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 Ondas Holdings Inc. ("Ondas," "we" or the
"Company"). This discussion should be read together with our condensed
consolidated financial statements and the notes included therein, which are
included in this Quarterly Report on Form 10-Q (the "Report"). This information
should also be read in conjunction with the information contained in our Annual
Report on Form 10-K for the year ended December 31, 2021, filed with the
Securities and Exchange Commission (the "SEC") on March 22, 2022, including the
audited consolidated financial statements and notes included therein as of and
for the year ended December 31, 2021 ("2021 Form 10-K"). This discussion
contains forward-looking statements that involve risks and uncertainties. For a
description of factors that may cause our actual results to differ materially
from those anticipated in these forward-looking statements, please refer to the
below section of this Report titled "Cautionary Note Regarding Forward-Looking
Statements." The reported results will not necessarily reflect future results of
operations or financial condition.
Overview
Ondas Holdings is a leading provider of private wireless, drone, and automated
data solutions through its wholly owned subsidiaries Ondas Networks Inc. ("Ondas
Networks") and American Robotics, Inc. ("American Robotics" or "AR"). Ondas
Networks and American Robotics together provide users in rail, energy, mining,
agriculture, and critical infrastructure markets with improved connectivity, and
data collection capabilities and automated decision making to improve
operations. Ondas operates these two subsidiaries as separate business segments,
and the following is a discussion of each segment.
Ondas Networks Segment
Ondas Networks provides wireless connectivity solutions enabling
mission-critical Industrial Internet applications and services. We refer to
these applications as the Mission-Critical Internet of Things ("MC-IoT"). Our
wireless networking products are applicable to a wide range of MC-IoT
applications, which are most often located at the very edge of large industrial
networks. These applications require secure, real-time connectivity with the
ability to process large amounts of data at the edge of large industrial
networks. Such applications are required in all of the major critical
infrastructure markets, including rail, electric grids, drones, oil and gas, and
public safety, homeland security and government, where secure, reliable and fast
operational decisions are required in order to improve efficiency and ensure a
high degree of safety and security.
We design, develop, manufacture, sell and support FullMAX, our patented,
Software Defined Radio ("SDR") platform for secure, licensed, private, wide-area
broadband networks. Our customers install FullMAX systems in order to upgrade
and expand their legacy wide-area network infrastructure. Our MC-IoT
intellectual property has been adopted by the Institute of Electrical and
Electronics Engineers ("IEEE"), the leading worldwide standards body in data
networking protocols, and forms the core of the IEEE 802.16s standard. Because
standards-based communications solutions are preferred by our mission-critical
customers and ecosystem partners, we have taken a leadership position in IEEE as
it relates to wireless networking for industrial markets. As such, management
believes this standards-based approach supports the adoption of our technology
across a burgeoning ecosystem of global partners and end markets.
Our software-based FullMAX platform is an important and timely upgrade solution
for privately-owned and operated wireless wide-area networks, leveraging
Internet Protocol-based communications to provide more reliability and data
capacity for our mission-critical infrastructure customers. We believe
industrial and 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.
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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 Siemens Mobility ("Siemens") for the development of new types
of wireless connectivity for the global rail markets
The Global Rail Markets and our Siemens Mobility Partnership
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. We believe 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 Ondas' frequency-agnostic SDR architecture to enable a substantial
capacity increase utilizing the railroad's existing wireless infrastructure and
dedicated Federal Communication Commission ("FCC") licensed radio frequencies,
as well as the flexibility to adapt to and take advantage of future changes in
spectrum availability. The Class 1 Rails operate four separate nationwide
networks, all of which are addressable by our FullMAX platform. Ondas is
targeting the 900 MHz network for the initial adoption of its wireless platform
by the Class 1 Rails, who were awarded greenfield spectrum in the 900 MHz band
by the FCC in 2020.
