
$ | 5,207 | |
Customer relationships | |
| 6 | | |
| 2,130 | | |
| (1,183 | ) | |
| 947 | |
Trademarks | |
| 2 | | |
| 720 | | |
| (720 | ) | |
| — | |
Non-compete | |
| 3 | | |
| 180 | | |
| (180 | ) | |
| — | |
Total acquired intangible assets | |
| | | |
$ | 10,840 | | |
$ | (4,686 | ) | |
$ | 6,154 | |
| |
Weighted | | |
December 31, 2021 | |
| |
Average Useful Life (in years) | | |
Gross
Carrying Amount | | |
Accumulated
Amortization | | |
Net
Carrying
Amount | |
Internally developed technology | |
| 10 | | |
$ | 7,810 | | |
| (2,408 | ) | |
| 5,402 | |
Customer relationships | |
| 6 | | |
| 2,130 | | |
| (1,094 | ) | |
| 1,036 | |
Trademarks | |
| 2 | | |
| 720 | | |
| (720 | ) | |
| — | |
Non-compete | |
| 3 | | |
| 180 | | |
| (180 | ) | |
| — | |
Total acquired intangible assets | |
| | | |
$ | 10,840 | | |
| (4,402 | ) | |
| 6,438 | |
Amortization
expense related to the Company’s intangible assets amounted to $0.3 million for both the three months ended March 31,
2022 and 2021.
Estimated
amortization expense for the remainder of 2022 and thereafter related to the Company’s intangible assets is as follows (in
thousands):
Schedule of estimated amortization expense | |
| | |
2022 | |
$ | 854 | |
2023 | |
| 1,136 | |
2024 | |
| 1,107 | |
2025 | |
| 781 | |
2026 | |
| 781 | |
Thereafter | |
| 1,495 | |
Total | |
$ | 6,154 | |
|
6. |
OTHER ACCRUED
EXPENSES |
Other
accrued expenses consist of the following (in thousands):
Schedule of other accrued expenses | |
| | | |
| | |
| |
March 31, 2022 | | |
December 31, 2021 | |
Payroll and related benefits and taxes | |
$ | 7,226 | | |
$ | 7,258 | |
Royalties | |
| 2,923 | | |
| 2,870 | |
Agent and sales commissions | |
| 2,698 | | |
| 2,833 | |
Right-of-use lease liability, current portion | |
| 2,416 | | |
| 2,599 | |
Tax liabilities | |
| 1,661 | | |
| 1,611 | |
Product warranty liabilities | |
| 1,341 | | |
| 1,285 | |
Product marketing | |
| 791 | | |
| 752 | |
Manufacturing subcontractor costs | |
| 2,506 | | |
| 2,165 | |
Legal and professional services | |
| 2,462 | | |
| 2,275 | |
Other | |
| 1,513 | | |
| 3,319 | |
Other accrued expenses | |
$ | 25,537 | | |
$ | 26,967 | |
On
August 6, 2015, Legacy Airspan issued Golden Wayford Limited a $10.0 million subordinated Convertible Promissory Note (the
“Golden Wayford Note”) pursuant to a Subordinated Convertible Note Purchase Agreement. The Golden Wayford Note was
amended and restated on November 28, 2017, to reduce the interest rate thereon and to reflect the application of the payment
of $1.0 million of principal on such note. The Golden Wayford Note had an original maturity date of February 16, 2016, which
through subsequent amendments was extended to June 30, 2020. The conversion rights related to this agreement expired on its
maturity date, June 30, 2020, and on this date the loan was reclassified from Subordinated Convertible Debt to Subordinated
Debt.
The
principal and accrued interest under the Golden Wayford Note would have been automatically converted into common shares at the
time of the next equity financing and consummated prior to, on or after the maturity date (June 30, 2020). Such conversion
right expired in accordance with its term. Interest accrues at 5.0% per annum and is payable quarterly, however, because such
payment is prohibited by the terms of the subordination, interest is (in accordance with the terms of the related promissory note)
paid in kind.
The
Golden Wayford Note is subordinate to the obligations under the Fortress Credit Agreement (see Note 9). A limited waiver under
the Fortress Credit Agreement waives each actual and prospective default and event of default existing under the Fortress Credit
Agreement directly as a result of the non-payment of the Golden Wayford Note.
