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Item 7. Management’s Discussion and Analysis

of Financial Condition and Results of Operations

General

You should read the following

discussion and analysis in conjunction with our Consolidated Financial Statements and the notes to those financial statements included

elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”). This discussion

contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding

Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking

statements.

Overview

Ondas Holdings Inc. (“Ondas

Holdings,” the “Company,” “we” or “our”) is a leading provider of private wireless, drone, and

automated data solutions through its subsidiaries Ondas Networks Inc., a Texas corporation (“Ondas Networks”), Ondas Autonomous

Systems Inc., a Nevada corporation (“OAS”), which wholly-owns Airobotics Ltd., an Israeli company (“Airobotics”),

and American Robotics, Inc., a Delaware corporation (“American Robotics”).

Ondas Networks provides wireless

connectivity solutions. OAS provides drone and automated data solutions through its subsidiaries Airobotics and American Robotics. Ondas

Networks and OAS 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 OAS 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 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, drone operations, 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. 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.

We design, develop, manufacture,

sell and support FullMAX, our patented, Software Defined Radio (“SDR”) platform for secure, private, wide-area broadband networks.

Our customers install FullMAX systems in order to upgrade and expand their legacy wide-area network infrastructure. By upgrading their

legacy systems, customers benefit from significant increases in data throughput which enables new applications. 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 dated 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. The freight rail operators

through the Association of American Railroads (“AAR”), its advisory subsidiary MxV Rail, as well as the American Railway Engineering

and Maintenance Association (“AREMA”), 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 security, more reliability and significant data throughput 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 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.

Industry Partnerships

Ondas Networks continues to

develop partnerships in the rail space to develop and market wireless communications products and services based on Ondas Networks’

technology. Our partnership with Siemens Mobility (“Siemens”) is geared to market our FullMAX-based networking technology

and services and to jointly develop certain 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 are working with other industry partners

to commercialize our platform technologies for specific use cases and to drive broad industry adoption of dot16 applications.

OAS Segment

Our OAS 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 defense, homeland security, public safety, smart city, airport authorities, and other governmental entities

together with commercial operators of critical industrial and technology facilities such as oil & gas, seaports, mining, and heavy

construction as well as for data centers and semiconductor fabs. For these industries, OAS 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.

OAS 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 OAS 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.

War in Israel

On October 7, 2023, the State

of Israel, where Airobotics’ main offices and facilities are located, suffered a surprise attack by hostile forces from the Gaza

Strip, which led to the Security Cabinet of the State of Israel declaring a state of war in Israel. This military operation and related

activities are on-going as of the date of this filing.

The Company is closely monitoring how the military operation and related

activities could adversely affect its anticipated milestones and its Israel-based activities to support future operations, including the

Company’s ability to import materials that are required to construct the Optimus SystemTM and to ship them outside of Israel.

Although there have been disruptions in our business and operations, the Company has determined that there have not been any materially

adverse effects on its business or operations. The Company does not believe the disruptions in its business and operations will have an

enduring impact on its business and operations, but it continues to monitor the situation, as any future escalation or change could result

in a material adverse effect on the ability of the Company’s Israeli office to support the Company’s activities. The Company

does not have any specific contingency plans in the event of any such escalation or change.

Results of Operations

Year ended December 31, 2024 compared to year

ended December 31, 2023

Revenues

Year Ended December 31,

Revenue, net

Revenue decreased by $8,498,736 to $7,192,694 for the year ended December

31, 2024 from $15,691,430 for the year ended December 31, 2023. Revenues during the year ended December 31, 2024 included $2,796,178 for

products, $2,491,955 for service and subscriptions, and $1,904,561 for development agreements, primarily with Siemens. Revenues during

the same period in 2023 included $12,102,388 for products, $2,126,560 for service and subscriptions, and $1,462,482 for development agreements

primarily with Siemens. The decrease in our revenues was primarily the result of a decrease of approximately $5,221,000 in product sales,

mainly to Siemens, at Ondas Networks, as further orders have been delayed by the railroads, as they work on implementing the 900 MHz band

network; a decrease of approximately $4,085,000 in decreased product sales at OAS, who had multi-drone orders during the year ended December