Siemens Partnership, ATCS Development Program
In April 2020, we entered a strategic partnership with Siemens, to jointly
develop wireless communications products for the North American Rail Industry
based on Siemens' Advanced Train Control System ("ATCS") protocol and our MC-IoT
platform. At the same time, we entered into an agreement to allow Siemens to
sell Ondas' 802.16 MC-IoT standardized products to the North American Rails
under the Siemens' brand name "Airlink." The dual-mode ATCS/MC-IoT radio system
was designed to support Siemens' extensive installed base of ATCS radios as well
as offer Siemens' customers the ability to support a host of new advanced rail
applications utilizing our MC-IoT wireless system. These new applications,
including Advanced Grade Crossing Activation and Monitoring, Wayside Inspection,
Railcar Monitoring, and support for next generation signaling and train control
systems, are designed to increase railroad productivity, reduce costs, and
improve safety. Siemens formally launched the dual mode ATCS/MC-IoT radio
products along with the Siemens branded Airlink radios in September 2021 at the
Railway Systems Suppliers (RSSI) conference in Indianapolis. In November 2021,
Siemens secured its first commercial 900 MHz rail order for a major Class I
Railroad in the United States for delivery by year-end. Ondas delivered this
initial order as requested in December 2021. On August 9, 2022, we announced
that we had secured an initial volume order from Siemens for the Class I Rail
900 MHz Network consisting of both ATCS compatible products along with Ondas'
catalog products. In September 2022, we received government authorization to
sell ATCS radios in Canada.
Multiple New Joint Development Programs
In January 2021, Ondas Networks and Siemens signed a Letter of Intent ("LOI")
for the development of a next generation radio product for the global rail
markets including support for our first onboard locomotive radio. The formal
agreement, referred to as the Next Generation Radio Board, was signed by the
parties in July 2021 with a targeted completion date in first quarter 2022. Also
in July 2021, Ondas Networks received a purchase order from Siemens Mobility for
the development of a new industrial radio to support rail safety. This program
was completed as requested by September 2021. In October 2021, Siemens
substantially expanded the Next Generation Radio Board development program by
issuing to Ondas Networks four new purchase orders which included customized
hardware and software solutions for Head of Train (HOT) locomotive applications
for the North American market and for a major Asian Rail customer. The expanded
program reprioritized the July 2021 agreement deliverables for products to be
delivered to an Asian Rail customer. In November 2022, Ondas Networks received
its first order for delivery of these products to Siemens.
802.16 ("dot16") Rail LabIn December 2021, we received an order from Siemens for the implementation of
the "dot16" North American Rail Lab ("Rail Lab"). The initial construction of
the Rail Lab was completed in June 2022 at our headquarters in Sunnyvale, CA. In
September 2022, the Rail Lab was transferred from our headquarters to MxV Rail's
headquarters in Pueblo, Colorado. MxV Rail, formerly known as TTCI, is the
subsidiary of the Association of American Railroads (AAR) responsible for
standardization of rail technology. The Rail Labs,, serves multiple purposes
including interoperability and coexistence testing of 802.16 compliant wireless
systems, customization and optimization of different network rail
configurations, and next generation rail application testing. Importantly, the
lab is focused on multiple frequency bands and networks beyond the 900 MHz that
Ondas is targeting for commercial deployment.
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To summarize, since announcing our strategic partnership in April 2020, Ondas
and Siemens have completed our first major joint development program for
ATCS/MC-IoT 900 MHz radios for the North American market and secured our first
volume order in August 2002 for products to be delivered to multiple Class I
railroads starting in Q3 2022. In July 2021, we entered into our second major
joint development program for an onboard locomotive radio. This program was
significantly expanded in October 2021 to incorporate specific locomotive
protocols and a global reach. We have completed the portion of the program for
Siemens customer in Asia (and have received our first volume order for these
products for delivery in 2023).. In September 2021, Siemens launched their
Siemens-branded MC-IoT wireless systems under brand name 'Airlink' at the RSSI
show in North America with an international launch at InnoTrans in Berlin in
September 2022 In December 2021, Siemens together with Ondas secured the Rail
Lab order from the North American railroads which has now been constructed and
delivered to its permanent location at MxV Rail in Pueblo, Colorado In June
2022, Ondas signed an LOI with Siemens UK to develop a new locomotive radio for
the European rail market with product delivery beginning in the fourth quarter
of 2023.
Ondas believes the Siemens strategic partnership validates our wireless
connectivity solutions and will serve as the foundation for the continued
adoption of our wireless technology in the global rail markets.
