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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

OR

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Airspan Networks Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-39679   85-2642786
(State or other jurisdiction
of incorporation or organization)
  (Commission File Number)   (I.R.S. Employer
Identification Number)

 

777 Yamato Road, Suite 310, Boca Raton, Florida   33431
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (561) 893-8670

 

New Beginnings Acquisition Corp. 

800 1st Street, Unit 1

Miami Beach, Florida 33139

(Former name or former address, if changed since last report)

 

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

 

Title of Each Class:   Trading Symbol:   Name of Each Exchange on Which Registered:
Common stock, par value $0.0001 per share   MIMO   NYSE American, LLC
Warrants, exercisable for shares of common stock at an exercise price of $11.50 per share   MIMO WS   NYSE American, LLC
Warrants, exercisable for shares of common stock at an exercise price of $12.50 per share   MIMO WSA   NYSE American, LLC
Warrants, exercisable for shares of common stock at an exercise price of $15.00 per share   MIMO WSB   NYSE American, LLC
Warrants, exercisable for shares of common stock at an exercise price of $17.50 per share   MIMO WSC   NYSE American, LLC

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

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

 

As of November 5, 2021, 72,024,437 shares of the registrant’s common stock, par value $0.0001 per share, were issued and outstanding.

 

 

 

 

 

AIRSPAN NETWORKS HOLDINGS INC.

Quarterly Report on Form 10-Q

Table of Contents

 

PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
     
  Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 1
     
  Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 2
     
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 3
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 5
     
  Notes to Unaudited Condensed Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 47
     
Item 4. Controls and Procedures 48
   
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 50
     
Item 1A. Risk Factors 50
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50
     
Item 3. Defaults Upon Senior Securities 50
     
Item 4. Mine Safety Disclosures 50
     
Item 5. Other Information 50
     
Item 6. Exhibits 51
   
SIGNATURES 52

 

i

 

 

INTRODUCTORY NOTE

 

On August 13, 2021 (the “Closing”), New Beginnings Acquisition Corp., a Delaware corporation (“New Beginnings”), Artemis Merger Sub Corp., a Delaware corporation and wholly-owned direct subsidiary of New Beginnings (“Merger Sub”), and Airspan Networks Inc., a Delaware corporation (“Legacy Airspan”), consummated their previously announced business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of March 8, 2021 (the “Business Combination Agreement”).

 

Pursuant to the Business Combination Agreement, on the Closing Date, (i) New Beginnings changed its name to “Airspan Networks Holdings Inc.” (the “Company”) and (ii) shares of Legacy Airspan capital stock issued and outstanding immediately prior to the Closing (including shares of Legacy Airspan capital stock issued pursuant to the net exercise of warrants to purchase Legacy Airspan capital stock, but excluding shares of Legacy Airspan restricted stock that were not Legacy Airspan accelerated restricted stock) were automatically converted into and became the right to receive 59,726,486 shares of Common Stock and 9,000,000 of our Post-Combination Warrants (as defined below).

 

ii

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

AIRSPAN NETWORKS HOLDINGS INC.

UNAUDITED CONDENSED consolidated BALANCE SHEETS

(in thousands, except for share data)

 

           
   September 30,
2021
   December 31,
2020
 
ASSETS          
Current assets:          
Cash and cash equivalents  $85,058   $18,196 
Restricted cash   186    422 
Accounts receivable, net of allowance of $243 and $374 at September 30, 2021 and December 31, 2020, respectively   53,438    71,621 
Inventory   13,976    12,019 
Prepaid expenses and other current assets   11,738    7,602 
Total current assets   164,396    109,860 
Property, plant and equipment, net   6,900    4,833 
Goodwill   13,641    13,641 
Intangible assets, net   6,732    7,629 
Right- of- use assets, net   7,144    7,882 
Other non-current assets   3,831    3,837 
Total assets  $202,644   $147,682 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable  $24,700   $36,849 
Deferred revenue   5,045    7,521 
Other accrued expenses   28,137    22,538 
Subordinated debt   10,445    10,065 
Current portion of long-term debt   281    298 
Total current liabilities   68,608    77,271 
Long-term debt   -    2,087 
Subordinated term loan - related party   37,149    34,756 
Senior term loan   39,978    36,834 
Convertible debt   40,748    - 
Other long-term liabilities   22,230    17,147 
Total liabilities   208,713    168,095 
           
Commitments and contingencies (Note 13)   -    - 
           
Stockholders’ deficit:          
Common stock, $0.0001 par value; 250,000,000 shares authorized; 72,024,437 and 59,710,047 shares issued and outstanding at September 30, 2021 and December 31, 2020   7    6 
Additional paid-in capital   740,169    674,906 
Accumulated deficit   (746,245)   (695,325)
Total stockholders’ deficit   (6,069)   (20,413)
Total liabilities and stockholders’ deficit  $202,644   $147,682 

 

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

 

1

 

 

AIRSPAN NETWORKS HOLDINGS INC.

