UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2023
or
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________ to ___________
Commission
File Number: 001-39761
ONDAS
HOLDINGS INC.
(Exact
name of registrant as specified in its charter)
53
Brigham Street, Unit 4, Marlborough, MA01752
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number (888)350-9994
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 ONDS The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2023 (the last business day of the
registrant’s most recently completed second fiscal quarter) was approximately $43,167,707. For purposes of this computation, all
officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed
to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.
The number of shares outstanding of the issuer’s common stock
as of March 27, 2024 was 65.6 million.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
From
time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed
or implied by these statements. Forward-looking statements may appear throughout this report, including without limitation, the following
sections: Item 1 “Business,” Item 1A “Risk Factors,” and Item 7. “Management’s Discussion and Analysis
of Financial Condition and Results of Operations. “Forward-looking statements generally can be identified by words such as “anticipates,”
“believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,”
“projects,” “will be,” “will continue,” “will likely result,” and similar expressions.
These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which
could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause
or contribute to such differences include those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed
under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange
Commission (“SEC”). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking
statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.
We
caution you that assumptions, beliefs, expectations, intentions, and projections about future events may and often do vary materially
from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by
our forward-looking statements. A summary of some of the factors that could cause actual results to differ from those expressed or implied
by our forward-looking statements, including forward-looking statements contained in this Annual Report on Form 10-K, is provided below
under “Risk Factor Summary.” These factors should not be construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included in this Annual Report on Form 10-K and our other filings with the SEC. Should one or more
of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material
respects from those projected in these forward-looking statements. Factors or events that could cause our actual results to differ may
emerge from time to time, and it is not possible for us to predict all of them. Our forward-looking statements do not reflect the potential
impact of any future acquisitions, mergers, dispositions, joint ventures, investments, or other strategic transactions we may make. You
should not place undue reliance on our forward-looking statements.
Each
forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise
any forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.
i
Risk Factor Summary
Our
business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Item 1A. Risk Factors”
in this Annual Report on Form 10-K. Some of these principal risks include the following:
Risks
Related to Our Business and Industry
ii
Risks
Related to Regulatory Requirements
Risks
Related to our Intellectual Property
Risks
Related to our Financial Results
● We will need to generate significant sales to achieve profitable operations.
iii
Risks
Related to our Common Stock
Risks
Related to the Notes
iv
Item
1. Business.
This
business description should be read in conjunction with our audited Consolidated Financial Statements and accompanying notes thereto
appearing elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), which
are incorporated herein by this reference.
The
use of the words “we,” “our,” the “Company” and “Ondas Holdings” in this Form 10-K refer
to Ondas Holdings Inc. and its subsidiaries.
Corporate
Overview
Ondas
Holdings Inc. is a leading provider of private wireless, drone, and automated data solutions through its subsidiaries Ondas Networks
Inc. (“Ondas Networks”), Ondas Autonomous Holdings Inc. (“OAH”), Airobotics, Ltd (“Airobotics”),
and American Robotics, Inc. (“American Robotics” or “AR”). Airobotics is an Israeli-based developer of autonomous
drone systems. American Robotics is a leading developer of highly automated commercial drone systems. Airobotics and American Robotics
operate together under OAH as a separate business unit called Ondas Autonomous Systems. Ondas Networks and Ondas Autonomous Systems together
provide users in rail, energy, mining, public safety and critical infrastructure and government markets with improved connectivity, data
collection capabilities, and data collection and information processing capabilities. We operate Ondas Networks and Ondas Autonomous
Systems as separate business segments, and the following is a discussion of each segment. See Note 1, Note 2, and Note 12 of the accompanying
Consolidated Financial Statements for further information regarding our segments.
Ondas
Networks
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. We have targeted the North American freight rail operators for the initial adoption of our FullMAX platform.
These rail operators currently operate legacy communications systems utilizing serial-based narrowband wireless technologies for voice
and data communications. These legacy wireless networks have limited data capacity and are unable to support the adoption of new, intelligent
train control and management systems. 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 802.16
standard. Because standards-based communications solutions are preferred by our mission-critical customers and ecosystem partners, we
continue to take a leadership position in IEEE as it relates to wireless networking for industrial markets. The freight rail operators
through the Association of American Railroads (“AAR”) and its advisory subsidiary MxV Rail have adopted the IEEE 802.16 standard
for future private wireless networks.
