# Ondas Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Ondas Inc.](/companies/onds.md) (CIK 1646188)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 08:28 ET
- Period: 2024-06-30
- Accession: 0001213900-24-068614
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1646188/000121390024068614/ea0210802-10q_ondas.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1646188/000121390024068614/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $957.9k | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $1.6m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $1.1m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $2.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | −$190.9k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | −$585.9k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $2.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $6.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$8.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$17.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $703.6k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $1.5m | us-gaap:InterestExpense |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$8.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$18.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.14 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.31 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.14 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.31 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 66,377,505 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 64,706,314 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$16.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $2.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $4.9m | us-gaap:Cash |
| Current assets | at 2024-06-30 | $15.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $82.5m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $37.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $46.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $19.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,081 characters.

### General

The following discussion and analysis provide information which our management believes to be relevant to an assessment and understanding of the results of operations and financial condition of Ondas Holdings Inc. (“Ondas,” “we” or the “Company”). This discussion should be read together with our unaudited Condensed Consolidated Financial Statements and the notes included therein, which are included in this Quarterly Report on Form 10-Q (the “Report”). This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024, including the audited consolidated financial statements and notes included therein as of and for the year ended December 31, 2023 (“2023 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. For a description of factors that may cause our actual results to differ materially from those anticipated in these forward-looking statements, please refer to the below section of this Report titled “Cautionary Note Regarding Forward-Looking Statements.” The reported results will not necessarily reflect future results of operations or financial condition.

### Overview

Ondas Holdings Inc. (“Ondas Holdings,” “Ondas,” the “Company,” “we” or “our”) is a leading provider of private wireless, drone, and automated data solutions through its subsidiaries Ondas Networks Inc., a Delaware corporation (“Ondas Networks”) and Ondas Autonomous Systems Inc., a Nevada corporation (“OAS”), which wholly-owns Airobotics, Ltd., an Israeli company (“Airobotics”), and American Robotics, Inc., a Delaware corporation (“American Robotics” or “AR”). On August 8, 2024, the Company filed a certificate of amendment with the Secretary of State of the State of Nevada, amending Ondas Autonomous Holdings Inc.’s name to Ondas Autonomous Systems Inc.

Ondas Networks provides wireless connectivity solutions. OAS provides drone and automated data solutions through its subsidiaries Airobotics and American Robotics. Ondas Networks and OAS together provide users in rail, energy, mining, public safety and critical infrastructure and government markets with improved connectivity, data collection capabilities, and data collection and information processing capabilities. We operate Ondas Networks and OAS as separate business segments, and the following is a discussion of each segment. See Note 1, Note 2, and Note 12 of the accompanying unaudited Condensed Consolidated Financial Statements for further information regarding our segments.

### Ondas Networks Segment

Ondas Networks provides wireless connectivity solutions enabling mission-critical Industrial Internet applications and services. We refer to these applications as the Mission-Critical Internet of Things (“MC-IoT”). Our wireless networking products are applicable to a wide range of MC-IoT applications, which are most often located at the very edge of large industrial networks. These applications require secure, real-time connectivity with the ability to process large amounts of data at the edge of large industrial networks. Such applications are required in all of the major critical infrastructure markets, including rail, electric grids, drones, oil and gas, and public safety, homeland security and government, where secure, reliable and fast operational decisions are required in order to improve efficiency and ensure a high degree of safety and security.

We design, develop, manufacture, sell and support FullMAX, our patented, Software Defined Radio (“SDR”) platform for secure, licensed, private, wide-area broadband networks. Our customers install FullMAX systems in order to upgrade and expand their legacy wide-area network infrastructure. We have targeted the North American freight rail operators for the initial adoption of our FullMAX platform. These rail operators currently operate legacy communications systems utilizing serial-based narrowband wireless technologies for voice and data communications. These legacy wireless networks have limited data capacity and are unable to support the adoption of new, intelligent train control and management systems. Our MC-IoT intellectual property has been adopted by the Institute of Electrical and Electronics Engineers (“IEEE”), the leading worldwide standards body in data networking protocols, and forms the core of the IEEE 802.16 standard. Because standards-based communications solutions are preferred by our mission-critical customers and ecosystem partners, we continue to take a leadership position in IEEE as it relates to wireless networking for industrial markets. As such, management believes this standards-based approach supports the adoption of our technology across a burgeoning ecosystem of global partners and end markets.

