ONDS 10-K & 10-Q changes, risk factors and insider trading
Ondas Inc. · Nasdaq · Radio & Tv Broadcasting & Communications Equipment · CIK 1646188 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may not successfully manage our growth.”
New heading “We depend on governmental customers and funding, and our business could be adversely affected by changes in government spending, budget priorities, or procurement policies.”
New heading “The development and use of artificial intelligence technologies presents risks that may affect our business, operations, and competitive position.”
New heading “Our past acquisitions, as well as any acquisitions we may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.”
New heading “Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.”
New heading “Our international operations are subject to various operational and financial risks that could adversely affect our business.”
New heading “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.”
Removed heading “Failure to manage our planned growth could place a significant strain on our resources.”
Removed heading “The Company faces uncertainty and adverse changes in the economy.”
Removed heading “We do not control certain aspects of the manufacturing process.”
Removed heading “We may pursue additional strategic transactions in the future, which could be difficult to implement, disrupt our business or change our business profile significantly.”
Removed heading “We are subject to numerous legal and regulatory regimes, and we could be harmed by changes to, or the interpretation or the application of, the laws and regulations of each of the jurisdictions in which it operates.”
Removed heading “Our exposure to fluctuations in foreign currency exchange rates has increased.”
Removed heading “We have limited trading activity and as a result, the price of our common stock might fluctuate significantly, and you could lose all or part of your investment.”
Removed heading “Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.”
Removed heading “Risks Related to the Notes”
Removed heading “We may not have the ability to pay interest on the Notes or to redeem the Notes.”
Removed heading “Provisions in the Notes may deter or prevent a business combination that may be favorable to you.”
Removed heading “Future sales of a significant number of our shares of Common Stock in the public markets, or the perception that such sales could occur, could depress the market price of our shares of Common Stock or cause it to be highly volatile.”
Removed heading “Our financing arrangements contain, and we expect that other future loan agreements and financing arrangements will contain, customary covenants that may limit our liquidity and corporate activities, which could limit our operational flexibility and have an adverse effect on our financial condition and results of operations.”
Largest changes
“Our financing arrangements contain, and we expect that other future loan agreements and financing arrangements will contain, customary covenants that may limit our liquidity and corporate activities, which could limit our operational flexibility and have an adverse effect on our financial condition and results of operations.”see in full comparison
“We incorporate machine learning and artificial intelligence capabilities into certain of our products and solutions and may seek to expand the use of AI in our offerings in the future. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect our business. AI algorithms and training methodologies may be flawed. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. …”see in full comparison
“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.”see in full comparison
“As a global company, our performance is affected by global economic, market and industry conditions as well as geopolitical issues and other conditions with global reach. In recent years, concerns about the global economic outlook, inflation and increased interest rates have adversely affected market and business conditions in general. Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and operating expenses. …”see in full comparison
“Our financial arrangements contain, and we expect that other future loan agreements and financing arrangements will contain, customary covenants and event of default clauses, which may affect operational and financial flexibility. Such restrictions could affect, and in many respects limit or prohibit, among other things, our ability to pay dividends, incur additional indebtedness, create liens, sell assets, or engage in mergers or acquisitions. …”see in full comparison
“We are subject to numerous legal and regulatory regimes, and we could be harmed by changes to, or the interpretation or the application of, the laws and regulations of each of the jurisdictions in which it operates.”see in full comparison
Full comparison: every changed paragraph (103)
Even if we achieve profitability, we may not be able to sustain or increase such profitability. Additionally, our costs may increase in future periods and we may expend substantial financial and other resources on, among other things, sales and marketing, the hiring of additional officers, employees, contractors and other service providers, and general administration, which may include a significant increase in legal and accounting expenses related to public company compliance, continued compliance and various regulations applicable to our business or arising from the growth and maturity of our company. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain regulatory approvals, diversify our product and service offerings or continue our operations, and may cause the price of our common stock to decline.
We may not successfully manage our growth.
We have grown substantially over prior years, including by expanding our internal resources, making acquisitions and entering new markets and we intend to continue to focus on growth, including organic growth and additional acquisitions. We may experience difficulties and higher than expected expenses in executing this strategy as a result of unfamiliarity with new markets, changes in revenue and business models, entry into new geographic areas or increased pressure on our existing infrastructure and information technology systems.
Our growth will place a significant strain on our management, operational, financial and information technology resources. We will need to continually improve existing procedures and controls, as well as implement new transaction processing, operational and financial systems and procedures and controls to expand, train and manage our employee base. Our working capital needs will continue to increase as our operations grow. Failure to manage our growth effectively or obtain necessary working capital could have a material adverse effect on our business, results of operations, cash flows and financial condition.
We believe that our success is dependent on our ability to continue identifying and anticipating the needs of our customers, to retain our existing customers and to add new customers. For example, our business plan is designed to penetrate large, critical infrastructure end markets with our wireless and UAS driven data solutions and have expanded our dedicated sales resources and field personnel to broaden our marketing and field support efforts into new industries and sectors. As a result, we have significantly increased customer engagement in the transportation, security and UAS end markets with Ondas Networks and in the defense, industrial, public safety and government markets with OAS. We expect that our qualified customer pipeline will increase in other additional strategic end markets. However, as we become larger through organic growth, the growth rates for customer engagement, project volume and average spend per customer may slow, even if we continue to add customers on an absolute basis. In addition, the costs associated with customer retention may be substantially lower than costs associated with the acquisition of new customers. Therefore, our failure to retain existing customers, even if such losses are offset by an increase in revenue resulting from the acquisition of new customers, could have an adverse effect on our business, financial condition or results of operations.
Because we have only recently invested in our customer service and support organization, a small number of customers have accounted for a substantial amount of our revenue. During the year ended December 31, 2025, two customers accounted for approximately 55% and 11%, respectively. During the year ended December 31, 2024, three customers accounted for approximately $3.8 million, $1.9 million, and $0.7 million of our revenue or approximately 52%, 26%, and 10%, respectively. As of December 31, 2025, one customer accounted for 73% of accounts receivable. The loss of any of our customers or a decrease in the business conducted with such customers could have a material adverse impact on our business, financial condition or results of operations.
We depend on governmental customers and funding, and our business could be adversely affected by changes in government spending, budget priorities, or procurement policies.
A significant portion of our business, particularly through our OAS segment, involves sales to government customers, including defense, homeland security, and public safety agencies. Our revenue from government customers depends on the availability of funding and continued government interest in our products and services. Government contracts are subject to the government’s budgetary approval process, and there is no assurance that budgets for our programs will continue at current levels or that our programs will not be terminated or experience funding delays. Changes in government budgetary priorities, including continuing resolutions, government shutdowns, or sequestration, could result in reduced or delayed funding for programs in which we participate, which could adversely affect our revenue and operating results.
Government contracts are also subject to various uncertainties, including the risk of contract termination for convenience, modification, or non-renewal. The government may terminate, reduce, or modify contracts or subcontracts if its requirements or budgetary constraints change. In addition, the government contracts are subject to a competitive bidding process that can consume significant resources without generating any revenue. Much of the government business that we expect to seek in the foreseeable future will likely be awarded through competitive bidding. Competitive bidding presents a number of risks, including the substantial cost and managerial time that must be spent to prepare bids and proposals for contracts that may not be awarded to us, the need to accurately estimate the resources and cost structure required to service any contract we are awarded, and the expense and delay that may arise if competitors protest or challenge contract awards made to us. Any of these factors could adversely affect our business, financial condition and results of operations.
Ondas
Networks is currently
developing technology compatible with the proposed wireless broadband standard known as IEEE 802.16t, which is an
evolution of the EEE IEEE
802.16s wireless broadband standard published in October 2017. We believe we are currently the only manufacturer
of IEEE 802.16s compliant
wireless solutions and are likely to be the only manufacturer of IEEE 802.16t compliant wireless solutions when
that standard is formally
ratified. The benefits of the standard to buyers of our equipment are greater when there exists a large, deep
market in terms of the number
of customers. A large market benefits from the scale provided such that many vendors can compete on service,
price and quality of solution
driving improved value for customers. If a large end market does not develop and customers do not see the
related benefits from the standard,
we may not be able to grow our business.
Our growth depends
in part on the success
of our strategic partnershipscollaborations with third parties such as Siemens Mobility, who are alsokey customers, as well as on
our ability to establish and expand a broad rangeecosystem of additional ecosystem partner and customer relationships
with leading global industrial vendors.
In
orderTo to growsupport our business, growth,
we depend on partnershipscollaborate with market leading technology and industrial companiescompanies, suchmany asof Siemens Mobility,
whowhom are also customersour of Ondas Networks, in ordercustomers, to help accelerate the adoption
of our wireless technology. If we are unsuccessfulunable into maintaining
oursustain partnership andthese customer relationships with third parties, including Siemens Mobility, or if ourthese partnershipscollaborations do not provide usdeliver the expected
anticipated benefits, our ability to compete in the marketplace or toand grow our revenue could be impairedadversely affected, and our operating results may suffer.
suffer. In addition, adoption of our FullMAX wireless platform, Optimus System™, and Iron Drone Raider™ requires us to establish additional
additional ecosystem relationships with leading global industrial vendors and customers. Even if we are successful in executing these partnerships
partnerships and integrating with additional ecosystem vendors, we cannot assure you that these partnerships and relationships will result
in increased
adoption of our technology or increased revenue.
Failure to manage
our planned growth could place a significant strain on our resources.
We
believe that our success is dependent on our ability to continue identifying and anticipating the needs of our customers, to retain our
existing customers and to add new customers. For example, our business plan is designed to penetrate large, critical infrastructure end
markets with our wireless and UAS driven data solutions and have expanded our dedicated sales resources and field personnel to broaden
our marketing and field support efforts into new industries and sectors. As a result, we have significantly increased customer engagement
in the transportation, security and UAS end markets with Ondas Networks and in the industrial, public safety and government markets with
OAS. We expect that our qualified customer pipeline will increase in other additional strategic end markets. However, as we become larger
through organic growth, the growth rates for customer engagement, project volume and average spend per customer may slow, even if we continue
to add customers on an absolute basis. In addition, the costs associated with customer retention may be substantially lower than costs
associated with the acquisition of new customers. Therefore, our failure to retain existing customers, even if such losses are offset
by an increase in revenue resulting from the acquisition of new customers, could have an adverse effect on our business, financial condition
or results of operations.
