<PAGE>
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 1, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________to__________.
COMMISSION FILE NUMBER 000-31031
AIRSPAN NETWORKS INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 75-2743995
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CAMBRIDGE HOUSE, OXFORD ROAD UB8 1UN
UXBRIDGE, MIDDLESEX ENGLAND (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
011 44 1895 467 100
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares outstanding of the registrant's common stock as of
October 31, 2000: 34,673,814
================================================================================
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AIRSPAN NETWORKS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 31, October 1,
1999 2000
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash and Cash equivalents $ 58,828 $128,506
Restricted Cash 4,068 2,917
Accounts Receivable, less allowance for
doubtful accounts of $1,130 in 1999 and
$1,485 at October 1, 2000 6,091 13,362
Unbilled Accounts receivable 1,581 605
Inventory 7,127 6,075
Prepaid expenses and other current assets 1,970 3,217
-------- --------
Total Current Assets 79,665 154,682
Property, plant and equipment, net 6,751 6,921
Intangible assets, net 1,804 1,315
Other non-current assets -- 348
-------- --------
Total Assets $ 88,220 $163,266
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,334 $ 5,844
Short term debt -- 1,203
Accrued taxes 874 779
Other accrued expenses 2,866 4,975
Current portion of capital lease obligations 53 48
Current portion of note payable
to DSC Telcom L.P. -- 4,112
Current portion of other long-term debt 1,743 790
-------- --------
Total Current Liabilities 10,870 17,751
-------- --------
NON CURRENT LIABILITIES
Long-term portion of note payable
to DSC Telcom L.P. 16,904 13,696
Other long-term debt 2,947 2,725
Accrued interest on long-term debt 253 267
Capital lease obligations 34 --
-------- --------
20,138 16,688
-------- --------
Stockholders' equity
Preferred Stock, $0.01 par value
81,000,000 shares authorized in 1999 and
Preferred stock $0.0001 par value 5,000,000
authorized in 2000.
Series A convertible preferred stock, $0.01
par value, 40,000,000 shares authorized and
issued in 1999 and zero in 2000 400 --
Series B convertible preferred stock, $0.01
par value, 18,571,429 shares authorized and
issued in 1999 and zero in 2000 185 --
Series C convertible preferred stock, $0.01
par value, 20,000,000 shares authorized and
issued in 1999 and zero in 2000 200 --
Common Stock, $0.0003 par value; 33,333,333
shares authorized and 1,321,720 issued in
1999 and 50,000,000 shares authorized and
34,659,518 issued in 2000 40 51
Note receivable-stockholder (130) (130)
Additional Paid in capital 121,562 213,970
Accumulated Deficit (65,045) (85,064)
-------- --------
Total Stockholders' Equity 57,212 128,827
-------- --------
Total Liabilities and Stockholders' Equity $ 88,220 $163,266
======== ========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
AIRSPAN NETWORKS INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands except for share and per share data)
Three months ended Three months ended Nine months ended Nine months ended
October 3, 1999 October 1, 2000 October 3, 1999 October 1, 2000
(unaudited) (unaudited) (unaudited) (unaudited)
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Revenue $ 3,509 $ 8,801 $ 6,904 $ 21,324
Cost of revenue (2,209) (5,546) (4,207) (13,545)
-------- ----------- -------- ----------
Gross Profit 1,300 3,255 2,697 7,779
-------- ----------- -------- ----------
Operating expenses:
Research and development 3,460 4,355 10,005 12,748
Sales and marketing 2,388 3,500 6,026 9,973
General and administration 1,900 2,330 5,482 6,678
Amortization of intangibles 619 108 1,857 489
-------- ----------- -------- ----------
Total operating expenses 8,367 10,293 23,370 29,888
-------- ----------- -------- ----------
Loss from operations (7,067) (7,038) (20,673) (22,109)
Interest expense (377) (407) (1.062) (1,279)
Interest and other income 334 1508 1,197 3,369
-------- ----------- -------- ----------
Loss before income taxes (7,110) (5,937) (20,538) (20,019)
Income taxes (28) 16 (68) -
Net loss $ (7,138) $ (5,921) $(20,606) $ (20,019)
======== =========== ======== ===========
Net loss per share-basic and diluted $ (7.49) $ (0.17) $ (25.09) $ (1.64)
Weighted average shares outstanding-
basic and diluted 953,301 34,457,325 821,293 12,225,677
Pro forma net loss per share-
basic and diluted $ (0.17) $ (0.67)
Pro forma weighted average shares
outstanding-basic and diluted 34,457,325 30,046,576
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
AIRSPAN NETWORKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine months Nine months