UAS, Drones and AURA Network Systems
In December 2019, Ondas Networks received a purchase order for FullMAX base
stations and remote radios from AURA Networks Systems ("AURA"), a privately held
company deploying a nationwide network for the command and control of commercial
drones. AURA's key differentiator is its exclusive ownership of dedicated,
licensed Air-to-Ground frequencies. We believe that operators of large,
fast-moving, and high-flying drones, including those used for inspection and
security applications as well as those for the Urban Air Mobility market (also
known as "flying cars"), will require a secure command and control network like
that planned by AURA. This command and control (C2) network will be designed to
meet Federal Aviation Administration ("FAA") requirements in order to fly long
distances beyond visual line of site (BVLOS) of a drone operator.
In July 2020, we completed delivery of AURA's first purchase order for the
ground infrastructure. AURA has now installed its initial nationwide
infrastructure based on our FullMAX technology in order to satisfy their FCC
license requirements. In January 2021, AURA achieved another major milestone
with approval from the FCC to use their frequencies for Unmanned Ariel Systems
("UAS")/Drone operation. Based on this approval and other advances in the
network, AURA placed a new purchase order in the first quarter of 2021 for
continued system development related to the optimization of FullMAX base station
and remote radio equipment for customer testing and demonstration networks. We
have completed this project as of December 2021.
In August 2022, we announced that we had started integration of our wireless
technology with American Robotics' Terrestrial Acoustic Sensor Array (TASA)
detect-and-avoid system. In October 2022, American Robotics obtained site based
experimental licenses from the FCC to use Ondas Networks radios at locations in
California, Massachusetts, Kansas and Louisiana. Ondas Networks and American
Robotics plan to standardize this licensed solution for TASA in order to obtain
higher reliability and availability of frequency for this critical system.
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. In June 2022, we announced the first successful
installation of our technology into an Integrated Coastal Surveillance System
(ICSS) in the Caribbean with a global defense contractor. In October 2022, the
defense contractor placed its next order for an ICSS system for a sovereign
nation in Asia. We expect additional orders from this defense vendor for the
ICSS application in 2023. We believe our FullMAX technology's licensed frequency
flexibility, reliability, and long communications range over ocean surfaces, is
broadening the scale of our technology in this emerging market for homeland
security.
American Robotics Segment
American Robotics designs, develops and manufactures autonomous drone systems,
providing high-fidelity, ultra-high-resolution aerial data to enterprise
customers. We provide our customers turnkey data solutions designed to meet
their unique requirements in the field. We do this via our internally developed
Scout System™, an industrial drone platform which provides commercial and
government customers with the ability to continuously digitize, analyze, and
monitor their assets and field operations in near real-time.
The 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 efficiencies as a drone solution for commercial use. Once
installed in the field at customer locations, a fleet of connected Scout Systems
remain indefinitely in an area of operation, automatically collecting data each
day, self-charging, and seamlessly delivering data analysis regularly and
reliably. AR markets the Scout System™ under a Robot-as-a-Service ("RaaS")
business model, whereby our drone platform aggregates customer data and provides
the data analytics meeting customer requirements in return for an annual
subscription fee.
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The Scout System™ consists of (i) Scout™, a highly automated, AI-powered drone
with advanced imaging payloads, (ii) the ScoutBaseTM, a ruggedized weatherproof
base station for housing, charging, data processing, and cloud transfer, and
(iii) ScoutViewTM, a secure web portal and API which enables remote interaction
with the system, data, and resulting analytics anywhere in the world. These
major subsystems are connected via a host of supporting technologies. Using a
suite of proprietary technologies, including Detect-and-Avoid ("DAA") and other
proprietary intelligent safety systems, we achieved the first and only FAA
approval for automated operations without a human on-site in the United States
on January 15, 2021. As a result, American Robotics currently has the unique
ability to serve markets which require automated drone technology to enable
scalable drone operations, which the Company estimates to be 90% of all
commercial drone applications.
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 September 30, 2022, American Robotics had signed subscription agreements
of varying contract lengths with customers in multiple industries including
agriculture, oil and gas and materials management.