The
Company had subordinated debt outstanding of $9.0 million, plus $1.7 million and $1.6 million of accrued interest as of March 31,
2022 and December 31, 2021, respectively.
|
8. |
SUBORDINATED
TERM LOAN – RELATED PARTY |
On
February 9, 2016, Legacy Airspan entered into a $15.0 million subordinated term loan agreement with a related party (the
“Subordinated Term Loan Agreement”) that was due to mature on February 9, 2018. On July 12, 2016, Legacy
Airspan entered into an additional $15.0 million Amendment No. 1 to the Subordinated Term Loan Agreement that was due to mature
on February 9, 2018. On July 3, 2017, Legacy Airspan entered into Amendment No. 2 to the Subordinated Term Loan Agreement
that extended the maturity date to June 30, 2019. On May 23, 2019, Legacy Airspan entered into Amendment No. 3 to the
Subordinated Term Loan Agreement that extended the maturity date to December 31, 2020. On March 30, 2020, Legacy Airspan
entered into Amendment No. 4 to the Subordinated Term Loan Agreement that extended the maturity date to December 31, 2021.
On December 30, 2020, Legacy Airspan entered into Amendment No. 5 to the Subordinated Term Loan Agreement that extended the
maturity date to the later of (a) December 30, 2024 and (b) 365 days after the maturity date of the Fortress Credit Agreement
(as in effect on December 30, 2020) (see Note 9). The term loan is subordinate to the Fortress Credit Agreement (see Note
9).
Prior
to May 23, 2019, interest accrued at 2.475% per annum and was payable quarterly. In accordance with the amendments below,
the interest rate changed as follows:
|
(a) |
Amendment No. 3,
on May 23, 2019, the interest rate changed to 9.0% per annum to be accrued; |
|
(b) |
Amendment No. 4,
on March 30, 2020, the interest rate changed to 9.0% per annum through December 31, 2020 and from and after January 1,
2021, at a rate of 12.0% per annum to be accrued; and |
|
(c) |
Amendment No. 5,
on December 30, 2020, the interest rate from January 1, 2021 and thereafter changed to 9.0% per annum to be accrued,
subject to reversion to 12.0% if a condition subsequent is not satisfied. The subsequent condition was satisfied. |
The
principal and accrued interest may be repaid early without penalty.
The
Company had a subordinated term loan outstanding of $30.0 million, plus $8.8 million and $8.0 million of accrued interest as of
March 31, 2022 and December 31, 2021, respectively.
On
December 30, 2020, Legacy Airspan, together with Holdco, Airspan Networks (SG) Inc., Mimosa Networks, Inc., Mimosa Networks
International, LLC, Airspan Communications Limited, Airspan Networks LTD, and Airspan Japan K.K., as guarantors, together with
the other parties thereto, entered into an assignment agreement, whereby Pacific Western Bank (“PWB”) and Ally Bank
assigned their interests in a loan facility under the Second Amended and Restated Loan and Security Agreement with Legacy Airspan
(the “PWB Facility”) to certain new lenders (the “Assignment Agreement”), and PWB entered into a resignation
and assignment agreement (the “Agent Resignation Agreement”) pursuant to which PWB resigned in its capacity as agent
under all of the transaction documents and Fortress became the successor agent (as defined in the Agent Resignation Agreement),
replacing PWB in such capacity under the PWB Facility. The Assignment Agreement and the Agent Resignation Agreement, along with
a Reaffirmation and Omnibus Amendment, resulted in the amendment and restatement of the terms of the PWB Facility and the Fortress
Credit Agreement with the new lenders as the lenders thereunder. Fortress became the administrative agent, collateral agent and
trustee for the lenders and other secured parties. At Closing, on August 13, 2021, the Company, Legacy Airspan and certain
of the Company’s subsidiaries who are party to the Fortress Credit Agreement entered into a Waiver and Consent, Second Amendment,
Restatement, Joinder and Omnibus Amendment to Credit Agreement and Other Loan Documents relating to the Fortress Credit Agreement
with Fortress (the “August 2021 Fortress Amendment”) to, among other things, add the Company as a guarantor,
recognize and account for the Business Combination, recognize and account for the Convertible Notes (see Note 10) and provide
updated procedures for replacement of LIBOR. On March 29, 2022, the Company, Legacy Airspan and certain of the Company’s
subsidiaries who are party to the Fortress Credit Agreement entered into a Third Amendment and Waiver to Credit Agreement and
Other Loan Documents relating to the Fortress Credit Agreement with Fortress to, among other things, amend the financial covenants
included in the Fortress Credit Agreement.
The
Fortress Credit Agreement initial term loan total commitment of $34.0 million and a term loan commitment of $10.0 million were
both funded to Legacy Airspan on December 30, 2020. Pursuant to the Fortress Credit Agreement, the Company may expand the
term loan commitment by $20.0 million subject to the terms and conditions of the Fortress Credit Agreement. The maturity date
of the total loan commitment is December 30, 2024. The Fortress Credit Agreement contains a prepayment premium of 5.0% if
the prepayment occurs during the period from December 30, 2021 through December 29, 2022, and 3.0% if the prepayment
occurs during the period from December 30, 2022 through December 29, 2023. The Fortress Credit Agreement also contained
a prohibition on prepayment during the period from December 30, 2020 through December 29, 2021. Subsequent to December 29,
2021, the Company may prepay this loan but will incur a related fee in the amount of a make-whole amount of interest that would
have been payable had such prepayment not been made.