Our software-based FullMAX platform is an important and timely upgrade solution for privately-owned and operated wireless wide-area networks, leveraging Internet Protocol-based communications to provide more reliability and data capacity for our mission-critical infrastructure customers. We believe industrial and critical infrastructure markets throughout the globe have reached an inflection point where legacy serial and analog based protocols and network transport systems no longer meet industry needs. In addition to offering enhanced data throughput, FullMAX is an intelligent networking platform enabling the adoption of sophisticated operating systems and equipment supporting next-generation MC-IoT applications over wide field areas. These new MC-IoT applications and related equipment require more processing power at the edge of large industrial networks and the efficient utilization of network capacity and scarce bandwidth resources which can be supported by the “Fog-computing” capability integrated in our end-to-end network platform. Fog-computing utilizes management software to enable edge compute processing and data and application prioritization in the field enabling our customers more reliable, real-time operating control of these new, intelligent MC-IoT equipment and applications at the edge.

#### Partnership with Siemens and Market Advancements

Ondas Networks and Siemens Mobility (“Siemens”), have a strategic partnership, to both market our FullMAX-based networking technology and services and to jointly develop wireless communications products for the North American Rail Industry based on Siemens’ Advanced Train Control System (“ATCS”) protocol and our FullMAX MC-IoT platform.

We believe Siemens has both the sales and marketing reach and support to drive our technology to wide scale acceptance across the global rail market beginning with the North American Class I Railroad market. We have a jointly-developed product with Siemens – the dual-mode ATCS/MC-IoT radio systems, and Siemens is marketing and selling our proprietary systems under the brand name *Airlink* to our railroad customers. The dual-mode ATCS radio systems support Siemens’ extensive installed base of ATCS radios as well as offer Siemens’ customers the ability to support a host of new advanced rail applications utilizing our MC-IoT wireless system. These new applications, including Advanced Grade Crossing Activation and Monitoring, Wayside Inspection, Railcar Monitoring and next generation signaling and train control systems, are designed to increase railroad productivity, reduce costs and improve safety. In addition, Siemens markets and sells Ondas Networks’ standalone MC-IoT 802.16 products under the Siemens *Airlink brand.*

We developed a new radio for the Head of Train (HOT) Market in North America and a similar product for the Indian rail market. Siemens delivered these 900 MHz rail orders for a major Class I Railroad in the United States and received HOT orders for the Indian market.

Ondas and Siemens developed a new locomotive radio to support European Railroads. We secured an initial volume order from Siemens for the Class I Rail 900 MHz Network consisting of both ATCS compatible products along with Ondas’ catalog products. We received government authorization to sell ATCS radios in Canada and Siemens and launched our joint effort for the European market at Innotrans in Berlin. Siemens and Ondas demonstrated our over the air compatibility to systems used by passenger rails in the Northeast Corridor of the US.

In March 2023 the Association of American Railroads (“AAR”) formally announced that IEEE 802.16 standard would be the wireless platform for the greenfield 900 MHz network. In April 2023, the American Railway Engineering and Maintenance-of-Way Association (AREMA) voted to require the use of 802.16 in the 900 MHz greenfield band; The AAR also confirmed they have agreed with the Federal Communications Committee to retire the legacy 900 MHz band by September 2025 and that the wireless network in the new 900 MHz band would be substantially built by April 2026. In May and June 2023, we responded to RFPs to passenger rail customers in the Northeast Corridor. In February 2024, Siemens was selected by Amtrak to deliver their next generation radio based on Ondas’ FullMAX technology and the 802.16 standard.

Our relationship with Siemens has expanded significantly since entering into the partnership both with (i) the wider marketing of our wireless technology platform and (ii) multiple additional joint-product programs. Siemens has expanded its marketing reach of Ondas Networks products with identified opportunities in North American Transit Rail as well as in European and Asian Rail markets. We believe our technology has broad potential in these large, newly targeted markets.

