Ondas Inc.: Form 10-Q for the period ended Mar 31, 2025

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, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025, including the audited consolidated financial statements and notes included therein as of and for the year ended December 31, 2024 (“2024 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,” the “Company,” “we” or “our”) is a leading provider of private wireless, drone, and automated data solutions through its subsidiaries Ondas Networks Inc., a Texas corporation (“Ondas Networks”), 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”).

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 defense, homeland security, and critical infrastructure 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 10 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, drone operations, 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. 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.

We design, develop, manufacture, sell and support FullMAX, our patented, Software Defined Radio (“SDR”) platform for secure, private, wide-area broadband networks. Our customers install FullMAX systems in order to upgrade and expand their legacy wide-area network infrastructure. By upgrading their legacy systems, customers benefit from significant increases in data throughput which enables new applications. 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 dated 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. The freight rail operators through the Association of American Railroads (“AAR”), its advisory subsidiary MxV Rail, as well as the American Railway Engineering and Maintenance Association (“AREMA”), have adopted the IEEE 802.16 standard for future private wireless networks. The IEEE 802.16t Direct Peer-to-Peer (“DPP”) protocol has been selected by the AAR as the new standard for Next Generation head-of-train / end-of-train (“HOT-EOT”) communications or “NGHE Gen4.” This new protocol for train telemetry operations enables new safety and operational improvements to existing HOT-EOT applications.

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 security, more reliability and significant data throughput 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 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.

Industry Partnerships

Ondas Networks continues to develop partnerships in the rail space to develop and market wireless communications products and services based on Ondas Networks’ technology. Our partnership with Siemens Mobility (“Siemens”) is geared to market our FullMAX-based networking technology and services and to jointly develop certain 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 are working with other industry partners to commercialize our platform technologies for specific use cases and to drive broad industry adoption of dot16 applications.

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 defense, homeland security, public safety, smart city, airport authorities, and other governmental entities together with commercial operators of critical industrial and technology facilities such as oil & gas, seaports, mining, and heavy construction as well as for data centers and semiconductor fabs. 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 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. Although there have been disruptions in our business and operations, the Company has determined that there have not been any materially adverse effects on its business or operations. The Company does not believe the disruptions in its business and operations will have an enduring impact on its business and 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 March 31, 2025 compared to three months ended March 31, 2024

Revenues

43

Our revenues increased by $3,623,173 to $4,248,182 for the three months ended March 31, 2025, compared to $625,009 for the three months ended March 31, 2024. Revenues during the three months ended March 31, 2025, included $3,223,973 for products, $808,841 for service and subscriptions, and $215,368 for development agreements, primarily with Siemens. Revenues during the three months ended March 31, 2024, included $2,274 for products, $309,587 for service and subscriptions, and $313,148 for development agreements primarily with Siemens. The increase in our revenues were primarily the result of approximately $3,224,000 in increased product sales and $502,000 in increased service revenue at OAS, which had multi-drone sales with associated services in the three months ended March 31, 2025, but no comparable sales in the three months ended March 31, 2024. These increases were partially offset by a decrease of approximately $98,000 in development revenue, primarily with Siemens, and a decrease of approximately $5,000 in product and service revenue at Ondas Networks, as further orders have been delayed by the railroads as they work on implementing the 900 MHz band network.

Cost of goods sold

Our cost of goods sold increased by $1,739,641 to $2,759,632 for the three months ended March 31, 2025, compared to $1,019,991 for the three months ended March 31, 2024. The increase in cost of goods sold was primarily a result of increased revenue for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Cost of goods sold at OAS did not increase in the same ratio as revenue due to fixed manufacturing costs.

Gross profit (loss)

Our gross profit increased by $1,883,532 to $1,488,550 for the three months ended March 31, 2025 compared to a gross loss of 394,982 for the three months ended March 31, 2024. Gross margin for the three months ended March 31, 2025 and 2024 was 35% and (63%), respectively. The increase in gross margin of 98% is primarily related to the increase in product revenue at OAS, which has higher gross margins as compared to the service and subscription revenue recognized in the three months ended March 31, 2024.