31, 2023, but no comparable sales until the second half of 2024. These decreases were offset by an increase of approximately

$344,000 in maintenance, service, support, and subscriptions revenue and an increase of approximately $33,000 in development

revenue at OAS due to new orders at Airobotics and American Robotics. Further offset by an increase of approximately $21,000 in service

revenue at Ondas Networks, and an increase of approximately $409,000 in development revenue to Siemens, related to a new development

agreement at Ondas Networks.

Cost of goods sold

Year Ended December 31,

Cost of goods sold

Cost of goods sold decreased by $2,462,745 to $6,847,511 for the year

ended December 31, 2024 from $9,310,256 for the year ended December 31, 2023. The decrease in cost of goods sold was primarily a result

of decreased revenue for the year ended December 31, 2024, as compared to the year ended December 31, 2023. Cost of goods sold at OAS

did not decrease in the same ratio as revenue because of fixed manufacturing costs.

Gross profit

Year Ended December 31,

Gross profit

Our gross profit decreased by $6,035,991 to $345,183 for the year ended

December 31, 2024 compared to $6,381,174 for the year ended December 31, 2023 based on the changes in revenues and cost of goods sold

as discussed above. Gross profit for the years ended December 31, 2024 and 2023 was 5% and 41%, respectively. The decrease in gross margin

of 36% is due to the change in the mix of revenues during the year ended December 31, 2024, which included development projects with lower

gross margins as compared to product revenue with higher gross margins during the year ended December 31, 2023, as well as certain fixed

costs related to OAS delivery.

Operating Expenses

Year Ended December 31,

Operating expenses:

Our principal operating costs

include the following items as a percentage of total operating expenses:

Year Ended December 31,

Human resource costs, including benefits 40 % 34 %

Travel and entertainment 2 % 2 %

Other general and administration costs:

Professional fees and consulting expenses 10 % 10 %

Facilities and other expenses 13 % 10 %

Depreciation and amortization 14 % 11 %

Long-term asset impairment - % 9 %

Operating expenses for the

year ended December 31, 2024 decreased by $11,155,987, or 24%, as a result of the following items:

Human resource costs, including benefits $ (1,810,417 )

Travel and entertainment 118,277

Other general and administration costs

Professional fees and consulting costs (1,151,589 )

Facilities and other expenses (35,677 )

Depreciation and amortization (277,712 )

Long-term asset impairment (3,935,139 )

The decrease in operating

expenses was primarily due to:

Operating Loss

Year Ended December 31,

As a result of the foregoing,

our operating loss decreased by $5,119,996, or 13%, to $34,609,304 for the year ended December 31, 2024, compared with $39,729,300 for

the year ended December 31, 2023. Operating loss decreased primarily as a result of a decrease in operating expenses as described above,

partially offset by decreased revenue and gross margin for the year ended December 31, 2024.

Total Other Income (Expense), net

Year Ended December 31,

Total other expense, net,

decreased by $1,717,119, to $3,398,453 for the year ended December 31, 2024, compared with $5,115,572 for the year ended December 31,

2023. Total other expense, net decreased primarily as a result of a decrease of approximately $574,000 from the change in fair value of

government grant liability; a decrease in interest expense of approximately $534,000 primarily related to amortization of debt discount

and debt issuance costs; an increase in interest income of approximately $111,000 due to interest earned on cash deposits; a decrease

of approximately $161,000 in other expense primarily related to an impairment of deferred offering costs of approximately $116,000 related

to the termination of the ATM Agreement during the year ended December 31, 2023; and a decrease in foreign exchange loss, net of approximately

$337,000.