As
of March 31, 2022, the Company was in compliance with all applicable covenants under the Fortress Credit Agreement.
The
Company’s senior term loan balance was $46.2 million and $46.8 million, inclusive of accrued interest of $3.1 million and
$2.5 million, as of March 31, 2022 and December 31, 2021, respectively. Deferred financing fees of $5.0 million and
$5.9 million are reflected as reductions of the outstanding senior term loan balance as of March 31, 2022 and December 31,
2021, respectively.
On
August 13, 2021, the Company, together with Legacy Airspan, Holdco, Airspan Networks (SG) Inc., Mimosa Networks, Inc., Mimosa
Networks International, LLC, Airspan Communications Limited, Airspan Networks LTD, and Airspan Japan K.K., as guarantors, and
Fortress, entered into a Senior Secured Convertible Note Purchase and Guarantee Agreement (the “Fortress Convertible Note
Agreement”), in order to meet the available cash requirement of the reverse recapitalization described in Note 3. Pursuant
to the Fortress Convertible Note Agreement, $50.0 million was funded to the Company in exchange for the issuance of $50.0 million
aggregate principal amount of Convertible Notes on August 13, 2021, the date of the reverse recapitalization. The Convertible
Notes bear interest at 7.0% per annum (the “Base Rate”), payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, beginning on September 30, 2021. The Convertible Notes will mature on
December 30, 2024, unless earlier accelerated, converted, redeemed or repurchased. Under certain circumstances, a default
interest will apply following an event of default under the Convertible Notes at a per annum rate equal to the lower of (i) the
Base Rate plus 3.75% and (ii) the maximum amount permitted by law. The Convertible Notes are pari passu in right of payment
and lien priority and are secured by a security interest in (a) all of the real, personal and mixed property in which liens are
granted or purported to be granted pursuant to any of the collateral documents as security for the obligations, (b) all products,
proceeds, rents and profits of such property, (c) all of each loan party’s book and records and (d) all of the foregoing
whether now owned or existing, in each case excluding certain excluded assets.
On
March 29, 2022, the Company and certain of its subsidiaries who are party to the Fortress Convertible Note Agreement entered
into a First Amendment and Waiver to Senior Secured Convertible Note Purchase and Guarantee Agreement and Other Note Documents
relating to the Fortress Convertible Note Agreement and the Convertible Notes (the “Fortress Convertible Note Agreement
Amendment”) to, among other things, amend the financial covenants included in the Fortress Convertible Note Agreement, amend
the conversion price of the Convertible Notes and amend the optional redemption provisions of the Convertible Notes.
Prior
to the Fortress Convertible Note Agreement Amendment, the Convertible Notes, together with all accrued but unpaid interest thereon,
were convertible, in whole or in part, at any time prior to the payment in full of the principal amount thereof (together with
all accrued but unpaid interest thereon), into shares of Common Stock at a conversion price equal to $12.50 per share. Pursuant
to the Fortress Convertible Note Agreement Amendment, the conversion price with respect to the Convertible Notes was decreased
to $8.00 per share. The conversion price with respect to the Convertible Notes is subject to adjustment to reflect stock splits
and subdivisions, stock and other dividends and distributions, recapitalizations, reclassifications, combinations and other similar
changes in capital structure. The conversion price with respect to the Convertible Notes is also subject to a broad-based weighted
average anti-dilution adjustment in the event the Company issues, or is deemed to have issued, shares of Common Stock, other than
certain excepted issuances, at a price below the conversion price then in effect. In addition, pursuant to the Fortress Convertible
Note Agreement Amendment, if, during the period commencing on and including the date of the Fortress Convertible Note Agreement
Amendment and ending on and including the 15-month anniversary of the date of the Fortress Convertible Note Agreement Amendment,
there is no 30 consecutive trading day-period during which the average of the daily volume weighted average price of the Common
Stock (“Daily VWAP”) for such 30 consecutive trading day-period (after excluding the three highest and the three lowest
Daily VWAPs during such period) equals or exceeds $10.00 (as adjusted for stock splits, stock combinations, dividends, distributions,
reorganizations, recapitalizations and the like), the conversion price with respect to the Convertible Notes will be reduced to
the amount that such conversion price would otherwise have been had the conversion price with respect to the Convertible Notes
been $6.00 on the date of the Fortress Convertible Note Agreement Amendment.