 UNAUDITED CONDENSED consolidated STATEMENTS OF OPERATIONS

 

                     
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2021   2020   2021   2020 
                 
Revenues:                    
Products and software licenses  $32,447   $25,227   $106,487   $60,520 
Maintenance, warranty and services   6,476    10,811    20,419    30,889 
Total revenues   38,923    36,038    126,906    91,409 
                     
Cost of revenues:                    
Products and software licenses   20,990    17,344    66,605    41,179 
Maintenance, warranty and services   825    1,349    3,021    3,446 
Total cost of revenues   21,815    18,693    69,626    44,625 
Gross profit   17,108    17,345    57,280    46,784 
                     
Operating expenses:                    
Research and development   17,529    13,239    47,427    38,952 
Sales and marketing   10,315    7,051    25,157    21,464 
General and administrative   19,347    4,043    28,247    11,990 
Amortization of intangibles   299    596    897    1,374 
Loss on sale of assets   -    -    -    22 
Total operating expenses   47,490    24,929    101,728    73,802 
                     
Loss from operations   (30,382)   (7,584)   (44,448)   (27,018)
                     
Interest expense, net   (3,630)   (1,480)   (8,580)   (4,676)
Gain on extinguishment of debt   -    -    2,096    - 
Other income (expense), net   7,516    (685)   636    (1,925)
                     
Loss before income taxes   (26,496)   (9,749)   (50,296)   (33,619)
                     
Income tax expense   (457)   (172)   (624)   (370)
                     
Net loss  $(26,953)  $(9,921)  $(50,920)  $(33,989)
                     
Loss per share - basic and diluted  $(0.41)  $(0.17)  $(0.82)  $(0.57)
Weighted average shares outstanding - basic and diluted   66,276,223    59,710,047    61,923,661    59,710,047 

 

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

 

2

 

 

AIRSPAN NETWORKS HOLDINGS INC.

 UNAUDITED CONDENSED consolidated STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

                                                                            
   September 30, 2021     
   Convertible Preferred Stock     
   Series B Shares   Series B-1 Shares   Series C Shares   Series C-1 Shares   Series D Shares   Series D-1 Shares   Series D-2 Shares   Series E Shares   Series E-1 Shares   Series F Shares   Series F-1 Shares   Series G Shares   Series H Shares   Total
Shares
   Total
Mezzanine
Equity
 
                                                             
Balance at December 31, 2020 (as previously reported)         -    72,123          -    416,667    1,080,993    325,203    370,000    615,231    393,511    352,076    46,325    740,987    168,288    4,581,404   $363,481 
Retrospective application of the recapitalization due to the Business Combination (Note 3)   -    (72,123)   -    (416,667)   (1,080,993)   (325,203)   (370,000)   (615,231)   (393,511)   (352,076)   (46,325)   (740,987)   (168,288)   (4,581,404)  $(363,481)
Balance at December 31, 2020, effect of Business Combination (Note 3)   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at March 31, 2021   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at June 30, 2021   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at September 30, 2021   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 

 

 

                                         
   September 30, 2021 
   Legacy Airspan Common Stock   Common Stock   Additional         
   Common
Shares
   Common B
Shares
   Par
Value
   Shares   Amount   Paid-In
Capital
   Accumulated
Deficit
   Total 
Balance at December 31, 2020 (as previously reported)   202,582    466,952   $-    -   $-   $311,431   $(695,325)  $(383,894)
Retrospective application of the recapitalization due to the Business Combination (Note 3)   (202,582)   (466,952)   -    59,710,047    6    363,475    -    363,481 
Balance at December 31, 2020, effect of Business Combination (Note 3)   -    -   $-    59,710,047   $6   $674,906    (695,325)   (20,413)
Net loss   -    -    -    -    -    -    (13,549)   (13,549)
Issuance of Series H preferred stock, net of issuance costs   -    -    -    -    -    653    -    653 
Share-based compensation expense   -    -    -    -    -    661    -    661 
Balance at March 31, 2021   -    -   $-    59,710,047   $6   $676,220   $(708,874)  $(32,648)
Net loss   -    -    -    -    -    -    (10,418)   (10,418)
Exercise of common stock options   -    -    -    14,277    -    69    -    69 
Share-based compensation expense   -    -    -    -    -    828    -    828 
Balance at June 30, 2021   -    -   $-    59,724,324   $6   $677,117   $(719,292)  $(42,169)
Net loss   -    -    -    -    -    -    (26,953)   (26,953)
Exercise of common stock options   -    -    -    2,162    -    10    -    10 
Extinguishment of pre-combination warrant liability in connection with the Reverse Recapitalization   -    -    -    -    -    10,284    -    10,284 
Business Combination and PIPE financing, net of redemptions and equity issuance costs of $26.2 million   -    -    -    12,297,951    1    52,097    -    52,098 
Share-based compensation expense   -    -    -    -    -    661    -    661 
Balance at September 30, 2021   -    -   $-    72,024,437   $7   $740,169   $(746,245)  $(6,069)

 

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

 

3

 

 

AIRSPAN NETWORKS HOLDINGS INC.

UNAUDITED CONDENSED consolidated STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(continued)

 

                                                                            
   September 30, 2020     
   Convertible Preferred Stock     
   Series B Shares   Series B-1 Shares   Series C Shares   Series C-1 Shares   Series D Shares   Series D-1 Shares   Series D-2 Shares   Series E Shares   Series E-1 Shares   Series F Shares   Series F-1 Shares   Series G Shares   Series H Shares   Total
Shares
   Total
Mezzanine
Equity
 
                                                             
Balance at December 31, 2019 (as previously reported)   72,123    -    416,667    -    1,450,993    325,203    -    615,231    393,511    352,076    46,325    -    -    3,672,129   $309,923 
Retrospective application of the recapitalization due to the Business Combination (Note 3)   (72,123)        (416,667)        (1,450,993)   (325,203)        (615,231)   (393,511)   (352,076)   (46,325)             (3,672,129)  $(309,923)
Balance at December 31, 2019, effect of Business Combination (Note 3)   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at March 31, 2020   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at June 30, 2020   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 
                                                                            
