ONDAS HOLDINGS INC. General
The following discussion and analysis provide information which our management
believes to be relevant to an assessment and understanding of the results of
operations and financial condition of
Overview
Ondas Networks Segment
Our FullMAX SDR platform is an important and timely upgrade solution for privately-owned and operated wireless WANs, leveraging Internet Protocol-based communications to provide more reliability and data capacity for our mission-critical infrastructure customers. Critical infrastructure markets throughout the globe have reached an inflection point where legacy serial and analog based protocols and network transport systems no longer meet industry needs. In addition to offering enhanced data throughput, FullMAX is an intelligent networking platform enabling the adoption of sophisticated operating systems and equipment supporting next-generation MC-IoT applications over wide field areas. These new MC-IoT applications and related equipment require more processing power at the edge of large industrial networks and the efficient utilization of network capacity and scarce bandwidth resources which can be supported by the "Fog-computing" capability integrated in our end-to-end network platform. Fog-computing utilizes management software to enable edge compute processing and data and application prioritization in the field enabling our customers more reliable, real-time operating control of these new, intelligent MC-IoT equipment and applications at the edge.
We sell our products and services globally through a direct sales force and
value-added sales partners to critical infrastructure providers including major
rail operators, commercial and industrial drone operators, electric and gas
utilities, water and wastewater utilities, oil and gas producers and pipeline
operators, and for other critical infrastructure applications in areas such as
homeland security and defense, and transportation. We continue to develop our
value-added reseller relationships which today include a major strategic
partnership with
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The Global Rail Markets and our
The North American Rail Network is vast in scale, consisting of 140,000 miles of
track, 25,000 locomotives, and 1.6 million railcars. Within this large
footprint, we believe there are 200,000 highway crossings, with at least 65,000
of the crossings equipped with electronic systems today, a number which is
expected to increase in the coming years. A significant portion of the
communications infrastructure has been in operation for more than 20 years and
now requires a technological upgrade to support new applications and increased
capacity requirements. Our MC-IoT platform offers an excellent migration path
for these applications. We believe the Class I Rails value the ability of
In
We believe the Siemens partnership validates our wireless connectivity solutions and will accelerate the adoption of our wireless technology in the global rail markets. We believe Siemens has both the sales and marketing reach and support to drive our technology to wide scale adoption.
UAS, Drones and AURA Network Systems
In
In
Additional Critical Markets
In the coming quarters we expect to launch additional initiatives to take our
MC-IoT connectivity and ecosystem partnering strategy into other critical
infrastructure markets. As evidence of this, in
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American Robotics Segment
American Robotics is a commercial developer of highly automated drone systems, providing ultra-high resolution aerial data to enterprise customers. Through innovations in robot autonomy, machine vision, edge computing and AI, American Robotics has created the next generation of drone technology: a highly automated robotic data platform capable of continuous, unattended operation. As a result, American Robotics provides enterprise customers with the ability to continuously digitize, monitor and analyze their assets in near real-time.
The American Robotics Scout System has been designed from the ground up as an end-to-end product capable of continuous unattended operations in the real world. Powered by innovations in robotics automation, machine vision, edge computing, and AI, the Scout System provides unprecedented efficiencies as a drone solution for commercial use. The Scout System consists of (1) Scout, a highly automated drone with advanced imaging payloads (2) the ScoutBaseTM, a ruggedized base station for housing, charging, data processing, and cloud transfer, and (3) ScoutViewTM, American Robotics' analytics and user interface software package, as well as a host of supporting technologies that connect these major subsystems. Once installed in the field at customer locations, a fleet of connected, weatherproof Scouts remain indefinitely in an area of operation, automatically collecting data each day, self-charging, and seamlessly delivering data analysis regularly and reliably.
The advanced and high automation incorporated into the Scout drone technology enables the implementation of a Robot-as-a-Service (RaaS) business model wherein American Robotics' customers are not required to make expensive capital investments in robotics or drone hardware, and instead can obtain the data collected by the Scout drone systems via a subscription service. This enables American Robotics to realize high profitability margins on the drone hardware that the company retains ownership of and operates on behalf of these customers. Customers are also guaranteed access to the latest hardware and software features as American Robotics develops and releases these features.