### OAS Segment

Our OAS business unit develops and integrates drone-based solutions focusing on high-performance critical applications for government and Tier-1 commercial enterprises. Ondas is marketing comprehensive drone-based solutions to address the needs of governmental and commercial customers based on its commercially available platforms: the Optimus System™, a fully autonomous drone platform capable of continuous and multipurpose aerial data capturing and analytics, and the Iron Drone Raider™, a fully autonomous interceptor drone designed to neutralize small hostile drones.

Our unique, fully autonomous platforms enable cutting-edge aerial capabilities and are designed to serve and protect critical infrastructure and operations. Our business focuses on end-user entities in Public Safety, Defense, Homeland Security, Smart City, Port Authorities, State Departments, and other governmental entities together with commercial customers of industrial sensitive facilities such as Oil & Gas, Seaports, Mining, and Heavy Construction. For these industries, OAS provides specialized real-time aerial data capturing and aerial protection solutions in the most complex environments such as urban areas, sensitive and critical facilities and field area operations, and high-priority projects. In addition, we offer a wide suite of supplementary, enabling services for successful implementation such as AI data analytics, data automation, IT implementation, safety planning, certification, training, and maintenance, handling all the complex aspects of such high-performance drone operations.

Our portfolio companies, American Robotics and Airobotics, form a unique, powerful, and synergistic combination covering all the aspects required for successful Aerospace business together with data technologies and services for digital transformation industries. Our companies are specialized in addressing all the challenges arising along these types of product lifecycles including research and development, manufacturing, certification, and ongoing support.

OAS and its portfolio companies have already gained a track record of industry-leading regulatory successes including the securing of the first-of-its-kind Type Certification (TC) from the FAA for the Optimus 1-EX UAV on September 25, 2023, becoming the first autonomous security data capture UAV to achieve this distinction. TC, recognized as the highest echelon of Airworthiness Certification, streamline operational approvals for broad flight operations over people and infrastructure. The certification verifies the compliance of the system’s design with the required FAA airworthiness and noise standards, ensuring safe operation within the US National Airspace System (NAS) thereby significantly broadening the range of operational scenarios and scaling up of operations for automated UAS. Achieving FAA Type Certification will enable drone operations beyond-visual-line-of-sight (BVLOS) without a human operator on-site. With a strong footprint in the US market and worldwide, we believe that OAS is well-positioned with proven technology, a unique offering, and strong capabilities to strategically transform critical operations with our cutting-edge drone tech and capabilities.

#### War in Israel

On October 7, 2023, the State of Israel, where Airobotics’ main offices and facilities are located, suffered a surprise attack by hostile forces from the Gaza Strip, which led to the Security Cabinet of the State of Israel declaring a state of war in Israel. This military operation and related activities are on-going as of the date of this filing.

The Company has considered various ongoing risks relating to the military operation and related matters, including:

- That approximately 17% of the Company’s workforce in Israel was called to active duty, which temporarily reduced our workforce;
- That some of the Company’s Israeli subcontractors, vendors, suppliers and other companies in which the Company relies, are currently only partially active, as instructed by the relevant authorities or due to personnel shortages related to the war effort, which resulted in a temporary delay of inventory production; and
- A slowdown in the number of international flights in and out of Israel.

The Company is closely monitoring how the military operation and related activities could adversely affect its anticipated milestones and its Israel-based activities to support future operations, including the Company’s ability to import materials that are required to construct the Optimus System™ and to ship them outside of Israel. As of the date of this Report, the Company has determined that there have not been any materially adverse effects on its business or operations, but it continues to monitor the situation, as any future escalation or change could result in a material adverse effect on the ability of the Company’s Israeli office to support the Company’s activities. The Company does not have any specific contingency plans in the event of any such escalation or change.

### Results of Operations

#### Three months ended June 30, 2024 compared to three months ended June 30, 2023

|  | Three Months Ended June 30, 2024 | 2023 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Revenue, net | $957,851 | $5,468,964 | $(4,511,113) |
| Cost of goods sold | 1,148,746 | 2,397,188 | (1,248,442) |
| Gross profit | (190,895) | 3,071,776 | (3,262,671) |
| Operating expenses: |  |  |  |
| General and administrative | 4,163,987 | 5,316,848 | (1,152,861) |
| Sales and marketing | 1,308,705 | 1,743,588 | (434,883) |
| Research and development | 2,640,003 | 4,508,005 | (1,868,002) |
| Total operating expenses | 8,112,695 | 11,568,441 | (3,455,746) |
| Operating loss | (8,303,590) | (8,496,665) | (193,075) |
| Other income (expense), net | 33,854 | (461,421) | (495,275) |
| Net loss | $(8,269,736) | $(8,958,086) | $(688,350) |