The
following is the allocation among the freestanding instruments (in thousands) at the issuance date:
Schedule of convertible notes | |
| | |
Convertible Notes | |
$ | 41,887 | |
Conversion option derivative | |
| 7,474 | |
Call and contingent put derivative | |
| 639 | |
Total Convertible Notes | |
$ | 50,000 | |
As
of March 31, 2022, the Company had convertible debt outstanding as shown below (in thousands):
Schedule of convertible debt | |
| | |
| |
March 31, 2022 | |
Convertible Notes | |
$ | 41,887 | |
Accrued interest(a) | |
| 1,262 | |
Subtotal | |
| 43,149 | |
Loan discount costs | |
| (1,179 | ) |
Total Convertible Notes | |
$ | 41,970 | |
| (a) | The
accrued interest will accrete to principal value by the end of the term, December 30, 2024. |
As
of March 31, 2022, the Company was in compliance with all applicable covenants under the Fortress Convertible Note Agreement.
| 11. | FAIR
VALUE MEASUREMENTS |
The
Company’s assets and liabilities recorded at fair value are categorized based upon a fair value hierarchy that ranks the
quality and reliability of the information used to determine fair value.
The
Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of
impairment, and they are recorded at fair value only when impairment is recognized. These assets include property, plant and equipment,
goodwill and intangible assets, net. The Company did not record impairment to any non-financial assets in the three months ended
March 31, 2022 and 2021. The Company does not have any non-financial liabilities measured and recorded at fair value on a
non-recurring basis.
Financial
Disclosures about Fair Value of Financial Instruments
The
tables below set forth information related to the Company’s condensed consolidated financial instruments (in thousands):
Schedule of assumptions | |
| | |
| | | |
| | | |
| | | |
| | |
| |
Level in | | |
March 31,
2022 | | |
December 31,
2021 | |
| |
Fair Value | | |
Carrying | | |
Fair | | |
Carrying | | |
Fair | |
| |
Hierarchy | | |
Amount | | |
Value | | |
Amount | | |
Value | |
Assets: | |
| | |
| | | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
1 | | |
$ | 45,930 | | |
$ | 45,930 | | |
$ | 62,937 | | |
$ | 62,937 | |
Restricted cash | |
1 | | |
| 185 | | |
| 185 | | |
| 185 | | |
| 185 | |
Cash and investment in severance benefit accounts | |
1 | | |
| 3,597 | | |
| 3,597 | | |
| 3,687 | | |
| 3,687 | |
| |
| | |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | |
| | | |
| | | |
| | | |
| | |
Subordinated term loan(a) | |
2 | | |
$ | 38,834 | | |
$ | 28,473 | | |
$ | 37,991 | | |
$ | 28,376 | |
Subordinated debt(a) | |
2 | | |
| 10,707 | | |
| 7,844 | | |
| 10,577 | | |
| 7,674 | |
Senior term loan(a) | |
2 | | |
| 41,279 | | |
| 42,620 | | |
| 41,063 | | |
| 43,276 | |
Convertible debt | |
2 | | |
| 41,970 | | |
| 46,066 | | |
| 41,343 | | |
| 44,494 | |
Public Warrants | |
1 | | |
| 4,025 | | |
| 4,025 | | |
| 8,510 | | |
| 8,510 | |
Warrants(b) | |
3 | | |
| 624 | | |
| 624 | | |
| 1,317 | | |
| 1,317 | |
| (a) | As
of March 31, 2022 and December 31, 2021, the fair value of the subordinated term loan, subordinated debt and senior term loan
considered the senior status of the senior term loan under the Fortress Credit Agreement, followed by the junior status of the subordinated
term loan and subordinated debt. The implied yields of the subordinated term loan, subordinated debt and senior term loan were 17.62%,
17.54% and 14.50%, respectively, as of March 31, 2022 and 17.16%, 16.83% and 13.8%, respectively, as of December 31, 2021. |
| (b) | As
of March 31, 2022 and December 31, 2021, the fair value of warrants outstanding that are classified as liabilities are included
in other long-term liabilities in the Company’s condensed consolidated balance sheets. The key inputs to the valuation models that
were utilized to estimate the fair value of the Post-Combination Warrants and Private Placement Warrants as of March 31, 2022 were
as follows: |
Schedule of assumptions |
| | | |
| | |
|
Post-
Combination Warrants | |
Private Placement Warrants | |
Assumptions: |
| | | |
| | |
Stock price |
$ | 2.91 | | |
$ | 2.91 | |
Exercise price |
$ | 12.50 – $17.50 | | |
$ | 11.50 | |
Risk free rate |
| 1.85 | % | |
| 2.40 | % |
Expected volatility |
| 73.6 | % | |
| 56.9 | % |
Dividend yield |
| 0.00 | % | |
| 0.00 | % |