Balance at September 30, 2020   -    -    -    -    -    -    -    -    -    -    -    -    -    -   $- 

 

 

                                         
   September 30, 2020 
   Legacy Airspan Common Stock   Common Stock   Additional         
   Common
Shares
   Common B
Shares
   Par
Value
   Shares   Amount   Paid-In
Capital
   Accumulated
Deficit
   Total 
Balance at December 31, 2019 (as previously reported)   202,582    466,952   $-    -   $-   $308,788   $(669,682)  $(360,894)
Retrospective application of the recapitalization due to the Business Combination (Note 3)   (202,582)   (466,952)   -    59,710,047    6    363,475    -    363,481 
Balance at December 31, 2019, effect of Business Combination (Note 3)   -    -   $-    59,710,047   $6   $672,263    (669,682)   2,587 
Net loss   -    -    -    -    -    -    (13,015)   (13,015)
Share-based compensation expense   -    -    -    -    -    492    -    492 
Balance at March 31, 2020   -    -   $-    59,710,047   $6   $672,755   $(682,697)  $(9,936)
Net loss   -    -    -    -    -    -    (11,053)   (11,053)
Share-based compensation expense   -    -    -    -    -    495    -    495 
Balance at June 30, 2020   -    -   $-    59,710,047   $6   $673,250   $(693,750)  $(20,494)
Net loss   -    -    -    -    -    -    (9,921)   (9,921)
Share-based compensation expense   -    -    -    -    -    495    -    495 
Balance at September 30, 2020   -    -   $-    59,710,047   $6   $673,745   $(703,671)   $(29,920)

 

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

 

4

 

 

AIRSPAN NETWORKS HOLDINGS INC.

UNAUDITED CONDENSED consolidated STATEMENTS OF CASH FLOWS

(continued)

  

           
  

Nine Months Ended

September 30,

 
   2021   2020 
         
Cash flows from operating activities:          
Net loss  $(50,920)  $(33,989)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   3,117    3,624 
Foreign exchange (gain) loss on long-term debt   (8)   12 
Bad debt expense   182    - 
Gain on extinguishment of debt   (2,096)   - 
Change in fair value of warrants and derivatives   (7,045)   1,756 
Share-based compensation   2,150    1,482 
Total adjustments   (3,700)   6,874 
Changes in operating assets and liabilities:          
Decrease in accounts receivable   18,001    7,480 
(Increase) decrease in inventory   (1,957)   4,679 
(Increase) decrease in prepaid expenses and other current assets   (452)   836 
Decrease in other operating assets   6    86 
(Decrease) in accounts payable   (15,799)   (6,238)
(Decrease) increase in deferred revenue   (2,476)   568 
Increase in other accrued expenses   5,599    483 
Increase in other long-term liabilities   468    1,086 
Increase in accrued interest on long-term debt   5,917    2,677 
Net cash used in operating activities   (45,313)   (15,458)
           
Cash flows from investing activities:          
Purchase of property, plant and equipment   (4,287)   (1,159)
Net cash used in investing activities   (4,287)   (1,159)
           
Cash flows from financing activities:          
Repayments under line of credit, net   -    (237)
Borrowings under other long-term debt   -    2,073 
Proceeds from the Business Combination, issuance of convertible debt and PIPE financing, net of issuance costs paid   115,501    - 
Proceeds from the exercise of stock options   78    - 
Proceeds from the sale of Series G stock, net   -    21,913 
Proceeds from the sale of Series H stock, net   505    - 
Proceeds from the issuance of Series H warrants   142    - 
Net cash provided by financing activities   116,226    23,749 
           
Net increase in cash, cash equivalents and restricted cash   66,626    7,132 
           
Cash, cash equivalents and restricted cash, beginning of year   18,618    3,013 
           
Cash, cash equivalents and restricted cash, end of period  $85,244   $10,145 

 

5

 

 

AIRSPAN NETWORKS HOLDINGS INC.

UNAUDITED CONDENSED consolidated STATEMENTS OF CASH FLOWS

(CONTINUED)

 

  

Nine Months Ended

September 30,

 
   2021   2020 
         
Supplemental disclosures of cash flow information          
Cash paid for interest  $8,045   $4,623 
Cash paid for income taxes  $552   $394 
           
Supplemental disclosure of non-cash financing activities:          
Reclassification of redeemable convertible preferred stock warrants to common stock  $10,284   $- 
Non-cash net liabilities assumed from business combination  $38   $- 

 

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

 

6

 

 

AIRSPAN NETWORKS HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED Consolidated FINANCIAL STATEMENTS

 

1.BUSINESS AND BASIS OF PRESENTATION

 

Business

 

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 (“Merger Sub”) and wholly-owned direct subsidiary of the Company, and Airspan Networks Inc., a Delaware corporation (“Legacy Airspan”) (See Note 3). 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 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 (“U.K.”); 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.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying condensed 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 equity holders’ 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, 2020, and Legacy Airspan’s financial statements as of and for the year ended December 31, 2020, included in the Company’s Form S-4 registration statement (File No. 333-256137) which is available on EDGAR.

 

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.

 

7

 

 

The Company had $164.4 million of current assets and $68.6 million of current liabilities at September 30, 2021. During the nine months ended September 30, 2021, the Company used $45.3 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 2021 and through the first half of 2022. Cash on hand and borrowing capacity under the Fortress Credit Agreement (see Note 9) may not allow the Company to reasonably expect to meet its forecasted cash requirements.