Acquisition of Airobotics
On August 4, 2022, the Company entered into an Agreement of Merger (the "AIRO
Agreement") with Talos Ltd. (or such other name as shall be approved by the
Israeli Registrar of Companies), an Israeli company in formation as a wholly
owned subsidiary of the Company ("Merger Sub"), and AIROBOTICS Ltd., an Israeli
publicly traded company on the Tel Aviv Stock Exchange and a leading Israeli
developer of autonomous unmanned aircraft systems and automated data analysis
and visualization platforms ("Airobotics").
The AIRO Agreement provides that, upon the terms and subject to the conditions
set forth in the AIRO Agreement, and in accordance with the Companies Law
5759-1999 of the State of Israel (together with the rules and regulations
thereunder), Merger Sub shall be merged with and into Airobotics, and Airobotics
will continue as a wholly owned subsidiary of the Company (the "AIRO Merger").
At the closing of the AIRO Merger, upon the terms and subject to the conditions
set forth in the AIRO Agreement, each ordinary share of Airobotics issued and
outstanding immediately prior to the closing of the AIRO Merger (other than
shares owned by Airobotics or its subsidiaries (dormant or otherwise) or by the
Company or Merger Sub) shall be exchanged for and converted into the right to
receive 0.16806 of a fully paid and nonassessable share of the Company common
stock without interest and subject to applicable tax withholdings ("Merger
Consideration"). All fractional shares of the Company common stock that would
otherwise be issued to a holder of Airobotics ordinary shares as part of the
Merger Consideration will be rounded up to the nearest whole share based on the
total number of shares of the Company's common stock to be issued to such holder
of Airobotics ordinary shares.
Each of the Company, Merger Sub, and Airobotics has provided customary
representations, warranties and covenants in the AIRO Agreement. The completion
of the AIRO Merger is subject to various closing conditions, including (a) the
requisite regulatory approvals being obtained; (b) the absence of any applicable
order (whether temporary, preliminary or permanent) in effect which prohibits
the consummation of the AIRO Merger; (c) the absence of any law of any
governmental authority of competent jurisdiction prohibiting the consummation of
the AIRO Merger; and (d) Airobotics obtaining the requisite stockholder
approval. The AIRO Agreement contains customary termination rights for both the
Company and Airobotics. Both the Company and Airobotics have the right to
terminate the AIRO Agreement if the closing of the AIRO Merger does not occur on
or before February 15, 2023.
The AIRO Merger is expected to close in the first quarter of 2023.
COVID-19
In December 2019, a novel strain of coronavirus ("COVID-19") was identified and
has resulted in increased travel restrictions, business disruptions and
emergency quarantine measures across the world including the United States.
The Company's business, financial condition and results of operations were
impacted from the COVID-19 pandemic for the nine months ended September 30, 2022
and 2021 as follows:
? 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
? manufacturing and sales were disrupted due to ongoing supply chain
constraints for certain critical parts.
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The Company expects its business, financial condition and results of operations
will be impacted from the COVID-19 pandemic during 2022, primarily due to the
slowdown of customer activity during 2020 and 2021, ongoing supply chain
constraints for certain critical parts, and difficulties in attracting
employees. The extent to which the coronavirus 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 conditions, 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 2022.
Recent Developments
October 2022 Note Offering
On October 26, 2022, Ondas entered into a placement agent agreement (the
"Placement Agent Agreement") with Oppenheimer, as the sole placement agent
relating to the Company's sale and issuance to selected institutional investors
(the "Investors") in a registered direct offering of 3% senior convertible notes
due 2023 in the aggregate original principal amount of $34.5 million (the "2022
Notes"). The 2022 Notes have an original issue discount of thirteen percent
(13%) resulting in gross proceeds to the Company of $30.0 million. The 2022
Notes were sold pursuant to the terms of a Securities Purchase Agreement, dated
October 26, 2022 (the "SPA"), between Ondas and each investor in connection with
this offering (the "Offering"). Upon Ondas' filing of an additional prospectus
supplement, indenture and supplemental indenture, if elected by the initial
purchasers of 2022 Notes, we may consummate additional closings of up to an
additional $34.5 million in aggregate principal amount of 3% senior convertible
notes due two years after the date of issuance pursuant to the SPA. Up to
16,235,294 shares of the Company's common stock (the "Shares") are issuable from
time to time upon conversion or otherwise under the 2022 Notes (including shares
of common stock that may be issued as interest in lieu of cash payments). The
2022 Notes and Shares are being offered pursuant to the Form S-3, and a
registration statement on Form S-3 (Registration No. 333-268014) pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, which was effective
immediately upon filing. Oppenheimer served as the sole placement agent for the
transaction pursuant to the terms of the Placement Agent Agreement. Under the
terms of the Placement Agent Agreement, we paid our placement agent a cash fee
equal to 5.0% of the gross proceeds in connection with the Offering. The
Offering closed on October 28, 2022. The net amount of proceeds to Ondas from
the Offering after deducting the placement agent's fees and offering expenses
was approximately $27,750,000.