#### Revenues

| Revenue, net: | Three Months Ended June 30, 2024 | 2023 | (Decrease) |
| --- | ---: | ---: | ---: |
| Ondas Networks | $659,298 | $1,518,496 | $(859,198) |
| OAS | 298,553 | 3,950,468 | (3,651,915) |
| Total | $957,851 | $5,468,964 | $(4,511,113) |

Our revenues decreased by $4,511,113 to $957,851 for the three months ended June 30, 2024, compared to $5,468,964 for the three months ended June 30, 2023. Revenues during the three months ended June 30, 2024, included $22,484 for products, $298,553 for maintenance, service, support, and subscriptions, and $636,814 for development agreements, mainly with Siemens. Revenues during the three months ended June 30, 2023, included $4,344,056 for products, $975,468 for maintenance, service, support, and subscriptions, and $149,440 for development agreements, mainly with Siemens. The decrease in our revenues were primarily the result of approximately $2,975,000 in decreased product sales and approximately $675,000 in decreased maintenance, service, support, and subscription revenue at OAS, who had a multi-drone order in the three months ended June 30, 2023, but no comparable sales in the three months ended June 30, 2024, and a decrease of approximately $1,346,000 in product sales to Siemens at Ondas Networks, as further orders have been delayed. These decreases were offset by an increase of approximately $485,000 in development revenue to Siemens during the three months ended June 30, 2024, related to a new development agreement at Ondas Networks.

#### Cost of goods sold

| Cost of goods sold: | Three Months Ended June 30, 2024 | 2023 | (Decrease) |
| --- | ---: | ---: | ---: |
| Ondas Networks | $573,483 | $973,046 | $(399,563) |
| OAS | 575,263 | 1,424,142 | (848,879) |
| Total | $1,148,746 | $2,397,188 | $(1,248,442) |

Our cost of goods sold was $1,148,746 for the three months ended June 30, 2024, compared to $2,397,188 for the three months ended June 30, 2023. The decrease in cost of goods sold was primarily a result of decreased revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, offset by fixed manufacturing costs at OAS, resulting in negative gross profit for the three months ended June 30, 2024, as further discussed below.

#### Gross profit

| Gross profit: | Three Months Ended June 30, 2024 | 2023 | (Decrease) |
| --- | ---: | ---: | ---: |
| Ondas Networks | $85,815 | $545,450 | $(459,635) |
| OAS | (276,710) | 2,526,326 | (2,803,036) |
| Total | $(190,895) | $3,071,776 | $(3,262,671) |

Our gross profit decreased by $3,262,671 for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Gross margin for the three months ended June 30, 2024 and 2023 was (20%) and 56%, respectively. The decrease in gross margin of 76% is primarily related to the decrease in revenue combined with fixed manufacturing costs at OAS.

#### Operating Expenses

| Operating expenses: | Three Months Ended June 30, 2024 | 2023 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| General and administrative | $4,163,987 | $5,316,848 | $(1,152,861) |
| Sales and marketing | 1,308,705 | 1,743,588 | (434,883) |
| Research and development | 2,640,003 | 4,508,005 | (1,868,002) |
| Total | $8,112,695 | $11,568,441 | $(3,455,746) |

Our principal operating costs include the following items as a percentage of total expense.

|  | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Human resource costs, including benefits | 44% | 47% |
| Travel and entertainment | 2% | 2% |
| Other general and administration costs: |  |  |
| Professional fees and consulting expenses | 10% | 8% |
| Other expense | 14% | 8% |
| Depreciation and amortization | 15% | 11% |
| Other research and deployment costs, excluding human resources and travel and entertainment | 13% | 19% |
| Other sales and marketing costs, excluding human resources and travel and entertainment | 2% | 5% |