 

Going concern

 

The accompanying condensed consolidated financial statements have been prepared and are presented assuming the Company’s ability to continue as a going concern. As discussed in Notes 9 and 10 to the financial statements, the Company’s Convertible Notes and senior term loans require certain prospective financial covenants to be met. The Company’s business plan for 2021 and first half of 2022 contemplates increased revenue and reduced operating losses to achieve satisfaction of the financial covenants. Given the continued uncertainty in the global markets, in the event that the Company was unable to achieve these prospective covenants, the Company’s senior term loan (see Note 9) and the subordinated loan (see Note 8) could become due prior to the maturity date. As of September 30, 2021, the Company was not in compliance with the respective covenants of both the Convertible Notes and senior term loans; however, the Company was granted a waiver from compliance for these covenants as of September 30, 2021 and prospectively for December 31, 2021.

 

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 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 has 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 2021 and 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.   

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of estimates

 

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.

 

8

 

 

Cash and cash equivalents and restricted cash

 

The Company considers all highly liquid investments with an original maturity, or remaining maturity when acquired, of three months or less to be cash equivalents. Cash and cash equivalents are all maintained in bank accounts.

 

          
   September 30, 
   2021   2020 
Cash and cash equivalents  $85,058   $10,007 
Restricted cash   186    138 
Total cash, cash equivalents and restricted cash  85,244   $10,145 

 

Restricted cash consists of cash on deposit and cash pledged as collateral to secure the guarantees described in Note 9. The cash on deposit balance reflects the remaining balance available of the senior term loan (see Note 9) that is solely for the purpose of financing the manufacture of products for a specific customer’s network. Restricted cash balances were as follows (in thousands):

 

          
  

September 30,

2021

  

December 31,

2020

 
Customer and supplier guarantees  $176   $298 
Landlord guarantees   10    124 
Total  $186   $422 

 

Accounts receivable

 

Accounts receivable represent receivables from customers in the ordinary course of business. These are recorded at the invoiced amount and do not bear interest. Receivables are recorded net of the allowance for doubtful accounts in the accompanying condensed consolidated balance sheets. The Company evaluates the collectability of its accounts receivable based on a combination of factors, such as historical experience, credit quality, country risk, current level of business, age of the accounts receivable and current economic conditions. The Company regularly analyzes its customer accounts overdue more than 90 days and when it becomes aware of a specific customer’s inability to meet its financial obligations, the Company records a specific allowance to reduce the related receivable to the amount it reasonably believes to be collectible. When collection efforts cease or collection is considered remote, the account and related allowance are written off.

 

Inventory

 

Inventory is stated at the lower of cost or net realizable value under the average cost method. Cost includes all costs incurred in bringing each product to its present location and condition. We record inventory write-downs to net realizable value through an allowance for obsolete and slow-moving items based on inventory turnover trends and historical experience.

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost, less accumulated depreciation. The costs of additions and betterments that substantially extend the useful life of an asset are capitalized and the expenditures for ordinary repairs and maintenance are expensed in the period incurred as part of general and administrative expenses in the consolidated statements of operations. Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, based on prices prevailing at the date of acquisition of each asset evenly over its expected useful life, as follows:

 

  Plant, machinery and equipment — over 2 to 5 years

 

  Furniture and fixtures — over 4 to 5 years

 

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

 

9

 

 

Goodwill

 

Goodwill is the result of a business combination that occurred in 2018. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible assets and other intangible assets acquired. Goodwill is not amortized, rather, an impairment test is conducted on an annual basis, or more frequently if indicators of impairment are present, which are determined through a qualitative assessment. A qualitative assessment includes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. If not, we compare the fair value with its carrying amount. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. The Company’s annual assessment date is December 31.

 

Based on the results of the assessments performed, no indicators of impairment were noted. Accordingly, no further impairment testing was completed and no impairment charges related to goodwill were recognized during all periods presented in the condensed consolidated financial statements.

 

Intangible assets, net

 

The Company’s intangible assets are primarily the result of business combinations and include acquired developed technology, customer relationships, trademarks and non-compete agreements. These are amortized utilizing a straight line method over their estimated useful lives. When establishing useful lives, the Company considers the period and the pattern in which the economic benefits of the intangible asset are consumed or otherwise used; or, if that pattern cannot be reliably determined, using a straight-line amortization method over a period that may be shorter than the ultimate life of such intangible asset. There is no residual value associated with the Company’s finite-lived intangible assets.

 

The Company reviews for impairment indicators of finite-lived intangibles and other long-lived assets as described below in “Impairment of long-lived assets.”

 

Impairment of long-lived assets

 

The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. This review consists of a comparison of the carrying value of the asset with the asset’s expected future undiscounted cash flows. Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions and projections. If the expected undiscounted future cash flows exceed the carrying value of the asset, no impairment is recognized. If the carrying value of the asset exceeds the expected undiscounted future cash flows, impairment exists and is determined by the excess of the carrying value over the fair value of the asset. Any impairment provisions recognized are permanent and may not be restored in the future. No impairments were recorded during the three and nine months ended September 30, 2021 and 2020.  

 

Other non-current assets

 

Other non-current assets represent the value of funded employee severance benefit accounts and deposits issued to landlords. Eighteen employees are entitled to one month of the employee’s current salary, multiplied by the number of years of employment. The Company accrues a liability for this obligation and funds an employee severance benefit account monthly. The deposited funds include earnings accumulated up to the balance sheet date. The deposited funds may be withdrawn by the employee only upon the fulfillment of the obligation pursuant to labor law or agreements. The value of these funds is recorded in other non-current assets and the liability is recorded in other long-term liabilities in the Company’s condensed consolidated balance sheets.