Net Loss

Year Ended December 31,

As a result of the net effects

of the foregoing, net loss decreased by $6,837,115, or 15%, to $38,007,757 for the year ended December 31, 2024, compared with $44,844,872

for the year ended December 31, 2023. Net loss per share of common stock, basic and diluted, was $(0.61) for the year ended December 31,

2024, compared with $(0.88) for the year ended December 31, 2023.

Summary of (Uses) and Sources of Cash

Year Ended December 31,

Net cash provided by (used in) investing activities (1,731,676 ) 536,273

The principal use of cash

in operating activities for the year ended December 31, 2024, was to fund the Company’s current expenses primarily related to operating

activities necessary to allow us to service and support customers.

The decrease in cash flows

used in operating activities of $549,896 was primarily due to a decrease in net loss of approximately $6,837,000, of which approximately

$1,409,000 relates to non-cash and credits, including depreciation, amortization of debt discount and issuance costs, amortization of

intangibles assets and right of use asset, stock-based compensation, and change in fair value of government grant liability; approximately

$4,011,000 relates to non-cash impairment of long-term assets; offset by changes in operating assets and liabilities resulting in a cash

outflow of approximately $867,000.

The increase in cash flows

used in investing activities of $2,267,949, relates to an increase of approximately $1,452,000 in payments made for purchase of equipment,

software intangibles and patent costs, and a decrease of approximately $47,000 from net of proceeds from sale of equipment, combined with

a decrease of approximately $1,049,000 for cash acquired with the Airobotics acquisition in the year ended December 31, 2023, partially

offset by the decrease of approximately $280,000 for cash paid for asset acquisitions in the year ended December 31, 2023.

The increase in cash provided

by financing activities of $31,448,470 was due to an increase in net proceeds from convertible debt of approximately $27,687,000, increase

in net proceeds from notes payable of approximately $1,422,000, increase in proceeds from exercise of options and warrants of approximately

$18,000, increase in net proceeds of approximately $110,000 from government grants, and approximately $7,304,000 in net proceeds from

the sale of the Company’s Common Stock and warrants. Combined with a decrease of approximately $4,355,000 in cash payments on the

2022 Convertible Exchange Notes and a decrease of approximately $1,140,000 in cash payments for Airobotics related debt. This was partially

offset by a decrease in net proceeds of approximately $10,317,000 from the sale of noncontrolling interest in Ondas Networks and an increase

of approximately $271,000 in cash payments on the government grants liability.

Liquidity and Capital Resources

We have incurred losses since

inception and have funded our operations primarily through debt and the sale of capital stock. On December 31, 2024, we had an accumulated

deficit of approximately $236,368,000. On December 31, 2024, we had net long-term borrowings outstanding of approximately $18,057,000

net of debt discount and issuance costs of approximately $1,682,000 and short-term borrowings outstanding of approximately $38,747,000,

net of debt discount and issuance costs of approximately $5,825,000. On December 31, 2024, we had cash and restricted cash of approximately

$29,999,000 and a working capital deficit of approximately $3,056,000. We had approximately $33,470,000 of net cash flows used in operations

for the year ended December 31, 2024.

In 2024, we raised approximately

$36,997,000 of net proceeds from issuance of convertible notes in Ondas Holdings, Ondas Networks, and OAS; approximately $1,422,000 of

net proceeds from issuance of secured notes in Ondas Networks; approximately $7,304,000 of net proceeds from issuing common stock in Ondas

Holdings, warrants in Ondas Holdings, and warrants in OAS; and approximately $4,375,000 in net proceeds from issuing additional redeemable

preference shares in Ondas Networks and warrants in Ondas Holdings.

In January 2025, we raised

approximately $931,000 in gross proceeds from issuance of convertible notes in Ondas Networks.