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.
1
Ondas
Autonomous Systems
Our
Ondas Autonomous Systems business unit develops and integrates drone-based solutions focusing on high-performance critical applications
for government and Tier-1 commercial enterprises. Ondas is marketing comprehensive drone-based solutions to address the needs of governmental
and commercial customers based on its commercially available platforms: the Optimus SystemTM, a fully autonomous drone platform
capable of continuous and multipurpose aerial data capturing and analytics, and the Iron Drone RaiderTM , a fully autonomous interceptor
drone designed to neutralize small hostile drones.
Our
unique, fully autonomous platforms enable cutting-edge aerial capabilities and are designed to serve and protect critical infrastructure
and operations. Our business focuses on end-user entities in Public Safety, Defense, Homeland Security, Smart City, Port Authorities,
State Departments, and other governmental entities together with commercial customers of industrial sensitive facilities such as Oil
& Gas, Seaports, Mining, and Heavy Construction. For these industries, Ondas Autonomous Systems provides specialized real-time aerial
data capturing and aerial protection solutions in the most complex environments such as urban areas, sensitive and critical facilities
and field area operations, and high-priority projects. In addition, we offer a wide suite of supplementary, enabling services for successful
implementation such as AI data analytics, data automation, IT implementation, safety planning, certification, training, and maintenance,
handling all the complex aspects of such high-performance drone operations.
Our
portfolio companies, American Robotics and Airobotics, form a unique, powerful, and synergistic combination covering all the aspects
required for successful Aerospace business together with data technologies and services for digital transformation industries. Our companies
are specialized in addressing all the challenges arising along these types of product lifecycles including research and development,
manufacturing, certification, and ongoing support.
Ondas
Autonomous Systems and its portfolio companies have already gained a track record of industry-leading regulatory successes including
the securing of the first-of-its-kind Type Certification (TC) from the FAA for the Optimus 1-EX UAV on September 25, 2023, becoming the
first autonomous security data capture UAV to achieve this distinction. TC, recognized as the highest echelon of Airworthiness Certification,
streamline operational approvals for broad flight operations over people and infrastructure. The certification verifies the compliance
of the system’s design with the required FAA airworthiness and noise standards, ensuring safe operation within the US National
Airspace System (NAS) thereby significantly broadening the range of operational scenarios and scaling up of operations for automated
UAS. Achieving FAA Type Certification will enable drone operations beyond-visual-line-of-sight (BVLOS) without a human operator on-site.
With a strong footprint in the US market and worldwide, we believe that Ondas Autonomous Systems is well-positioned with proven technology,
a unique offering, and strong capabilities to strategically transform critical operations with our cutting-edge drone tech and capabilities.
Partnership
with Siemens and Market Advancements
Ondas
Networks and Siemens Mobility (“Siemens”) have a strategic partnership to both market our FullMAX-based networking technology
and services and to jointly develop wireless communications products for the North American Rail Industry based on Siemens’ Advanced
Train Control System (“ATCS”) protocol and our FullMAX MC-IoT platform.
We
believe Siemens has both the sales and marketing reach and support to drive our technology to wide scale acceptance across the global
rail market beginning with the North American Class I Railroad market. We have a jointly-developed product with Siemens – the dual-mode
ATCS/MC-IoT radio systems, and Siemens is marketing and selling our proprietary systems under the brand name Airlink to our railroad
customers. The dual-mode ATCS radio systems 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 next generation signaling and
train control systems, are designed to increase railroad productivity, reduce costs and improve safety. In addition, Siemens markets
and sells Ondas Networks’ standalone MC-IoT 802.16 products under the Siemens Airlink brand.
Ondas
and Siemens developed a new locomotive radio to support European Railroads. We 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. We received government authorization
to sell ATCS radios in Canada and Siemens and launched our joint effort for the European market at Innotrans in Berlin. Siemens and Ondas
demonstrated our over the air compatibility to systems used by passenger rails in the Northeast Corridor of the US. In addition, we have
developed a new radio for the Head of Train (HOT) Market in North America and a similar product for the Indian rail market. Siemens has
received initial orders for the HOT product from a customer in India.
