Ondas(ONDS) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The company's financial statements for the period ended June 30, 2025, show a significant increase in total assets to $152.0 million from $109.6 million at year-end 2024, primarily driven by a substantial rise in cash from financing activities. Revenues for the second quarter and first half of 2025 grew dramatically to $6.3 million and $10.5 million, respectively, compared to the prior year, leading to a positive gross profit. However, increased operating expenses resulted in a higher net loss of $24.9 million for the six-month period. Cash flow from financing activities was a strong inflow of $53.9 million, mainly from a public offering and warrant exercises, which significantly improved the company's liquidity position Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets increased to $152.0 million from $109.6 million at December 31, 2024, largely due to a significant rise in cash to $67.6 million. Total liabilities decreased to $39.3 million from $73.7 million, primarily from the repayment of convertible notes. Consequently, total stockholders' equity improved substantially to $90.8 million from $16.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $67,568 | $29,958 | | Total current assets | $91,210 | $47,521 | | Total assets | $151,951 | $109,622 | | Liabilities & Equity | | | | Total current liabilities | $31,490 | $50,577 | | Total liabilities | $39,293 | $73,678 | | Total stockholders' equity | $90,821 | $16,583 | | Total liabilities and stockholders' equity | $151,951 | $109,622 | Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2025, revenues significantly increased to $6.3 million and $10.5 million, respectively, compared to the same periods in 2024. This drove a shift from a gross loss to a gross profit of $3.3 million for the quarter and $4.8 million for the six-month period. Despite revenue growth, higher operating and interest expenses led to an increased net loss attributable to common stockholders of $12.0 million for the quarter and $27.4 million for the six months Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $6,273 | $958 | $10,522 | $1,583 | | Gross profit (loss) | $3,332 | $(191) | $4,821 | $(586) | | Operating loss | $(9,249) | $(8,304) | $(19,560) | $(17,431) | | Net loss | $(10,750) | $(8,270) | $(24,887) | $(18,146) | | Net loss attributable to common stockholders | $(12,019) | $(9,378) | $(27,362) | $(20,227) | | Net loss per share | $(0.08) | $(0.14) | $(0.21) | $(0.31) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $15.1 million, a slight improvement from $16.3 million in the prior year period. Investing activities used a minimal $0.3 million. Financing activities provided a substantial $53.9 million in cash, primarily from a $42.7 million public offering and $10.0 million from the exercise of options and warrants. This resulted in a significant increase in cash and restricted cash, which ended the period at $68.6 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,063) | $(16,275) | | Net cash used in investing activities | $(306) | $(2,315) | | Net cash provided by financing activities | $53,921 | $8,543 | | Increase (decrease) in cash | $38,552 | $(10,047) | | Cash, beginning of period | $29,999 | $15,022 | | Cash, end of period | $68,551 | $4,975 | Notes to the Unaudited Condensed Consolidated Financial Statements The notes detail the company's business structure, comprising Ondas Networks and Ondas Autonomous Systems (OAS), and key accounting policies. A significant development is the alleviation of substantial doubt about the company's ability to continue as a going concern, following successful capital raises in Q2 2025. The notes also provide breakdowns of revenue by type and geography, details on debt instruments (many of which were repaid in 2025), equity transactions including a major public offering, segment performance showing strong revenue growth in the OAS segment, and related party transactions - The company operates through two business segments: Ondas Networks (private wireless connectivity) and Ondas Autonomous Systems (OAS), which provides drone and automated data solutions[22] - Management concluded that substantial doubt about the Company's ability to continue as a going concern no longer exists as of August 12, 2025, following capital raises of approximately $42.7 million from a public offering and $9.0 million from warrant/option exercises in Q2 2025[34][35] - As of July 18, 2025, the 2022 Convertible Promissory Notes, 2023 Additional Notes, and 2024 Additional Notes have been repaid in full, significantly deleveraging the balance sheet[32] Disaggregated Revenue by Type (Six Months Ended June 30) | Revenue Type | 2025 | 2024 | | :--- | :--- | :--- | | Product revenue | $6,828,993 | $24,758 | | Service and subscription revenue | $3,304,768 | $608,140 | | Development revenue | $387,809 | $949,962 | | Total revenue | $10,521,570 | $1,582,860 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant revenue growth in the first half of 2025 to the Ondas Autonomous Systems (OAS) segment, which had multi-drone sales with associated services. This led to a substantial improvement in gross profit, turning a loss in H1 2024 into a $4.8 million profit in H1 2025. However, operating expenses also rose by 45% due to increased headcount, stock-based compensation, and R&D investment, resulting in a higher operating loss. The company's liquidity has been significantly strengthened by a $42.7 million public offering and nearly $10 million from warrant exercises, alleviating previous going concern doubts Results of Operations Comparing the first six months of 2025 to 2024, revenue surged by $8.9 million to $10.5 million, driven by the OAS segment's product and service sales. This resulted in a gross profit of $4.8 million, a $5.4 million improvement from the prior year's loss. Operating expenses increased by $7.5 million, primarily due to higher human resource costs (including $2.8 million in stock-based compensation), professional fees, and R&D investments. The combination of these factors led to a net loss of $24.9 million, an increase from $18.1 million in the prior year Financial Performance Comparison (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue, net | $10,521,570 | $1,582,860 | | Gross profit (loss) | $4,820,620 | $(585,877) | | Operating loss | $(19,559,542) | $(17,430,785) | | Net loss | $(24,886,500) | $(18,145,820) | - The increase in revenue was primarily driven by the OAS segment, which grew by $9.5 million year-over-year due to multi-drone orders. The Ondas Networks segment saw a revenue decrease of $0.6 million[273] - Operating expenses rose by 45% ($7.5 million), with key drivers being a $6.5 million increase in human resource costs (including a $2.8 million increase in stock-based compensation) and an $0.8 million increase in professional fees[280] Liquidity and Capital Resources The company's liquidity position has significantly improved. As of June 30, 2025, cash and restricted cash stood at $68.6 million. This was bolstered by financing activities in the first half of 2025, including approximately $42.7 million net proceeds from a public offering and $10.0 million from the exercise of stock options and warrants. These funds have alleviated the substantial doubt about the company's ability to continue as a going concern, and management believes there is sufficient capital to fund operations for the next twelve months - As of June 30, 2025, the company had cash and restricted cash of approximately $68.6 million and working capital of approximately $59.7 million[290] - Key financing activities in H1 2025 included raising $42.7 million from a registered public offering and $10.0 million from the exercise of stock options and warrants[292] - Management has concluded that substantial doubt about the Company's ability to continue as a going concern no longer exists[295] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide information under this item - As a smaller reporting company, Ondas Holdings Inc. is exempt from the requirement to provide quantitative and qualitative disclosures about market risk[303] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. There were no material changes to the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report (June 30, 2025)[304] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[305] PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or operating results - The company states it is not currently involved in any legal proceeding or investigation that it believes will have a material adverse effect on its business[308] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and the Quarterly Report on Form 10-Q for the period ended March 31, 2025 - No material changes to the Risk Factors have occurred since those disclosed in the 2024 Form 10-K and the Q1 2025 Form 10-Q[310] Unregistered Sales of Equity Securities and Use of Proceeds None - There were no unregistered sales of equity securities during the period[312] Other Information On August 11, 2025, the company's Compensation Committee approved an Amended and Restated Non-Employee Director Compensation Policy, which increased the quarterly cash retainer to $12,500 and the annual value of restricted stock units to $100,000 - The company amended its Non-Employee Director Compensation Policy to increase the quarterly cash retainer to $12,500 and the annual RSU value to $100,000[315] Exhibits The report lists several exhibits filed, including a Certificate of Amendment, Form of Pre-Funded Warrant, an employment agreement, an amendment to the 2021 Incentive Stock Plan, a letter agreement, the amended director compensation policy, and various officer certifications and XBRL data files