We expect to fund our operations

for the next twelve months from the filing date of this Annual Report on Form 10-K from the cash on hand as of December 31, 2024, proceeds

from the 2025 financing activity discussed above, gross profits generated from revenue growth, potential prepayments from customers for

purchase orders, potential proceeds from warrants issued and outstanding, and additional funds that we may seek through equity or debt

offerings and/or borrowings under additional notes payable, lines of credit or other sources. There is substantial doubt that the funding

plans will be successful and therefore the conditions discussed above have not been alleviated. As a result, there is substantial doubt

about the Company’s ability to continue as a going concern for one year from March 12, 2025, the date the Consolidated Financial

Statements were available to be issued.

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 and services from customers currently identified in our sales pipeline as well as new customers. We also

will be required to efficiently manufacture 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 assurance that we will generate revenue and

cash 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 conditions, or results of operations.

In addition, the global economy

has recently seen a rise in tariffs and threats of tariffs. While tariffs have not had a material impact on our business, financial condition

or results of operations to date, new tariffs could increase the costs of raw materials and other goods, both for us and our suppliers,

which could impact our business, particularly as we begin to scale our manufacturing operations.

Off-Balance Sheet Arrangements

As of December 31, 2024, we

had no off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of financial

statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires

management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management

considers an accounting estimate to be critical if:

We base our estimates and

judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry,

information provided by our customers and information available from other sources. Actual results may differ from these estimates under

different assumptions or conditions. We have identified the following accounting policies and estimates as those that we believe are most

critical to our financial condition and results of operations and that require management’s most subjective and complex judgments

in estimating the effect of inherent uncertainties: share-based compensation expense, income taxes, complex derivative financial instruments

and impairment of long-lived assets including intangible assets acquired in business combinations.

Stock-Based Compensation

Expense. We calculate stock-based compensation expense for option awards (“Stock-based Award(s)”) based on the estimated

grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) and recognize the

expense on a straight-line basis over the vesting period. We account for forfeitures as they occur. The Black-Scholes Model requires the

use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting

period in determining the fair value of Stock-based Awards. The expected term is based on the “simplified method.” Under this

method, the term is estimated using the weighted average of the service vesting period and contractual term of the option award. As the

Company does not yet have sufficient history of its own volatility, the Company has identified several public entities of similar complexities

and industry and calculates historical volatility based on the volatilities of these companies. Although we believe our assumptions used

to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which

are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the

amount of expense recorded in a given period.

We recognize restricted stock

unit expense over the period of vesting or period that services will be provided. Compensation associated with shares of Common Stock

issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement

date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares

in exchange for the services to be provided.

Income Taxes. As part

of the process of preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions

in which we operate. Our provision for income taxes is determined using the asset and liability approach to account for income taxes.

A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recorded

for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets

and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect

for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities

of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date. Valuation

allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. Changes in

valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are

modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted. Where

a valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited

or charged to income tax expense. See Note 13 – Income Taxes in the accompanying Consolidated Financial Statements for discussion

related to Tax Reform.

The determination of our provision

for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. In the

ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain. In spite

of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may

be successfully challenged by the taxing authorities. We determine the tax benefits more likely than not to be recognized with respect

to uncertain tax positions. Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject

to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events

and rely on estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could

be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.

Complex Derivative Financial

Instruments. From time to time, we sell common stock, and we issue convertible debt, both with common stock purchase warrants, which

may include terms requiring conversion price or exercise price adjustments based on subsequent issuance of securities at prices lower

than those in the agreements of such securities. In these situations, the instruments may be accounted for as liabilities and recorded

at fair value each reporting period. Due to the complexity of the agreement, we use an outside expert to assist in providing the mark

to market fair valuation of the liabilities over the reporting periods in which the original agreement was in effect. It was determined

that a Binomial Lattice option pricing model using a Monte Carlo simulation would provide the most accuracy given all the potential variables

encompassing a future dilutive event. This model incorporated transaction assumptions such as our stock price, contractual terms, maturity,

risk free rates, as well as estimates about future financings, volatility, and holder behavior. Although we believe our estimates and

assumptions used to calculate the fair valuation liabilities and related expense were reasonable, these assumptions involved complex judgments

about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could

significantly impact the amount of expense recorded in a given period.