2
In
March 2023 the AAR formally announced that IEEE 802.16 standard would be the wireless platform for the greenfield 900 MHz network. In
April 2023, the American Railway Engineering and Maintenance-of-Way Association (AREMA) voted to require the use of 802.16 in the 900
MHz greenfield band; The AAR also confirmed they have agreed with the Federal Communications Committee to retire the legacy 900 MHz band
by September 2025 and that the wireless network in the new 900 MHz band would be substantially built by April 2026. In May and June 2023,
we responded to RFPs to passenger rail customers in the Northeast Corridor. In February 2024, Ondas received an order from Siemens to
develop and supply the next generation ACSES PTC data radio in the 220 MHz frequency band to be designed specifically for the Northeast
Corridor which includes integration of Ondas’ IEEE 802.16 capability.
Our
relationship with Siemens has expanded significantly since entering into the partnership both with (i) the wider marketing of our wireless
technology platform and (ii) multiple additional joint-product programs. Siemens has expanded its marketing reach of Ondas Networks products
with identified opportunities in North American Transit Rail as well as in European and Asian Rail markets. We believe our technology
has broad potential in these large, newly targeted markets.
Our
Strategy
Our
goal is to be a global leader in providing turnkey data solutions for industrial, public safety and government markets by offering i)
secure wireless connectivity solutions enabling high-bandwidth, mission-critical Industrial Internet applications and services through
Ondas Networks and ii) aerial security and data collection and analysis via automated drone platforms through Ondas Autonomous Systems.
The
key elements of our growth strategy include the following:
3
Our
Business Model
Ondas
Networks
We
sell our FullMAX MC-IoT wireless products and services globally through a direct sales force and value-added sales partners to industrial
and critical infrastructure providers including major rail operators, with growth opportunities in other markets such as 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 public safety, homeland security and defense, and transportation.
We continue to develop our value-added reseller relationships which today include a strategic partnership with Siemens for the development
of new types of wireless connectivity for the North American Rail market as well as selected global markets in both Europe and Asia.
We believe our Siemens’ partnership is indicative of the potential for additional Tier 1 partnerships in our other vertical markets
including securing reseller relationships with major suppliers to the worldwide government and homeland security markets.
In
executing our go-to-market strategy, we intend to monetize our software-based intellectual property and grow revenue and cash flow with
embedded FullMAX software sales, Software-as-a-Service (“SaaS”) arrangements, IP royalties based on Ondas Networks software
and through additional services provided to customers and ecosystem partners. Customers deploy our connectivity and Fog-computing platform
in private networks that are designed for lifetimes of 10 – 15 years or even longer. Our FullMAX platform is software-defined and
offers customers flexibility to expand capacity and evolve network utilization. Similarly, our ecosystem partners often integrate our
FullMAX software and wireless capability into their own long-lived equipment and systems which their customers purchase and deploy. As
such, we believe our software solutions provide ongoing revenue opportunities related to both connectivity value and edge computing capability.
Customers and ecosystem partners will require ongoing FullMAX system and security enhancements and for us to design additional features
which create opportunities for additional, recurring revenue and profit streams. Our monetization strategies include:
Systems
sales: Our FullMAX deployments are typically large, mission-critical wide-area networks deployed and privately operated by our industrial
and government customers. These end-to-end system deployments involve sales consisting of both base stations and edge radio end points
with embedded FullMAX software and network management software and tools.
Software
and hardware maintenance agreements: Our customers contract with us for extended software and hardware maintenance which provide
them with critical ongoing support for their installed network. These contracts provide revenue to us in the year following an initial
installation. Software maintenance licenses entitle the customer to ongoing software and security upgrades as well as enabling the provision
of additional system features. Similarly, hardware maintenance programs provide customers with extended equipment warranty terms for
an installed network.
4
These
arrangements allow our customers to continue to maintain a modern, flexible and upgradeable network over a long period of time. These
agreements may extend for multiple years given the long average life of the installed and growing network.
Licensing
/ Royalties: In certain system deployments, our ecosystem partners may choose to embed FullMAX software into their own hardware and
software platforms providing us with an ongoing per device multi-year revenue stream. Licensing is an effective way for an ecosystem
partner to jumpstart customer activity. Alternatively, a partner may choose to develop software based on our intellectual property generating
royalty revenue.
Other
Services: We provide ancillary services directly related to the sale of our wireless communications products which include wireless
network design, systems engineering, radio frequency planning, software configuration, product training, installation, and onsite support.
Furthermore, we also provide engineering and product development services to ecosystem partners who are interested in integrating their
intelligent equipment with our FullMAX SDR platform and need our expertise to do so.
