Ondas Inc S-1, filed Oct 26, 2020

Ondas Inc. (ONDS)

S-1 2020-10-26

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Nevada		3663		47-2615102
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☒

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price⁽¹⁾				Amount of Registration Fee⁽³⁾
Common Stock, $0.0001 par value per share⁽²⁾		$	25,000,000			$	2,727.50	⁽⁴⁾

(1)	Includes the public offering price of shares that the underwriters have the option to purchase to cover overallotments, if any. Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)	Pursuant to Rule 416 of the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
(3)	Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate initial public offering price.
(4)	Pursuant to Rule 457(p) under the Securities Act, a filing fee of $6,666.00 has previously been paid with respect to securities to be registered pursuant to a Registration Statement on Form S-1 (Registration No. 333-230855) initially filed with the SEC on April 12, 2019, as amended by Amendment No. 1 filed with the SEC on May 29, 2019, Amendment No. 2 filed with the SEC on June 6, 2019, Amendment No. 3 filed with the SEC on June 18, 2019, and Amendment No. 4 filed with the SEC on July 19, 2019, which was withdrawn prior to effectiveness. As a result, $2,727.50 of the $6,666.00 filing fee associated with such securities is being carried forward and is being offset against the $2,727.50 filing fee currently due in connection with this filing.

	Per share	Total
Public offering price	$	$
Underwriting discounts and commissions⁽¹⁾	$	$
Proceeds to Ondas Holdings Inc., before expenses	$	$

PROSPECTUS SUMMARY	1
THE OFFERING	9
SUMMARY FINANCIAL DATA	10
RISK FACTORS	11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	29
USE OF PROCEEDS	30
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	31
DIVIDEND POLICY	31
CAPITALIZATION	32
DILUTION	33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
BUSINESS	48
MANAGEMENT	65
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	71
CONTROLS AND PROCEDURES	73
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	75
DESCRIPTION OF CAPITAL STOCK	76
SHARES ELIGIBLE FOR FUTURE SALE	78
UNDERWRITING	79
LEGAL MATTERS	84
EXPERTS	84
WHERE YOU CAN FIND MORE INFORMATION	84
INDEX TO FINANCIAL STATEMENTS	F-1
PART II INFORMATION NOT REQUIRED IN PROSPECTUS	II-1

	●	offers a dedicated private network for industrial applications which safeguards critical assets and information and protects against cyberattacks;
	●	has frequency agility with the capability to operate in any frequency between 70 MHz and 6 GHz;
	●	may be deployed in a wide variety of narrow and broadband channel sizes and can aggregate non-contiguous channels; and
	●	implements standard and enhanced versions of the IEEE 802.16 protocol, the new 802.16s amendment, and the planned 802.16t enhancements

	●	Deliver on sales pipeline opportunities;
	●	Secure additional marketing partnerships and OEM relationships;
	●	Develop new products and features to continuously improve our customer value; and
	●	Expand our MC-IoT capabilities via partnerships, joint ventures, or acquisitions.

	●	We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability.
	●	The IEEE 802.16s wireless broadband standard is newly published and adoption of this standard by customers in our target critical infrastructure sectors is uncertain.
	●	Our growth depends in part on the success of our strategic partnerships with third parties such as Siemens Mobility as well as on our ability to establish a broad range of additional ecosystem relationships with leading global industrial vendors.
	●	Any outbreak or worsening of an outbreak of contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations, financial condition and results of operations.
	●	We do not control certain aspects of the manufacture of our product, including the supply of key components used to build our products and we also depend on a limited number of manufacturers.
	●	We may not be able to generate sufficient cash to service our indebtedness, which currently consists of the secured loans with Steward Capital.
	●	If we do not obtain additional capital to fund our growth, operations, and obligations, our growth may be limited.
	●	We have limited trading activity and a result, the price of our common stock might fluctuate significantly and you could lose all or part of your investment.
	●	There is a limited market for our securities, which may make it more difficult to dispose of our securities and we may fail to sustain trading on Nasdaq, which could make it more difficult for investors to sell their shares.
	●	We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

Common stock offered by us:		Shares (or approximately shares if the underwriters exercise their option to purchase additional shares in full) (based on an assumed offering price of $ per share)

Common stock to be outstanding after this offering:		Shares (or approximately shares if the underwriters exercise their option to purchase additional shares in full).