Operating expenses decreased by $3,455,746, or 30%, as a result of the following items:

|  | Three Months Ended June 30, 2024 |
| --- | ---: |
| Human resource costs, including benefits | $(1,894,173) |
| Travel and entertainment | 2,402 |
| Other general and administration costs: |  |
| Professional fees and consulting costs | (148,464) |
| Other expense | 197,245 |
| Depreciation and amortization | (146,080) |
| Other research and development costs, excluding human resources and travel and entertainment | (1,079,909) |
| Other sales and marketing costs, excluding human resources and travel and entertainment | (386,767) |
|  | $(3,455,746) |

The decrease in operating expenses was primarily due to: (i) a decrease of approximately $1,894,000 in human resource costs, including benefits, of which approximately $1,246,000 relates to stock-based compensation primarily due to reduced headcount at Ondas Networks and American Robotics and the resulting forfeiture of stock options and RSUs, and approximately $648,000 relates to the decreased head count and synergies achieved by integrating American Robotics and Airobotics; (ii) a decrease of approximately $1,080,000 in other research and development costs, excluding human resources and travel and entertainment, of which approximately $592,000 relates to settlement of all amounts due to a vendor under previous development and manufacturing agreements during the three months ended June 30, 2024 at American Robotics, approximately $90,000 relates to synergies achieved by integrating American Robotics and Airobotics, and approximately $398,000 relates to additional development expenses allocated to cost of goods sold at Ondas Networks; and (iii) a decrease of approximately $387,000 in other sales and marketing costs, excluding human resources and travel and entertainment related to a decrease in use of third party contractors and consultants.

#### Operating Loss

|  | Three Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Operating loss | $(8,303,590) | $(8,496,665) | $(193,075) |

As a result of the foregoing, our operating loss decreased by $193,075 or 2%, to $8,303,590 for the three months ended June 30, 2024, compared with $8,496,665 for the three months ended June 30, 2023. Operating loss decreased primarily as a result of the decrease in operating expenses described above, offset by decreased revenue and gross margin for the three months ended June 30, 2024.

#### Total Other Income (Expense), net

|  | Three Months Ended June 30, 2024 | 2023 | Increase |
| --- | ---: | ---: | ---: |
| Other income (expense), net | $33,854 | $(461,421) | $495,275 |

Other income (expense), net increased by $495,275, to other income, net of $33,854 for the three months ended June 30, 2024, compared with the other expense, net of $461,421 for the three months ended June 30, 2023. Other income, net increased primarily as a result of an increase in other income of approximately $508,000 from the change in fair value of government grant liability, offset by a net increase of approximately $13,000 in all other expenses, net.

#### Net Loss

|  | Three Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Net loss | $(8,269,736) | $(8,958,086) | $(688,350) |

As a result of the net effects of the foregoing, net loss decreased by $688,350, or 8%, to $8,269,736 for the three months ended June 30, 2024, compared with $8,958,086 for the three months ended June 30, 2023. Net loss per share of common stock, par value $0.0001 per share (“Common Stock”), basic and diluted, was $(0.14) for the three months ended June 30, 2024, compared with $(0.18) for the three months ended June 30, 2023.

#### Six months ended June 30, 2024 compared to six months ended June 30, 2023

|  | Six Months Ended June 30, 2024 | 2023 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Revenue, net | $1,582,860 | $8,064,955 | $(6,482,095) |
| Cost of goods sold | 2,168,737 | 3,966,283 | (1,797,546) |
| Gross profit | (585,877) | 4,098,672 | (4,684,549) |
| Operating expenses: |  |  |  |
| General and administrative | 8,062,076 | 10,783,959 | (2,721,883) |
| Sales and marketing | 2,629,854 | 2,981,073 | (351,219) |
| Research and development | 6,152,978 | 11,482,984 | (5,330,006) |
| Total operating expenses | 16,844,908 | 25,248,016 | (8,403,108) |
| Operating loss | (17,430,785) | (21,149,344) | (3,718,559) |
| Other income (expense), net | (715,035) | (2,264,293) | (1,549,258) |
| Net loss | $(18,145,820) | $(23,413,637) | $(5,267,817) |

#### Revenues

| Revenue, net | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Ondas Networks | $971,130 | $2,648,698 | $(1,677,568) |
| OAS | 611,730 | 5,416,257 | (4,804,527) |
| Total | $1,582,860 | $8,064,955 | $(6,482,095) |