The Company faces uncertainty and adverse
changes in the economy.
Adverse changes in the economy
could negatively impact the Company’s business. Future economic distress may result in a decrease in demand for the Company’s
products, which could have a material adverse impact on the Company’s operating results and financial condition. Uncertainty and
adverse changes in the economy could also increase costs associated with developing and publishing products, increase the cost and decrease
the availability of sources of financing, and increase the Company’s exposure to material losses from bad debts, any of which could
have a material adverse impact on the financial condition and operating results of the Company.
Because
we have only recently invested in our customer service and support organization, a small number of customers have accounted for a substantial
amount of our revenue. During the year ended December 31, 2024, three customers accounted for approximately $3,763,000, $1,902,000, and
$745,000 of our revenue or approximately 52%, 26%, and 10%, respectively. During the year ended December 31, 2023, three customers accounted
approximately $6,703,000, $5,127,000, and $3,395,000 of our revenue or approximately 43%, 33%, and 22%, respectively. The loss of the
2024 customers or a decrease in the business conducted with such customers could have a material adverse impact on our business, financial
condition or results of operations.
Our
reliance on a small
number of thirdmanufacturers party contractors to complete manufacturing, certain research and development and deployment functions
reduces our control over the manufacturing process, exposing us to risks, including reduced control over quality
assurance, product costs
and product supply including delays in transportation and delivery. Any manufacturing disruption by our usual contractors
manufacturers could impair
our ability to fulfill orders. We may be unable to manage our relationships with our usual contractorsmanufacturers effectively
as they may experience
delays, disruptions, capacity constraints or quality control problems in their manufacturing operations, customer concerns about the contractor
or our failure to extend existing task orders or issue new task orders,operations or otherwise
fail to meet our future requirements for timely delivery.
Similarly, to the extent that our usual contractorsmanufacturers procure materials on our
behalf, we may not benefit from any warranties received by
our usual contractorsmanufacturers from the suppliers or otherwise have recourse against
the original supplier of the materials or even the manufacturer.
In such circumstances, if the original supplier were to provide us or
our usual contractorsmanufacturers with faulty materials, we might not be able
to recover the costs of such materials or be compensated for any damages
that arise as a result of the inclusion of the faulty components
in our products.
If
any of our contractors fail to deliver on a timely basis the agreed-upon supplies and/or perform the agreed-upon services, then our ability
to fulfill our obligations may be jeopardized. In addition, the absence of qualified contractors with whom we have a satisfactory relationship
could adversely affect the quality of our service and our ability to perform under some of our contracts. One or more of our usual
manufacturers contractors
may suffer an interruption in its business, or experience delays, disruptions or quality control problems in its manufacturing
operations, operations,
or seek to terminate its relationship with us, or we may choose to change or add additional contractorsmanufacturers for other reasons.
Additionally, Additionally,
we do not have long-term supply agreements with our usual contractors.manufacturers. As a result, we may be unable to renew or extend
our agreement
on terms favorable to us, if at all. Although the manufacturing services required to manufacture and assemble our products
may be readily
available from a number of established manufacturers, it may be risky, time consuming and costly to qualify and implement
new manufacturer
relationships.
Our
marketing efforts
depend significantly on our ability to call on our current and past customers to provide positive references to new,
potential customers.
A material portion of our current pipeline activity is concentrated in the defense, transportation and aviation sectors as
well as in the United Arab Emirates (UAE).sectors. Given our limited
number of customers, the loss or dissatisfaction of any customer could substantially
harm our brand and reputation, inhibit the market
acceptance of our products and services, and impair our ability to attract new customers
and maintain existing customers. Further, as
we expand into new vertical and geographic end markets, references from existing customers
could be similarly important. Any of these
consequences could have a material adverse effect on our business, financial condition and
results of operations.
OurCertain Optimusof System™
our products makes use of
lithium-ion battery cells, which, if not appropriately managed and controlled, have occasionally been observed to catch
fire or vent smoke
and flames. If such events occur with our products, we could face liability associated with our warranty, for damage
or injury, adverse
publicity and a potential safety recall, any of which would adversely affect our business, prospects, financial condition
and operating
results.
The
battery packs in certain
of our Optimus™ droneproducts use lithium-ion cells, which have been used for years in laptop computers and cell phones. On
occasion, if not appropriately
managed and controlled, lithium-ion cells can rapidly release the energy they contain by venting smoke
and flames in a manner that can
ignite nearby materials. Highly publicized incidents of laptop computers and cell phones bursting into
flames have focused consumer attention
on the safety of these cells. These events also have raised questions about the suitability of
these lithium-ion cells for automotive
applications. There can be no assurance that a field failure of our battery packs will not occur,
which would damage the vehicle or lead
to personal injury or death and may subject us to lawsuits. Furthermore, there is some risk of
electrocution if individuals who attempt
to repair battery packs on our vehicles do not follow applicable maintenance and repair protocols.
Any such damage or injury would likely
lead to adverse publicity and potentially a safety recall. Any such adverse publicity could adversely
affect our business, prospects,
financial condition and operating results.
The current generation
of our FullMAX, Optimus System™ and Iron
Drone Raider™certain technology platforms have only been developed in the last several years and will continue to evolve. Deploying and operating
operating our technology is complex and, until recently, had been done primarily by a small number of customers. As the size, complexity
and scope
of our deployments grow we have been able to test product performance at a greater scale and in a variety of new geographic
settings and
environmental conditions. As the number, size and complexity of our deployments grow and we deploy our technology platforms
for new applications
in new critical infrastructure industries, we may encounter unforeseen operational, technical and other challenges,
some of which could
cause significant delays, trigger contractual penalties, result in unanticipated expenses, and/or damage to our reputation,
each of which
could materially and adversely affect our business, financial condition and results of operations.
Our future growth depends
on penetrating new markets, adapting existing
products to new applications and new environments, and introducing new products and services
that achieve market acceptance. We plan to
incur substantial research and development costs as part of our efforts to design, develop
and commercialize new products and services
and enhance existing products. For example, we will incur research and development costs to
improve the functionality of our acoustic
DAA solution configuration in certain environments, in addition to integrating new payloads
to broaden the functionality of our Optimus
System™products and Iron Drone Raider™.services. Further, our research and development programs may not produce successful results,
and our
new products and services may not achieve market acceptance, create additional revenue or become profitable, which could materially
harm harm
our business, prospects, financial results and liquidity.
We depend, in part, on the performance of Eric Brock, our Chief Executive
Officer and President,President; Neil Laird, our Interim Chief Financial Officer, TreasurerOfficer and Secretary,Treasurer; and Patrick Huston, our Chief Operating Officer, General
Counsel and Secretary; Markus Nottelmann, Chief Executive Officer
of Ondas Networks,Networks; Menashe Shahar, the Chief Technology Officer of Ondas Networks,
Networks; Oshri Lugassi the Co-Chief Executive Officer of OAS,
OAS; Meir Kliner the President of OAS; and YishayAmit CurelaruBigler, the Chief Financial
Officer of AiroboticsOAS to operate and grow our business. The loss
of any of Messrs. Brock, Laird, Huston, Nottelmann, Shahar, Lugassi, Kliner
or CurelaruBigler could negatively impact our ability to execute our business
strategies. Although we have entered into employment agreements
with Messrs. Brock, Laird, Huston, Nottelmann, Shahar, Lugassi, Kliner and Curelaru,
Bigler, we may be unable to retain them or replace any of them
if we lose their services for any reason.
Our
future success will
also depend on our ability to attract, retain and motivate highly skilled management, product development, operations,
sales, technical
and other personnel in the United StatesU.S. and abroad. Even in today’s economic climate, competition for these types
of personnel is intense, particularly in Silicon Valley. intense.
Given the lengthy sales cycles with utilities and deployment periods of our networking
platform and solutions, the loss of key personnel
at any time could adversely affect our business, financial condition or results of operations.
The development and use of artificial intelligence technologies presents risks that may affect our business, operations, and competitive position.
We incorporate machine learning and artificial intelligence capabilities into certain of our products and solutions and may seek to expand the use of AI in our offerings in the future. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect our business. AI algorithms and training methodologies may be flawed. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. Further, incorporating AI could give rise to litigation risk and risk of non-compliance and unknown cost of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed, including potential liability for breaching intellectual property or privacy rights or laws.
Additionally, leveraging AI capabilities to potentially improve internal functions and operations presents further risks and challenges. The use of AI to support business operations carries inherent risks related to data privacy and security, such as intended, unintended, or inadvertent transmission of proprietary, sensitive or export-controlled information, as well as challenges related to implementing and maintaining AI tools. Our competitors might move faster than us to gain efficiencies by incorporating AI into their design and development processes, and our products and/or cost structure could become less competitive as a result. The rapid evolution of AI will require the application of resources by us to develop, test and maintain our products, services and operations to help ensure that AI is implemented ethically in order to minimize unintended, harmful impact. Our competitors may be faster or more successful than we are in incorporating AI and other disruptive technology into their offerings, which would impair our ability to compete successfully.
The regulatory framework for AI technologies is rapidly evolving. Existing laws and regulations may be interpreted in ways that could affect the operation of our AI technologies, and federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations applicable to AI technologies. The cost to comply with such laws, regulations, and guidance, or to adjust our business plans based on changes to how such laws are enforced, could be significant and would increase our operating expenses or impact our ability to use, procure or commercialize AI technologies. Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations.
We do not control
certain aspects of the manufacturing process.
Our
reliance on a small number of manufacturers reduces our control over the manufacturing process, exposing us to risks, including reduced
control over quality assurance, product costs and product supply including delays in transportation and delivery. Any manufacturing disruption
by our usual manufacturers could impair our ability to fulfill orders. We may be unable to manage our relationships with our usual manufacturers
effectively as they may experience delays, disruptions, capacity constraints or quality control problems in their manufacturing operations
or otherwise fail to meet our future requirements for timely delivery. Similarly, to the extent that our usual manufacturers procure materials
on our behalf, we may not benefit from any warranties received by our usual manufacturers from the suppliers or otherwise have recourse
against the original supplier of the materials or even the manufacturer. In such circumstances, if the original supplier were to provide
us or our usual manufacturers with faulty materials, we might not be able to recover the costs of such materials or be compensated for
any damages that arise as a result of the inclusion of the faulty components in our products.