ended ended
October 3, October 1,
1999 2000
(unaudited) (unaudited)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,606) $ (20,019)
Depreciation and amortization 3,675 2,770
Stock compensation - 65
Accretion of interest on notes payable 852 917
Decrease/(increase) in receivables 1,227 (7,619)
Decrease/(increase) in inventories (2,376) 1,052
Increase in other current assets (250) (271)
Increase/(decrease) in accounts payable (488) 510
Increase/(decrease) in other accrued expenses (571) 2,029
Decrease in notes receivable 20 -
--------- ---------
Net cash used in operating activities (18,517) (20,566)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,687) (2,469)
Proceeds from the sale of property
and equipment - 18
--------- ---------
Net cash used in investing activities (3,687) (2,451)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 45 -
Net proceeds from issuance of preferred stock 3,820 5,447
Net proceeds from IPO - 86,092
Net proceeds from issuance of short-term debt - 1,320
Net proceeds from issuance of long-term debt 5,000 -
Payment of short term debt - (117)
Payment of long term debt including capital
lease obligations (278) (1,228)
Exercise of stock options 48 30
Restricted cash movement (2,050) 1,151
--------- ---------
Net cash provided by financing activities 6,585 92,695
--------- ---------
Increase/(decrease) in cash and cash
equivalents (15,619) 69,678
Cash and cash equivalents, beginning
of period 36,178 58,828
--------- ---------
Cash and cash equivalents, end of period $ 20,559 $ 128,506
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Issuance of preferred stock warrants in
connection with debt facilities $ 95 -
Interest paid 198 348
========= =========
The accompanying notes are an integral part of these financial statements
4
<PAGE>
Business
The Company is a global supplier of fixed wireless Digital Subscriber Line, DSL,
systems and telecomms access networks that enable communications service
providers to deliver integrated high speed data and voice services. The
Company's systems are based on Code Division Multiple Access, CDMA, technology
that can be deployed rapidly and cost effectively, providing an alternative to
traditional copper wire and fiber communications networks. The Company's
product portfolio includes software tools that assist operators plan and
optimize the use of radio spectrum, and a comprehensive network management
system. To facilitate the deployment and operation of its systems, the Company
also offers network installation, integration, training and support services.
The Company's main operations are based in Uxbridge, United Kingdom with the new
Corporate headquarter opening in November in Fort Lauderdale, Florida USA.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to form 10-Q and Article 10 Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. The interim operating results are not
necessarily indicative of operating results expected in subsequent periods or
for the year as a whole.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the company's initial public offering document on
Form S-1 (Reg. No. 333-34514) effective on July 19, 2000.
All notes to the financial statements are shown in thousands, except for share
data.
INVENTORY
Inventory consists of the following:
December 31, October 1,
1999 2000
------------ ----------
(unaudited)
Purchased parts and materials $4,226 $4,107
Work in progress - -
Finished goods and consumables 2,901 1,968
------ ------
$7,127 $6,075
====== ======
SHORT TERM DEBT
On July 19, 2000 the Company entered into a loan agreement with AFCO Finance to
borrow $1,320 at an interest rate of 7% per annum. The loan is repayable in 11
equal monthly instalments starting in August, 2000.
CURRENT PORTION OF LONG-TERM DEBT
The current portion of long-term debt consists of:
<TABLE>
<CAPTION>
December 31, October 1,
1999 2000
------------ -----------
(unaudited)
<S> <C> <C>
Promissory note payable to DSC, bearing interest at 7% $ - $4,112
Promissory note bearing interest at 9% 493 470
Subordinated promissory notes bearing interest at 6% 1,250 320
------------ -----------
$1,743 $4,902
============ ===========
</TABLE>
SEGMENTAL INFORMATION
As a developer and supplier of fixed wireless DSL systems and telecomms access
networks, the Company has one reportable segment. The revenue of this single
segment is comprised primarily of revenue from products and, to a lesser extent,
services. Predominantly all of the Company's revenue is generated from the
United Kingdom operations. Substantially all of the Company's assets, other than
most of the cash and certain intangibles which are held in the United States,
are located within the United Kingdom.