Option to purchase additional shares:		The underwriters have an option within 30 days of the date of this prospectus to purchase up to additional shares of our common stock to cover over-allotments, if any

Use of proceeds:		We estimate that the net proceeds from this offering will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase an additional shares in full), assuming a public offering price of $ per share, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. We intend to use the net proceeds of this offering: (1) to continue research and development of future configurations of our FullMAX platform; (2) to build product inventory to support expected increased levels of customer sales activity; (3) subject to us receiving gross proceeds of not less than $20 million in the offering, repay approximately $5 million of principal and accrued interests under the Steward Capital Loan and Security Agreement, that matures on September 9, 2021; and (4) for other general corporate purposes. See “Use of Proceeds” for additional information.

Risk factors:		Investing in our common stock involves substantial risk. You should read the “Risk Factors” section beginning on page 11 and other information included in this prospectus for a discussion of factors to consider carefully before deciding to invest in our securities.

Proposed Nasdaq Trading Symbol:		Our common stock is quoted on the OTCQB of OTC Markets Group, Inc. (the “OTCQB”), under the symbol “ONDS,” and, to date, has traded on a limited basis. As of October 22, 2020, the last reported sale price of our common stock on OTCQB Market was $4.00. We have applied to list our common stock on The Nasdaq Stock Market (the “Nasdaq”) under the symbol “ONDS.”

	●	shares of common stock underlying 2,350,390 shares of Series A Preferred outstanding;
	●	outstanding warrants to purchase 5,639,167 shares of common stock;
	●	10,000,000 shares of common stock reserved for issuance pursuant to future awards under our 2018 Incentive Stock Plan (the “2018 Plan”), pursuant to which 4,877,478 shares of common stock underlie currently outstanding options and restricted stock units.

	Six months ended June 30,						Year ended December 31,
	2020			2019			2019			2018
Revenues, net	$	1,355,572		$	225,451		$	320,383		$	190,029
Cost of sales		721,677			55,948			79,126			39,365
Gross profit		633,895			169,503			241,257			150,664
Operating expenses:
General and administrative		3,398,844			2,838,173			4,792,867			2,611,992
Sales and marketing		681,388			3,554,212			5,403,901			2,897,703
Research and development		1,650,845			3,160,530			5,416,425			3,076,502
Total operating expense		5,731,077			9,552,915			15,613,193			8,586,197
Operating loss		(5,097,182	)		(9,383,412	)		(15,371,936	)		(8,435,533	)
Other income (expense)		(930,644	)		(1,540,941	)		(4,018,196	)		(3,661,331	)
Net loss	$	(6,027,826	)	$	(10,924,353	)	$	(19,390,132	)	$	(12,096,864	)

	●	on an actual basis; and
	●	on an as adjusted basis to give effect to our sale of shares of common stock in this offering at the assumed offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

	June 30, 2020
	Actual			As Adjusted⁽¹⁾
	(Unaudited)
Balance Sheet data:
Cash and cash equivalents	$	43,964		$
Total assets		2,557,831
Total liabilities		18,959,218
Accumulated deficit		(57,799,493	)
Total stockholders’ equity (deficit)		(16,401,387	)

	As of June 30, 2020
	Actual			Proforma			Proforma As Adjusted
Cash and cash equivalents	$	43,964		$	4,360,164		$
Current liabilities		17,953,740			18,010,087
Long-term liabilities		1,005,478			743,564
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued and outstanding, actual; 10,000,000 shares authorized and 2,350,390 issued and outstanding, proforma; 10,000,000 shares authorized and 2,350,390 issued and outstanding, as adjusted		—			235
Common stock, $0.0001 par value; 350,000,000 shares authorized, 59,268,085 shares issued and outstanding, actual; 350,000,000 shares authorized, shares issued and outstanding, proforma as adjusted		5,927			5,927
Additional paid-in capital		41,392,179			46,231,177
Other Comprehensive loss		-			(355,484	)
Accumulated deficit		(57,799,493	)		(57,803,345	)
Total stockholders’ equity (deficit)	$	(16,401,387	)	$	(11,921,490	)	$
Total capitalization	$	(15,395,909	)	$	(11,177,926	)	$