Operating Expenses

44

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

Operating expenses increased by $3,066,775, or 35%, as a result of the following items:

The increase in operating expenses was primarily due to:

(i) An increase of approximately $2,895,000 in human resource costs, including an increase in stock-based compensation at the Company of approximately $1,187,000 for new stock options and RSUs granted during the three months ended March 31, 2025, an increase of approximately $1,289,000 related to an increase in taxable fringe benefit expense, for tax on employee benefits such as Company subsidized vehicles, meals, and other expenses, at OAS primarily as the result of an audit by the Israeli government for previous years, an increase of approximately $253,000 in salary and benefit expense related to an increase in headcount in our sales and marketing department as we work on improving sales, and an increase of approximately $153,000 in bonus expense at Ondas Networks due to a new bonus structure implemented in 2025;

(ii) An increase of approximately $565,000 in professional fees and consulting expenses, of which an increase of approximately $715,000 relates to legal and accounting fee costs, primarily related to the $450,000 recovery of legal fees from the settlement agreement for legal proceedings related to Ardenna, which reduced our legal fee expenses during the three months ended March 31, 2024, and approximately $265,000 relates to increased use of accounting consultants and increased audit fees. These increases were partially offset by a decrease of approximately $150,000 in other third-party contractors and consultants;

(iii) A decrease of approximately $303,000 in other expense, of which approximately $225,000 relates to reduced rent and facilities charges, as Ondas Networks was paying two office leases during the three months ending March 31, 2024 as compared to one lease during the three months ended March 31, 2025, approximately $30,000 relates to a reduction in the Company’s D&O insurance expense, and approximately $48,000 relates to a increase in our allocation of other general and administrative costs to research and development;

(iv) A decrease of approximately $452,000 in other research and development costs, excluding human resources and travel and entertainment, primarily related to a decrease in use of third-party research and development contractors and consultants; and

(v) An increase of approximately $267,000 in other sales and marketing costs, excluding human resources and travel and entertainment, of which approximately $196,000 relates to an increase in use of sales and marketing third-party contractors and consultants and approximately $71,000 relates to increased attendance at trade shows and other marketing events.

Operating Loss

As a result of the foregoing, our operating loss increased by $1,183,243, or 13%, to $10,310,438 for the three months ended March 31, 2025, compared with $9,127,195 for the three months ended March 31, 2024. Operating loss increased as a result of the increase of $3,066,775 in operating expenses described above for the three months ended March 31, 2025, partially offset by the increase of $1,883,532 in gross profit for the three months ended March 31, 2025.

Total Other Income (Expense), net

Total other expense, net increased by $3,077,023, to $3,825,912 for the three months ended March 31, 2025, compared with $748,889 for the three months ended March 31, 2024. Total other expense, net increased primarily as a result of the increase in interest expense, amortization of debt discount, and amortization of debt issuance costs for the 2024 Additional Notes, Ondas Networks Convertible Notes, OAS Convertible Notes, and Networks Secured Note. For a summary of our outstanding Notes Payable, see Note 7 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Net Loss

As a result of the net effects of the foregoing, net loss increased by $4,260,266, or 43%, to $14,136,350 for the three months ended March 31, 2025, compared with $9,876,084 for the three months ended March 31, 2024. Net loss per share of Common Stock, basic and diluted, was $(0.15) for the three months ended March 31, 2025, compared with $(0.17) for the three months ended March 31, 2024.

Summary of (Uses) and Sources of Cash

46

The principal use of cash in operating activities for the three months ended March 31, 2025, was to fund the Company’s current expenses primarily related to operating activities necessary to allow us to service and support customers.

The increase in cash flows used in operating activities of approximately $796,000 was primarily due to an increase in net loss of approximately $4,260,000, of which approximately $4,008,000 related to non-cash and credits, including depreciation, amortization of debt discount and issuance costs, amortization of intangibles assets and right of use asset, change in fair value of government grant liability, and stock-based compensation, offset by changes in operating assets and liabilities resulting in a cash inflow of approximately $1,048,000.

The decrease in cash flows used in investing activities of approximately $1,017,000 relates to a decrease in in purchases of equipment in the three months ended March 31, 2025.

The decrease in cash flows provided by financing activities of approximately $5,972,000 relates to the proceeds received from the sale of common stock in the Company of approximately of $3,859,000 and the sale of preferred stock in Ondas Networks of approximately $4,375,000 during the three months ended March 31, 2024. These decreases were partially offset set by an increase in proceeds of approximately $982,000 from the exercise of options and warrants, an increase in net proceeds of approximately $923,000 from the January 2025 Networks Convertible Notes, and an increase in proceeds, net of repayments, of approximately $357,000 from government grants during the three months ended March 31, 2025. For a summary of our outstanding Notes Payable, see Note 7 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 March 31, 2025, we had an accumulated deficit of approximately $250,504,000. As of March 31, 2025, we had net long-term borrowings outstanding of approximately $2,558,000 and short-term borrowings outstanding of approximately $38,732,000, net of debt discount and issuance costs of approximately $3,855,000, including accrued interest of approximately $2,178,000, of which approximately $230,000 is due to related parties. As of March 31, 2025, we had cash and restricted cash of approximately $25,410,000 and a working capital deficit of approximately $7,021,000. We had approximately $6,659,000 of net cash flows used in operations for the three months ended March 31, 2025.

In 2024, we raised approximately $36,997,000 of net proceeds from issuance of convertible notes in Ondas Holdings, Ondas Networks, and OAS; approximately $1,422,000 of net proceeds from issuance of secured notes in Ondas Networks; approximately $7,304,000 of net proceeds from issuing common stock in Ondas Holdings, warrants in Ondas Holdings, and warrants in OAS; and approximately $4,375,000 in net proceeds from issuing additional redeemable preference shares in Ondas Networks and warrants in Ondas Holdings.

In January 2025, we raised approximately $923,000 in proceeds, net of issuance costs, from issuance of convertible notes in Ondas Networks, $984,000 from the exercise of warrants in Ondas Holdings and $365,000 in Israeli government grants to Airobotics.

We expect to fund our operations for the next twelve months from the filing date of this Quarterly Report on Form 10-Q from the cash on hand as of March 31, 2025, 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 May 15, 2025, the date the unaudited Condensed Consolidated Financial Statements were 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 and services 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 assurance that we will generate revenue and cash 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 conditions, or results of operations.

Off-Balance Sheet Arrangements

As of March 31, 2025, 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 2024 Form 10-K. There have been no significant changes in our critical accounting policies since the filing of the 2024 Form 10-K.

Recent Accounting Pronouncements

There have been no material changes to our significant accounting policies as summarized in Note 2 of our 2024 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 2024 Form 10-K, which was filed with the SEC on March 12, 2025. 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.

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

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 March 31, 2025. 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 March 31, 2025.

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 March 31, 2025 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.

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, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025 (the “2024 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 2024 Form 10-K, except as set forth below.

Changes in U.S. trade policy, including the imposition of new tariffs or other import restrictions, could increase our costs, disrupt our supply chain, and adversely affect our business, financial condition, and results of operations.

The United States has recently enacted, and may enact or propose to enact, significant new tariffs on imported goods, including technology components, raw materials, and finished products. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. As a result, there continues to be significant uncertainty surrounding the future of U.S. trade policy and its global implications. This uncertainty—whether arising from actual regulatory actions or even the perception that such changes may occur—could adversely impact global economic conditions, increase volatility in financial markets, and reduce international trade volumes, including trade between the United States and countries where our suppliers, contract manufacturers, or customers are located.

As a company with global operations and dependencies on a complex international supply chain, these developments could materially affect our cost structure, operating efficiency, and commercial execution. Specifically:

• We may face increased costs from tariffs on imported components used in our drone systems and wireless infrastructure products;
• Our ability to source certain materials or components may be constrained or delayed, resulting in supply chain disruptions and missed customer deadlines;
• We may be required to seek alternative suppliers or relocate manufacturing capacity at substantial cost and with uncertain outcomes;
• Export restrictions or retaliatory tariffs imposed by foreign governments could impact our ability to sell products internationally, particularly in strategic growth markets;
• Evolving regulatory requirements may increase our compliance burden and legal exposure related to customs classifications, country-of-origin tracking, and trade licensing.

Any of these outcomes could reduce our gross margins, hinder our revenue growth, delay strategic initiatives, and adversely affect our business, financial condition, and results of operations.