45

Our revenues decreased by $6,482,095 to $1,582,860 for the six months ended June 30, 2024, compared to $8,064,955 for the six months ended June 30, 2023. Revenues during the six months ended June 30, 2024, included $24,758 for products, $608,140 for maintenance, service, support, and subscriptions, and $949,962 for development agreements, mainly with Siemens. Revenues during the six months ended June 30, 2023, included $6,699,837 for products, $1,055,406 for maintenance, service, support, and subscriptions, and $309,712 for development agreements with Siemens. The decrease in our revenues were primarily the result of approximately $4,374,000 in decreased product sales and approximately $430,000 in decreased maintenance, service, support, and subscription revenue at OAS, who had multi-drone orders during the six months ended June 30, 2023, but no comparable sales in the six months ended June 30, 2024, and a decrease of approximately $2,300,000 in product sales, mainly to Siemens, at Ondas Networks, as further orders have been delayed. These decreases were offset by an increase of approximately $622,000 in development revenue to Siemens during the six months ended June 30, 2024, related to a new development agreement at Ondas Networks.

#### Cost of goods sold

| Cost of goods sold: | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Ondas Networks | $990,101 | $1,519,803 | $(529,702) |
| OAS | 1,178,636 | 2,446,480 | (1,267,844) |
| Total | $2,168,737 | $3,966,283 | $(1,797,546) |

Our cost of goods sold was $2,168,737 for the six months ended June 30, 2024, compared to $3,966,283 for the six months ended June 30, 2023. The decrease in cost of goods sold was primarily a result of decreased revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, offset by fixed manufacturing costs at OAS, resulting in negative gross profit for the six months ended June 30, 2024, as further discussed below.

#### Gross profit

| Gross profit: | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Ondas Networks | $(18,971) | $1,128,895 | $(1,147,866) |
| OAS | (566,906) | 2,969,777 | (3,536,683) |
| Total | $(585,877) | $4,098,672 | $(4,684,549) |

Our gross profit decreased by $4,684,549 for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Gross margin for the six months ended June 30, 2024 and 2023 was (37%) and 51%, respectively. The decrease in gross margin of 88% is primarily related to the decrease in revenue combined with fixed manufacturing costs at OAS.

#### Operating Expenses

| Operating expenses: | Six Months Ended June 30, 2024 | 2023 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| General and administrative | $8,062,076 | $10,783,959 | $(2,721,883) |
| Sales and marketing | 2,629,854 | 2,981,073 | (351,219) |
| Research and development | 6,152,978 | 11,482,984 | (5,330,006) |
| Total | $16,844,908 | $25,248,016 | $(8,403,108) |

46

Our principal operating costs include the following items as a percentage of total expense.

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Human resource costs, including benefits | 43% | 44% |
| Travel and entertainment | 2% | 2% |
| Other general and administration costs: |  |  |
| Professional fees and consulting expenses | 8% | 8% |
| Other expense | 13% | 7% |
| Depreciation and amortization | 14% | 10% |
| Other research and deployment costs, excluding human resources and travel and entertainment | 18% | 26% |
| Other sales and marketing costs, excluding human resources and travel and entertainment | 2% | 3% |

Operating expenses decreased by $8,403,108, or 33%, as a result of the following items:

|  | Six Months Ended June 30, 2024 |
| --- | ---: |
| Human resource costs, including benefits | $(3,767,180) |
| Travel and entertainment | (4,801) |
| Other general and administration costs: |  |
| Professional fees and consulting costs | (1,003,207) |
| Other expense | 324,513 |
| Depreciation and amortization | (104,597) |
| Other research and development costs, excluding human resources and travel and entertainment | (3,361,953) |
| Other sales and marketing costs, excluding human resources and travel and entertainment | (485,883) |
|  | $(8,403,108) |

The decrease in operating expenses was primarily due to: (i) a decrease of approximately $3,767,000 in human resource costs, of which approximately $2,226,000 relates to stock-based compensation primarily due to reduced headcount at Ondas Networks and American Robotics and the resulting forfeiture of stock options and RSUs, approximately $596,000 relates to the decreased head count at Ondas Networks, and approximately $945,000 relates to the decreased head count at OAS and synergies achieved by integrating American Robotics and Airobotics; (ii) a decrease of approximately $1,003,000 in professional fees and consulting costs, of which approximately $765,000 relates to legal and accounting fee costs incurred during the six months ended June 30, 2023 for the sale of *Series A-1 Preferred Stock* in Ondas Networks and approximately $238,000 relates to synergies achieved by integrating American Robotics and Airobotics; (iii) a decrease of approximately $3,362,000 in other research and development costs, excluding human resources and travel and entertainment, of which approximately $592,000 relates to settlement of all amounts due to a vendor under previous development and manufacturing agreements during the six months ended June 30, 2024 at American Robotics, approximately $1,368,000 relates to one-time costs incurred during the six months ended June 30, 2023 associated with terminating a development contract at American Robotics, approximately $782,000 relates to synergies achieved by integrating American Robotics and Airobotics, and approximately $620,000 relates to additional development expenses allocated to cost of goods sold at Ondas Networks; (iv) a decrease of approximately $486,000 in other sales and marketing costs, excluding human resources and travel and entertainment related to a decrease in use of third party contractors and consultants; (v) offset by a net increase of approximately $325,000 in all other operating expenses primarily related to increased rent expense.

#### Operating Loss

|  | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Operating loss | $(17,430,785) | $(21,149,344) | $3,718,559 |

As a result of the foregoing, our operating loss decreased by $3,718,559, or 18%, to $17,430,785 for the six months ended June 30, 2024, compared with $21,149,344 for the six months ended June 30, 2023. Operating loss decreased primarily as a result of the decrease in operating expenses described above, offset by decreased revenue and gross margin, for the six months ended June 30, 2024.

#### Total Other Income (Expense), net

|  | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Other income (expense), net | $(715,035) | $(2,264,293) | $1,549,258 |

Other expense, net decreased by $1,549,258, to $715,035 for the six months ended June 30, 2024, compared with the other expense, net of $2,264,293 for the six months ended June 30, 2023. Other expense, net decreased primarily as a result of an increase in other income of approximately $467,000 from the change in fair value of government grant liability; an increase in interest income of approximately $178,000 due to interest earned on cash deposits; a decrease in interest expense, including amortization of debt discount and debt issuance costs, of approximately $818,000 for the 3% Senior Convertible Notes Due 2025 (the “2022 Convertible Exchange Notes”) and the 3% Series B-2 Senior Convertible Notes (the “2023 Additional Notes”); and an increase in foreign exchange gain, net of approximately $78,000.

#### Net Loss

|  | Six Months Ended June 30, 2024 | 2023 | Decrease |
| --- | ---: | ---: | ---: |
| Net Loss | $(18,145,820) | $(23,413,637) | $5,267,817 |

As a result of the net effects of the foregoing, net loss decreased by $5,267,817, or 22%, to $18,145,820 for the six months ended June 30, 2024, compared with $23,413,637 for the six months ended June 30, 2023. Net loss per share of Common Stock, basic and diluted, was $(0.31) for the six months ended June 30, 2024, compared with $(0.47) for the six months ended June 30, 2023.

### Summary of (Uses) and Sources of Cash

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash flows used in operating activities | $(16,274,722) | $(21,864,777) |
| Net cash flows provided by (used in) investing activities | (2,314,873) | 695,484 |
| Net cash flows provided by (used in) financing activities | 8,542,969 | (5,501,087) |
| Decrease in cash, cash equivalents, and restricted cash | (10,046,626) | (26,670,380) |
| Cash, cash equivalents, and restricted cash, beginning of period | 15,022,000 | 29,775,096 |
| Cash, cash equivalents, and restricted cash, end of period | $4,975,374 | $3,104,716 |

The principal use of cash in operating activities for the six months ended June 30, 2024, was to fund the Company’s current expenses primarily related to operating activities necessary to allow us to service and support customers. The decrease in cash flows used in operating activities of $5,590,055 was primarily due to the decrease in net loss of approximately $5,268,000, of which approximately $3,822,000 related to non-cash and credits, including depreciation, amortization of debt discount and issuance costs, amortization of intangibles assets and right of use asset, stock-based compensation, and change in fair value of government grant liability, combined with changes in operating assets and liabilities resulting in a cash inflow of approximately $4,144,000.