The conversion option derivative and call and contingent put derivative are considered a Level 3 measurement due to the utilization of significant unobservable inputs in the valuation. The Company utilized a binomial model to estimate the fair value of the embedded derivative features requiring bifurcation associated with the Convertible Notes payable at the issuance date and as of the March 31, 2022 reporting date. The key inputs to the valuation models that were utilized to estimate the fair value of the convertible debt derivative liabilities include:
Schedule of assumptions | |
| | | |
| | |
| |
March 31, 2022 | | |
December 31,
2021 | |
Assumptions: | |
| | | |
| | |
Stock price | |
$ | 2.91 | | |
$ | 9.75 | |
Conversion strike price | |
$ | 8.00 | | |
$ | 12.50 | |
Volatility | |
| 65.00 | % | |
| 25.00 | % |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Risk free rate | |
| 2.38 | % | |
| 0.51 | % |
Debt discount rate | |
| 14.50 | % | |
| 12.80 | % |
Coupon interest rate | |
| 7.00 | % | |
| 7.00 | % |
Face amount (in thousands) | |
$ | 50,000 | | |
$ | 50,000 | |
Contingent put inputs and assumptions: | |
| | | |
| | |
Probability of fundamental change | |
| 25.0 | % | |
| 25.0 | % |
The
following table presents a roll-forward of the Level 3 instruments:
Schedule of warrants | |
| | | |
| | | |
| | |
(in thousands) | |
Warrants | | |
Conversion option
derivative | | |
Call and contingent
put derivative | |
Beginning balance, December 31, 2021 | |
$ | 1,317 | | |
$ | 1,343 | | |
$ | 1,651 | |
Change in fair value | |
| (693 | ) | |
| 5,029 | | |
| (309 | ) |
Ending balance, March 31, 2022 | |
$ | 624 | | |
$ | 6,372 | | |
$ | 1,342 | |
The
fair value of the Company’s cash and cash equivalents and restricted cash approximate the carrying value because of the
short-term nature of these accounts.
| 12. | COMMITMENTS
AND CONTINGENCIES |
The
Company had commitments with its main subcontract manufacturers under various purchase orders and forecast arrangements of $66.9
million as of March 31, 2022, the majority of which have expected delivery dates during the remainder of 2022.
Contingencies
and Legal Proceedings
From
time to time, the Company receives and reviews correspondence from third parties with respect to licensing their patents and other
intellectual property in connection with the sale of the Company’s products. Disputes may arise with such third parties
if an agreement cannot be reached regarding the licensing of such patents or intellectual property.
On
October 14, 2019, Barkan Wireless IP Holdings, L.P. (“Barkan”) filed a suit against Sprint Corporation and related
entities (“Sprint”) in the United States District Court for the Eastern District of Texas alleging patent infringement
based in part on two of the Company’s products, Airave 4 and Magic Box Gold. See Barkan Wireless IP Holdings, L.P. v.
Sprint Corporation et al, Case No. 2:19-cv-00336-JRG (E.D. Tex.). On March 26, 2021, after a settlement between Barkan
and Sprint, the court granted an agreed motion to dismiss and the case was closed. Sprint has demanded that the Company indemnify
Sprint $3,870,000 for a portion of the amounts Sprint paid to defend and settle the case. On April 27, 2021, Sprint gave
notice that it intends to set-off amounts it owes the Company until Sprint’s indemnity demand is satisfied. The Company
disputes Sprint’s indemnity demand and, on March 15, 2022, filed a complaint for breach of contract in the United States
District Court for the District of Kansas. See Airspan Networks, Inc. v. Sprint/United Management Company, Case No. 2:22-cv-02104-JAR-ADM
(D. Kan.).
Except
as set forth above, the Company is not currently subject to any other material legal proceedings. The Company may from time to
time become a party to various other legal proceedings arising in the ordinary course of its business. While the results of such
claims and litigation cannot be predicted with certainty, the Company currently believes that it is not a party to any litigation
the final outcome of which is likely to have a material adverse effect on the Company’s condensed consolidated financial
position, results of operations or cash flows.
| 13. | COMMON
STOCK AND WARRANTS |
Common
Stock
As
of March 31, 2022, 260,000,000 shares, $0.0001 par value per share are authorized, of which, 250,000,000 shares are designated
as Common Stock and 10,000,000 shares are designated as preferred stock. As of March 31, 2022, there were 72,335,952 shares
of Common Stock issued and outstanding and no shares of preferred stock issued or outstanding.