One
or more of our usual manufacturers may suffer an interruption in its business, or experience delays, disruptions or quality control problems
in its manufacturing operations, or seek to terminate its relationship with us, or we may choose to change or add additional manufacturers
for other reasons. Additionally, we do not have long-term supply agreements with our usual manufacturers. As a result, we may be unable
to renew or extend our agreement on terms favorable to us, if at all. Although the manufacturing services required to manufacture and
assemble our products may be readily available from a number of established manufacturers, it may be risky, time consuming and costly
to qualify and implement new manufacturer relationships.
Any
of these risks could have a material adverse effect on our business, financial condition and results of operations.
In
order to produce our Optimus System™
products and Iron Drone Raider™services and related safety systems, we obtain certain hardware
components, as well as subsystems and systems from a limited
group of suppliers, some of which are sole source suppliers. We do not
have long-term agreements with any of these suppliers that obligate
them to continue to sell components, subsystems, systems or
products to us. Our reliance on these suppliers involves significant risks
and uncertainties, including whether our suppliers will
provide an adequate supply of required components, subsystems, or systems of sufficient
quality, will increase prices for the
components, subsystems or systems and will perform their obligations on a timely basis.
Because we currently do
not have long-term supply contracts with guaranteed
pricing, we are subject to fluctuations in the prices of the raw materials, parts
and components and equipment we use in the production
of our Optimus System™products and Iron Drone Raider™.services. Substantial increases in the prices for such raw materials,
components and
equipment would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through
increased prices.
Any attempts to increase prices of our automated data solutions in response to increased costs could be viewed negatively
by our customers
and could adversely affect our business, prospects, financial condition and operating results.
Our past acquisitions, as well as any acquisitions we may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.
We intend to consider additional potential strategic transactions, which could involve acquisitions of businesses or assets, joint ventures or investments in businesses, products or technologies that expand, complement or otherwise relate to our current or future business. While we intend for our acquisitions to improve our competitiveness and profitability, we cannot be certain that our past or future acquisitions will be accretive to earnings or otherwise meet our operational or strategic expectations. Special risks, including accounting, regulatory, compliance, information technology or human resources issues may arise in connection with, or as a result of, the acquisition of an existing company, including the assumption of unanticipated liabilities and contingencies, difficulties in integrating acquired businesses, possible management distractions or the inability of the acquired business to achieve the levels of revenue, income, productivity or synergies we anticipate or otherwise perform as we expect on the timeline contemplated. We are unable to predict all the risks that could arise as a result of our acquisitions.
If the performance of an acquired business varies from our projections or assumptions or if estimates about the future profitability of an acquired business change, our revenues, earnings or other aspects of our financial condition could be adversely affected. We may also experience difficulties in connection with integrating any acquired companies into our existing businesses and operations, including our existing infrastructure and information technology systems. The infrastructure and information technology systems of acquired companies could present issues that we were unable to identify prior to the acquisition and could adversely affect our financial condition and results. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or equity securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of product lines or businesses. Also, such activities could result in one-time charges and expenses and have the potential to either dilute the interests of our existing shareholders or result in the issuance of, or assumption of debt.
We may pursue additional strategic transactions
in the future, which could be difficult to implement, disrupt our business or change our business profile significantly.
We intend to consider additional
potential strategic transactions, which could involve acquisitions of businesses or assets, joint ventures or investments in businesses,
products or technologies that expand, complement or otherwise relate to our current or future business. We may also consider, from time
to time, opportunities to engage in joint ventures or other business collaborations with third parties to address particular market segments.
Should our relationships fail to materialize into significant agreements, or should we fail to work efficiently with these companies,
we may lose sales and marketing opportunities and our business, results of operations and financial condition could be adversely affected.
These activities, if successful,
create risks such as, among others: (i) the need to integrate and manage the businesses and products acquired with our own business and
products; (ii) additional demands on our resources, systems, procedures and controls; (iii) disruption of our ongoing business; (iv) potential
unknown or unquantifiable liabilities associated with the target company; and (v) diversion of management’s attention from other
business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or
equity securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition
or disposition of product lines or businesses. Also, such activities could result in one-time charges and expenses and have the potential
to either dilute the interests of our existing shareholders or result in the issuance of, or assumption of debt. Such acquisitions, investments,
joint ventures or other business collaborations may involve significant commitments of financial and other resources. Any such activities
may not be successful in generating revenue, income or other returns, and any resources we committed to such activities will not be available
to us for other purposes. Moreover, if we are unable to access the capital markets on acceptable terms or at all, we may not be able to
consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability to take advantage of
growth opportunities or address risks associated with acquisitions or investments in businesses may negatively affect our operating results.
Additionally, anywe may not realize all of the synergies
we anticipate from past and potential future acquisitions. Among the synergies that we may expect to realize are cross-selling opportunities
to our existing customers, as well as operational efficiencies. Variances from these or other assumptions or expectations could adversely
affect our financial condition and results of operations. Any impairment
of goodwill or other intangible assets acquired in an acquisition
or in an investment, or charges to earnings associated with any acquisition
or investment activity, may materially reduce our earnings.
Future acquisitions or joint ventures may not result in their anticipated
benefits, and we may not be able to properly integrate acquired
products, technologies or businesses with our existing products and operations
or successfully combine personnel and cultures. Failure
to do so could deprive us of the intended benefits of those acquisitions. Moreover, if we are unable to access the capital markets on
acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital
structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments in businesses
may negatively affect our operating results.
In December 2024,2025, the Company bypassedperformed thea qualitative analysis and
proceededconcluded directlythere towere ano quantitative analysis. The Company engaged a third-party service provider to carry out a valuationindications of theimpairment. OAS
reporting unit. Using a discounted cash flow model and market approach model with updated forecasts for revenue and cash flows, it was
determined that the fair value of the reporting unit was higher than the carrying value asAs of December 31, 2024, and no further impairment
to2025, goodwill was necessaryapproximately as$251.8 ofmillion. DecemberRefer 31, 2024. Seeto Note 5 – Goodwill and Business Acquisition 6
of the accompanying Consolidated
Financial Statements for further information regarding the impairment of goodwill.
Since Airoboticsmany isof our subsidiaries are located in Israel,
the Company has considered various
ongoing risks relating to the military operation and related matters. All of the Company’s workforce
in Israel returned to work
and inventory production restraints have eased. 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™products and the Iron Drone Raider™services and to ship them outside
outside of Israel. To date, we have not had material disruptions to our ability to produce, manage and deliver products and services to customers
customers as our U.S. teams have supported our ongoing operations in Israel and the Middle East; however, a prolonged war or an escalation
of the
current conditions in Israel could materially adversely affect our business, financial condition, and results of operations. Due
to the
ongoing and evolving nature of these events, the extent of the adverse effect on our business operations is still unknown.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
Global credit and financial markets have experienced extreme disruptions in recent years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that renewed deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, costlier and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon implementing business initiatives.
Uncertainty about current and future global economic conditions may cause governments, including the U.S. government, which is a target customer, other customers and businesses to modify, defer or cancel purchases in response to tighter credit, decreased cash availability and declining consumer confidence. Accordingly, future demand for our products could differ materially from our current expectations. Additionally, if customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. Any inability of current and/or potential customers to pay us for our products may adversely affect our earnings and cash flow. In addition, if our suppliers face challenges in obtaining credit, selling their products, or otherwise in operating their businesses or remaining solvent, they may become unable to offer the materials we use to manufacture our products.
As a global company, our performance is affected by global economic, market and industry conditions as well as geopolitical issues and other conditions with global reach. In recent years, concerns about the global economic outlook, inflation and increased interest rates have adversely affected market and business conditions in general. Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and operating expenses. Further, bank failures and other adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have led to market-wide liquidity problems. Sustained or worsening of global economic conditions and geopolitical issues may increase our cost of doing business, materially disrupt our supply chain operations, cause our customers to reduce or delay spending and intensify pricing pressures. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, demand for our products, and our business, financial condition and results of operations, could be adversely affected.
Our
products and services and our utility customers are subject to
federal, state, local and foreign laws and regulations. Laws and regulations
applicable to us and our products govern, among other things,
the manner in which our products communicate, and the environmental impact
and electrical reliability of our products. Additionally, our
critical infrastructure customers are often regulated by national, state
and/or local bodies, including public utility commissions, the
Department of Energy, the Department of Energy,War, the Federal Energy Regulatory Commission, the FAA,
the FCC, Federal RailRailroad Association, Administration,
Israeli Defense Export Controls Agency of the Ministry of Defense and other bodies. Prospective customers
may be required to gain approval
from any or all of these organizations prior to implementing our products and services, including specific
permissions related to the
cost recovery of these systems. Regulatory agencies may impose special requirements for implementation and
operation of our products,
which may result in unforeseen delays. We may incur material costs or liabilities in complying with government
regulations applicable
to us or our utility customers. In addition, potentially significant expenditures could be required in order to
comply with evolving regulations
and requirements that may be adopted or imposed on us or our utility customers in the future. Such costs
could make our products less
economical and could impact our utility customers’ willingness to adopt our products, which could materially
and adversely affect
our revenue, results of operations and financial condition.
Failure to obtain necessary regulatory approvals
from the FAA
or other governmental agencies, or limitations put on the use of small UAS in response to public privacy and other concerns,
may prevent
us from expanding the sales of our drone solutions to industrial and government customers in the United States.U.S.
The regulation of small UAS for commercial use
in the United StatesU.S. is undergoing substantial change and the ultimate treatment is uncertain.
On February 14, 2012, the FAA Modernization
and Reform Act of
2012 was enacted, establishing various deadlines for the FAA to allow expanded use of small UAS for both public and
commercial applications.