5
<PAGE>
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares of
common stock outstanding less the number of shares subject to repurchase. Shares
associated with stock options, Warrants and the convertible preferred stock are
not included in the calculation of diluted net loss per share as they are
antidilutive. During the quarter the preferred stock upon the closing of the
initial public offering converted to common stock. Pro forma net loss per share
data has been determined as if each share of convertible preferred stock had
converted to common stock at the time of the issuance.
The following table sets forth the computation of basic and diluted net loss per
share and pro forma basis and diluted net loss per share for the periods
indicated.
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
------------ ------------ ------------ -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Numerator
Net loss $ (7,138) $ (5,921) $ (20,606) $ (20,019)
============== ============== ============= =============
Denominator
Weighted average common
shares outstanding 1,279,690 34,658,714 1,204,781 12,458,315
Less: weighted average
shares of restricted stock (326,389) (201,389) (383,488) (232,639)
-------------- -------------- ------------- -------------
Denominator for basic and
diluted calculations 953,301 34,457,325 821,293 12,225,677
============== =============
Weighted average pro forma
conversion of convertible
preferred stock 0 17,820,900
-------------- -------------
Denominator for pro forma
basic and diluted
calculation 34,457,325 30,046,576
============== =============
Net loss per share
Basic and diluted $ (7.49) $ (0.17) $ (25.09) $ (1.64)
============== ============== ============= =============
Pro forma basic and diluted $ (0.17) $ (0.67)
============== =============
</TABLE>
IMPACT OF RECENTLY ISSUED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral with the
Effective Date of FASB Statement No. 133. This statement defers the effective
date of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, to fiscal years beginning after June 15, 2000, although early
adoption is permitted. In June 2000, the Financial Accounting Standards Board
issued SFAS No. 138, Accounting for Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement 133, which is effective
simultaneously with Statement 133. Statement 138 does not amend any
of the fundamental precepts of Statement 133.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments. It requires an entity to recognize all derivatives as either assets
or liabilities in the financial statements and measure those instruments at fair
value. Additionally, any fair value adjustments will affect either stockholder's
equity or net income, depending on whether the derivative instrument qualifies
as a hedge for accounting purposes and so, the nature of the hedging activity.
Airspan is currently evaluating the impact of this SFAS on its financial
reporting of results of operations. Management does not expect the adoption of
this SFAS to have a material effect on the Company's results of operations,
however, the effect on the Company's financial position depends on the fair
values of the Company's derivatives and related financial instruments at the
date of adoption.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTER ENDED OCTOBER 1, 2000 TO THE QUARTER ENDED
OCTOBER 3, 1999
Revenue
Revenue totalled $8.8 million for the quarter ended October 1, 2000. This
represented a 151% increase from the $3.5 million reported for the comparable
1999 quarter. Higher sales were driven by network deployments to customers in
Ireland, Poland and the United States. During the quarter, shipments were made
to 26 customers including nine new customers, which represented almost 30% of
revenue. Geographically, 55% of our revenues were derived from Europe, 23% from
Asia, 14% from U.S. based customers and 8% from the rest of the world.
Cost of Revenue
Cost of revenue increased 151% from $2.2 million during the quarter ended
October 3, 1999 to $5.5 million for the quarter ended October 1, 2000, resulting
from the increase in revenue. Gross profit as a percentage of revenue totalled
37% in the third quarter of 2000 and the corresponding quarter of 1999.
Research and Development Expenses
Research and development expenses increased 26% from $3.5 million during the
quarter ended October 3, 1999 to $4.4 million for the quarter ended October 1,
2000, due to increased headcount. Major expenses during the quarter ended
October 1, 2000 were on programs focused on new products and cost reductions.
Sales and Marketing Expenses
Sales and marketing expenses increased 47% from $2.4 million during the quarter
ended October 3, 1999 to $3.5 million for the quarter ended October 1, 2000,
reflecting a higher headcount, the expansion of our sales and marketing
activities and the impact of commissions based on higher sales.
