Ondas(US:ONDS)2025-05-15 12:38PART I - FINANCIAL INFORMATION Financial Statements Q1 2025 revenue increased to $4.25 million with positive gross profit, but net loss widened to $14.1 million as total assets decreased to $104.6 million and liabilities to $58.0 million, indicating going concern doubts Condensed Consolidated Balance Sheets Total assets decreased to $104.6 million by March 31, 2025, primarily due to reduced cash, while total liabilities significantly decreased to $58.0 million, boosting stockholders' equity Condensed Consolidated Balance Sheet Summary (Unaudited) | Balance Sheet Items | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | $25,363,853 | $29,958,106 | | Total current assets | $43,396,551 | $47,520,551 | | Goodwill, net | $27,751,921 | $27,751,921 | | Total assets | $104,600,639 | $109,622,288 | | Liabilities & Equity | | | | Total current liabilities | $50,417,322 | $50,576,622 | | Total long-term liabilities | $7,533,698 | $23,101,154 | | Total liabilities | $57,951,020 | $73,677,776 | | Redeemable noncontrolling interest | $20,568,332 | $19,361,205 | | Total stockholders' equity | $26,081,287 | $16,583,307 | | Total liabilities and stockholders' equity | $104,600,639 | $109,622,288 | Condensed Consolidated Statements of Operations Q1 2025 revenues surged to $4.25 million with a $1.49 million gross profit, but increased operating expenses led to a wider net loss of $14.1 million compared to the prior year Consolidated Statement of Operations Summary (Unaudited) | Metric | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Revenues, net | $4,248,182 | $625,009 | | Gross profit (loss) | $1,488,550 | $(394,982) | | Operating loss | $(10,310,438) | $(9,127,195) | | Net loss | $(14,136,350) | $(9,876,084) | | Net loss per share - basic and diluted | $(0.15) | $(0.17) | | Weighted average shares outstanding | 105,004,818 | 63,035,122 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $6.7 million in Q1 2025, but a sharp decline in financing activities led to a $4.6 million decrease in total cash, ending at $25.4 million Consolidated Statement of Cash Flows Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Net cash flows used in operating activities | $(6,659,264) | $(7,455,524) | | Net cash flows used in investing activities | $(195,019) | $(1,212,413) | | Net cash flows provided by financing activities | $2,264,936 | $8,236,646 | | Decrease in cash, cash equivalents, and restricted cash | $(4,589,347) | $(431,291) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's segment structure, significant customer concentration, complex debt instruments, and critically, management's conclusion of substantial doubt about its ability to continue as a going concern - The company operates through two business segments: Ondas Networks (private wireless solutions) and Ondas Autonomous Systems (OAS) (drone and automated data solutions)23 - Due to a history of losses, a working capital deficit of approximately $7.0 million, and reliance on external financing, there is substantial doubt about the Company's ability to continue as a going concern for one year from May 15, 20253134 - Revenue is highly concentrated. For Q1 2025, three customers accounted for 43%, 36%, and 14% of total revenue109 - The company has multiple complex debt instruments, including convertible notes with related parties, which are detailed in Note 7 and Note 13125139216 - Subsequent to the quarter end, the company increased its authorized common stock from 300 million to 400 million shares and increased the shares available under its 2021 Equity Incentive Plan231 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 579% revenue growth from OAS multi-drone sales, improving gross margin to 35%, but operating expenses rose to $11.8 million, exacerbating liquidity concerns and substantial doubt about going concern Results of Operations Q1 2025 revenues increased by $3.6 million driven by OAS multi-drone sales, improving gross profit, but a $3.1 million rise in operating expenses led to a wider net loss of $14.1 million Q1 2025 vs Q1 2024 Performance | Metric | Q1 2025 ($) | Q1 2024 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenue, net | $4,248,182 | $625,009 | $3,623,173 | | Gross Profit (Loss) | $1,488,550 | $(394,982) | $1,883,532 | | Operating Expenses | $11,798,988 | $8,732,213 | $3,066,775 | | Operating Loss | $(10,310,438) | $(9,127,195) | $(1,183,243) | | Net Loss | $(14,136,350) | $(9,876,084) | $(4,260,266) | - The increase in revenue was primarily driven by approximately $3.2 million in increased product sales and $0.5 million in increased service revenue at the OAS segment, related to multi-drone sales246 - Operating expenses increased mainly due to a $2.9 million rise in human resource costs, which included a $1.2 million increase in stock-based compensation and a $1.3 million increase in taxable fringe benefit expense at OAS resulting from an Israeli government audit251 Liquidity and Capital Resources The company faces a $7.0 million working capital deficit and $25.4 million in cash, with management concluding substantial doubt about its going concern ability, relying on revenue growth and future financing - As of March 31, 2025, the company had cash and restricted cash of approximately $25.4 million and a working capital deficit of about $7.0 million261 - The company has raised significant capital through various financing activities in 2024 and early 2025, including convertible notes, common stock sales, and redeemable preference shares262263 - The company explicitly states there is substantial doubt about its ability to continue as a going concern, and future funding depends on revenue growth and the ability to raise additional capital264265 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025272 - No material changes to internal control over financial reporting were identified during the quarter ended March 31, 2025273 PART II - OTHER INFORMATION Legal Proceedings The company won a $2.14 million judgment in an Abu Dhabi legal dispute, but collection is not guaranteed and no receivable has been recorded - On October 9, 2024, the Abu Dhabi Civil Court of Appeals ruled in favor of Airobotics for $2,138,945 plus interest and expenses in a non-payment case against a customer. Collection is being pursued, but success is not guaranteed and no receivable is recorded212 Risk Factors No material changes to risk factors, except for a new risk concerning U.S. trade policy, which could increase costs and disrupt the supply chain - A new risk factor was added regarding changes in U.S. trade policy, including tariffs, which could increase costs, disrupt the supply chain, and adversely impact business operations and financial condition280281 Other Information Director Joseph Popolo resigned from the board, and the Compensation Committee approved a $400,000 annual salary and $50,000 discretionary bonus for CEO Eric Brock - Director Joseph Popolo resigned from the board effective May 14, 2025, in connection with his nomination to be a U.S. Ambassador286 - The Compensation Committee approved a $400,000 annual salary (effective April 1, 2025) and a $50,000 discretionary bonus for CEO Eric Brock287