Holders
of our Common Stock are entitled to receive dividends when, as and if declared by the board of directors of the Company (the “Board”),
payable either in cash, in property or in shares of capital stock. As of March 31, 2022, the Company had not declared any
dividends.
Legacy
Airspan Warrants
The
Company accounted for Legacy Airspan convertible preferred stock warrants that have been earned and are exercisable into shares
of Legacy Airspan’s convertible preferred stock as liabilities pursuant to Accounting Standards Codification 480, “Distinguishing
Liabilities from Equity” as the warrants were exercisable into shares of Legacy Airspan convertible preferred stock
that were contingently redeemable upon events outside the control of Legacy Airspan. The warrant liability is included in other
long-term liabilities on the accompanying condensed consolidated balance sheets. The warrants are remeasured and recognized at
fair value at each balance sheet date. At the end of each reporting period, changes in fair value during the period are recognized
as a component of other expense, net on the accompanying condensed consolidated statements of operations.
In
January 2021 and February 2021, Legacy Airspan issued warrants for the purchase of 6,097 and 406, respectively, shares
of Legacy Airspan Series H Convertible Preferred Stock to certain holders of Legacy Airspan Series H Senior Convertible Preferred
Stock (one warrant for every two shares of Legacy Airspan Series H Senior Convertible Preferred Stock purchased in January and
February 2021, respectively) with an exercise price of $61.50 per share and a 5-year term (“Series H warrants”).
Legacy Airspan accounted for the initial fair value of the Series H warrants as a discount on the Legacy Airspan Series H Senior
Convertible Preferred Stock issuance and recorded a corresponding warrant liability.
In
October 2015, Legacy Airspan issued warrants to purchase 487,805 shares of Legacy Airspan Series D Convertible Preferred
Stock to holders of its Series D Convertible Preferred Stock with an exercise price of $61.50 per share, subject to certain performance
requirements (the “Series D-1 Warrants”). In June 2014, Legacy Airspan issued warrants to purchase 203,252 shares
of Legacy Airspan Series D Convertible Preferred Stock to holders of Legacy Airspan Series D Convertible Preferred Stock with
an exercise price of $61.50 per share, subject to certain performance requirements (the “Series D Warrants”).
The
Series D Warrants expired unexercised in January 2021 and the Series D-1 Warrants and Series H warrants were converted as
part of the Closing of the Business Combination (Note 3) and ceased to exist after the Business Combination.
Common
Stock Warrants
As
of March 31, 2022, there are 12,045,000 Common Stock Warrants outstanding, consisting of 11,500,000 and 545,000 Public Warrants
and Private Placement Warrants, respectively.
As
part of NBA’s initial public offering, 11,500,000 Public Warrants were sold. The Public Warrants entitle the holder thereof
to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment. The Public Warrants may be exercised
only for a whole number of shares of Common Stock. No fractional shares will be issued upon exercise of the Public Warrants. The
Public Warrants will expire on August 13, 2026 at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The
Company may redeem the Public Warrants when exercisable, in whole and not in part, at a price of $0.01 per warrant, so long as
the Company provides not less than 30 days’ prior written notice of redemption to each warrant holder, and if, and only
if, the reported last sale price of the Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading
day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders.
Simultaneously
with the Company’s initial public offering, NBA consummated a private placement of 545,000 Private Placement Warrants with
its sponsor. The Private Placement Warrants are exercisable for one share of Common Stock at a price of $11.50 per share, subject
to adjustment. The Private Placement Warrants are identical to the Public Warrants, except that, so long as the Private Placement
Warrants are held by the initial purchaser or its permitted transferees, the Private Placement Warrants: (1) may be exercised
for cash or on a cashless basis; (2) may not be transferred, assigned or sold until thirty (30) days after the date of the Closing;
and (3) may not be redeemed.
Post-Combination
Warrants
As
of March 31, 2022, there are 9,000,000 Post-Combination Warrants outstanding.
At
Closing, the Company issued Post-Combination Warrants exercisable for 9,000,000 shares of Company Common Stock. The Post-Combination
Warrants include: (i) 3,000,000 Post-Combination $12.50 Warrants; (ii) 3,000,000 Post-Combination $15.00 Warrants; and (iii) 3,000,000
Post-Combination $17.50 Warrants. As of March 31, 2022, there were 3,000,000 Post-Combination $12.50 Warrants, 3,000,000
Post-Combination $15.00 Warrants, and 3,000,000 Post-Combination $17.50 Warrants outstanding. The Post-Combination Warrants may
only be exercised during the period commencing on the Closing and terminating on the earlier of (i) two years following the date
of the Closing and (ii) the redemption date, for a price of $12.50 per Post-Combination $12.50 Warrant, $15.00 per Post-Combination
$15.00 Warrant and $17.50 per Post-Combination $17.50 Warrant.
| 14. | SHARE-BASED
COMPENSATION |
2021
Stock Incentive Plan
Prior
to the Business Combination, the Company maintained its 2009 Omnibus Equity Compensation Plan (the “2009 Plan” and
together with the 2021 Plan, the “Plans”). Upon Closing of the Business Combination, awards under the 2009 Plan were
converted at the exchange ratio calculated in accordance with the Business Combination Agreement and the 2021 Plan became effective.