On June 21, 2016, the FAA released its final rules regarding the routine use of certain small UAS (under 55 pounds)
in the U.S. National
Airspace System pursuant to the act (the “Part 107 Rules”). The Part 107 Rules, which became effective
in August 2016, provided
safety regulations for small UAS conducting non-recreational operations and contain various limitations and restrictions
for such operations,
including a requirement that operators keep UAS within visual-line-of-sight and prohibiting flights over unprotected
people on the ground
who are not directly participating in the operation of the UAS. On December 28, 2020, the FAA announced final rules
requiring remote identification
of drones and allowing operators of small drones to fly over people and at night under certain conditions. On June 8, 2021, the FAA announced
the formation of an Aviation Rulemaking Committee (“ARC”) to develop new rules to further define regulations for the operations
of UAS Beyond Visual Line-of-Site (“BVLOS”). The timing of additional rulemaking is uncertain as is the outcome of the still
developing regulatory environment related to the operation of small UAS. Additionally, recent focus on reducing the size of the federal
workforce could negatively impact the availability of resources within the FAA which could delay our progress towards certification.
Additionally, in December 2019, the FAA proposed rules regarding remote UAS identification, which became the final rule on September 16, 2023. In April 2021, the final rule for the operation of small UAS over people went into effect, which permits routine operations of small, uncrewed aircraft over people, moving vehicles, and at night under certain conditions. The FAA has also introduced proposed rules for a new policy regarding the airworthiness certification of a newly created special class of UAS, which rules are not yet in effect. On June 8, 2021, the FAA announced the formation of an Aviation Rulemaking Committee (“ARC”) to develop new rules to further define regulations for the operations of UAS Beyond Visual Line-of-Site (“BVLOS”). The timing of additional rulemaking is uncertain as is the outcome of the still developing regulatory environment related to the operation of small UAS. Additionally, recent focus on reducing the size of the federal workforce could negatively impact the availability of resources within the FAA which could delay our progress towards certification.
Substantially
all our current wireless
networking products depend on the availability and are subject to the use of licensed radio frequencies regulated
by the FCC in the United States.U.S.
As
a manufacturer of consumer
products, we are subject to significant government regulations, restrictions and requirements, including, in
the United States,U.S., those issued under
the Consumer Products Safety Act, as well as those issued under product safety and consumer protection
statutes in our international markets.
Failure to comply with any applicable product safety or consumer protection regulation could result
in sanctions that could have a negative
impact on our business, financial condition and results of operations.
Our business is
subject to federal,
state and international laws regarding data protection, privacy, information security and informationnational security, as well as confidentiality
obligations under various agreements, and our actual or perceived failure to comply with such obligations could damage our reputation,
expose us to litigation risk and adversely affect our business and operating results.
In connection with our
business, we receive, collect, process and retain
certain personal and confidential customer information. As a result, we are subject
to increasingly rigorous federal, state and international
laws regarding privacy and data protection. Personal privacy, data protection
and information security are significant issues in the United
StatesU.S. and the other jurisdictions where we offer our products and services. The
regulatory framework for privacy and security issues
worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable
future. Our handling of data is subject to a variety
of laws and regulations, including regulation by various government agencies, including
the United States Federal Trade Commission (“FTC”)
and various state, local and foreign bodies and agencies. We also execute
confidentiality and data protection agreements with various
parties under which we are required to protect their confidential information.
The United StatesU.S. federal and various
state and foreign governments
have adopted or proposed limitations on the collection, distribution, use and storage of personal information
of individuals, including
end-customers and employees. In the United States,U.S., the FTC and many state attorney generals are applying federal and
state consumer protection
laws to the online collection, use and dissemination of data. Additionally, many foreign countries and governmental
bodies, and other
jurisdictions in which we operate or conduct our business, have laws and regulations concerning the processing of personal
information information
obtained from their residents or by businesses operating within or processing personal information that falls within their
jurisdiction. jurisdiction.
These laws and regulations often are more restrictive than those in the United StatesU.S. in certain areas, whereas U.S. laws may impose
requirements requirements
not included in their international counterparts. Such laws and regulations may, for example, require companies to implement
new privacy
and security policies and practices, permit individuals to access, correct and delete personal information stored or maintained
by such
companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’
consent to use personal information for certain purposes.
We
also expect that there
will continue to be new proposed laws, regulations and industry standards concerning privacy, data protectionprotection, information security and
informationnational security in the United States,U.S., the European Union and other jurisdictions, and we cannot yet determine the impact of such
future laws,
regulations and standards may have on our business. ForWe are subject to heightened national security-based data restrictions and evolving
U.S. enforcement trends, which may impose potential compliance costs, restrictions on data movement, and risks tied to defense-related
or export-controlled data. Also, for example, the California Consumer Privacy Act, which became effective
in 2020, provides new data privacy
rights for consumers and new operational requirements for companies. Additionally, we expect that existing
laws, regulations and standards
may be interpreted differently in the future. There remains significant uncertainty surrounding the regulatory
framework for the future
of personal data transfers from the European Union to the United StatesU.S. with regulations such as the recently
adopted General Data Protection Regulation
(“GDPR”), which imposes more stringent European Union data protection requirements,
provides an enforcement authority, and
imposes large penalties for noncompliance. Future laws, regulations, standards and other obligations,
including the adoption of the GDPR,
as well as changes in the interpretation of existing laws, regulations, standards and other obligations
could impair our ability to collect,
use or disclose information relating to individuals, which could decrease demand for our products,
require us to restrict our business
operations, increase our costs and impair our ability to maintain and grow our customer base and increase
our revenue.
Management's Discussion & Analysis (MD&A)
New heading “Non-GAAP Measures”
Removed heading “Ondas Networks Segment”
Removed heading “Cost of goods sold”
Removed heading “Operating Expenses”
Removed heading “Total Other Income (Expense), net”
Largest changes
“Acquired intangible assets. During 2025, we completed multiple acquisitions that were accounted for as business combinations under ASC 805. Business combination accounting requires significant judgment in estimating the fair value of assets acquired, liabilities assumed, noncontrolling interests, redeemable noncontrolling interests, and goodwill as of the acquisition date. …”see in full comparison
“Impairment of long-lived assets, including goodwill. Goodwill is not amortized but is tested for impairment at least annually and whenever events or changes in circumstances indicate that impairment may exist. As of December 31, 2025, goodwill represented a significant portion of our total assets. Our goodwill impairment analysis requires judgment in identifying reporting units and assessing qualitative and quantitative impairment indicators.”see in full comparison
We expect to fund our operations for the next twelve months from the filing date of this Annual Report on Form 10-K from the cash on hand as of December 31,see in full comparison2024,2025, proceeds from the20252026 financing activity 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 March 12, 2025, the date the Consolidated Financial Statements were available to be issued.
“Impairment of Long-Lived Assets. Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability. …”see in full comparison
“The carrying values of property and equipment and other finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability. This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held and used. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (83)
General
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide material information relevant to an assessment of the Company’s financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources. This MD&A is designed to focus specifically on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition. This includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that are reasonably likely based on management’s assessment to have a material impact on future operations.
Ondas, Inc. (together with its subsidiaries, the “Company,” “Ondas,” “we,” “us,” or “our”) is a defense, security, and critical infrastructure technology company organized around three business units: Ondas Autonomous Systems Inc. (“OAS”), Ondas Networks Inc. (“Ondas Networks”), and Ondas Capital Inc. (“Ondas Capital”). Through these business units, we develop and commercialize autonomous systems, private wireless networking technologies, and strategic investment and partnership initiatives that support the scaling and adoption of mission-critical solutions for governments and industrial customers.
We manage these business units as distinct operating platforms aligned to complementary end markets and customer requirements. Our approach is designed to combine advanced autonomy, secure communications, and integrated operating capabilities to help customers improve situational awareness, operational resilience, and safety and security outcomes in complex, regulated, and often contested environments.
We operate in two reportable segments, Ondas Networks and OAS. We organize our operating segments based primarily on the nature of the products, solutions and services offered. Operational results for Ondas Capital are not material for the year ended December 31, 2025 and have been included in the corporate results with Ondas Inc. For additional information regarding our reportable segments, refer to Note 15 in the accompanying Consolidated Financial Statements.
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 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
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.
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.
Comparison of Results for the Year endedEnded December
31, 2025 and 2024 compared to year
ended December 31, 2023
Revenues
Revenue decreased by $8,498,736 to $7,192,694 for the year ended December
31, 2024 from $15,691,430 for the year ended December 31, 2023. Revenues during the year ended December 31, 2024 included $2,796,178 for
products, $2,491,955 for service and subscriptions, and $1,904,561 for development agreements, primarily with Siemens. Revenues during
the same period in 2023 included $12,102,388 for products, $2,126,560 for service and subscriptions, and $1,462,482 for development agreements
primarily with Siemens. The decrease in our revenues was primarily the result of a decrease of approximately $5,221,000 in product sales,
mainly to Siemens, at Ondas Networks, as further orders have been delayed by the railroads, as they work on implementing the 900 MHz band
network; a decrease of approximately $4,085,000 in decreased product sales at OAS, who had multi-drone orders during the year ended December
31, 2023, but no comparable sales until the second half of 2024. These decreases were offset by an increase of approximately
$344,000 in maintenance, service, support, and subscriptions revenue and an increase of approximately $33,000 in development
revenue at OAS due to new orders at Airobotics and American Robotics. Further offset by an increase of approximately $21,000 in service
revenue at Ondas Networks, and an increase of approximately $409,000 in development revenue to Siemens, related to a new development
agreement at Ondas Networks.
Cost of goods sold
Cost of goods sold decreased by $2,462,745 to $6,847,511 for the year
ended December 31, 2024 from $9,310,256 for the year ended December 31, 2023. The decrease in cost of goods sold was primarily a result
of decreased revenue for the year ended December 31, 2024, as compared to the year ended December 31, 2023. Cost of goods sold at OAS
did not decrease in the same ratio as revenue because of fixed manufacturing costs.
Gross profit
Our gross profit decreased by $6,035,991 to $345,183 for the year ended
December 31, 2024 compared to $6,381,174 for the year ended December 31, 2023 based on the changes in revenues and cost of goods sold
as discussed above. Gross profit for the years ended December 31, 2024 and 2023 was 5% and 41%, respectively. The decrease in gross margin
of 36% is due to the change in the mix of revenues during the year ended December 31, 2024, which included development projects with lower
gross margins as compared to product revenue with higher gross margins during the year ended December 31, 2023, as well as certain fixed
costs related to OAS delivery.
Operating Expenses
Our principal operating costs
include the following items as a percentage of total operating expenses:
OperatingRevenue, expensesnet by reportable
segment for the
year years ended December 31, 2025 and 2024 decreased by $11,155,987, or 24%,are as a result of the following itemsfollows:
Revenue, net increased $43.5 million to $50.7 million for the year ended December 31, 2025 from $7.2 million for the year ended December 31, 2024. Revenues in our OAS segment increased by $44.5 million, primarily due to $26.9 million in revenue generated by companies acquired during the year. OAS revenue also increased by $17.6 million attributable to Airobotics, of which approximately $16.4 million relates to product sales and approximately $1.2 million relates to service revenue from sales of our Optimus System™ and Iron Drone Raider™. These increases were offset by a decrease of $952 thousand in Ondas Networks revenue, primarily related to decreased development revenue.
Cost of goods sold increased to $30.6 million for the year ended December 31, 2025, from $6.9 million for the year ended December 31, 2024. The $23.7 million increase was primarily due to activity from acquisitions and an increase in revenues discussed above, in addition to increased labor and material costs.
Gross margin percentage increased to 40% for the year ended December 31, 2025, compared to 5% for the year ended December 31, 2024. The 35% increase in gross margin percentage is primarily due to the more favorable mix of revenue, with significant increases in revenue generated by product sales offsetting fixed service delivery costs at OAS.
General and administrative expenses (“G&A”) increased $27.3 million, or 159%, to $44.5 million for the year ended December 31, 2025, from $17.2 million for the year ended December 31, 2024. This increase is primarily due to (i) an increase of $11.7 million in stock-based compensation for awards granted during the year; (ii) an increase of $6.5 million in human resource costs, including benefits from increased headcount as we build out our management team; (iii) an increase of $4.9 million in professional fees and consulting costs primarily related to legal, accounting and due diligence fees associated with the acquisitions completed during the year; and (iv) an increase of $4.7 million related to general and administrative expense attributable to companies acquired during the year. These increases were partially offset by a decrease of approximately $435 thousand primarily in rent and facilities charges.
Sales and marketing expenses (“S&M”) increased $7.9 million, or 147%, to $13.2 million for the year ended December 31, 2025, from $5.3 million for the year ended December 31, 2024. This increase is primarily due to (i) an increase of $4.1 million in human resource costs, including benefits from increased headcount and an increase in taxable fringe benefit expense; (ii) an increase of $1.3 million in other S&M costs primarily related to increased marketing and advertising costs, use of third-party contractors and consultants, and increased attendance at trade shows and other marketing events; and (iii) an in increase of $2 million related to S&M attributable to companies acquired during the year. The remaining increase of $567 thousand is related to increased stock-based compensation for awards granted during the year and increased travel and entertainment costs.
Research and development expenses (“R&D”) increased $8.4 million, or 67%, to $20.9 million for the year ended December 31, 2025, from $12.5 million for the year ended December 31, 2024, of which $3 million related to companies acquired during the year ended December 31, 2025. Other increases in R&D include, (i) an increase of $2.8 million in human resource costs, including benefits from increased headcount, and (ii) an increase of $1.8 million in other R&D costs primarily related to increased cloud-based software expenses, use of third-party consultants and allocation of general expenses to research and development, and a one-time settlement of all amounts due to a vendor under previous development and manufacturing agreements, which reduced other R&D costs for the year ended December 31, 2024. The remaining increase of $862 thousand is related to increased stock-based compensation for awards granted during the year and increased travel and entertainment costs.
Total other expense, net increased $71.1 million, or 2,093%, to $74.5 million for the year ended December 31, 2025, from $3.4 million for the year ended December 31, 2024. Total other expense, net increased primarily as a result of the net loss of $82.2 million related to the change in fair value of our warrant liability, an increase of approximately $2.9 million in interest expense, amortization of debt discount and debt issuance costs, and an increase in other expense of approximately $299 thousand from the change in fair value of government grant liability. This was offset by the increase of approximately $14.3 million in interest and dividend income and unrealized gain on our equity security investments from the cash raised from our equity offerings consummated in 2025.
The Company recorded income tax expense of $488 thousand for the year ended December 31, 2025, and an income tax provision of $0 for the year ended December 31, 2024. The 2025 income tax expense is attributable to earnings in foreign jurisdictions.
Net loss increased $95.4 million, or 251%, to $133.4 million for the year ended December 31, 2025, from $38 million for the year ended December 31, 2024. For the year ended December 31, 2025, $1.4 million of net loss was attributable to noncontrolling interests (“NCI”), related to the subsidiaries in which we acquired less than 100% ownership during 2025. These subsidiaries incurred operating losses due to early-stage operating performance. Net loss per share of common stock basic and diluted was $(0.62) and $(0.61) for the years ended December 31, 2025 and 2024, respectively.
Non-GAAP Measures
As required by the rules of the Securities and Exchange Commission (“SEC”), we provide a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures. These reconciliations are set forth in the tables below.
We believe that adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is a useful supplemental measure for evaluating our operating performance and period to period trends because it eliminates the impact of items that primarily reflect our capital structure, tax position, non-cash accounting charges, acquisition-related transaction costs, and other items that management does not consider indicative of ongoing operating performance. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income (loss) and other measures prepared in accordance with GAAP. Adjusted EBITDA removes the effects of interest and financing-related items, depreciation and amortization, income taxes, stock-based compensation, acquisition-related expenses, and other non-operating gains and losses. Management believes that excluding these items enhances comparability across periods and facilitates analysis of underlying operating trends. Other companies may calculate similarly titled non-GAAP measures differently, and therefore our Adjusted EBITDA may not be comparable to measures used by other companies.
Cash Operating Expense is a non-GAAP financial measure that represents total operating expenses excluding depreciation, amortization of intangible assets, and stock-based compensation. The most directly comparable GAAP measure to Cash Operating Expense is total operating expenses. Management believes Cash Operating Expense provides useful supplemental information by isolating recurring, cash-based operating costs and facilitating meaningful period-to-period comparisons. Management uses this measure for internal cost management, budgeting, and liquidity planning, and to evaluate operating trends exclusive of non-cash accounting charges. Cash Operating Expense should be considered in addition to, and not as a substitute for, total operating expenses prepared in accordance with GAAP.
Management uses Adjusted EBITDA and Cash Operating Expense, together with GAAP results, in making operating and planning decisions and in evaluating the Company’s ongoing performance.
The decrease in operating
expenses was primarily due to:
Operating Loss
As a result of the foregoing,
our operating loss decreased by $5,119,996, or 13%, to $34,609,304 for the year ended December 31, 2024, compared with $39,729,300 for
the year ended December 31, 2023. Operating loss decreased primarily as a result of a decrease in operating expenses as described above,
partially offset by decreased revenue and gross margin for the year ended December 31, 2024.
Total Other Income (Expense), net
Total other expense, net,
decreased by $1,717,119, to $3,398,453 for the year ended December 31, 2024, compared with $5,115,572 for the year ended December 31,
2023. Total other expense, net decreased primarily as a result of a decrease of approximately $574,000 from the change in fair value of
government grant liability; a decrease in interest expense of approximately $534,000 primarily related to amortization of debt discount
and debt issuance costs; an increase in interest income of approximately $111,000 due to interest earned on cash deposits; a decrease
of approximately $161,000 in other expense primarily related to an impairment of deferred offering costs of approximately $116,000 related
to the termination of the ATM Agreement during the year ended December 31, 2023; and a decrease in foreign exchange loss, net of approximately
$337,000.
Net Loss
As a result of the net effects
of the foregoing, net loss decreased by $6,837,115, or 15%, to $38,007,757 for the year ended December 31, 2024, compared with $44,844,872
for the year ended December 31, 2023. Net loss per share of common stock, basic and diluted, was $(0.61) for the year ended December 31,
2024, compared with $(0.88) for the year ended December 31, 2023.
The principal use of cash
in operating activities for the year ended December 31, 2024,2025, was to fund the Company’s current expenses primarily related to operating
activities necessary to allow us to service and support customers.customers for the year ended December 31, 2025.
The decreaseincrease in cash flows
used in operating activities of $549,896$5.3 wasmillion primarily duerelates to aan decreaseincrease in net loss of approximately$95.4 $6,837,000,million, of which approximately $96.6
$1,409,000million relatesrelated to non-cash charges and credits, includingwhich depreciation,primarily includes investment gains, change in fair value of warrant liability,
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; approximately
$4,011,000 relates to non-cash impairment of long-term assets; offset by changes in operating assets and liabilities
resulting in a cash
outflow of approximately $867,000.$6.5 million for the year ended December 31, 2025.
The increase in cash flows used in investing activities of $258.4 million primarily relates to cash paid, net of cash acquired, for acquisitions of $206.8 million, purchases of long-term equity investments of $35.6 million, and purchases of short-term investments of $15.4 million.
The increase in cash provided by financing activities of $812.5 million primarily relates to the net proceeds of approximately $829.5 million received from equity offerings consummated in 2025, during the year ended December 31, 2025, compared to the net proceeds received from the sale of Common Stock in the Company of approximately $7.3 million during the year ended December 31, 2024, combined with proceeds of approximately $1.2 million from the exercise of warrants in OAS, the increase in proceeds from the exercise of stock options and warrants of approximately $30.8 million during the year ended December 31, 2025. These increases were partially offset by the decrease in net proceeds of $37.3 million from the issuance of notes payable and convertible notes payable and a decrease in net proceeds of $4.4 million from the sale of preferred stock in Ondas Networks during the year ended December 31, 2024.
The increase in cash flows
used in investing activities of $2,267,949, relates to an increase of approximately $1,452,000 in payments made for purchase of equipment,
software intangibles and patent costs, and a decrease of approximately $47,000 from net of proceeds from sale of equipment, combined with
a decrease of approximately $1,049,000 for cash acquired with the Airobotics acquisition in the year ended December 31, 2023, partially
offset by the decrease of approximately $280,000 for cash paid for asset acquisitions in the year ended December 31, 2023.
The increase in cash provided
by financing activities of $31,448,470 was due to an increase in net proceeds from convertible debt of approximately $27,687,000, increase
in net proceeds from notes payable of approximately $1,422,000, increase in proceeds from exercise of options and warrants of approximately
$18,000, increase in net proceeds of approximately $110,000 from government grants, and approximately $7,304,000 in net proceeds from
the sale of the Company’s Common Stock and warrants. Combined with a decrease of approximately $4,355,000 in cash payments on the
2022 Convertible Exchange Notes and a decrease of approximately $1,140,000 in cash payments for Airobotics related debt. This was partially
offset by a decrease in net proceeds of approximately $10,317,000 from the sale of noncontrolling interest in Ondas Networks and an increase
of approximately $271,000 in cash payments on the government grants liability.
We have incurred losses since
inception and have funded our operations primarily through debt and the sale of capital stock. OnAs of December 31, 2024,2025, we had an accumulated
deficit of approximately$368.4 $236,368,000.million. On December 31, 2024,2025, we had net long-term borrowings outstanding of approximately $18,057,000
net$3.8 of debt discount and issuance costs of approximately $1,682,000million and short-term
borrowings outstanding of approximately $38,747,000,
net$9.4 million, including accrued interest of debt$721 discount and issuance costs of approximately $5,825,000.thousand. On December 31, 2024,2025, we had cash,
cash equivalents, and restricted cash of approximately
$29,999,000 $594.4 million and a working capital deficit of approximately$544 $3,056,000.million. We had approximately$38.7 $33,470,000million of net
cash flows used in operations
for the year ended December 31, 2024.2025.
What changed in the latest 10-Q
Risk Factors
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, 2025, filed with the Securities and Exchange Commission on March 30, 2026 (the “2025 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 2025 Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Comparison of Results for the Six Months Ended June 30, 2026 and 2025”
Largest changes
“Comparison of Results for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“Beginning in the period ended June 30, 2026, the Company revised its calculation of Adjusted EBITDA and Adjusted Cash Operating Expense to exclude changes in the fair value of contingent consideration and other acquisition related obligations. These amounts reflect periodic remeasurement adjustments required under U.S. GAAP and are primarily driven by changes in estimates and assumptions related to future earn-out payments. …”see in full comparison
The Company deconsolidated Ondas Networks Inc. (“Ondas Networks”) effective January 16, 2026 and no longer includes the assets, liabilities, and results of operations of Ondas Networks in its consolidated financial statements subsequent to that date. Additionally, our results of operations for the three and six months endedsee in full comparisonMarch 31,June 30, 2026 have been affected by recent acquisitions. For additionalinformationinformation, see Note5-5,GOODWILLGoodwillANDandACQUISITIONS.Acquisitions – of Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
Adjusted Cash Operating Expense is a non-GAAP financial measure that represents total operating expenses excluding depreciation, amortization of intangible assets, acquisition-related expenses, change in fair value of contingent consideration and other acquisition related obligations, and stock-basedsee in full comparisoncompensation.compensation and expense. The most directly comparable U.S. GAAP measure to Adjusted Cash Operating Expense is total operating expenses. Management believes Adjusted Cash Operating Expense provides useful supplemental information by isolating recurring, cash-based operating costs and facilitating meaningful period-to-period comparisons. Management uses this measure for internal cost management, budgeting, andliquidity planning, andto evaluate operating trends exclusive of non-cash accounting charges. Adjusted Cash Operating Expense should be considered in addition to, and not as a substitute for, total operating expenses prepared in accordance with U.S. GAAP.
“Cost of goods sold increased to $73.1 million for the six months ended June 30, 2026, from $5.7 million for the six months ended June 30, 2025. The $67.4 million increase was primarily due to activity from companies acquired since June 30, 2025 and the increase in Airobotics revenues discussed above, in addition to increased labor and material costs.”see in full comparison
“Also beginning in the period ended June 30, 2026, the Company introduced Adjusted Gross Profit and Adjusted Gross Margin. Adjusted Gross Profit is a non-GAAP financial measure that represents gross profit excluding amortization of acquisition-related intangible assets and stock-based compensation and expense included in cost of goods sold. Adjusted Gross Margin is a non-GAAP financial measure that represents Adjusted Gross Profit as a percentage of revenue. The most directly comparable U.S. …”see in full comparison
Full comparison: every changed paragraph (53)
Ondas,Ondas Inc. (together with its subsidiaries, the “Company,”
“Ondas,” “we,” “us,” or “our”) is a defense, security, and critical infrastructure technology
company organized around two business units: Ondas Autonomous Systems Inc. (“OAS”), and Ondas Capital Inc. (“Ondas Capital”).
Through these business units, we develop and commercialize autonomous systems, and strategic investment and partnership initiatives that support
the scaling and adoption of mission-critical solutions for governments and industrial customers.
•
OAS focuses on autonomous and unmanned aerial and ground systems and integrated mission solutions for defense, homeland security, public safety, and other critical infrastructure and industrial end markets. Through its product company subsidiaries, OAS develops, commercializes, and delivers integrated capabilities across Counter-Unmanned Aerial System (“CUAS”), aerial Intelligence, Surveillance, and Reconnaissance (“ISR”), and Unmanned Ground Vehicle (“UGV”) applications.
•
Ondas Capital supports our growth strategy through strategic investments, partnerships, and capital formation initiatives intended to accelerate technology development, expand market access, and enhance long-term value creation across the Ondas platform.
The Company deconsolidated
Ondas Networks Inc. (“Ondas Networks”) effective January 16, 2026 and no longer includes the assets, liabilities, and results of operations of Ondas Networks
in its consolidated financial statements subsequent to that date. Additionally, our results of operations for the three and six months ended March
31,June 30, 2026 have been affected by recent acquisitions. For additional informationinformation, see Note 5-5, GOODWILLGoodwill ANDand ACQUISITIONS.Acquisitions – of Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
Comparison of Results for the Three Months
Ended MarchJune 31,30, 2026 and 2025
Revenue, net for the three
months ended MarchJune 31,30, 2026 and 2025 areis as follows:
Revenue, net increased $45.9
$77.5 million to $50.1$83.8 million for the three months ended MarchJune 31,30, 2026 from $4.2$6.3 million for the three months ended MarchJune 31,30, 2025. The increase
in revenue is primarily attributed to our OAS segment, of which $34.7 million of revenue growth was generated by companies acquired since
March 31,June 30, 2025 of $70.0 million, including $15.8$21.8 million from Sentry CS Ltd and $13.2 million from Omnisys Ltd. OASThe revenueremaining alsoincrease increasedis byprimarily $11.4attributed to an increase of $6.8 million at Airobotics, of which approximately
$7.9 $5.2 million relates to product sales and approximately $3.5$1.6 million relates to service revenue from sales of our Optimus System™
and Iron Drone Raider™.
Cost of goods sold increased
to $25.5$47.6 million for the three months ended MarchJune 31,30, 2026, from $2.8$2.9 million for the three months ended MarchJune 31,30, 2025. The $22.7$44.7 million
increase was primarily due to activity from companies acquired since MarchJune 31,30, 2025 and the increase in Airobotics revenues discussed
above, in addition to increased labor and material costs.
Gross margin percentage increased
decreased to 51%43% for the three months ended MarchJune 31,30, 2026, compared to 35%53% for the three months ended MarchJune 31,30, 2025. The 16%10% increasedecrease in gross
margin percentage is primarily due to the significantamortization increasesof incapitalized revenueintellectual generated by product sales offsetting fixed service delivery costs
at OAS.property.
General and administrative
expenses (“G&A”) increased $37.4$121.9 million, or 633%,2006%, to $43.3$128.0 million for the three months ended MarchJune 31,30, 2026, from $5.9
$6.1 million for the three months ended MarchJune 31,30, 2025. This increase is primarily due to (i) an increase of $11.5$60.3 million in stock-based
compensation for awards granted since MarchJune 31,30, 2025; (ii)2025, an increase of $8.4$26.7 million in software costs; (iii)costs, an increase of $7.7$7.2 million
in professional fees and consulting costs, of which $5.8$4.4 million related to legal, accounting and due diligence fees associated with
the acquisitions completed during the year;year. (iv)The anremaining increase ofis $7.1 millionprimarily related to general and administrative expense attributable
to companies acquired since MarchJune 31,30, 2025, of which $2.8 million relates to amortization and depreciation of acquired assets; and (v)
an increase of $2.7 million in human resource costs, including benefits, from increased headcount as we build out our management team
at both Ondas Inc. and OAS.2025.
Sales and marketing expenses (“S&M”)
increased $8.1$18.6 million, or 332%,822%, to $10.5$20.9 million for the three months ended MarchJune 31,30, 2026, from $2.4$2.3 million for the three months ended
March 31,June 30, 2025. This increase is primarily due to (i) an increase of $5.4$14.5 million related to S&M attributable to companies acquired
since MarchJune 31,30, 2025, of which $1.8$7.1 million relates to amortization and depreciation of acquired assets;assets, (ii)and an increase of $861$2.0 thousand
million related to increased stock-based compensation for awards granted since June 30, 2025. The remaining increase is primarily attributable to increases in human resource costs, including benefits, from increased headcount; (iii) an increase of $893 thousand in other S&M costs primarily
related toand increased marketing and advertising costs,costs use of third-party contractors and consultants, andfrom increased attendance at trade
shows and other marketing events; and (iv) an increase of $836 thousand related to increased stock-based compensation for awards granted
since March 31, 2025.events.
Research and development expenses (“R&D”)
increased $10.0$26.8 million, or 291%,631%, to $13.5$31.0 million for the three months ended MarchJune 31,30, 2026, from $3.5$4.2 million for the three months ended
March 31,June 2025,30, 2025. This increase is primarily due to an increase of which $7.8$21.1 million related to R&D attributable to companies acquired since MarchJune 31,30, 2025.2025, Otherof increaseswhich in$7.0 R&Dmillion include,relates (i)to amortization and depreciation of acquired assets, and an increase
of $911$3.4 thousandmillion related to increased stock-based compensation for awards granted since June 30, 2025. The remaining increase is primarily attributable to increases in human resource costs, including benefits, from increased headcount, (ii) an increase of $779 thousand is related to
increased stock-based compensation for awards granted since March 31, 2025, and (iii) an increase of $534 thousand in other R&D costs
primarily related to increased use of third-party consultants and allocation of general expenses to research and development.headcount.
The Company recorded $19.2 million of expense for the three months ended June 30, 2026, related to the change in fair value of contingent consideration based on changes in the significant unobservable inputs used in the valuation of the contingent consideration liabilities, which may include projected revenue, probability of achieving performance and milestone targets, discount rates, and the expected timing of payments. The Company’s contingent consideration liabilities consist of earn-out and milestone payment arrangements related to business combinations.
Total other income, net increased
$408 million$45.7 million, to $404.2$44.2 million for the three months ended MarchJune 31,30, 2026, from total other expense, net of $3.8$1.5 million for the three
months ended MarchJune 31,30, 2025. Total other income, net increased primarily as a result of an increase of approximately $27.6 million in interest and dividend income and realized and unrealized gains on investments, and the net gain of $389.5$15.2 million related to the
change in fair value of our warrant liability, an increase of approximately $51.5 million related to the gain on the deconsolidation of
Ondas Networks, an increase of approximately $11.9 million in interest and dividend income, and a decrease of approximately $3.5 million
in interest expense. This was partially offset by a loss on acquisition of Indo Earth of approximately $46.2 million and the net unrealized
losses of approximately $2.6 million on our equity security investments.liability.
The Company recorded an income
tax provisionbenefit of $245$29.1 thousandmillion for the three months ended MarchJune 31,30, 2026, and an income tax provision of $0 for the three months ended
March 31,June 30, 2025. The 2026 income tax provisionbenefit is attributablerelated to earningscurrent-year intax foreignlosses. jurisdictions.The benefit was recognized because the associated deferred tax assets are expected to be realized through the reversal of existing deferred tax liabilities.
Net incomeloss increased $375.4
million$78.9 million, to $361.3$89.7 million for the three months ended MarchJune 31,30, 2026, from a net loss of $14.1$10.8 million for the three months ended March
31,June 30, 2025. For the three months ended MarchJune 31,30, 2026, the Company attributed $1.7$1.5 million of net loss to noncontrolling interests (“NCI”),
related to the subsidiaries in which we acquired less than 100% ownership during the fourth quarter of 2025. These subsidiaries incurred
operating losses due to early-stage operating performance.
Comparison of Results for the Six Months Ended June 30, 2026 and 2025
Revenue, net for the six months ended June 30, 2026 and 2025 is as follows:
Revenue, net increased $123.4 million to $133.9 million for the six months ended June 30, 2026 from $10.5 million for the six months ended June 30, 2025. The increase in revenue is primarily attributed to revenue growth generated by companies acquired since June 30, 2025 of $104.6 million, including $37.6 million from Sentry CS Ltd, $16.5 million from Bird Aerosystems Ltd, and $13.2 million from Omnisys Ltd. The remaining increase is primarily attributed to an increase of $18.2 million at Airobotics, of which approximately $13.1 million relates to product sales and approximately $5.1 million relates to service revenue from sales of our Optimus System™ and Iron Drone Raider™.
Cost of goods sold increased to $73.1 million for the six months ended June 30, 2026, from $5.7 million for the six months ended June 30, 2025. The $67.4 million increase was primarily due to activity from companies acquired since June 30, 2025 and the increase in Airobotics revenues discussed above, in addition to increased labor and material costs.
Gross margin percentage decreased to 45% for the six months ended June 30, 2026 compared to 46% for the six months ended June 30, 2025.
G&A increased $159.3 million, or 1,329%, to $171.3 million for the six months ended June 30, 2026, from $12.0 million for the six months ended June 30, 2025. This increase is primarily due to an increase of $73.2 million in stock-based compensation for awards granted since June 30, 2025, an increase of $41.6 million in software costs, an increase of $14.7 million in professional fees and consulting costs, of which $10.3 million related to legal, accounting and due diligence fees associated with the acquisitions completed during the year. The remaining increase is primarily related to general and administrative expense attributable to companies acquired since June 30, 2025.
S&M increased $26.7 million, or 568%, to $31.4 million for the six months ended June 30, 2026, from $4.7 million for the six months ended June 30, 2025. This increase is primarily due to an increase of $19.2 million related to S&M attributable to companies acquired since June 30, 2025, of which $8.9 million relates to amortization and depreciation of acquired assets, and an increase of $3.6 million related to increased stock-based compensation for awards granted since June 30, 2025. The remaining increase is primarily attributable to increases in human resource costs, including benefits, from increased headcount and increased marketing and advertising costs from increased attendance at trade shows and other marketing events.
R&D increased $36.8 million, or 478%, to $44.5 million for the six months ended June 30, 2026, from $7.7 million for the six months ended June 30, 2025. This increase is primarily due to an increase of $25.4 million related to R&D attributable to companies acquired since June 30, 2025, of which $5.3 million relates to amortization and depreciation of acquired assets, and an increase of $5.9 million related to increased stock-based compensation for awards granted since June 30, 2025. The remaining increase is primarily attributable to increases in human resource costs, including benefits, from increased headcount and the reallocation of amortization of acquired developed technology intangibles from G&A to R&D.
The Company recorded $19.2 million of expense for the six months ended June 30, 2026, related to the change in fair value of contingent consideration based on changes in the significant unobservable inputs used in the valuation of the contingent consideration liabilities, which may include projected revenue, probability of achieving performance and milestone targets, discount rates, and the expected timing of payments. The Company’s contingent consideration liabilities consist of earn-out and milestone payment arrangements related to business combinations.
Total other income, net increased $453.7 million to $448.4 million for the six months ended June 30, 2026, from total other expense, net of $5.3 million for the six months ended June 30, 2025. Total other income, net increased primarily as a result of the net gain of $404.8 million related to the change in fair value of our warrant liability, a net gain of $51.5 million related to the deconsolidation of Ondas Networks, and an increase of approximately $37.4 million in interest and dividend income and realized and unrealized gains on investments, partially offset by a loss on acquisition of Indo Earth Moving Ltd. of approximately $46.2 million.
The Company recorded an income tax benefit of $28.8 million for the six months ended June 30, 2026, and an income tax provision of $0 for the six months ended June 30, 2025. The 2026 income tax benefit is related to current-year tax losses. The benefit was recognized because the associated deferred tax assets are expected to be realized through the reversal of existing deferred tax liabilities.
Net income increased $296.5 million to $271.6 million for the six months ended June 30, 2026, from a net loss of $24.9 million for the six months ended June 30, 2025. For the six months ended June 30, 2026, the Company attributed $3.1 million of net loss to noncontrolling interests (“NCI”), related to the subsidiaries in which we acquired less than 100% ownership during the fourth quarter of 2025. These subsidiaries incurred operating losses due to early-stage operating performance.
As required by the rules of
the Securities and Exchange Commission (“SEC”),SEC, we provide a reconciliation of our non-GAAP financial measures to the most
directly comparable U.S. GAAP measures. These reconciliations are set forth in the tables below.
We believe that adjusted earnings
before interest, taxes, depreciation, and amortization (“"Adjusted EBITDA”") is a useful supplemental measure for evaluating
our operating performance and period to period trends because it eliminates the impact of items that primarily reflect our capital structure,
tax position, non-cash accounting charges, acquisition-related transaction costs, and other items that management does not consider indicative
of ongoing operating performance. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income (loss)
and other measures prepared in accordance with U.S. GAAP. Adjusted EBITDA removes the effects of interest and financing-related items, depreciation
and amortization, income taxes, stock-based compensation,compensation and expense, acquisition-related expenses, change in fair value of contingent consideration and other acquisition related obligations, and other non-operating gains and losses. Management
believes that excluding these items enhances comparability across periods and facilitates analysis of underlying operating trends. Other
companies may calculate similarly titled non-GAAP measures differently, and therefore our Adjusted EBITDA may not be comparable to measures
used by other companies.
Adjusted Cash Operating Expense is
a non-GAAP financial measure that represents total operating expenses excluding depreciation, amortization of intangible assets, acquisition-related
expenses, change in fair value of contingent consideration and other acquisition related obligations, and stock-based compensation.compensation and expense. The most directly comparable U.S. GAAP measure to Adjusted Cash Operating Expense is total operating expenses.
Management believes Adjusted Cash Operating Expense provides useful supplemental information by isolating recurring, cash-based operating costs
and facilitating meaningful period-to-period comparisons. Management uses this measure for internal cost management, budgeting, and liquidity
planning, and to evaluate operating trends exclusive of non-cash accounting charges. Adjusted Cash Operating Expense should be considered in addition
to, and not as a substitute for, total operating expenses prepared in accordance with U.S. GAAP.
Beginning in the period ended June 30, 2026, the Company revised its calculation of Adjusted EBITDA and Adjusted Cash Operating Expense to exclude changes in the fair value of contingent consideration and other acquisition related obligations. These amounts reflect periodic remeasurement adjustments required under U.S. GAAP and are primarily driven by changes in estimates and assumptions related to future earn-out payments. Management believes excluding these acquisition-related fair value adjustments improves period-to-period comparability and provides investors with additional insight into the Company's operating performance. This revision did not affect any previously reported Adjusted EBITDA or Adjusted Cash Operating Expense amounts because no gains or losses related to changes in the fair value of contingent consideration were recognized in the prior periods presented. In connection with this change, the Company renamed 'Cash Operating Expense' to 'Adjusted Cash Operating Expense'. The revised caption is intended to more clearly communicate the measure as a management-defined non-GAAP performance measure that excludes specified cash and noncash expenses and does not represent all operating expenses requiring cash settlement.
Also beginning in the period ended June 30, 2026, the Company introduced Adjusted Gross Profit and Adjusted Gross Margin. Adjusted Gross Profit is a non-GAAP financial measure that represents gross profit excluding amortization of acquisition-related intangible assets and stock-based compensation and expense included in cost of goods sold. Adjusted Gross Margin is a non-GAAP financial measure that represents Adjusted Gross Profit as a percentage of revenue. The most directly comparable U.S. GAAP measures to Adjusted Gross Profit and Adjusted Gross Margin are gross profit and gross margin (gross profit as a percentage of revenue), respectively. Management believes these measures provide investors with additional insight into the underlying profitability of the Company's products and services, operating performance and period-to-period trends. Comparative prior-period amounts have been presented on a consistent basis.
Management uses Adjusted EBITDA
andEBITDA, Adjusted Cash Operating Expense, Adjusted Gross Profit, and Adjusted Gross Margin together with U.S. GAAP results, in making operating and planning decisions and in evaluating the Company’s
Company's ongoing performance. Other companies may calculate similarly titled non-GAAP measures differently, and therefore our non-GAAP measures may not be comparable to measures used by other companies.
