Ondas Holdings, Inc. — FY2018 Form 10-K
Reporting period: Year ended December 31, 2018; filed March 19, 2019. Although requested as 2018 Q4, this is an annual filing, not a standalone quarterly report. Ondas completed its reverse acquisition of Ondas Networks on September 28, 2018, discontinued Zev Ventures’ ticket-resale business, and thereafter focused on Ondas Networks’ industrial wireless operations. The comparative results principally reflect the Ondas Networks business.
Business context
Ondas develops, sells, and supports FullMAX secure private wireless networks for mission-critical industrial connectivity, including utility, oil and gas, transportation, and other infrastructure applications. The company sees IEEE 802.16s standard adoption as a growth opportunity, but adoption and commercialization remain uncertain.
Financial results and liquidity
| Metric (USD) | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue | $190,029 | $274,403 | Down 31% |
| Gross profit / margin | $150,664 / 79% | $194,635 / 71% | Gross profit down |
| Operating expenses | $8.586 million | $2.589 million | Up $5.998 million |
| Operating loss | $(8.436) million | $(2.394) million | Loss increased |
| Net loss | $(12.097) million | $(3.022) million | Loss increased |
| Basic and diluted loss per share | $(0.42) | $(0.19) | |
| Net cash used in operating activities | $(8.517) million | $(2.630) million | Use increased |
| Cash at year end | $1.130 million | $456,018 |
Revenue came mainly from pilot programs and small deployments. Operating-expense growth reflected expanded staffing and spending on sales and marketing, research and development, and administrative support. Other expense was $3.661 million, including $2.664 million of interest expense and a $976,000 derivative-liability fair-value loss. Two customers generated approximately 76% and 17% of 2018 revenue.
At December 31, 2018, total assets were $2.662 million, total liabilities $17.546 million, and stockholders’ deficit $14.885 million. Current liabilities were $17.246 million against current assets of $2.042 million; the reported working-capital deficit was approximately $15.205 million. Outstanding borrowings were approximately $14.246 million: about $3.883 million due March 30, 2019 and $10.063 million due September 2019. The secured loans were backed by substantially all company assets.
Outlook, risks, and unusual items
- Management said available cash plus $3.3 million borrowed from Energy Capital in early 2019 was expected to fund operations only through March 2019. The company said it lacked funds to repay the March 30, 2019 debt maturity and needed additional financing; the remaining Energy Capital facility was not available for that repayment. Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern through March 19, 2020.
- Management planned continued investment in sales, support, and product development, with product releases targeted for 2019, including Jupiter and Mars base-station platforms and Mercury endpoint radios. These are stated plans and timetables, not assured outcomes; the filing provides no quantified revenue or earnings guidance.
- Key risks include sustained losses, financing and refinancing needs, debt covenants and collateral exposure, uncertain customer adoption of IEEE 802.16s, long sales cycles, high customer concentration, reliance on contractors and suppliers, and limited operating history outside electric utilities. The common stock had very limited OTC trading.
- The company restated its Q3 2018 financial statements for debt-conversion and debt-modification accounting errors. Management reported a material weakness in internal control over financial reporting, citing limited accounting staff and inadequate segregation of duties; disclosure controls were also deemed ineffective. The auditor expressed an unmodified opinion on the financial statements but included a going-concern explanatory paragraph and did not opine on internal-control effectiveness.
Most important facts for investors to verify
- Whether Ondas raised sufficient capital to repay the March 30, 2019 debt and meet subsequent secured-loan maturities; confirm actual post-year-end borrowings, repayments, and any refinancing.
- Whether liquidity improved beyond management’s stated March 2019 runway, and whether going-concern uncertainty was resolved.
- Whether planned 2019 products launched on schedule and secured material customer deployments or recurring service revenue.
- Whether customer concentration declined and whether IEEE 802.16s adoption and market demand developed as management expected.
- Whether the disclosed accounting-control material weakness was remediated and whether subsequent filings identify further restatements or control deficiencies.