General and Administrative Expenses
General and administrative expenses increased 23% from $1.9 million during
quarter ended October 3, 1999 to $2.3 million for the quarter ended October 1,
2000. The increase was due to a higher headcount to support our expanding
operations as well as the additional costs associated with being a public
company.
Amortization of Intangibles
Amortization of intangibles expense decreased 83% from $0.6 million during the
quarter ended October 3, 1999 to $0.1 million for the quarter ended October 1,
2000, reflecting the full write off of developed technology, purchased sales
contracts and patents in previous quarters
Interest and Other Income
Interest and other income increased 351% from $0.3 million for the quarter ended
October 3, 1999 to $1.5 million in the quarter ended October 1, 2000. The
increase was a result of greater interest income earned on higher cash deposits
with financial institutions from additional equity capital raised. Amounts from
interest income were partially offset by interest expense of $0.4 million for
the quarter ended October 1, 2000 and $0.4 million for the quarter ended October
3, 1999, predominantly on outstanding indebtedness owed to DSC related to the
purchase of the company's assets in January 1998.
Income Taxes
We did not record an income tax benefit for the tax losses generated in the U.K.
because we have experienced operating losses since inception. The tax benefit
recorded for the third quarter 2000 related to the overpayment of U.S. federal
tax. The tax provision for the third quarter 1999 relates to U.S. federal
income taxes currently payable primarily attributable to intercompany interest
income.
Net Loss
Net loss decreased $1.2 million or 17% from the third quarter 1999 to the third
quarter 2000. Increases in gross profit of $2.0 million, decrease in
amortization of intangibles of $0.5 million and an increase in interest and
other income of $1.2 million were partially offset by increases in research and
development, sales and marketing, general and administrative expenses of $0.9
million, $1.1 million and $0.4 million, respectively.
7
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED OCTOBER 1, 2000 TO THE NINE MONTHS ENDED
OCTOBER 3, 1999
Revenue
Revenue increased 209% from $6.9 million for the nine months ended October 3,
1999 to $21.3 million for the nine months ended October 1, 2000. Higher sales
were driven mainly by deployments to customers in Europe and in Asia. Our
increase in revenue was due to volume, rather than price increases.
Cost of Revenue
Cost of revenue increased 222% from $4.2 million during the nine months ended
October 3, 1999 to $13.5 million for the nine months ended October 1, 2000,
resulting from the increase in revenue. Gross profit as a percentage of revenue
decreased from 39% for the nine months ended October 3, 1999 to 36% for the nine
months ended October 1, 2000. The decrease in gross profit reflected a less
favourable product mix with a higher percentage of subscriber terminal units
shipped and lower average selling prices.
Research and Development Expenses
Research and development expenses increased 27% from $10.0 million during the
nine months ended October 3, 1999 to $12.7 million for the nine months ended
October 1, 2000, due to increased headcount and the cost of programs focused on
new products and cost reductions.
Sales and Marketing Expenses
Sales and marketing expenses increased 65% from $6.0 million during the nine
months ended October 3, 1999 to $10.0 million for the nine months ended October
1, 2000, reflecting a higher headcount, the expansion of our sales and marketing
activities and the impact of commissions based on higher sales.
General and Administrative Expenses
General and administrative expenses increased 22% from $5.5 million during the
nine months ended October 3, 1999 to $6.7 million for the nine months ended
October 1, 2000. The increase was due to a higher headcount to support our
expanding operations as well as the additional costs associated with being a
public company.
Amortization of Intangibles
Amortization of intangibles expense decreased 74% from $1.9 million during the
nine months ended October 3, 1999 to $0.5 million for the nine months ended
October 1, 2000, reflecting the full write off of developed technology,
purchased sales contracts and patents.
Interest and Other Income
Interest and other income increased 181% from $1.2 million for the nine months
ended October 3, 1999 to $3.4 million for the nine months ended October 1, 2000
and consisted predominantly of interest earned on cash deposits with financial
institutions. The increase in interest income was earned on higher cash balances
from additional equity capital. Amounts from interest income were partially
offset by interest expense of $1.1 million for the nine months ended October 3,
1999 and $1.3 million for the nine months ended October 1, 2000, predominantly
on outstanding indebtedness owed to DSC related to the purchase of the company's
assets in January 1998.
Income Taxes
We did not record an income tax benefit for the tax losses generated in the U.K.
because we have experienced operating losses since inception. The tax provision
for the nine months ended October 3, 1999 relates to U.S. federal income taxes
currently payable primarily attributable to intercompany interest income.
8
<PAGE>
Net Loss
Net loss decreased $0.6 million from the first nine months of 1999 to the first
nine months of 2000. Increases resulting from higher gross profits of $5.1
million, lower amortization of intangibles of 1.4 million and higher interest
and other income of $2.2 million were largely offset by increases in research
and development, sales and marketing, general and administrative expenses of
$2.7 million, $3.9 million and $1.2 million respectively.
Liquidity and sources of capital
As of October 1, 2000 we had cash and cash equivalents totaling $131.4 million,
including $2.9 million of restricted cash that is held as collateral for
performance guarantees on customer and supplier contracts and with landlords.
We do not have a line of credit or similar borrowing facility, nor do we have
any material capital commitments.
Since inception, we have financed our operations primarily through private sales
of convertible preferred stock, which totaled $117.3 million (net of transaction
expenses) and on July 25, 2000, we completed an initial public offering of
common stock. In conjunction with the closing of that offering, we issued
6,325,000 shares of common stock for approximately $86.1 million in cash (net of
underwriting discounts, commission and other expenses). The Company intends to
use the net proceeds of the offering for additional working capital and other
general corporate purposes.
At October 1, 2000 we had outstanding debts of $22.8 million. This is
predominantly made up of a promissory note payable to DSC Telecom L.P. for $18.1
million.
For the nine months ended October 1, 2000 we used $20.6 million cash in
operating activities compared with $18.5 million for the nine months ended
October 3, 1999. The cash used in operations is primarily a result of the
operating loss and changes in working capital.
The net cash used in investing activities in the nine months to October 1, 2000
and October 3, 1999 all related to capital equipment.
Our financing cash flows for the nine months ended October 1, 2000 were $92.7
million. The inflows primarily arose from $5.4 million of proceeds from the
issuance of preferred stock, $86.1 million of net proceeds from the initial
public offering and a $1.2 million reduction in restricted cash. The decrease in
restricted cash relates to the removal of a performance guarantee as work has
been completed on a customer contract.
The Company has no material commitments other than obligations under is long
term debt, operating and capital leases and the forward exchange contracts
mentioned below.
Item 3 Quantitative and Qualitative Disclosure of Market Risk
Interest rate risk
The Company's earnings are affected by changes in interest rates. As of December
31, 1999 and October 1, 2000 we had cash and cash equivalents of $62.9 million
and $131.4 million, respectively, (including restricted cash). Substantially all
of these amounts consisted of highly liquid investments with remaining
maturities at the date of purchase of less than 90 days. These investments are
exposed to interest rate risk and will decrease in value if market interest
rates increase. A hypothetical increase or decrease in market interest rates of
2 percent from October 1, 2000 rates would cause the fair market value of these
short-term investments to change by an insignificant amount. Due to the short
duration of these investments, a short term increase in interest rates would not
have a material effect on our financial condition or results of operations.
Declines in interest rates over time would, however, reduce our interest income,
however, management would likely take action to mitigate the impact if such a
decline occurred. Due to the uncertainty of the specific actions to mitigate
this that would be taken and their possible effects, the sensitivity analysis
does not take into account any such action.
Foreign currency exchange rate risk
For the nine months ended October 1, 2000 24.5% of our sales were denominated in
euros, 1.1% were denominated in Canadian dollars and the remaining 74.4% were
denominated in US dollars. Our total euro denominated sales for the nine months
ended October 1, 2000 were 5.4 million euros that were recorded at an average
exchange rate of $1US to 1.0464 euros. If the average exchange rate used had
been higher or lower by 10% it would have increased or decrease the euro
denominated sales value by $0.5 million. We expect the proportions of sales in
euros to fluctuate over time. The Company's sensitivity analysis for changes in
foreign currency exchange rates does not factor in changes in sales volumes.