American Robotics sells its products and services nationally through a direct sales force to large enterprises that operate in the agriculture, industrial and critical infrastructure verticals that include major rail operators, electric and gas utilities, oil and gas producers, large agricultural input manufacturers, large agricultural coops, and for other critical infrastructure applications in areas such as homeland security and defense, and transportation.
As of
COVID-19
In
The Company's business, financial condition and results of operations were
impacted from the COVID-19 pandemic for the nine months ended
? sales and marketing efforts were disrupted as our business development
team was unable to travel to visit customers and customers were unable
to receive visitors for on-location meetings;
? field activity for testing and deploying our wireless systems was
delayed due to the inability for our field service team to install and
test equipment for our customers; and
? ongoing supply chain constraints for certain critical parts.
In the first quarter of 2020, we reduced our business activity to critical
operations only, and furloughed 80% of our workforce. Per orders issued by the
Health Officer of the
The Company expects its business, financial condition and results of operations will be impacted from the COVID-19 pandemic during 2021, primarily due to the slowdown of customer activity during 2020 and 2021, supply chain constraints for certain critical parts, and difficulties in attracting employees. Further, the COVID-19 pandemic is ongoing and remains an unknown risk for the foreseeable future. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and its variants. As a result, the Company is unable to reasonably estimate the full extent of the impact from the COVID-19 pandemic on its future business, financial condition, and results of operations. In addition, if the Company were to experience any new impact to its operations or incur additional unanticipated costs and expenses as a result of the COVID-19 pandemic, such operational delays and unanticipated costs and expenses could further adversely impact the Company's business, financial condition and results of operations during 2021.
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Although COVID-19 has had an immediate near-term impact on our business
operations, we also believe the one outcome of the pandemic will be to reinforce
the need for more reliable private commercial and industrial communications.
This can be seen specifically in the need for new Unmanned Aerial Systems
("UAS") solutions including the safe command and control of drones as remote
delivery method. In a recent filling at the
American Robotics Acquisition
Merger Agreement
On
On
On the Closing Date, American Robotics merged with and into Merger Sub I
("Merger I"), with American Robotics continuing as the surviving entity, and
American Robotics then subsequently and immediately merged with and into Merger
Sub II ("Merger II" and, together with Merger I, the "Mergers"), with Merger Sub
II continuing as the surviving entity and as a direct wholly owned subsidiary of
the Company. Simultaneously with Merger II, Merger Sub II was renamed
Pursuant to the Agreement, American Robotics stockholders and certain service
providers received (i) cash consideration in an amount equal to
Also on the Closing Date, the Company entered into employment agreements and issued 1,375,000 restricted stock units under the Company's incentive stock plan to key members of American Robotics' management.
Lock-Up and Registration Rights Agreement
On
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Promissory Note
On
Results of Operations Three months endedSeptember 30, 2021 compared to three months endedSeptember 30, 2020 Revenues Three Months Ended September 30, Increase 2021 2020 (Decrease)
Revenue, net
- 22,693
Total $ 283,329 $ 614,026 $ (330,697 ) Our revenues were
Cost of goods sold
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Cost of goods sold
Ondas Networks $ 264,116 $ 365,863 $ (101,747 )
American Robotics 5,600 - 5,600
Total $ 269,716 $ 365,863 $ (96,147 ) Our cost of goods sold was
Gross profit
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Gross Profit (Loss)
Ondas Networks $ (3,480 ) $ 248,163 $ (251,643 )
American Robotics 17,093 - 17,093
Total $ 13,613 $ 248,163 $ (234,550 ) Our gross profit decreased by
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Operating Expenses
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Operating expenses:
General and administrative $ 2,721,785 $ 1,823,336 $ 898,449
Sales and marketing 424,992 253,560 171,432
Research and development 1,780,187 904,378 875,809
Total $ 4,926,964 $ 2,981,274 $ 1,945,690
Our principal operating costs include the following items as a percentage of
total expense.
