Ondas Holdings Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY2021. This filing reports annual results, not standalone fourth-quarter results. The financial statements were audited and received an unqualified opinion. The auditor did not opine on internal-control effectiveness.
Business context
Ondas develops private wireless networks through Ondas Networks and autonomous drone and data solutions through American Robotics. Airobotics was acquired on January 23, 2023, after year-end, and therefore its results are not included in FY2022. The businesses were subsequently combined under Ondas Autonomous Systems. Core products include FullMAX industrial wireless systems and Optimus drone-in-a-box services. Management’s growth plans center on North American railroad network upgrades, drone fleet deployments, and expansion into government and industrial markets.
Financial performance and liquidity
| Metric | FY2022 / Dec. 31, 2022 | FY2021 / Dec. 31, 2021 |
|---|---|---|
| Revenue | $2.13 million | $2.91 million |
| Gross profit / margin | $1.11 million / 52% | $1.10 million / 38% |
| Operating expenses | $70.54 million | $19.07 million |
| Operating loss | $69.43 million | $17.97 million |
| Net loss | $73.24 million; $1.73 per share | $15.02 million; $0.44 per share |
| Cash used in operations | $37.96 million | $16.90 million |
| Cash and cash equivalents | $29.78 million | $40.82 million |
| Working capital | $14.2 million | Not stated here |
| Stockholders’ equity | $58.22 million | $112.23 million |
- Revenue fell 27%, mainly as development revenue declined to $0.93 million from $2.40 million; product revenue rose to $0.87 million from $0.41 million. Management attributed the higher gross margin to a greater mix of product, support, and subscription sales.
- Operating expenses increased substantially, including $24.04 million of research and development versus $5.80 million in FY2021. FY2022 expenses also included a $19.42 million goodwill impairment relating to American Robotics, following lower revised revenue and cash-flow forecasts.
- Other expense was $3.81 million, including interest expense of $3.76 million; the filing cites debt discount and issuance-cost amortization among the drivers. No income tax benefit was recorded in FY2022, compared with a $2.92 million benefit in FY2021.
- Investing activities used $6.93 million; financing activities provided $33.86 million. The company raised approximately $27.7 million net from convertible notes and $6.09 million through its at-the-market offering in 2022.
- At year-end, the balance sheet showed $14.90 million of current and $15.15 million of long-term convertible notes, both net of discounts and issuance costs, plus a $0.30 million note payable. The 3% convertible notes were exchanged in January 2023 and their maturity extended to October 28, 2024; the notes permit share conversion or cash installments subject to conditions.
Material changes, outlook, and risks
- Revenue concentration increased: one customer represented approximately $1.89 million, or 89% of FY2022 revenue. Two customers accounted for 89% of FY2021 revenue combined.
- Management said available cash, remaining financing capacity, and expected revenue growth should fund operations for at least 12 months from the financial-statement issuance date. This depends on execution and is not a guarantee; the company warns additional capital may be needed.
- Management expected railroad 900 MHz deployments to accelerate during 2023 and cited two UAE customer orders received in December 2022. Those customers indicated plans for approximately 50 systems in the UAE by 2025. These are expectations and customer plans, not reported completed deployments or firm company guidance.
- Key risks include persistent losses and cash burn; customer concentration; lengthy sales and deployment cycles; dependence on partners, contractors, and component suppliers; supply-chain and cost pressures; FAA and FCC approvals and other regulation; drone safety, product liability, cybersecurity, and insurance; and potential dilution from future financing and convertible securities.
- COVID-related travel, deployment, and supply-chain disruptions affected operations and cash flow; management said uncertainty and potential effects could continue in 2023. The filing also notes foreign-currency exposure increased after the Airobotics acquisition.
- Subsequent events included the Airobotics acquisition, the March 2023 Iron Drone asset acquisition, and integration actions: a 45-employee workforce reduction and termination of a development contract. The company expected charges of approximately $264,000 and $1.59 million, respectively, in Q1 2023.
- A prior material weakness in review of acquisition-related stock compensation was reported as remediated at December 31, 2022; management concluded controls were effective. The audit firm did not conduct an audit of internal controls.
- The company reported $361,813 at Silicon Valley Bank above insured limits as of March 10, 2023; the filing says the federal government announced deposit protection on March 12.
Most important facts for investors to verify
- Whether revenue grows beyond FY2022’s $2.13 million and whether customer concentration declines.
- Conversion, repayment, and dilution terms and the current status of the 2022 convertible notes, including post-year-end shares issued.
- Cash burn, actual liquidity runway, and any financing raised or required after the filing date.
- Commercial railroad orders and deployments, UAE system rollout, and the timing and status of FAA Type Certification for Optimus.
- Final Airobotics purchase accounting, integration costs and savings, and the outcome of the announced restructuring and contract termination.
- Whether the American Robotics goodwill impairment assumptions and remaining goodwill carrying value remain supportable.