202,711 shares of the Company's common stock were issued to the investors as the
first monthly payment on the Notes on November 1, 2022.
Amendment to Equity Distribution Agreement
On October 26, 2022, Ondas entered into Amendment No. 1 to the Equity
Distribution Agreement, dated March 22, 2022 ("Amendment No. 1"), with
Oppenheimer & Co. Inc., as sales agent. Amendment No. 1 provides for the
reduction of the aggregate offering price from up to $50 million to up to $40
million of shares of the Company's common stock.
Amendments to Agreements with Airobotics
On September 20, 2022, Airobotics and the Company entered into a loan agreement
(the "Loan Agreement"), according to which, commencing from October 3, 2022, the
Company provided Airobotics with credit of up to $1.5 million, which will be
utilized for the purpose of financing Airobotics' ongoing activities, subject to
customary conditions, including the delivery of documents and standard approvals
of the Company. The Loan Agreement was amended on October 30, 2022 to increase
the available credit to $2.0 million. The primary purpose of the increase is is
to fund inventory for known customer demand Airobotics has borrowed $1.75
million under the Loan Agreement.
On November 13, 2022, Ondas and Airobotics entered into an amendment to the Loan
Agreement, as amended, changing the maturity date to February 15, 2023.
Also, on November 13, 2022, Ondas and Airobotics entered into an amendment to
the Merger Agreement changing the termination date to February 15, 2023.
Results of Operations
Three months ended September 30, 2022, compared to three months ended September
30, 2021
Three Months Ended
September 30,
Increase
2022 2021 (Decrease)
Revenue, net $ 632,489 $ 283,329 $ 349,160
Cost of goods sold 233,001 269,716 (36,715 )
Gross profit 399,488 13,613 385,875
Operating expenses: -
General and administrative 7,362,274 2,721,785 4,640,489
Sales and marketing 792,613 424,992 367,621
Research and development 5,793,345 1,780,187 4,013,158
Total operating expense 13,948,232 4,926,964 9,021,268
Operating loss (13,548,744 ) (4,913,351 ) (8,635,393 )
Other income (expense) (29,597 ) (921 ) (28,676 )
Net loss (13,578,341 ) (4,914,272 ) (8,664,069 )
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Revenues
Three Months Ended
September 30,
Increase
2022 2021 (Decrease)
Revenue, net
Ondas Networks 566,784 260,636 306,148
American Robotics 65,705 22,693 43,012
Total 632,489 283,329 349,160
Our revenues increased by $349,160 to $632,489 for the three months ended
September 30, 2022, compared to $283,329 for the three months ended September
30, 2021. Revenues during the three months ended September 30, 2022, included
$235,172 for products, $190,705 for maintenance, service, support, and
subscriptions, and $206,612 for development agreements with Siemens. Revenues
during the three months ended September 30, 2021, included $45,358 for product,
$20,693 for maintenance, service and support and $215,987 for development
agreements with Siemens and AURA, and $1,291 for other revenues. The decrease in
our development revenues were the result of substantial completion of our
development contracts in third quarter of 2022.
Cost of goods sold
Our cost of goods sold was $233,001 for the three months ended September 30,
2022, compared to $269,716 for the three months ended September 30, 2021. The
decrease in cost of goods sold was primarily a result of a decline in costs
related to the development agreements and improved margins on product revenue.
Gross profit
Our gross profit increased by $385,875 for the three months ended September 30,
2022 compared to the three months ended September 30, 2021 based on the changes
in revenues and costs of goods sold as discussed above. Gross margin for the
three months ended September 30, 2022 and 2021 was 63% and 5%, respectively.
This increase in gross margin is a direct result of a decline in the development
costs and improved margins on product revenue.
Operating Expenses
Three Months Ended
September 30,
Increase
2022 2021 (Decrease)
Operating expenses:
General and administrative 7,362,274 2,721,785 4,640,489
Sales and marketing 792,613 424,992 367,621
Research and development 5,793,345 1,780,187 4,013,158
Total 13,948,232 4,926,964 9,021,268
Our principal operating costs include the following items as a percentage of
total expense.
Three Months Ended
September 30,
2022 2021
Human resource costs, including benefits 38 % 30 %
Travel and entertainment 3 % 2 %
Other general and administration costs:
Professional fees and consulting expenses 21 % 29 %
Other expense 13 % 13 %
Depreciation and amortization 7 % 14 %
Other research and deployment costs, excluding human
resources and travel and entertainment
17 % 13 %
Other sales and marketing costs, excluding human resources
and travel and entertainment 1 % -
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Operating expenses increased by $9,021,268, or 183% as a result of the following
items:
Three Months
Ended
September 30,
2022
(000s)
Human resource costs, including benefits $ 3,774
Travel and entertainment 284
Other general and administration costs:
Professional fees and consulting costs 1,512
Other expense 1,222
Depreciation and amortization 342
Other research and deployment costs, excluding human resources and
travel and entertainment
1,806
Other sales and marketing costs, excluding human resources and travel
and entertainment 81
$ 9,021
The increase in operating expenses was primarily as the result of the
acquisition of American Robotics which accounted for $8,439,169 of the increase,
specifically in compensation expense, depreciation and amortization and research
and development expenses. The rest of the increase was primarily in legal,
accounting and other services and insurance.
Operating Loss
As a result of the foregoing, our operating loss increased by $8,635,393, or
176%, to $13,548,744 for the three months ended September 30, 2022, compared
with $4,913,351 for the three months ended September 30, 2021. Operating loss
increased primarily as a result of higher general and administration expenses
and research and development expenses for the three months ended September 30,
2022.
Total other Income (Expense), net
Other expense, net increased by $28,676, to $29,597 for the three months ended
September, 2022, compared with the other expense of $921 for the three months
ended September 30, 2021.
Net Loss
As a result of the net effects of the foregoing, net loss increased by
$8,664,069, or 176%, to $13,578,341 for the three months ended September 30,
2022, compared with $4,914,272 for the three months ended September 30, 2021.
Net loss per share of common stock, basic and diluted, was $(0.13) for the three
months ended September 30, 2021, compared with $(0.32) for the three months
ended September 30, 2022.
Nine months ended September 30, 2022 compared to nine months ended September 30,
2021
Nine Months Ended
September 30,
Increase
2022 2021 (Decrease)
Revenue, net $ 1,646,905 $ 2,335,525 $ (688,620 )
Cost of goods sold 806,571 1,405,741 (599,170 )
Gross profit 840,334 929,784 (89,450 )
Operating expenses: -
General and administrative 18,727,626 7,625,909 11,101,717
Sales and marketing 2,210,021 808,513 1,401,508
Research and development 14,815,852 3,428,406 11,387,446
Total operating expense 35,753,499 11,862,828 23,890,671
Operating loss (34,913,165 ) (10,933,044 ) (23,980,121 )
Other income (expense) (67,000 ) 58,887 (125,887 )
Net loss (34,980,165 ) (10,874,157 ) (24,106,008 )
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Revenues
Nine Months Ended
September 30,
Increase
2022 2021 (Decrease)
Revenue, net
Ondas Networks 1,453,659 2,312,832 (859,173 )
American Robotics 193,246 22,693 170,553
Total 1,646,905 2,335,525 (688,620 )
Our revenues decreased by $688,620 to $ 1,646,905 for the nine months ended
September 30, 2022, compared to $ 2,335,525 for the nine months ended September
30, 2021. Revenues during the nine months ended September 30, 2022, included
$823,184 for products, $318,247 for maintenance, service, support, and
subscriptions, and $505,474 for development agreements with Siemens and AURA.