Ondas
Autonomous Systems
Ondas
Autonomous Systems markets aerial solutions based on its Optimus SystemTM and Iron Drone RaiderTM platforms via direct sales
to enterprises and government customers. Additionally, Ondas Autonomous Systems utilizes channel marketing strategies, building a network
of partners and agents to distribute our solutions. We focus on identifying and qualifying large, sophisticated customers with active
drone programs who have the ability and intent to expand those programs and eventually deploy fleets of automated drones across their
portfolio of assets. Our unique value proposition is based on our core strategic capability to provide holistic solutions, being a trusted
one-stop-shop for major entities, and de-risking innovative complex drone implementation processes.
After
initial customer qualification, contracting and the receipt of a purchase order, we ship and install our platforms and solutions on the
customer premises. Via American Robotics and Airobotics staff, we are planning our customers deployments providing complete support for
all stages of implementation. Our field service personnel remain on location for a short period of time to ensure the programmed automated
drone operations are meeting customer and regulatory requirements and implemented successfully on-prem, on-time and on-budget.
We
offer our solutions in several business models designated to allow the required flexibility and benefits for our customers and creating
recurring revenues and organic growth within our accounts:
5
Our
Products and Services
Ondas
Networks
Ondas
Networks has developed a next-generation radio platform specifically to meet the evolving data needs of large industrial and government
customers and markets. These markets are differentiated from consumer markets in that the customers assets are dispersed over very wide
and remote geographies with specific challenges to installation, maintenance, and upgrades. These challenges led us to design a new type
of software-based radio platform capable of supporting a long useful life to the network hardware. Instead of using low cost, off the
shelf, dedicated communications chipsets (“ASICs”), we selected powerful programmable embedded general-purpose processors,
DSPs, and FPGAs, all of which are software upgradable. Our software defined radio (“SDR”) architecture allows us to
customize almost any aspect of the air interface protocol, the key components of which are patented and have been incorporated into new
IEEE wireless standards. The ability to constantly improve customer networks and hosted software applications with flexible, over-the-air
software upgrade helps create customer loyalty and creates high switching costs.
Our
FullMAX SDR platform is designed to enable highly secure and reliable industrial-grade connectivity for truly mission-critical applications.
An end-to-end FullMAX network consists of connected wireless base stations, fixed and mobile edge radios and supporting technology all
enabled by critical software developed and owned by Ondas Networks. The Fog-computing capability integrated in our end-to-end FullMAX
SDR platform, primarily through docker container technology, is valued by our customers and ecosystem partners as they seek to leverage
the value of MC-IoT applications for improved safety, efficiency, and profitability. Our IEEE 802.16s compliant equipment is designed
to optimize the performance of unused or underutilized VHF / UHF low frequencies licensed radio spectrum and narrower channels. We do
this through various patented software algorithms including via “spectrum harvesting” techniques which aggregate narrowband
channels to create increased broadband network capacity. Our channel aggregation algorithms include the ability to aggregate hard to
utilize, non-contiguous narrowband channels and are a hallmark feature of a FullMAX broadband system.
The
critical software algorithms powering our end-to-end FullMAX wireless SDR platform and related Fog-computing architecture have been developed
by and are owned by Ondas Networks. FullMAX is an intelligent networking system which integrates core network management systems with
edge computing resources including computing hardware and MC-IoT software applications. In the MC-IoT Fog enabled by FullMAX, base stations
are enabled with a highly configurable Quality of Service algorithms which coordinate the data traffic within the Fog for both the edge
radio and the resident MC-IoT applications. The intelligent base stations control and manage all network resources including our edge
remotes; dynamically allocating bandwidth, prioritizing data packets and managing edge applications. The intelligent software-managed
base stations determine whether to process data at the edge, distribute data traffic across the Fog to other edge remote radios or to
transport information to the corporate Cloud. Our Edge remotes have embedded compute capability and are able to host MC-IoT applications
including those from third party vendors via virtualized software systems managed in docker / container architectures and can also manage
data from intelligent equipment or sensor networks that interface with the edge remotes in the field. Our software-managed edge remotes
offer security via authentication, multi-layer encryption and virtual software firewalls which are requirements for mission-critical
data networks.