There are 6,007,718 shares of Common Stock authorized for issuance under the 2021 Plan, plus any shares of Common Stock subject
to awards under the 2009 Plan that are forfeited or reacquired by the Company due to termination or cancellation. As of March 31,
2022, there were 11.5 million shares of Common Stock reserved under the Plans.
The
following table summarizes share-based compensation expense for the three months ended March 31, 2022 and 2021 (in thousands):
Schedule of summarizes share-based compensation expense | |
| | | |
| | |
| |
Three Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Research and development | |
$ | 966 | | |
$ | 214 | |
Sales and marketing | |
| 1,083 | | |
| 140 | |
General and administrative | |
| 4,474 | | |
| 293 | |
Cost of sales | |
| 41 | | |
| 14 | |
Total share-based compensation | |
$ | 6,564 | | |
$ | 661 | |
Common
Stock options
The
following table sets forth the activity for all stock options:
Schedule of common stock options | | |
| | | |
| | | |
| | | |
| | |
| | |
Number of
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Life (Years) | | |
Weighted-
Average
Grant Date
Fair Value | |
Outstanding, December 31, 2021 | | |
| 5,489,492 | | |
$ | 4.23 | | |
| 6.05 | | |
$ | 2.27 | |
Granted | | |
| 803,760 | | |
| 3.70 | | |
| - | | |
| 1.69 | |
Exercised | | |
| - | | |
| - | | |
| - | | |
| - | |
Forfeited | | |
| (9,607 | ) | |
| 6.29 | | |
| - | | |
| 2.46 | |
Expired | | |
| (139,172 | ) | |
| 5.10 | | |
| - | | |
| 2.73 | |
Outstanding, March 31, 2022(a) | | |
| 6,144,473 | | |
$ | 4.14 | | |
| 6.47 | | |
$ | 2.18 | |
| | |
| | | |
| | | |
| | | |
| | |
Exercisable, March 31, 2022(b) | | |
| 4,109,406 | | |
$ | 3.93 | | |
| 5.38 | | |
$ | 2.06 | |
(a) |
The aggregate intrinsic
value of all stock options outstanding as of March 31, 2022 was $0.8 million. |
(b) |
The aggregate intrinsic
value of all vested/exercisable stock options as of March 31, 2022 was $0.8 million. |
As
of March 31, 2022, there was $4.1 million of unrecognized compensation expense related to stock options to be recognized
over a weighted average period of 2.66 years.
Restricted
Stock Awards (“RSAs”)
The
following table sets forth the activity for all RSAs:
Schedule of Unvested Restricted Stock Units | | |
| | | |
| | |
| | |
Number of Shares | | |
Weighted
Average Grant Date Fair Value | |
Outstanding (nonvested), December 31, 2021 | | |
| 351,831 | | |
$ | 9.63 | |
Granted | | |
| - | | |
| - | |
Forfeited | | |
| - | | |
| - | |
Outstanding (nonvested), March 31, 2022 | | |
| 351,831 | | |
$ | 9.63 | |
As
of March 31, 2022, there was $1.2 million of unrecognized compensation expense related to RSAs to be recognized over a weighted
average period of 0.37 years.
Restricted
Stock Units
As
part of the consideration in the Business Combination, RSUs with respect to 1,750,000 shares of Common Stock were granted to the
participants in Legacy Airspan’s MIP. For the RSUs granted to MIP Participants, the weighted average grant date fair value
was $9.75 per share. The RSUs granted in connection with the MIP vest one year after the date of the grant.
The
following table sets forth the activity for all RSUs:
| | |
Number of RSUs | | |
Weighted
Average Grant Date Fair Value | |
Outstanding (nonvested), December 31, 2021 | | |
| 2,962,884 | | |
$ | 8.60 | |
Granted | | |
| 743,670 | | |
| 3.72 | |
Forfeited | | |
| (88,000 | ) | |
| 6.94 | |
Outstanding (nonvested), March 31, 2022 | | |
| 3,618,554 | | |
$ | 7.64 | |
Because
the Company maintained a full valuation allowance on its U.S. deferred tax assets, it did not recognize any tax benefit related
to share-based compensation expense for the three months ended March 31, 2022 and 2021. As of March 31, 2022, there
was $16.0 million of unrecognized compensation expense related to RSUs to be recognized over a weighted average period of 1.58
years.