The decrease in cash flows provided by investing activities of $3,010,357, relates to an increase of approximately $2,200,000 in payments made for purchase of equipment, software intangibles and patent costs, combined with decrease of approximately $1,049,000 for cash acquired with the Airobotics acquisition in the six months end June 30, 2023, offset by the decrease of approximately $239,000 for cash paid for asset acquisitions in the six months end June 30, 2023.

The cash flows provided by financing activities increased by approximately $14,044,000 primarily due to proceeds received from the sale of common stock in the Company and options exercised of approximately of $3,867,000 and the sale of preferred stock in Ondas Networks of approximately $4,375,000; the increase of approximately $300,000 in cash proceeds received from government grants; combined with the decrease in cash payments of approximately $5,502,000 on the 2022 Convertible Exchange Notes, government grant liability, and Airobotics related debt. For a summary of our outstanding Long-Term Notes Payable, see Note 8 in the accompanying Notes to unaudited Condensed Consolidated Financial Statements.

### Liquidity and Capital Resources

We have incurred losses since inception and have funded our operations primarily through debt and the sale of capital stock. As of June 30, 2024, we had an accumulated deficit of approximately $216,506,000. As of June 30, 2024, we had net long-term borrowings outstanding of approximately $2,502,000 net of debt discount and issuance costs of approximately $110,000 and short-term borrowings outstanding of approximately $29,427,000, net of debt discount and issuance costs of approximately $4,975,000. As of June 30, 2024, we had cash and restricted cash of approximately $4,975,000 and a working capital deficit of approximately $22,801,000.

In 2023, we raised approximately $14,692,000 of net proceeds from the sale redeemable preferences shares in Ondas Networks and warrants in Ondas Holdings to third parties, and approximately $9,310,000 from a second convertible debt agreement. In February 2024, we raised gross proceeds of approximately $4,500,000 from issuing additional redeemable preference shares in Ondas Networks and warrants in Ondas Holdings to third parties, and approximately $4,050,000 from issuing common stock of Ondas Holdings and warrants in OAS.

We expect to fund our operations for the next twelve months from the filing date of this Report from the cash on hand as of June 30, 2024, proceeds from the 2024 financing activities discussed above, gross profits generated from revenue growth, potential prepayments from customers for purchase orders, potential proceeds from warrants issued and outstanding, and additional funds that we may seek through equity or debt offerings and/or borrowings under additional notes payable, lines of credit or other sources. There is substantial doubt that the funding plans will be successful and therefore the conditions discussed above have not been alleviated. As a result, there is substantial doubt about the Company’s ability to continue as a going concern for one year from August 14, 2024, the date the unaudited Condensed Consolidated Financial Statements were available to be issued.

Our future capital requirements will depend upon many factors, including progress with developing, manufacturing and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline as well as new customers. We also will be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, will require significant uses of working capital. There can be no assurances that we will generate revenue and cash flow as expected in our current business plan. We may seek additional funds through equity or debt offerings and/or borrowings under additional notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable terms or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial condition or results of operations.

### Off-Balance Sheet Arrangements

As of June 30, 2024, we had no off-balance sheet arrangements.

### Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, as well as related disclosures. We base our estimates and judgments on historical experience and other assumptions that we believe to be reasonable at the time and under the circumstances, and we evaluate these estimates and judgments on an ongoing basis. Information concerning our critical accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2023 Form 10-K. There have been no significant changes in our critical accounting policies since the filing of the 2023 Form 10-K.

### Recent Accounting Pronouncements

There have been no material changes to our significant accounting policies as summarized in Note 2 of our 2023 Form 10-K. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying unaudited Condensed Consolidated Financial Statements.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our 2023 Form 10-K, which was filed with the SEC on April 1, 2024. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

## Market risk

As filed, 127 characters.

We are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.

## Controls and procedures

As filed, 1,707 characters.

### Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of June 30, 2024. Based on that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, 2024.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

## Risk factors

As filed, 543 characters.

Our business, financial condition, operating results, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 (the “2023 Form 10-K”), the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in the 2023 Form 10-K.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001213900-24-068614. Last ingested by Listed: Oct 30, 2026, 12:37 ET. No prices; not investment advice.