 

Right-of-use assets and Lease liabilities

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” in 2019. This new standard establishes a right-of-use (“ROU”) model that requires the Company to recognize ROU assets and lease liabilities on the balance sheet for all leases with a term longer than 12 months at commencement of the lease. Lease payments are recognized in the condensed consolidated statements of operations on a straight-line basis over the lease term.

 

10

 

 

Convertible Notes

 

Concurrent with the Business Combination, the Company issued convertible notes. Refer to Notes 3 and 10 for further discussion on the convertible notes. The convertible notes are accounted as a liability under the traditional convertible debt model and measured at amortized cost under Accounting Standard Codification (“ASC”) 470-20.

 

The Company accounts for the embedded derivatives at fair value under ASC 815, Derivatives and Hedging (“ASC 815”). Under ASC 815, an embedded feature in a debt instrument that meets the definition of a derivative is fair valued at issuance and remeasured at each reporting period with changes in fair value recognized in earnings.

 

The Company evaluated the guidance in ASC 815 and concluded the conversion option is not considered indexed to the Company’s own stock. As a result, the redemption feature and conversion option were bifurcated from the Convertible Notes and are separately measured at fair value at each reporting period within other long-term liabilities in the Condensed Consolidated Balance Sheets with changes in their respective fair values recognized in other income (expense), net within the Condensed Consolidated Statements of Operations.

 

Common Stock Warrants and Post-Combination Warrants

 

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”) in connection with NBA’s initial public offering. The Common Stock Warrants entitle each holder to purchase one share of the Company’s common stock (the “Common Stock”) at an exercise price of at $11.50 per share. As of September 30, 2021, 12,045,000  Common Stock Warrants are outstanding.

 

At Closing of the Business Combination, the Company issued Post-Combination Warrants (as defined below) exercisable for 9,000,000 shares of Company Common Stock. The Post-Combination Warrants include: (i) 3,000,000 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”); (ii) 3,000,000 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 (iii) 3,000,000 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”). As of September 30, 2021, 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, as further described in Note 14, at the exercise prices described above.

 

The Company evaluated the Common Stock Warrants and Post-Combination Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity (“ASC 815-40”) and concluded they do not meet the criteria to be classified in stockholders’ equity. Since the Common Stock Warrants and Post-Combination Warrants meet the definition of a derivative under ASC 815-40, the Company records these warrants as liabilities on the Condensed Consolidated Balance Sheets within other long-term liabilities and measures these warrants at fair value at each reporting period date, with changes in their respective fair values recognized in other income (expense), net within the Condensed Consolidated Statements of Operations.

 

Revenue Recognition

 

We derive the majority of our revenue from sales of our networking products and software licenses, with the remaining revenue generated from service fees relating to maintenance contracts, professional services and training for our products. We sell our products and services to end customers, distributors and resellers. Products and services may be sold separately or in bundled packages.

 

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of our contracts have multiple distinct performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and the customer can benefit from these individual goods or services either on their own or together with other resources that are readily available to the customer. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling prices are determined based on the prices at which we separately sell these products. For items that are not sold separately, we estimate the stand-alone selling prices using either an expected cost-plus margin or the adjusted market assessment approach depending on the nature of the specific performance obligation.

 

For all of the Company’s product sales, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment of the product. For product sales, the Company generally does not grant return privileges, except for defective products during the warranty period. Sales taxes collected from customers are excluded from revenues.

 

11

 

 

Revenue from non-recurring engineering is recognized at a point in time or over-time depending on if the customer controls the asset being created or enhanced. For new product design or software development services, the customer does not control the asset being created, the customer is not simultaneously receiving or consuming the benefits from the work performed and the work performed has alternative use to the Company. Therefore, revenue related to these projects is recognized at a point in time which is when the specified developed technology has been delivered and accepted by the customer.

 

Revenue from professional service contracts primarily relates to training and other consulting arrangements performed by the Company for its customers. Revenues from professional services contracts provided on a time and materials basis are recognized when the Company has the right to invoice under the practical expedient as amounts correspond directly with the value of the services rendered to date.

 

Revenue from product maintenance contracts is recognized over time as the Company’s performance obligations are satisfied. This is typically the contractual service period, which is generally one year. Maintenance and support services are a distinct performance obligation that includes the stand-ready obligation to provide telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or extended hardware warranty, which is considered a service type warranty.

 

Revenue from software licenses is primarily related to the sale of perpetual licenses to customers. The software delivered to the customer has stand-alone functionality and the customer can use the intellectual property as it exists at any time. Therefore, the Company recognizes revenue when the software license is delivered to the customer. There are no further performance obligations once the software license is delivered to the customer.

 

Payment terms to customers generally range from prepayment to 120 days from invoice, which are considered to be standard payment terms. The Company assesses its ability to collect from its customers based primarily on the creditworthiness and past payment history of the customer. The Company has elected to apply the practical expedient that allows an entity to not adjust the promised amount of consideration in customer contracts for the effect of a significant financing component when the period between the transfer of product and services and payment of the related consideration is less than one year. The estimated cost of any post-sale obligations, including basic product warranties, is accrued at the time revenue is recognized based on a number of factors, which include historical experience and known conditions that may impact future warranty costs.