Assumed offering price per share				$
Historical net tangible book value per share as of June 30, 2020	$	(0.29	)
Increase in net tangible book value per share attributable to new investors
Net tangible book value per share after the offering
Dilution per share to new investors				$

	Shares Purchased			Total Consideration				Weighted Average
	Number	Percent		Amount		Percent		Price per Share
Existing stockholders			%	$	(1)		%	$
New investors
Total			%	$			%

	Three Months Ended June 30,
	2020			2019			Increase (Decrease)
Revenue	$	1,155,374		$	193,157		$	962,217
Cost of goods sold		540,585			50,646			489,939
Gross profit		614,789			142,511			472,278
Operating expenses:
General and administrative		2,490,257			1,223,443			1,266,814
Sales and marketing		132,370			1,685,241			(1,552,871	)
Research and development		757,916			1,499,111			(741,195	)
Total operating expense		3,380,543			4,407,795			(1,027,252	)
Operating loss		(2,765,754	)		(4,265,284	)		(1,499,530	)
Other income (expense)		(454,787	)		(835,344	)		(380,557	)
Net loss		(3,220,541	)		(5,100,628	)		(1,880,087	)
Foreign currency translation		-			9,239			9,239
Comprehensive loss	$	(3,220,541	)	$	(5,091,389	)	$	(1,870,848	)

	(000s)
Human resource costs, including benefits	$	(357	)
Travel and entertainment		(267	)
Other general and administration costs:
Professional fees and consulting costs		(37	)
Other expense		33
Depreciation and amortization		(5	)
Other research and deployment costs, excluding human resources and travel and entertainment		(169	)
Other sales and marketing costs, excluding human resources and travel and entertainment		(225	)
	$	(1,027	)

	Six Months Ended June 30,
	2020			2019			Increase (Decrease)
Revenue	$	1,355,572		$	225,451		$	1,130,121
Cost of goods sold		721,677			55,948			665,729
Gross profit		633,895			169,503			464,392
Operating expenses:
General and administrative		3,398,844			2,838,173			560,671
Sales and marketing		681,388			3,554,212			(2,872,824	)
Research and development		1,650,845			3,160,530			(1,509,685	)
Total operating expense		5,731,077			9,552,915			(3,821,838	)
Operating loss		(5,097,182	)		(9,383,412	)		(4,286,230	)
Other income (expense)		(930,644	)		(1,540,941	)		(610,297	)
Net loss		(6,027,826	)		(10,924,353	)		(4,896,527	)
Foreign currency translation		-			13,900			13,900
Comprehensive loss	$	(6,027,826	)	$	(10,910,453	)	$	(4,882,627	)

	(000s)
Human resource costs, including benefits	$	(1,824	)
Travel and entertainment		(432	)
Other general and administration costs:
Professional fees and consulting costs		(364	)
Other expense		(408	)
Depreciation and amortization		(12	)
Other research and deployment costs, excluding human resources and travel and entertainment		(262	)
Other sales and marketing costs, excluding human resources and travel and entertainment		(520	)
	$	(3,822	)

	(000s)
Human resource costs, including benefits	$	3,239
Travel and entertainment		262
Other general and administration costs:
Professional fees and consulting costs		1,612
Other expense		931
Depreciation and amortization		89
Other research and deployment costs, excluding human resources and travel and entertainment		479
Other sales and marketing costs, excluding human resources and travel and entertainment		415
	$	7,027

	Six Months Ended June 30
	2020			2019
Net cash used in operating activities	$	(2,765,865	)	$	(8,511,136	)
Net cash used in investing activities		(9,290	)		(321,217	)
Net cash provided by financing activities		666,091			8,282,650
Decrease in cash		(2,109,064	)		(549,703	)
Effect of foreign currency transaction on cash		-			10,742
Cash and cash equivalents, beginning of period		2,153,028			1,129,863
Cash, cash equivalents and restricted cash, end of period	$	43,964		$	590,902

	Outstanding Amount as of June 30, 2020

Paycheck Protection Program	$	666,091.00
Steward Capital Holdings LP	$	11,461,969.76
Promissory Notes⁽¹⁾	$	261,913.77
Convertible Promissory Note	$	336,508.25
	$	12,726,482.78

