Ondas Inc. annual report, FY2016

Business context and reporting period

Entity mismatch: The request identifies Ondas Inc., but the supplied Form 10-K is for Zev Ventures, Inc., a Nevada company that resells sports and concert tickets. This is its annual report for the fiscal year ended December 31, 2016, comparing 2016 with 2015; it is not a standalone fourth-quarter report.

The company described buying tickets in bulk for resale through online marketplaces, targeting a 5%–20% markup and potentially higher markups for high-demand events. It had no employees; its sole officer and director donated his time. The filing says the business had begun generating revenue, while the auditor cited insufficient revenue to cover operating costs.

Financial results and liquidity

Gross margin was negative in both years (approximately -125% in 2016 versus -39% in 2015). At December 31, 2016, current assets were $5,660 and current liabilities were $60,503, implying a working-capital deficit of $54,843. Liabilities included $52,503 due to a related party and $8,000 of accounts payable and accrued expenses. The related-party loan is unsecured, non-interest-bearing, and repayable on demand. No separate debt balance or interest expense is reported.

Changes, outlook, and risks

• Revenue increased by $1,621, but cost of sales increased by $7,013; the gross loss widened by $5,392.
• Operating expenses rose by $9,414, and net loss increased by $14,805. The filing attributes the higher loss to increased general and administrative expenses and operating costs, but its reference to salaries is not reconciled with financial statements showing no salary expense and executive compensation of zero.
• Cash used in operations increased by $8,351. Related-party financing of $26,200 helped fund operations, but cash still declined by $2,792 during 2016.
• The auditor’s March 27, 2017 report states that substantial doubt exists about the company’s ability to continue as a going concern. Management planned to seek public or private financing; the filing warns that without additional capital the company may have to suspend or cease its business plan. No assurance of financing is provided.
• The business faces low barriers to entry, many resellers, competition from primary ticket vendors, and competitors with greater financial and marketing resources. Profitability depends on event demand and sellouts; the company says expansion requires funding for inventory and marketing.
• The filing provides no quantified financial guidance. Management expresses an intention to expand, raise capital, and develop its business, but does not provide forecasts. It reports no material off-balance-sheet arrangements or legal proceedings.
• The company had no public market for its shares and intended to seek OTC quotation. It also disclosed no independent directors, no audit committee financial expert, and no code of ethics.

Important facts for investors to verify

• Confirm that this filing belongs to the intended issuer: it names Zev Ventures, Inc., not Ondas Inc.
• Resolve share-count inconsistencies: the cover states 2,000,000 shares outstanding, while the audited balance sheet and beneficial-ownership table report 3,000,000; the filing also describes 2,000,000 shares as outstanding as of March 28, 2017.
• Review the going-concern warning, cash runway, financing availability, and the demand-repayment terms of the $52,503 related-party loan.
• Assess ticket inventory economics and why cost of sales substantially exceeded revenue in both reported years.
• Reconcile the filing’s claims about revenue and salaries with the auditor’s going-concern discussion and the reported financial statements; also note that some disclosures refer to September 30, 2016 despite the annual reporting period ending December 31.