 

The Company accounts for shipping and handling activities as a fulfilment cost rather than an additional promised service. Therefore, revenue related to shipping and handling activities is included in product revenues. Shipping and handling costs are accrued and recorded as cost of revenue when the related revenue is recognized. Billings to customers for reimbursement of out-of-pocket expenses, including travel, lodging and meals, are recorded as revenue, and the associated costs incurred by the Company for those items are recorded as cost of revenue. Revenue related to the reimbursement of out-of-pocket costs are accounted for as variable consideration.

 

Contract Balances

 

A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must perform additional services in order to receive consideration). Amounts are recorded as receivables when our right to consideration is unconditional. When consideration is received, or we have an unconditional right to consideration in advance of delivery of goods or services, a contract liability is recorded. The transaction price can include non-refundable upfront fees, which are allocated to the identifiable performance obligations.

 

Contract assets are included within accounts receivables and contract liabilities are included in deferred revenue in our condensed consolidated balance sheets.

 

Costs to Obtain or Fulfill a Contract

 

The Company capitalizes commission expenses paid to internal sales personnel and sales agent commissions that are incremental to obtaining customer contracts, for which the related revenue is recognized over a future period. These costs are incurred on initial sales of product, maintenance and professional services and maintenance and support contract renewals. The Company defers these costs and amortizes them over the period of benefit, which the Company generally considers to be the contract term or length of the longest delivery period as contract capitalization costs in the condensed consolidated balance sheets. Commissions paid relating to contract renewals are deferred and amortized on a straight-line basis over the related renewal period as commissions paid on renewals are commensurate with commissions paid on initial sales transactions. Costs to obtain or fulfil contracts were not significant for the three months ended September 30, 2021 and 2020. Costs to obtain a contract for development and engineering service contracts are expensed as incurred in accordance with the practical expedient as the contractual period of these contracts are generally one year or less.

 

12

 

 

Warranty Liabilities

 

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

 

Foreign currency

 

The U.S. dollar is the functional currency of all of the Company’s foreign subsidiaries. Foreign currency denominated monetary assets and liabilities of subsidiaries for which the U.S. dollar is the functional currency are remeasured based on exchange rates at the end of the period. Non-monetary assets and liabilities of these operations are remeasured at historical rates in effect when the asset was recognized or the liability was incurred. Revenues and expenses for foreign entities transacted in local currency are remeasured at average exchange rates in effect during each period. The resulting remeasurement gains and losses are recognized within other income (expense), net on the Company’s condensed consolidated statements of operations.

 

The Company recorded foreign currency losses of $17 thousand and $2.4 million for the three and nine months ended September 30, 2021, respectively, and foreign currency gains of $0.1 million for both the three and nine months ended September 30, 2020, which are included in other income (expense), net.

 

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 72.6% and 68.2% of product sales were to non-U.S. customers for the three months ended September 30, 2021 and 2020, respectively and approximately 70.8% and 68.1% of product sales were to non-U.S. customers for the nine months ended September 30, 2021 and 2020, respectively. Three customers accounted for $34.7 million or 64.9% of the net accounts receivable balance at September 30, 2021 and two customers accounted for $52.6 million or 73% of the net accounts receivable balance at December 31, 2020. 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 3 customers accounted for 60.4% and 63.0% of revenue for the three months ended September 30, 2021 and 2020, respectively, and 59.6% and 64.2% of revenue for the nine months ended September 30, 2021 and 2020, respectively. For the three and nine months ended September 30, 2021, the Company had two customers whose revenue was greater than 10% of the three and nine-month period’s total revenue. For the three and nine months ended September 30, 2020, the Company had three customers whose revenue was greater than 10% of the three and nine-month period’s total revenue.

 

The Company received 97.6% and 99.1% of goods for resale from five suppliers in the three months ended September 30, 2021 and 2020, respectively. The Company received 98.3% and 97.8% of goods for resale from five suppliers in the nine months ended September 30, 2021 and 2020, 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.

 

13

 

 

Share-based compensation

 

The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the condensed consolidated statements of operations over the requisite service periods. Share-based compensation expense recognized in the condensed consolidated statements of operations includes compensation expense for share-based awards granted based on the estimated grant date fair value. Compensation expense for all share-based awards is recognized using the straight-line single-option method. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense has been reduced to account for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. (See Note 15).

 

Segment reporting

 

The Company operates as a single segment, the development and supply of broadband wireless products and technologies. This is based on the objectives of the business and how our chief operating decision maker, the President and Chief Executive Officer, monitors operating performance and allocates resources.

 

Income taxes

 

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances related to deferred tax assets are recorded based on the “more likely than not” criteria of ASC 740.

 

ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authorities. The Company does not have any other material uncertain tax positions.

 

The Company recognizes accrued interest related to unrecognized tax benefits, if any, in interest expense and penalties in operating expenses. As of September 30, 2021 and December 31, 2020, the Company did not have any amounts accrued for interest and penalties or recorded for uncertain tax positions.

 

Other taxes

 

Taxes on the sale of products and services to U.S. customers are collected by the Company as an agent and recorded as a liability until remitted to the respective taxing authority. For sales in applicable countries outside the U.S., the Company is subject to value added tax (VAT). These taxes have been presented on a net basis in the condensed consolidated financial statements.  

 

Fair value measurements

 

We carry certain assets and liabilities at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants on the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows:

 

  Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

  Level 2 Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and

 

  Level 3 Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability.