We
are dedicated to promoting standards-based wireless connectivity solutions for our customers. Our FullMAX platform is compliant with
the mission critical wireless Industrial Internet IEEE 802.16. Since 2017, the specifications in the IEEE 802.16 standard are primarily
based on our FullMAX technology, and many of our customers and industrial partners actively support our technology during the IEEE standards-making
process. In January 2020, a new working group was launched by the IEEE to establish IEEE 802.16t, a further evolution of this wireless
standard. The IEEE 802.16t working group includes industry-leading trade organizations such as the Association of American Railroads
(“AAR”), MxV Rail (“MxV Rail”), the Utilities Technology Council (UTC) and the Electric Power Research Institute
(EPRI), as well as representation from world-leading transportation and oil and gas companies. IEEE 802.16t has now received approval
to be incorporated into the standard, which is expected to be published in 2024. This new version of the standard has incorporated many
new critical functionalities including support for software control/coordinate base stations and direct peer to peer (DPP) connections.
We expect our technology to remain a prominent feature of this evolving standard.
6
Ondas
Autonomous Systems
We provide our customers with turnkey data and security aerial solutions
designed to meet their unique requirements in complex environments. Our solutions combine our platforms the Optimus SystemTM and
Iron Drone RaiderTM together with a wide suite of supplementary services to insure successful deployment and integration of the solution
on-prem.
The
Optimus SystemTM
The
Optimus SystemTM is a fully autonomous drone platform capable of continuous and multipurpose drone operations for various applications.
As one of the world’s first “drone-in-a-box” type drone, the Optimus SystemTM, is marketed as an “Aerial
Drone Infrastructure”. The Optimus SystemTM is deployed for aerial data collection and analysis for security, surveillance,
and supervision in governmental and commercial end markets. The Optimus SystemTM provides a cutting-edge solution to various use
cases of public safety, security, industrial Smart City and other critical operations. The platform enables routine high-resolution on-demand
aerial response, together with automated aerial mapping, surveying, and inspection capabilities, which are highly valued in the relevant
digital transformation and Gov-Tech markets such as Public Services, Oil & Gas, Infrastructure, heavy construction, Rail and Ports
and more.
The
Optimus SystemTM consists of (i) OptimusTM, a highly automated, AI-powered drone with advanced imaging payloads, (ii) the AirbaseTM,
a ruggedized weatherproof base station for housing, battery swapping, battery charging, payload swapping, data processing, and cloud
transfer, and (iii) InsightfulTM, 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. AirbaseTM has internal
robotic systems that enable the automated swapping of batteries and payloads. Automated battery swapping allows for 24/7 operation of
Optimus as the Optimus drone can immediately be redeployed after returning to the dock for a battery swap. Similarly, the ability to
autonomously swap sensors and advanced payloads without human intervention allows for the Optimus SystemTM to provide multiple applications
and use cases from a single location.
We
design, develop and manufacture the Optimus SystemTM, an autonomous drone platform, providing high-fidelity, ultra-high-resolution
aerial security and data collection and analysis to enterprise and government customers. We currently prioritize the marketing of our
Optimus SystemTM which provides customers with turnkey aerial security and data collection services and the ability to continuously
digitize, analyze, and monitor their assets and field operations in real-time or near real-time.
The
Optimus SystemTM 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. Once installed in the field at customer
locations, a fleet of connected Optimus SystemsTM, which are often deployed as networked drone infrastructure, remains indefinitely
positioned in an area of operation, automatically collecting, and seamlessly delivering security, data and information regularly and
reliably.
The
Iron Drone RaiderTM System
In
March 2023, Airobotics acquired the assets of Iron Drone Ltd, an Israeli counter-drone company, and fully integrated its team and technology
into the Company.
We
offer The Iron Drone RaiderTM system, which is a state-of-the-art counter-drone solution designed to counter small drones as they
are a growing threat in many defense, homeland security, and public safety aspects. As a cutting-edge technology, it is specifically
marketed to military, government, and enterprise customers, offering robust defense and security for critical infrastructure, valuable
assets, and human lives.
7
The
Iron Drone RaiderTM is comprised of a docking station and intercepting drones and can be integrated into any mobile drone detection
system. The heart of the RaiderTM lies in its level of autonomy, allowing it to fly without GPS, day, or night, and safely neutralize
small suspicious drones with minimal collateral damage, lowering them to the ground with a designated parachute. The system uses AI technologies
and onboard cameras and computers to enable it to detect and intercept unauthorized or hostile drones effectively, capable of addressing
multiple hostile drone targets simultaneously. It can seamlessly integrate with various existing drone detection systems, making it adaptable
and versatile for different operational contexts.