In connection with sales contracts where our customer is to pay in a currency
other than U.S. dollars, we have engaged since May 2000 in currency hedging
contracts that lock in minimum exchange rates of such foreign currencies. We do
not enter into any currency hedging activities for speculative purposes. The
total amount of euro hedges outstanding at October 1, 2000 are $4.9 million at
an average rate of $1US to 1.0742 euros. The cost of these contracts will be
included under interest and other income in our financial statements. We will
continue to monitor our foreign currency exposures and may modify hedging
strategies as we deem prudent.
The Company's results are affected by foreign currency risk, predominantly
Swedish krona and pounds sterling. During the nine months to October 1, 2000 we
have paid costs in local currency of approximately 77 million Swedish krona at
an average rate of 1$US to 8.8691 Swedish krona and 16 million pounds sterling
at an average rate of 1$US to 0.6454 pounds sterling. If the average exchange
rates had been higher or lower by 10%, the Swedish krona denominated costs
would have increased or decreased by $0.8 million and the pounds sterling
denominated costs by $2.5 million. We expect the proportions of costs paid in
Swedish krona and pounds sterling to fluctuate over time.
In order to manage our pound sterling foreign currency risk, we have entered
into a forward exchange contract to purchase 24 million pounds sterling at an
average exchange rate of $1US to 0.6793 pounds sterling in sixteen equal amounts
from November 2000 to February 2002. If the future average exchange rates over
the life of the contract are higher or lower than the contracted rate by 10%,
our results would be impacted by $3.5 million. There were no such contracts
outstanding at December 31, 1999.
9
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Change in securities and use of proceeds
During the three months ended October 1, 2000 we granted stock options to
purchase an aggregate 659,500 shares of our common stock at an average exercise
price of $10.03 per share to employees under our 1998 stock option plan. During
the three months ended October 1, 2000 employees exercised options for 44,657
shares of common stock for aggregate consideration of $19,886. The issuance of
these resticted securities was deemed to be exempt from registration under the
act in reliance upon Section 4(2) of the Act or Rule 701 promulgalated under
Section 3 (b) of the Act.
On July 25, 2000, the Company completed an initial public offering of 6,325,000
shares of its Common stock $0.0003 par value per share (the "IPO"). The managing
underwriters in the IPO were Credit Suisse First Boston Corporation, Deutsche
Bank Securities Inc., Lehman Brothers Inc., and U.S. Bancorp Piper Jaffray Inc.
The shares of common stock sold in the IPO were registered under the Securities
Act of 1933, as amended on a Registration Statement on Form S-1 (Reg. No. 333-
34514) (the "REGISTRATION STATEMENT") that was declared effective by the
Commission on July 19, 2000. All 6,325,000 shares of Common Stock registered
under the Registration Statement, including shares covered by an overallotment
option, were sold at a price to the public of $15.00 per share. The IPO resulted
in gross proceeds of $94.9 million, of which $6.6 million was applied toward
commissions to the underwriters. Expenses related to the IPO were approximately
$2.2 million. After deducting the underwriters' commissions and expenses, the
Company received net proceeds of approximately $86.1 million. The Company
intends to use the net proceeds of the IPO primarily for additional working
capital and other general corporate purposes, including in management's
estimation continued investment in research and development of between $15
million and $25 million and sales and marketing expenditures of between $10
million and $20 million. The amounts and timing of these expenditures will vary
depending on a number of factors, including the amount of cash generated by the
Company's operations, competitive and technological developments and the rate of
growth, if any, of the Company's business.
While the Company has no specific plans for the use of any remaining proceeds
from the IPO, it may also use a portion of the net proceeds to acquire
businesses, products and technologies or to establish joint ventures that it
believes will complement its current or future business. However, the Company
has no specific plans, agreements or commitments to do so and is not currently
engaged in any negotiations for any acquisition or joint venture.
The Company may also use a portion of the net proceeds of the IPO to repay
existing indebtedness to DSC, a division of Alcatel. The debt is under a
promissory note of $18.1 million, consisting of $15.0 million in principal
amount plus accrued but unpaid interest at an annual rate of 7%.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Exhibit Index
Exhibit Number Description of document
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorised.
November 15, 2000
AIRSPAN NETWORKS INC.
By: /s/ JOSEPH J. CAFFERELLI
-------------------------------
Joseph J. Cafferelli
Senior Vice President and Chief Financial Officer
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