Revenues during the nine months ended September 30, 2021, included $134,358 for
product, $45,804 for maintenance, service and support and $ 2,155,363 for
development agreements with Siemens and AURA. The decrease in our development
revenues were the result of substantial completion of our development contracts
in 2021.
Cost of goods sold
Our cost of goods sold was $806,571 for the nine months ended September 30,
2022, compared to $1,405,741 for the nine months ended September 30, 2021. The
decrease in the cost of goods sold was primarily a result of a decline in costs
related to the development agreements and improved product revenue margins.
Gross profit
Our gross profit decreased by $89,450 for the nine months ended September 30,
2022, compared to the nine months ended September 30, 2021 based on the changes
in revenues and costs of goods sold as discussed above. Gross margin for the
nine months ended September 30, 2022, and 2021 was 51% and 40%, respectively.
This increase in gross margin is a direct result of a decline in the development
revenues that have relatively lower margins and improvement in the gross margin
on the product revenue.
Operating Expenses
Nine Months Ended
September 30,
Increase
2022 2021 (Decrease)
Operating expenses:
General and administrative 18,727,626 7,625,909 11,101,717
Sales and marketing 2,210,021 808,513 1,401,508
Research and development 14,815,852 3,428,406 11,387,446
Total 35,753,499 11,862,828 23,890,671
Our principal operating costs include the following items as a percentage of
total expenses.
Nine Months Ended
September 30,
2022 2021
Human resource costs, including benefits 41 % 34 %
Travel and entertainment 2 % 1 %
Other general and administration costs:
Professional fees and consulting expenses 17 % 37 %
Other expense 14 % 14 %
Depreciation and amortization 8 % 6 %
Other research and deployment costs, excluding human
resources and travel and entertainment
17 % 8 %
Other sales and marketing costs, excluding human resources
and travel and entertainment 1 % - %
40
Operating expenses increased by $23,890,671, or 201% as a result of the
following items:
Nine Months
Ended
September 30,
2022
(000s)
Human resource costs, including benefits $ 10,782
Travel and entertainment 783
Other general and administration costs:
Professional fees and consulting costs 1739
Other expense 3,170
Depreciation and amortization 2,176
Other research and deployment costs, excluding human resources and
travel and entertainment
5,042
Other sales and marketing costs, excluding human resources and travel
and entertainment 199
$ 23,891The increase in operating expenses was primarily as the result of the
acquisition of American Robotics which accounted for $21,989,639 of the
increase, specifically in compensation expense, depreciation and amortization
and research and development expenses. The rest of the increase was primarily in
legal, accounting and other services and insurance.
Operating Loss
As a result of the foregoing, our operating loss increased by $ 23,980,121, or
219%, to $34,913,165 for the nine months ended September 30, 2022, compared with
$10,933,044 for the nine months ended September 30, 2021. Operating loss
increased primarily as a result of higher general and administration expenses
and research and development expenses for the nine months ended September 30,
2022.
Total Other Income (Expense), net
Other expense decreased by $125,887, or 214%, to $ 67,000 for the nine months
ended September, 2022, compared with the other income of ($58,887) for the nine
months ended September 30, 2021. During the nine months ended September 30,
2022, compared to the same period in 2021, we reported a decrease in interest
expense of approximately $ 537,128 as a result of paying off the promissory note
from Steward Capital Holdings LP on June 25, 2021. Also, the other income
decreased during the period ended September 30, 2022, as compared to the nine
months ended September 30, 2021 on account of PPP loan forgiveness of $666,091
granted during nine months ended September 30, 2021.
Net Loss
As a result of the net effects of the foregoing, net loss increased by $
24,106,008, or 222%, to $ 34,980,165 for the nine months ended September 30,
2022, compared with $10,874,157 for the nine months ended September 30, 2021.
Net loss per share of common stock, basic and diluted, was $(0.34) for the nine
months ended September 30, 2021, compared with $(0.83) for the nine months ended
September 30, 2022.
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ONDAS HOLDINGS INC. 