During
2023 we upgraded the Iron Drone RaiderTM system to address the needs of the Israel defense industries market and end users to support
the efforts of protecting military and civil operations against the threat of small kamikaze and surveillance hostile drones.
Ondas
Autonomous Systems Services
Ondas
Autonomous Systems provides specialized real-time aerial data capturing and analytics together with aerial protection services based
on its systems. In addition, we offer a wide suite of supplementary enabling services for successful implementation and customization
such as AI data analytics, data automation, IT implementation, safety planning, certification, training, and maintenance, handling all
the complex aspects of such high-performance drone operations. This unique combination makes our enterprise a one-stop-shop of visionary
drone installations.
Certification
and Aviation Regulatory Services. American Robotics and Airobotics have industry leading regulatory successes which include having
the first drone system approved by the FAA for automated operation BVLOS without a human operator or visual observer on-site. American
Robotics’ FAA approvals were enabled by integrating a suite of proprietary technologies, including Detect-and-Avoid (“DAA”)
and other proprietary intelligent safety systems into its autonomous drone platform, which we plan to integrate into the Optimus SystemTM.
Our regulatory team has been working closely with Civil Aviation Authorities worldwide since 2016 to explore new and innovative approaches
for approving complex automated BVLOS flights over people. Our regulatory strategy has consistently proven successful, leading to numerous
pioneering regulatory accomplishments worldwide, cementing our position as a leader in the global drone industry. Our team of experts
actively participates in rule-making advisory committees, drone associations, and maintains direct communication with regulators in each
country we operate in. We are committed to staying ahead of the curve in terms of drone regulations and compliance. Working with us allows
customers to certify and coordinate complicated drone operations with regulators worldwide.
Training,
Maintenance and Remote Operations. American Robotics and Airobotics have gained substantial experience in drone operations worldwide.
This includes training, maintenance and remote operations services. Our operational teams are highly qualified in all of the drone operation
roles, including drone piloting, training, and maintenance. As an aerospace developer, manufacturer, and operator our operational capabilities
enable our customers to overcome many operational challenges and reach operational readiness fast.
Implementation
and customization. American Robotics and Airobotics have gained substantial experience in implementation and customization of our
solutions to our customers. We offer support and engineering services to our customers in order to successfully integrate our aerial
platforms with the highest levels of both automation and data security, quickly and efficiently.
The
Market for Our Products and Services
Ondas
Networks
We
have targeted the North American freight rail operators for the initial adoption of our FullMAX platform. These rail operators currently
operate legacy communications systems utilizing serial-based narrowband wireless technologies for voice and data communications. These
legacy wireless networks have limited data capacity and are unable to support the adoption of new, intelligent train control and management
systems. In addition to data capacity challenges, rail operators need to reliably cover the vast and often remotely located rail track
and related infrastructure which extends nationwide. The rail operators require a next-generation, robust broadband system with significantly
increased data throughput capacity and flexibility to adopt new applications. We believe a transition to integrated Fog-computing wireless
communications systems will enable the rail operators to drive more intelligence to the edge of their operating environments enabling
real time automation and better operator control of many critical operating systems related to train control, crossing safety, train
and track integrity and drone operations. This upgrade cycle is being driven by a recent key event in which the Class 1 rail systems
in the U.S are required, by 2025, to vacate a series of legacy narrowband channels given to them by the FCC. The completion of this multiyear
negotiation between the FCC and other licensed users is projected to generate a major network upgrade cycle for the rail industry which
will support enhanced safety and improved efficiency and profitability of train operations.
8
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. The Class I railroads currently operate four separate private
wireless networks in support of train operations. Those networks are deployed using spectrum in the 160 MHz, 220 MHz, 450 MHz and 900
MHz bands. 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 FullMAX MC-IoT platform offers
an excellent migration path for these applications. The Class I Railroads value the ability of our frequency agnostic SDR architecture
to enable a substantial data capacity increase utilizing the railroad’s existing wireless infrastructure and dedicated FCC licensed
radio frequencies, as well as the flexibility to adapt to and take advantage of future changes in spectrum availability, as well as future
business and operational requirements. Based upon management estimates, we believe the addressable market for the four private North
American Railroad networks is approximately $1.3 billion. We believe the 900 MHz network will be the first network upgrade to adopt our
FullMAX technology and we estimate that the market size for the 900 MHz network is approximately $450 million.