 

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of assets and liabilities being measured within the fair value hierarchy. (See Note 12).

 

14

 

 

Earnings (loss) per share

 

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for each period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares and common share equivalents outstanding for each period. Diluted earnings (loss) per share reflects the potential dilution that could occur if outstanding stock options and warrants at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method. The potential issuance of common stock upon conversion of the Convertible Notes is evaluated under the if-converted method. Potential common shares are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss.

 

Recent Accounting Pronouncements

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-04 (amended by ASU 2019-10), “Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment.” which simplifies the test for goodwill impairment by removing the second step of the test. There is a one-step qualitative test, and this ASU does not amend the optional qualitative assessment of goodwill impairment. The new standard was adopted by the Company on January 1, 2021, and it did not have a material impact on the Company’s condensed consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” which requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customers in a software licensing arrangement. The new standard was adopted by the Company on January 1, 2021, and it did not have a material impact on the Company’s condensed consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, “Income taxes (Topic 740): Simplifying the Accounting for Income Taxes.” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifies and amends the existing guidance. The new standard was adopted by the Company on January 1, 2021, and it did not have a material impact on the Company’s condensed consolidated financial statements.

 

In August 2020, the FASB issued ASU 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 will be adopted by the Company on January 1, 2022. The new standard is not expected to have a material impact on the Company’s condensed consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, “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 will be adopted by the Company on January 1, 2022. The new standard is not expected to 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 may 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.

 

15

 

 

 

 

 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 of shares of Common Stock (the “PIPE” or “PIPE Financing”) 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 and 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 and 545,000 Private Placement 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 the 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 provides for 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 to be 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.

 

16

 

 

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 will comprise 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 will comprise 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 sheet as of September 30, 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.

 

Each Convertible Note, together with all accrued but unpaid interest, are 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 Note 10).

 

Summary of Net Proceeds

 

The following table summarizes the elements of the net proceeds from the Business Combination as of September 30, 2021:

 

     
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 
      
Non-cash net liabilities acquired from New Beginnings   (38,216)
      
Add: Asset prepayments made at Closing   3,684,000 
Less: Fair value of Common Stock Warrants   (13,176,450)
Less: Fair value of Post-Combination Warrants   (1,980,000)
Less: Fair value of Convertible Notes issued   (48,273,641)
Less: Underwriting fees and other issuance costs paid at Closing   (23,353,127)
Less: Other Business Combination-related costs paid prior to September 30, 2021   (3,618,792)
      
Additional Paid-in-Capital from Business Combination, net of issuance costs paid  $52,097,203 
      
Less: Non-cash net liabilities assumed from New Beginnings   38,216 
Less: Non-cash net assets assumed from New Beginnings   (3,684,000)
Add: Non-cash fair value of Common Stock Warrants   13,176,450 
Add: Non-cash fair value of Post-Combination Warrants   1,980,000 
Add: Non-cash fair value of Convertible Notes issued   48,273,641 
Add: Other issuance costs included in accounts payable and accrued liabilities   3,618,792 
      
Cash proceeds from the Business Combination  $115,500,302 

 

17

 

 

Summary of Shares Issued

 

The following table summarizes the number of shares of Common Stock outstanding immediately following the consummation of the Business Combination:

 

     
New Beginnings shares outstanding prior to the Business Combination   14,795,000 
Less: redemption of New Beginnings shares   (9,997,049)
Shares issued pursuant to the PIPE   7,500,000 
New Beginnings and PIPE shares prior to the Business Combination   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 common restricted stock   339,134 
Conversion of Legacy Airspan Class B common stock   1,340,611 
Conversion of Legacy Airspan Class B restricted 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 2021 Plan are not issued shares and are not included in the table above.

 

4.REVENUE RECOGNITION

 

The following is a summary of revenue by category (in thousands):

 

                    
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2021   2020   2021   2020 
                 
Products sales  $30,983   $24,617   $103,495   $58,509 
Non-recurring engineering (“NRE”)   3,569    4,978    10,465    13,630 
Product maintenance contracts   1,415    3,014    4,667    8,811 
Professional service contracts   1,492    2,822    5,287    8,451 
Software licenses   1,023    511    2,137    1,460 
Other   441    96    855    548 
Total revenue  $38,923   $36,038   $126,906   $91,409 

 

Revenue recognized at a point in time for NRE services amounted   to $1.4 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively, and $4.9 million and $7.7 million for the nine months ended September 30, 2021 and 2020, respectively. 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 $2.2 million and $1.9 million for the three months ended September 30, 2021 and 2020, respectively, and $5.6 million and $5.9 million for the nine months ended September 30, 2021 and 2020, respectively. The Company is allowed to bill for services performed under the contract in the event the contract is terminated.

 

18

 

 

The opening and closing balances of our contract asset and liability balances from contracts with customers as of September 30, 2021 and December 31, 2020 were as follows:

 

          
   Contracts
Assets
   Contracts
Liabilities
 
         
Balance as of December 31, 2020  $5,361   $7,521 
Balance as of September 30, 2021   11,522    5,045 
Change  $6,161   $(2,476)

  

Revenues for the three and nine months ended September 30, 2021 and 2020, include the following:

 

                
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2021   2020   2021   2020 
                 
Amounts included in the beginning of year contract liability balance  $626   $541   $5,053   $2,355 

 

 

Warranty Liabilities

 

Information regarding the changes in the Company’s product warranty liabilities for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

 

                    
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2021   2020   2021   2020 
Balance, beginning of period  $1,099   $967   $1,019   $981 
Accruals   236    16    496    197 
Settlements   (139)   (51)   (319)   (246)
Balance, end of period  $1,196   $932   $1,196   $932 

 

 

5.GOODWILL AND INTANGIBLE ASSETS, NET

 

The Company had goodwill of $13.6 million as of September 30, 2021 and December 31, 2020 resulting from a prior acquisition.