Three Months Ended
September 30,
2021 2020
Human resource costs, including benefits 30 % 55 %
Travel and entertainment 2 % - %
Other general and administration costs:
Professional fees and consulting expenses 28 % 25 %
Other expense 13 % 12 %
Depreciation and amortization 14 % 2 %
Other research and deployment costs, excluding human resources and travel and entertainment
13 % 6 %
Operating expenses increased by $1,945,690 , or 65% as a result of the following
items:
(000s)
Human resource costs, including benefits $ (157 )
Travel and entertainment 76
Other general and administration costs:
Professional fees and consulting costs 664
Other expense 250
Depreciation and amortization 629
Other research and deployment costs, excluding human resources and travel and entertainment
463
Other sales and marketing costs, excluding human resources and travel
and entertainment 20
$ 1,945 The increase in operating expenses was primarily due to an increase of
approximately
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Operating Loss
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Operating loss $ (4,913,351 ) $ (2,733,111 ) $ 2,180,240 As a result of the foregoing, our operating loss increased by
Other Income (Expense), net
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Other income (expense), net
Other expense, decreased by
Net Loss
Three Months Ended
September 30,
Increase
2021 2020 (Decrease)
Net Loss $ (4,914,272 ) $ (3,325,880 ) $ 1,588,392 As a result of the net effects of the foregoing, net loss increased by
Nine months endedSeptember 30, 2021 compared to nine months endedSeptember 30, 2020 Revenues Nine Months Ended September 30, Increase 2021 2020 (Decrease) Revenue, net Ondas Networks$ 2,312,832 $ 1,969,598 $ 343,234 American Robotics 22,693 - 22,693 Total$ 2,335,525 $ 1,969,598 $ 365,927 36
Our revenues were
Cost of goods sold
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Cost of goods sold
Ondas Networks $ 1,400,141 $ 1,087,540 $ 312,601
American Robotics 5,600 - 5,600
Total $ 1,405,741 $ 1,087,540 $ 318,201
Our cost of goods sold was $1,405,741 for the nine months ended September 30,
2021 compared to $1,087,540 for the nine months ended September 30, 2020 . The
increase in cost of goods sold was primarily a result of costs related to the
development agreements.
Gross profit
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Gross Profit (Loss)
Ondas Networks $ 912,691 $ 882,058 $ 30,633
American Robotics 17,093 - 17,093
Total $ 929,784 $ 882,058 $ 47,726 Our gross profit increased by
Operating Expenses
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Operating expenses:
General and administrative $ 7,625,909 $ 5,222,180 $ 2,403,729
Sales and marketing 808,513 934,948 (126,435 )
Research and development 3,428,406 2,555,223 873,183
Total $ 11,862,828 $ 8,712,351 $ 3,150,477
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Our principal operating costs include the following items as a percentage of
total expense.
Nine Months Ended
September 30,
2021 2020
Human resource costs, including benefits 34 % 49 %
Travel and entertainment 1 % 1 %
Other general and administration costs:
Professional fees and consulting expenses 37 % 33 %
Other expense 14 % 11 %
Depreciation and amortization 6 % 1 %
Other research and deployment costs, excluding human resources and travel and entertainment
8 % 4 %
Other sales and marketing costs, excluding human resources and
travel and entertainment - % 1 %
Operating expenses increased by $3,150,477 , or 36% as a result of the following
items:
(000s)
Human resource costs, including benefits $ (277 )
Travel and entertainment 35
Other general and administration costs:
Professional fees and consulting costs 1,486
Other expense 743
Depreciation and amortization 644
Other research and deployment costs, excluding human resources and travel and entertainment
551
Other sales and marketing costs, excluding human resources and travel
and entertainment (29 )
$ 3,150 The increase in operating expenses was primarily due to an increase of
approximately
Operating Loss
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Operating loss
As a result of the foregoing, our operating loss increased by
38
Other Income (Expense), net
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Other income (expense), net $ (58,887 ) $ (1,523,413 ) $ (1,464,526 ) Other income (expense), net increased by
Net Loss
Nine Months Ended
September 30,
Increase
2021 2020 (Decrease)
Net Loss $ (10,874,157 ) $ (9,353,706 ) $ 1,520,451 As a result of the net effects of the foregoing, net loss increased by
Summary of (Uses) and Sources of Cash
Nine Months Ended
September 30,
2021 2020
Net cash used in operating activities $ (11,623,656 ) $ (4,875,137 )
Net cash used in investing activities (8,684,736 ) (13,606 )
Net cash provided by financing activities 41,744,186 4,884,060
Increase (Decrease) in cash 21,435,794 (4,683 )
Cash and cash equivalents, beginning of period 26,060,733 2,153,028
Cash and cash equivalents, end of period
The principal use of cash in operating activities for the nine months ended
For a summary of our outstanding Secured Promissory Notes and Long-Term Notes Payable and, see Notes 9 and 10 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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Liquidity and Capital Resources
We have incurred losses since inception and have funded our operations primarily
through debt and the sale of capital stock. As of
In
We believe the funds raised in the
As described above, on
Our future capital requirements will depend upon many factors, including progress with developing, manufacturing and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline as well as new customers. We also will be required to efficiently manufacturer and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, will require significant uses of working capital. There can be no assurances that we will generate revenue and cash flow as expected in our current business plan. We may seek additional funds through equity or debt offerings and/or borrowings under additional notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable terms or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial condition or results of operations.
Off-Balance Sheet Arrangements
As of
Contractual Obligations
We are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of
operations is based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
Recent Accounting Pronouncements
There have been no material changes to our significant accounting policies as
summarized in Note 2 of our Annual Report on Form 10-K for the year ended
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that relate to future events or to our future operations or financial performance. Any forward-looking statement involves known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statement. Forward-looking statements include statements, other than statements of historical fact, about, among other things:
? our plans to further develop our FullMAX system of wireless base stations;
? our plans to further develop remote radios;
? the adoption by our target industries of the new IEEE 802.16s standard
for private cellular networks;
? our future development priorities;
? our estimates regarding the size of our potential target markets;
? our expectations about the impact of new accounting standards;
? our future operations, financial position, revenues, costs, expenses,
uses of cash, capital requirements, our need for additional financing
or the period for which our existing cash resources will be sufficient
to meet our operating requirements; or
? our strategies, prospects, plans, expectations, forecasts, or objectives.
Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "forecast," "intend," "may," "plan," "potential," "predict," "project," "targets," "likely," "will," "would," "could," "should," "continue," "scheduled" and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on our estimates or projections of the future that are subject to known and unknown risks and uncertainties and other important factors that may cause our actual results, level of activity, performance, experience or achievements to differ materially from those expressed or implied by any forward-looking statement. Actual results, level of activity, performance, experience, or achievements may differ materially from those expressed or implied by any forward-looking statement as a result of various important factors, including our critical accounting policies and risks and uncertainties relating, among other things, to:
? our ability to obtain additional financing on reasonable terms, or at all;
? the accuracy of our estimates regarding expenses, costs, future
revenues, uses of cash and capital requirements;
? the market acceptance of our wireless connection products and the IEEE
802.16s standard and IEEE 802.16t standard;
? our ability to develop future generations of our current products;
? our ability to generate significant revenues and achieve profitability;
? our ability to successfully commercialize our current and future
products, including their rate and degree of market acceptance;
? our ability to attract and retain key scientific or management
personnel and to expand our management team;
? our ability to establish licensing, collaboration or similar
arrangements on favorable terms and our ability to attract
collaborators with development, regulatory and commercialization
expertise;
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? our ability to manage the growth of our business;
? the success of our strategic partnerships with third parties;
? our ability to achieve the anticipated benefits of the American
Robotics acquisition;
? expenditures not resulting in commercially successful products;
? our outreach to global markets;
? our commercialization, marketing and manufacturing capabilities and strategy;
? our ability to expand, protect and maintain our intellectual property
position;
? the success of competing third-party products;
? our ability to fully remediate our identified internal control material
weaknesses;
? regulatory developments in the United States and other countries; and
? our ability to comply with regulatory requirements relating to our
business, and the costs of compliance with those requirements,
including those on data privacy and security.© Edgar Online, source