Net
loss per share is computed using the weighted average number of shares of Common Stock outstanding less the number of shares subject
to repurchase.
The
following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except
share data):
Schedule of basic and diluted net loss per share | |
| | | |
| | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Numerator: | |
| | | |
| | |
Net loss | |
$ | (29,738 | ) | |
| (13,549 | ) |
| |
| | | |
| | |
Denominator
- basic and diluted: | |
| | | |
| | |
Weighted average common shares outstanding | |
| 72,335,952 | | |
| 59,710,047 | |
| |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.41 | ) | |
| (0.23 | ) |
The
following table sets forth the amounts excluded from the computation of diluted net loss per share as of March 31, 2022 and
2021, because their effect was anti-dilutive.
Schedule of anti-dilutive net loss per share | |
| | | |
| | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Stock options outstanding | |
| 6,144,473 | | |
| 1,022,432 | |
Non-vested shares of restricted stock | |
| 3,970,385 | | |
| 72,989 | |
Warrants (a) | |
| - | | |
| - | |
Convertible notes (a) | |
| - | | |
| - | |
| (a) | The
Convertible Notes and warrants referred to in Notes 10 and 13 were also excluded on an as converted basis because their effect would
have been anti-dilutive. |
| 16. | RELATED
PARTY TRANSACTIONS |
As
disclosed in Note 8, as of March 31, 2022 and December 31, 2021, Legacy Airspan had a Subordinated Term Loan with a
related party. This related party has an indirect, non-controlling beneficial interest in
Fortress, which is the agent and principal lender under the Fortress Credit Agreement and the collateral agent and trustee
under the Fortress Convertible Note Agreement and the Convertible Notes. This related party also has an indirect, non-controlling
beneficial interest in each holder of Convertible Notes. The Company derived approximately $0.1 million in revenue from sales
of products and services to this related party for the three months ended March 31, 2022. The Company had outstanding receivables
amounting to $0.4 million from this related party as of December 31, 2021. There were no amounts receivable from this related
party as of March 31, 2022.
The
Company has an outstanding receivable from and payable to a related party, a stockholder, amounting to $0.5 million and $9.1 million,
respectively, as of March 31, 2022 and December 31, 2021, respectively.
In
addition, the Company has an outstanding accounts receivable from a separate related party, also a stockholder, amounting to $15.9
million and $11.5 million as of March 31, 2022 and December 31, 2021, respectively. The Company derived approximately
$7.3 million and $4.3 million in revenue from sales of products and services to this related party for the three months ended
March 31, 2022 and 2021, respectively. A senior executive at this customer is also a member of the Board.
The
Company derived revenues from sales of products and services to Dense Air Ltd. (“Dense Air”) amounting to $33 thousand
for the three months ended March 31 2021. There were no revenues derived from sales of products and services to Dense Air
for the three months ended March 31, 2022.
| 17. | EQUITY
METHOD INVESTMENT |
The
Company previously accounted for its investment in Dense Air, which prior to March 7, 2022, was a wholly-owned subsidiary
of the Company, as an equity method investment. Dense Air was historically funded by its sole lender through convertible debt
with various restrictions and requirements including a conversion option on substantially all of the ownership interest in Dense
Air. Dense Air was designed to acquire and hold specific assets and the fixed price conversion option was economically similar
to a call option on the assets of Dense Air. Therefore, the Company concluded consolidation was not required. The Company did
determine it had significant influence in the operations of Dense Air and therefore, applied the equity method of accounting.
Given Dense Air has operated at a loss since its inception, and the Company has not guaranteed the obligations of Dense Air or
otherwise committed to provide further financial support, equity method accounting was discontinued.
The
Company receives reimbursement of its expenses for providing certain management support functions to Dense Air, a related party,
which are not considered material. In addition, the Company is entitled to receive certain fees upon the successful acquisition
of spectrum rights by Dense Air, which are recorded as revenue when earned.
On
March 22, 2021, an investor acquired the sole lender to Dense Air’s rights and obligations under a convertible loan
agreement. Concurrently, the Company received a notice of conversion from the investor to convert the outstanding amount of the
loan into shares equating to 95% of the share capital of Dense Air. On March 7, 2022, the conversion was finalized. This
conversion did not have a significant effect on the Company’s condensed consolidated balance sheets, statements of operations
or cash flows.
The
investment had no carrying value as of December 31, 2021 and March 31, 2022.