 

Intangible assets, net consists of the following (in thousands):

 

                  
   Weighted  September 30, 2021 
   Average
Useful Life
(in years)
  Gross Carrying
Amount
   Accumulated Amortization   Net Carrying Amount 
                
Internally developed technology  10  $7,810   $(2,213)  $5,597 
Customer relationships  6   2,130    (1,005)   1,125 
Trademarks  2   720    (720)   - 
Non-compete  3   180    (170)   10 
Total acquired intangible assets     $10,840   $(4,108)  $6,732 

  

19

 

 

   Weighted  December 31, 2020 
   Average
Useful Life
(in years)
  Gross Carrying
Amount
   Accumulated Amortization   Net Carrying Amount 
                
Internally developed technology  10  $7,810   $(1,627)  $6,183 
Customer relationships  6   2,130    (739)   1,391 
Trademarks  2   720    (720)   - 
Non-compete  3   180    (125)   55 
Total acquired intangible assets     $10,840   $(3,211)  $7,629 

 

Amortization expense related to the Company’s intangible assets amounted to $0.3 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively, and $0.9 million and $1.4 million for the nine months ended September 30, 2021 and 2020, respectively.

 

Estimated amortization expense for the remainder of 2021 and thereafter related to the Company’s intangible assets is as follows (in thousands):

 

     
2021  $294 
2022   1,136 
2023   1,136 
2024   1,107 
2025   781 
Thereafter   2,278 
 Total  $6,732 

 

 

6.OTHER ACCRUED EXPENSES 

 

Other accrued expenses consist of the following (in thousands):

 

          
   September 30,
2021
   December 31,
2020
 
Payroll and related benefits and taxes  $9,292   $6,812 
Royalties   2,347    3,401 
Agent and sales commissions   3,889    2,501 
Right-of-use lease liability, current portion   2,853    2,671 
Tax liabilities   806    1,967 
Product warranty liabilities   1,196    1,019 
Product marketing   1,022    869 
Manufacturing subcontractor costs   3,307    1,243 
Legal and professional services   2,051    221 
Other   1,374    1,834 
Other accrued expenses  $28,137   $22,538 

 

7.SUBORDINATED DEBT 

 

On August 6, 2015, Legacy Airspan issued Golden Wayford Limited a $10.0 million subordinated Convertible Note Promissory Note (the “Golden Wayford Note”) pursuant to the subordinated Convertible Purchase Agreement dated such date. 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.

 

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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.

 

On December 30, 2020, Pacific Western Bank (“PWB”) and Ally Bank (“Ally”) 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 pursuant to an assignment agreement (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 DBFIP ANI LLC (“Fortress”) became the successor agent (as defined in the Agent Resignation Agreement), replacing PWB in such capacity under the PWB Facility.

 

The Golden Wayford Note was subordinate to the PWB Facility and, after giving effect to the Assignment Agreement, the Resignation Agreement and a Reaffirmation and Omnibus Amendment, is now subordinate to the obligations under Legacy Airspan’s Assignment Agreement, Resignation and Assignment Agreement and Credit Agreement (the “Fortress Credit Agreement”) with DBFIP ANI LLC (“Fortress”) (see Note 8). 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 $1.4 million and $1.1 million of accrued interest as of September 30, 2021 and December 31, 2020, 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 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 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 8). The term loan was subordinate to the PWB Facility and on December 30, 2020, the interests of PWB and Ally in the PWB Facility were assigned to new lenders pursuant to the Assignment Agreement and PWB entered into 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.

 

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. 

 

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The principal and accrued interest may be repaid early without penalty.

 

The Company had a subordinated term loan outstanding of $30.0 million, plus $7.1 million and $4.8 million of accrued interest as of September 30, 2021 and December 31, 2020, respectively.

 

9.SENIOR TERM LOAN

 

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 the Assignment Agreement, the Resignation and Assignment Agreement, and a Reaffirmation and Omnibus Amendment, the result of which was the amendment and restatement of the terms of the PWB Facility under the Fortress Credit Agreement with the new lenders as the lenders thereunder. Fortress in its capacity 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 to, among other things, add the Company as a guarantor, recognize and account for the Business Combination, recognize and account for the Convertible Notes and provide updated procedures for replacement of LIBOR. 

 

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 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 contains 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 September 30, 2021, the Company was not in compliance with all applicable covenants under the Fortress Credit Agreement; however, the Company was granted a waiver from compliance for these covenants as of September 30, 2021 and prospectively for December 31, 2021.

 

The Company had a senior term loan outstanding of $44.0 million, plus $1.8 million and $25 thousand of accrued interest as of September 30, 2021 and December 31, 2020, respectively.

 

10.CONVERTIBLE DEBT

 

On August 13, 2021, the Company, together with Airspan Networks Inc., 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. The Fortress Convertible Note Agreement of $50.0 million was funded to the Company on August 13, 2021, the date of the reverse recapitalization. The Convertible Notes bear interest at 7.0% per annum and the maturity date of the Convertible Notes is December 30, 2024. 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.

 

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The following is the allocation among the freestanding instruments (in thousands) at the issuance date: