Ondas Holdings Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Ondas provides wireless connectivity products and services for mission-critical industrial networks, including rail, utilities, drones, and government markets. Its principal platform is FullMAX, a software-defined radio system.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / prior balance |
|---|---|---|
| Revenue | $1.165 million | $0.200 million |
| Gross profit / margin | $0.609 million / 52% | $0.019 million / 10% |
| Operating expenses | $3.491 million | $2.351 million |
| Operating loss | $2.881 million | $2.331 million |
| Net loss | $3.138 million | $2.807 million |
| Net loss per share, basic and diluted | $(0.12) | $(0.14) |
| Cash and cash equivalents | $24.026 million | $26.061 million at Dec. 31, 2020 |
| Working capital | $14.860 million | Not stated for comparison |
| Net cash used in operating activities | $3.066 million | $1.974 million |
Development revenue was $1.138 million, compared with $0.182 million a year earlier; product revenue was $18,000 and service revenue was $8,000. Revenue was concentrated: two customers represented 18% and 81% of Q1 2021 revenue, and one accounted for 92% of period-end receivables.
Cash declined by $2.035 million during the quarter. Investing used $148,000, primarily for equipment and a security deposit; financing provided $1.180 million, mainly from warrant exercises, net of deferred offering costs. Stockholders’ equity was $14.709 million. Borrowings included approximately $7.064 million on the secured Steward Capital note, $104,000 of current notes payable, and $862,000 of long-term notes payable. The Steward note was scheduled to mature September 9, 2021.
Changes versus the prior period
- Revenue rose by $965,000, largely from development agreements with Siemens Mobility and AURA Network Systems. Gross margin increased to 52% from 10%, which management attributed to the new development agreements.
- Operating expenses increased 49%, chiefly reflecting $1.348 million of stock-based compensation. General and administrative expense rose $1.500 million; sales and marketing expense decreased $362,000.
- Operating cash use increased about $1.092 million, primarily due to reduced payables and accruals. Net loss increased $331,000 despite lower interest expense.
- The company raised $1.280 million from warrant exercises and issued 131,271 shares in connection with those exercises.
Outlook, risks, and notable items
- Management said December 2020 offering proceeds, together with expected revenue growth, were believed sufficient to fund operations for at least twelve months from the financial-statement issuance date. This depends on executing the business plan; the company cautioned that additional financing may be needed and may not be available on acceptable terms.
- COVID-19 continued to disrupt customer visits, sales activity, field testing, and deployments. Management could not estimate the full future impact.
- The company reported no material legal proceedings or recorded loss contingencies. Its PPP loan forgiveness application was submitted May 4, 2021; no determination had been made as of filing.
- After quarter-end, Ondas agreed to acquire American Robotics for $7.5 million in cash, subject to transaction expenses, 6.75 million common shares, and warrants for 1.875 million shares. Closing was expected in Q3 2021, subject to customary conditions and shareholder approvals. Ondas also made American Robotics a $2.0 million loan at 2% interest, due April 22, 2022.
- Ondas disclosed a material weakness in internal control over financial reporting, citing insufficient accounting resources and lack of segregation of duties. Management said remediation efforts were underway; disclosure controls were deemed ineffective as of March 31, 2021.
- The filing states that cash balances exceeded federally insured limits by approximately $23.750 million. The new Sunnyvale office lease began April 1, 2021, at $45,000 per month for 24 months.
Important facts for investors to verify
- Confirm timing and progress of Siemens and AURA development work, conversion of development projects into product sales, and customer concentration.
- Monitor cash burn, the Steward Capital note maturity and any required waiver or amendment, and the company’s ability to fund operations and the proposed acquisition.
- Track American Robotics closing conditions, total transaction and integration costs, dilution from shares, warrants, and potential management RSUs, and the status of the company’s own PPP forgiveness request.
- Assess progress in remediating the disclosed material weakness and whether future filings report effective controls.
- Verify reported EPS: the financial statements show $(0.12) for 2021 and $(0.14) for 2020, while one MD&A sentence reverses the period labels.