(1)
Acquisition-related expenses include legal, accounting, and other due diligence costs incurred in connection with completed or pending acquisitions.
(2)
Other (income) expense, net includes interest and dividend income, unrealized gain and losses on investments, interest expense, foreign exchange gain and loss, the change in the fair value of government grant liabilities and warrant liability, and other income (expense), net included on the Company’s unaudited Condensed Consolidated Statements of Operations.
(1)
Acquisition-related expenses include legal, accounting, and other due diligence costs incurred in connection with completed or pending acquisitions.
The principal use of cash
in operating activities for the threesix months ended MarchJune 31,30, 2026, was to fund the Company’s current expenses primarily related
to operating activities necessary to allow us to service and support customers for the threesix months ended MarchJune 31,30, 2026.
The increase in cash flows
used in operating activities of $44.6$122.3 million primarily relates to an increase in net income of $375.4$296.4 million, of which approximately
$371.8 $329.5 million related to non-cash charges and credits, which primarily includes gains and losses on investments, acquisitions, and deconsolidation
of subsidiary; change in fair value of warrant liability; amortization of debt discount and issuance costs; depreciation and amortization;
and stock-based compensation; combined with changes in operating assets and liabilities resulting in a cash outflow of approximately $48.2
$89.2 million for the threesix months ended MarchJune 31,30, 2026.
The increase in cash flows
used in investing activities of $474$762.7 million primarily relates to an increase of $429.1$689.8 million in purchases of short-term investments,
net of maturities of $23.1$66.5 million and cash proceeds from sale of short-term investments of $5.7 million; $31.8$45.2 million in cash paid, net of cash acquired, for acquisitions; $5$10 million in purchases of long-term
equity investments; $7$7.0 million relating to deconsolidation of subsidiary cash; and $1.1$8.8 million increase in cash paid for other tangible
and intangible assets.
The increase in cash provided
by financing activities of $966.2$917.5 million primarily relates to the increase in net proceeds of approximately $959.1$916.4 million received from the sale
of common stock and warrants, net of issuance costs during the threesix months ended MarchJune 31,30, 2026, combined with an increase in proceeds
of approximately $9$2.3 million from the exercise of stock options and warrants during the threesix months ended MarchJune 31,30, 2026, offset by an
increase of approximately $1.9$1.2 million in net cash outflow related to debt transactions.
As of MarchJune 31,30, 2026, the
Company had a strong liquidity position, including $1.0$666.0 billionmillion of cash, cash equivalents, and restricted cash, $448$727.0 million of short-term
investments, and working capital of approximately $1.5$1.4 billion. BasedSubsequent to June 30, 2026, the Company completed the acquisitions of High Point UAS, LLC and Cyberhawk Holdings Limited, which included $322.3 million of cash consideration funded from existing cash balances. Refer to Note 18 - Subsequent Events of Item 1, "Financial Statements" of this Quarterly Report on theseForm 10-Q. Notwithstanding this use of cash resources, management believes the Company has sufficient
liquidity to fund its operations and planned capital expenditures for at least the next twelve months.months and the foreseeable future. While the Company has incurred
losses since inception and historically funded operations through equity and debt financings, management does not believe additional financing
is required to support near-term operating needs based on current plans.
As of MarchJune 31,30, 2026, the Company had an accumulated deficit of $5.4
$93.7 million. At that date, the Company had net long-term borrowings outstanding of approximately $3.6$4.1 million and short-term borrowings of
approximately $779$1.6 thousand,million, including accrued interest.
In 2025, the Company raised
net proceeds of approximately $829.5 million from the sale of common stock and warrants, $30.8 million from the exercise of stock options
and warrants, $1.2 million from the exercise of warrants in OAS, and $923$0.9 thousandmillion from the issuance of convertible notes in Ondas Networks
(collectively, the “2025 Offerings”). In January 2026, the Company raised approximately $1 billion in gross proceeds from
the sale of common stock and warrants.
As of MarchJune 31,30, 2026, we had
no off-balance sheet arrangements.
Management’s discussion
and analysis of financial condition and results of operations is based upon our 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 2025 Form 10-K. ThereExcept for the addition of contingent consideration related to the business combinations completed during the six months ended June 30, 2026, there have been no significant changes in our
critical accounting policiesestimates since the filing of the 2025 Form 10-K.
Valuation of contingent consideration liabilities. Certain contingent consideration obligations, including earn-out and milestone payment arrangements associated with business combinations, are measured at fair value on a recurring basis and remeasured at each reporting date until the contingency is resolved. Changes in fair value of these liabilities are recognized within "change in fair value of contingent consideration" in the condensed consolidated statements of operations and may cause variability in our results of operations.
The valuation of these liabilities requires significant judgment because certain inputs are not directly observable in the market and are therefore classified as Level 3 measurements. We estimate the fair value of the contingent consideration liabilities primarily using scenario-based methods or Monte Carlo simulation models, depending on the terms and structure of the contingent consideration liability. These valuation methods require assumptions regarding projected performance targets, the probability of achieving the specified targets, the timing of expected payments, discount rates, and volatility assumptions. Changes in these assumptions could materially affect our results of operations.
ONDS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 5 filings (4 insiders, 5 trade dates, 2,408,197 shares, about $32.2M; 1 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -2,408,197 (purchases minus sales); net value about -$32.2M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-24 | Laird Neil J |
Option exercise | 12,500 | — | — |
| 2026-09-24 | Laird Neil J |
Open-market sale | 4,952 | $7.74 | $38.3K |
| 2026-08-18 | Cohen Richard M |
Open-market sale |
7,500 | $8.96 | $67.2K |
| 2026-08-14 | Cohen Richard M |
Option exercise | 6,482 | — | — |
| 2026-08-14 | Cohen Richard M |
Shares withheld for tax | 3,356 | $9.30 | $31.2K |
| 2026-08-14 | Cohen Richard M |
Option exercise | 2,817 | — | — |
| 2026-08-14 | Cohen Richard M |
Shares withheld for tax | 1,460 | $9.30 | $13.6K |
| 2026-08-14 | Huston Robert Patrick |
Option exercise | 8,334 | — | — |
| 2026-08-14 | Huston Robert Patrick |
Shares withheld for tax | 4,301 | $9.30 | $40.0K |
| 2026-08-14 | Sood Jaspreet K |
Option exercise | 6,482 | — | — |
| 2026-08-14 | Sood Jaspreet K |
Shares withheld for tax | 1,345 | $9.30 | $12.5K |
| 2026-08-14 | Sood Jaspreet K |
Option exercise | 2,817 | — | — |
| 2026-08-14 | Sood Jaspreet K |
Shares withheld for tax | 3,345 | $9.30 | $31.1K |
| 2026-08-14 | Laird Neil J |
Shares withheld for tax | 4,988 | $9.30 | $46.4K |
| 2026-08-14 | Laird Neil J |
Option exercise | 12,500 | — | — |
| 2026-07-01 | Seidl Randy |
Option exercise | 2,817 | — | — |
| 2026-07-01 | Seidl Randy |
Option exercise | 6,482 | — | — |
| 2026-06-02 | Brock Eric A |
Open-market sale | 2,378,245 | $13.43 | $31.9M |
| 2026-06-01 | Brock Eric A |
Option exercise | 4,500,000 | — | — |
| 2026-05-20 | Sood Jaspreet K |
Shares withheld for tax | 1,331 | $9.70 | $12.9K |
| 2026-05-20 | Sood Jaspreet K |
Shares withheld for tax | 10,630 | $9.70 | $103.1K |
| 2026-05-20 | Sood Jaspreet K |
Shares withheld for tax | 9,256 | $9.70 | $89.8K |
| 2026-05-20 | Sood Jaspreet K |
Shares withheld for tax | 1,337 | $9.70 | $13.0K |
| 2026-05-20 | Laird Neil J |
Shares withheld for tax | 6,038 | $9.70 | $58.6K |
| 2026-05-20 | Huston Robert Patrick |
Shares withheld for tax | 2,735 | $9.70 | $26.5K |
| 2026-05-20 | Huston Robert Patrick |
Shares withheld for tax | 2,745 | $9.70 | $26.6K |
| 2026-05-20 | Cohen Richard M |
Shares withheld for tax | 882 | $9.70 | $8.6K |
| 2026-05-20 | Cohen Richard M |
Shares withheld for tax | 876 | $9.70 | $8.5K |
| 2026-05-20 | Cohen Richard M |
Open-market sale | 7,500 | $9.50 | $71.2K |
| 2026-05-20 | Cohen Richard M |
Shares withheld for tax | 6,087 | $9.70 | $59.0K |
| 2026-05-20 | Cohen Richard M |
Shares withheld for tax | 7,307 | $9.70 | $70.9K |
| 2026-05-19 | Seidl Randy |
Open-market sale | 10,000 | $9.83 | $98.3K |
| 2026-05-18 | Sood Jaspreet K |
Option exercise | 19,607 | — | — |
| 2026-05-18 | Sood Jaspreet K |
Option exercise | 19,608 | — | — |
| 2026-05-18 | Sood Jaspreet K |
Option exercise | 2,816 | — | — |
| 2026-05-18 | Sood Jaspreet K |
Option exercise | 2,817 | — | — |
| 2026-05-18 | Laird Neil J |
Option exercise | 12,500 | — | — |
| 2026-05-18 | Huston Robert Patrick |
Option exercise | 8,333 | — | — |
| 2026-05-18 | Huston Robert Patrick |
Option exercise | 8,333 | — | — |
| 2026-05-18 | Cohen Richard M |
Option exercise | 2,817 | — | — |
| 2026-05-18 | Cohen Richard M |
Option exercise | 2,816 | — | — |
| 2026-05-18 | Cohen Richard M |
Option exercise | 19,607 | — | — |
| 2026-05-18 | Cohen Richard M |
Option exercise | 19,608 | — | — |
Well-known investors holding ONDS (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 5,616,989 | $50.8M | — | Sold out |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 3,713,296 | $30.6M | 0.02% | Added 693% |
| Two Sigma Investments | 2026-06-30 | 1,007,776 | $8.3M | 0.01% | Added 10% |
| Renaissance Technologies | 2026-06-30 | 680,839 | $6.2M | — | Sold out |
| D. E. Shaw & Co. | 2026-06-30 | 455,200 | $3.8M | 0.0% | Added 432% |