Ondas
Autonomous Systems
The total addressable market
(“TAM”) of Ondas Autonomous Systems is measured at over $100 billion in size according to management estimates and independent
third-party research. The TAM comprises the potential value of Ondas’ Optimus System in the global civil and military UAV market and in
the drone services market and the addressable market of the Iron-Drone Raider system in the Counter-Unmanned Aircraft Systems (C-UAS)
markets.
Ondas competes in the large drone markets which was valued by a study
by Spherical Insights at $28.5 billion in 2021 and forecasted to grow further at a compound annual growth rate of 27% reaching $260 billion
by 2030. In addition, Ondas provides drone services including drone data and data analytics based on multiple various sensors, in addition
to maintenance, repair and operational service. According to Fortune Business Insights, drone market services is valued at $13.9 billion
in 2022 and projected to grow to $189.4 billion by 2030. In the US, the FAA anticipates that the growth rate in the commercial drone sector
will remain high over the next few years. This is primarily driven by the regulatory clarity that Part 107 rules continues to provide
to industry. This is further supported by the Operations Over People final rule, published on December 28, 2020, which is the latest incremental
step towards further integration of small drones into the national airspace. Ondas has secured a key position within this market, holding
the first FAA Airworthiness Type Certificate, allowing it to apply to fly its drones in complex populated environments.
In addition to the Optimus System and its related drone services, Ondas
also competes in the C-UAS market providing the Iron-Drone Raider system for counter drone kinetic interception. The growing C-UAS technology
market has been valued in a recent study published by Grand View Research in 2023, at $1.4 billion in 2022, and $1.9 billion in 2023,
and forecasted growth at a compound annual growth rate of 28.1% from 2023 to 2030 with a revenue forecast for 2030 of $10.6 billion. We
believe these studies underestimate the potential market size, because they don’t fully consider the potential effect of security
vulnerabilities on the value of the activities the C-UAS equipment protects and enables, in sensitive locations such as major sporting
events, and the protection of industrial assets such as in the energy and utility sectors. Notably, although the North American C-UAS
marketplace is the largest by revenue, twelve other regions of the world are also active in C-UAS. High-profile events in other countries
involving UAS such as the war in Ukraine, the Israel-Hamas conflict, or the December 2018 Gatwick Airport incident when reported UA sightings
essentially closed that major airport – have drawn attention to the need for C-UAS technology internationally.
9
Customer
Activity
Ondas
Networks
The
majority of Ondas Networks customer activity has been with the Class 1 freight railroad operators and Siemens in North America. There
are seven Class I railroads in North America, all of which run multiple, frequency-specific networks for different applications. Our
FullMAX platform has the flexibility to operate in all these frequency bands and will allow these customers the opportunity to better
utilize their radio spectrum and add more high-value, data-intensive applications to their operations. Ondas Networks has completed multiple,
testing and pilot programs with railroads including Norfolk Southern Corporation, BNSF Railway Company and CSX Corporation, three North
American Class I freight railroad operators. This activity has spanned from the system validation work performed on behalf of the Association
of American Railroads’ (AAR) Wireless Communications Committee (WCC) as well as the current programs managed by Ondas and Siemens
to formally integrate Ondas wireless technology in operational 900 MHz networks. Our initial focus with these rail customers has been
for train control applications and related safety systems in the 900 MHz frequency band where the FCC has recently awarded our railroad
customers new radio spectrum.
We
delivered a Rail Lab (the “dot16 Rail Lab”) to MxV Rail, a subsidiary of the AAR. The dot16 Rail Lab is hosting multiple
Class 1 freight rail operators where they will perform on going network design and configuration related to optimizing the performance
of our IEEE 802.16 complaint systems in connection with wide-scale field deployment. In March 2023, the Association of American Railroads
(“AAR”) formally announced that IEEE 802.16 standard would be the wireless platform for the greenfield 900 MHz network. In
April 2023, the American Railway Engineering and Maintenance-of-Way Association (AREMA) voted to require the use of 802.16 in the 900
MHz greenfield band; The AAR also confirmed they have agreed with the Federal Communications Committee to retire the legacy 900 MHz band
by September 2025 and that the wireless network in the new 900 MHz band would be substantially built by April 2026.
We
are currently engaged in field installation activities with multiple railroads to demonstrate integration of our FullMAX wireless systems
with existing legacy train systems at the wayside through the back-office in the 900 MHz network. We believe that successful completion
of this demonstrated integration activity will lead to commercial volume orders which will begin the commercial rollout of the 900 MHz
with multiple Class 1 freight railroads, as well as certain short line, passenger and transit railroads in 2024 of our software-defined
wireless network technology. We expect a 900 MHz network upgrade cycle across all Class I railroad systems over the next few years in
order to comply with FCC license requirements and meet business needs related to safety and profitability.
We
have also engaged the AAR and the WCC on the technical roadmap for the legacy 160 MHz wireless network used by the railroads in North
America. We believe the 160 MHz network will be the next major wireless network the railroads upgrade utilizing IEEE 802.16t technology.,
As
of December 31, 2023, Ondas Networks was active with six of the Class 1 Rails in North America and with one of the largest railroads
in the world, Indian Railways, for a multi-year delivery program of locomotive radios for on-board telemetry applications.
10
Ondas
Autonomous Systems
Our
Optimus SystemTM addresses a wide number of applications and use cases across enterprise, industrial, and government end markets.
The platform has been extensively tested both internally and externally with customers for reliability, safety, and performance. We received
purchase orders from two customers in the UAE in December 2022, which represented our initial orders for commercial deployment as Urban
Drone Infrastructure fleets. The initial purchase order was received for a UAE government entity with plans to primarily use the system
for public safety and homeland security applications. We also announced a purchase order from Abu Dhabi-based SkyGo Transport of Goods
L.L.C. (“SkyGo”). Airobotics and SkyGo have also signed a Term Sheet agreeing to enter into a joint venture (the “SkyGo
JV”) to provide aerial drone services to municipal and government customers focused on Smart City use cases.
Customer
interest in our aerial data services has grown significantly since receiving these initial fleet orders and that is reflected in a growing
customer pipeline. The initial two customers have indicated plans to deploy approximately 50 systems in the UAE by 2025 and we believe
demand could grow further. In addition, moving customers from proof-of-concept deployments to Urban Drone Infrastructure fleet deployments
has validated the performance and value of our Optimus SystemTM, which has helped both accelerate our marketing activity with existing
customers and generated new customer interest to help expand the pipeline. We expect interest in our Optimus System TM to grow significantly
as awareness builds which will expand our customer pipeline.
We
expect to expand customer activity in the United States as American Robotics introduces Optimus to its existing customers and expands
marketing to new customers. In the United States, we are qualifying our oil and gas customers for marketing programs, and we plan to
expand marketing to other industrial and government markets.
We
launched our RaiderTM counter-drone system in March 2023 and began seeking customer orders at the same time. We have seen significant
interest in the RaiderTM For potential customers and partners and on March 10, 2023 we announced that the Dubai Police has signed
an MOU which expressed their intent to purchase a certain number of units of the RaiderTM. We expect to receive additional orders
as we expand marketing channels in 2024.
Our
Optimus SystemTM addresses a wide range of applications and use cases across enterprise, industrial, and government end markets.
The platform has been extensively tested both internally and externally with customers for reliability, safety, and performance.
In
the Middle East and Africa region, during 2023, we received purchase orders from two customers in the UAE, representing our initial orders
for commercial deployment as Urban Drone Infrastructure fleets. The initial purchase order was received from a UAE government entity
that has been deploying an urban drone infrastructure based on Our Optimus SystemTM since 2020. The infrastructure primarily utilizes
the systems for public safety and homeland security applications. During 2023, we received a $2.6 million order for more Optimus systems
and an additional service agreement with this local government entity for ongoing support and maintenance of the installed systems in
Dubai. In February, we also announced a $3.6 million purchase order from Abu Dhabi-based SkyGo Transport of Goods L.L.C. (“SkyGo”).
Airobotics and SkyGo have also signed a Term Sheet agreeing to enter into a joint venture (the “SkyGo JV”) to provide aerial
drone services to municipal and government customers focused on Smart City use cases. We have successfully completed a Proof of Concept
(PoC) with SkyGo as the first milestone, and we are looking forward to continuing the development of this new business in Abu Dhabi in
2024.
In
addition to these deals, we have announced a Memorandum of Understanding (MOU) to collaborate for the purpose of providing aerial defensive
solutions against potential aerial threats and to cooperate in the implementation of the Optimus SystemTM. Through the MOU, Airobotics