Impairment of Long-Lived

Assets. Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or

changes in circumstances indicate that their carrying values may not be recoverable. If impairment indicators are present, we determine

whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability.

This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal

of the assets to be held and used. Assessments also consider changes in asset utilization, including the temporary idling of capacity

and the expected timing for placing this capacity back into production. If the carrying value of the assets are not recoverable, then

a loss is recorded for the difference between the assets’ fair value and respective carrying value. The fair value of the assets

is determined using an “income approach” based upon a forecast of all the expected discounted future net cash flows associated

with the subject assets. Some of the more significant estimates and assumptions include: market size and growth, market share, projected

selling prices, manufacturing cost and discount rate. Our estimates are based upon historical experience, commercial relationships, market

conditions and available external information about future trends.

Recently Accounting Pronouncements and SEC Rules

See Note 2 to our Consolidated

Financial Statements included elsewhere in this Form 10-K for recently adopted accounting pronouncements and SEC rules and recently issued

accounting pronouncements not yet adopted as of the date of this report.

Item 7A. Quantitative and Qualitative

Disclosures about Market Risk.

We are a smaller reporting company as defined by

Rule 229.10(f)(1) and are not required to provide information under this item.

Item 8. Financial Statements and

Supplementary Data.

Financial statements begin on page F-1 following

this Report.

Index to Financial Statements

Page

Report of Independent Registered Public Accounting Firms [PCAOB No. 89] F-2

Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3

Notes to the Consolidated Financial Statements F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

FIRM

To the Board of Directors and

Stockholders of Ondas Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ondas

Holdings, Inc. (the Company) as of December 31, 2024 and 2023, and the related statements of operations, stockholders’ equity, and

cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the

financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period

ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that

the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced

recurring losses from operations, negative cash flows from operations and a working capital deficit as of December 31, 2024. The consolidated

financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our

audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to

the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

Excess and obsolete inventory reserve

As discussed in Note 2 to the consolidated financial

statements, management analyzes inventory for slow-moving and excess inventories on a recurring basis. Management establishes reserve

for excess and obsolete inventories based on historical and projected sales volumes and anticipated selling prices. Inventory that is

in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Inventory

that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand.

As of December 31, 2024, the Company has inventories of $9.8 million, net of excess quantities and obsolescence reserves.

We identified the Ondas Networks reserve for excess quantities and

obsolete inventory as a critical audit matter because of the significant estimates and assumptions management makes to quantify the reserve.

Subjective auditor judgment was required in evaluating whether historical sales experience is indicative of future product demand, as

future product demand is based on the outcome of uncertain future events.

How the Critical Audit Matter Was Addressed

in the Audit

We performed the following audit procedures, among others, to test

management’s estimate of inventory:

– Recomputed the mathematical accuracy of the Company’s reserve calculations.

/s/ Rosenberg Rich Baker Berman, P.A.

We have served as the Company’s auditor since 2018.

Somerset, New Jersey

March 12, 2025

F-3

ONDAS HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

December 31,

ASSETS

Current Assets:

Other Assets:

LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Long-Term Liabilities:

Other liabilities 82,500 -

Commitments and Contingencies (Note 14)

Temporary Equity

Stockholders’ Equity

The accompanying footnotes

are an integral part of these Consolidated Financial Statements.

F-4

ONDAS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

Operating expenses:

Long-term equity investment impairment - 1,500,000

Other income (expense), net

Change in fair value of government grant liability 94,962 (478,721 )

Provision for income taxes - -

Net loss per share - basic and diluted $ (0.61 ) $ (0.88 )

The accompanying footnotes are an integral part

of these Consolidated Financial Statements.

F-5

ONDAS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY

Shares Amount Shares Amount Capital Deficit Equity

The accompanying footnotes

are an integral part of these Consolidated Financial Statements.

F-6

ONDAS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Provision for obsolete inventory 120,790 -

Gain on termination of operating lease (12,256 ) -

Impairment of long-term equity investment - 1,500,000

Impairment of right of use asset and leasehold improvements - 1,383,537

Impairment of property and equipment - 1,127,768

Change in fair value of government grant liability (214,891 ) 427,208

Changes in operating assets and liabilities:

Cash paid for right of use asset (272,262 ) -

Accrued expenses and other current liabilities 1,151,994 (494,029 )

Other liabilities 82,500 -

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of software intangible (60,441 ) -

Cash paid for Iron Drone asset acquisition - (135,000 )

Cash acquired on the acquisition of Airobotics Ltd. - 1,049,454

Cash paid for Field of View LLC asset acquisition - (145,833 )

Net cash flows provided by (used in) investing activities (1,731,676 ) 536,273

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of stock options and warrants 57,790 40,338

Proceeds from notes payable, net of issuance costs, related party 1,422,186 -

Payments on convertible notes payable - (4,354,911 )

Payments on government grant liability (277,469 ) (6,576 )

Payments on loan payable - (1,140,301 )

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for income taxes $ - $ -

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

Warrants in relation to sale of common stock $ 2,198,559 $ -

Transfer of equipment into inventory $ 2,289,539 $ -

The accompanying footnotes are an integral part

of these Consolidated Financial Statements.

F-7

ONDAS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

Ondas Holdings Inc. (“Ondas Holdings”, “Ondas”,

the “Company,” “we,” or “our”) was originally incorporated in Nevada on December 22, 2014, under the

name of Zev Ventures Incorporated. On September 28, 2018, we acquired Ondas Networks Inc., a Delaware corporation (“Delaware Networks”),

and changed our name to Ondas Holdings Inc. On August 5, 2021, we acquired American Robotics, Inc. (“American Robotics” or

“AR”), a Delaware corporation. On January 23, 2023, we acquired Airobotics, Ltd. (“Airobotics”), an Israeli-based

developer of autonomous drone systems. See Note 5 – Goodwill and Business Acquisition. On December 6, 2023, the Company formed Ondas

Autonomous Holdings Inc. (“OAH”), a Nevada corporation, as an intermediate holding company which now wholly-owns American

Robotics and Airobotics. On August 8, 2024, the Company filed a certificate of amendment with the Secretary of State of the State of Nevada,

amending Ondas Autonomous Holdings Inc.’s name to Ondas Autonomous Systems Inc. (“OAS”). On August 7, 2024, the Company

formed Ondas Networks Texas Inc., a Texas corporation and wholly owned subsidiary of the Company (“Texas Networks”). Pursuant

to a certain Agreement and Plan of Merger, dated August 19, 2024, Delaware Networks merged with and into Texas Networks (the “Merger”)

with Texas Networks being the surviving entity resulting from the Merger and shall continuing to exist and being governed by the laws

of the State of Texas under the corporate name “Ondas Networks Inc.” (“Ondas Networks”).

As a result, Ondas Networks,

OAS, American Robotics and Airobotics became our subsidiaries. Ondas’ corporate headquarters are located in Boston, Massachusetts.

Ondas Networks has offices and facilities in Sunnyvale, California, American Robotics’ offices and facilities are located in Sparks,

Maryland, and Airobotics’ offices and facilities are located in Petah Tikva, Israel.

Business Activity

Ondas is a leading provider

of private wireless, drone, and automated data solutions through its subsidiaries Ondas Networks, OAS, Airobotics, and American Robotics.

Ondas Networks provides wireless connectivity solutions. OAS provides drone and automated data solutions through its subsidiaries Airobotics

and American Robotics. Ondas Networks and OAS 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 OAS as separate business segments, and the following is a discussion of each segment.

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.

F-8

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. 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.

Ondas Autonomous Systems (OAS)

Our OAS 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. Airobotics

acquired the assets of Iron Drone on March 6, 2023.