Name	Age	Position
Eric A. Brock	50	Chairman and Chief Executive Officer
Stewart Kantor	58	Director, Chief Financial Officer, Treasurer and Secretary
Thomas Bushey	40	Director, President
Richard M. Cohen	69	Director
Derek Reisfield	57	Director
Richard H. Silverman	80	Director

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non- Equity Incentive Plan Compen- sation ($)		Nonquali- fied Deferred Compen- sation Earnings ($)		All Other Compen- sation ($)		Total ($)
Eric A. Brock ⁽¹⁾ (CEO)		2019	$	200,000	$	-	$	-	$	-	$	-	$	-	$	27,819	$	227,819
		2018	$	50,769	$	-	$	-	$	-	$	-	$	-	$	5,846	$	56,615
Stewart Kantor ⁽²⁾ (President, CFO, Treasurer and Secretary)		2019	$	200,000	$	50,000	$	-	$	-	$	-	$	-	$	12,500	$	262,500
		2018	$	162,500	$	50,000	$	-	$	-	$	-	$	-	$	1,250	$	213,750

Plan Category	Number of securities to be issued upon exercise or vesting of outstanding equity awards (a)		Weighted- average exercise price of outstanding options (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c)
Equity compensation plans approved by security holders		—		—		10,000,000
Equity compensation plans not approved by security holders		—		—		—
Total		—		—		10,000,000

Name and Address of Officer and Directors	Amount and Nature of Beneficial Ownership⁽¹⁾		Percent of Class			Amount and Nature of Beneficial Ownership after the Offering	Percent of Class after the Offering
Eric A. Brock (Chairman of the Board and Chief Executive Officer)⁽²⁾		5,831,085		9.84	%			%
Thomas Bushey (Director and President)⁽³⁾		-		-	%			%
Stewart Kantor (Director, Chief Financial Officer, Treas. and Sec.)		2,725,333		4.60	%			%
Richard M. Cohen (Director)		72,942		*
Richard H. Silverman (Director)		72,942		*
Derek Reisfield (Director)		72,942		*
All Officers & Directors as a Group (6 persons)		8,775,244		14.81	%			%

Name and Address of Stockholders
Energy Capital, LLC⁽⁴⁾		17,389,363		28.33	%			%

Number of Shares and % of Total Outstanding		Date Available for Sale into Public Market
shares, or %		On the date of this prospectus.

shares, or %		March 28, 2021, subject to the 5% limitation over a 90 day period (described below under Lock-up Agreements)

shares, or %		90 days after the date of this prospectus, due to lock-up agreements between the holders of these shares and the underwriters, and further subject to the 5% limitation over a 90 day period (described above under Lock-up Agreements). However, the representatives of the underwriters, acting together, can waive the provisions of the 90 day lock-up agreements and allow these stockholders to sell their shares at any time.

		Number of
Underwriter		Shares of Common Stock
Oppenheimer & Co. Inc.
National Securities Corporation
Northland Securities, Inc.
Spartan Capital Securities, LLC
Total

	Page
Six months ended June 30, 2020

Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019	F-2
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)	F-3
Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	F-4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	F-5
Notes to the Unaudited Condensed Consolidated Financial Statements	F-6

Years ended December 31, 2019 and December 31, 2018

Report of Independent Registered Public Accounting Firm	F-24
Consolidated Balance Sheets as of December 31, 2019 and 2018	F-25
Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018	F-26
Consolidated Statements of Changes In Equity	F-27
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018	F-28
Notes to Consolidated Financial Statements	F-29

	June 30,			December 31,
	2020			2019
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	43,964		$	2,153,028
Restricted cash		19,332			-
Accounts receivable, net		332,981			20,212
Inventory		957,022			427,516
Other current assets		305,615			700,599
Total current assets		1,658,914			3,301,355

Property and equipment, net		209,671			252,246

Other Assets:
Licenses, net		270,059			200,000
Intangible assets, net		149,563			126,344
Lease deposits		49,377			52,152
Deferred offering costs		23,596			-
Operating lease right of use assets		196,651			331,419
Total other assets		689,246			709,915

Total assets	$	2,557,831		$	4,263,516

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	3,363,303		$	2,322,198
Operating lease liabilities		307,456			489,407
Accrued expenses and other current liabilities		3,598,296			3,141,649
Secured promissory note, net of debt discount $70,981 and $252,933, respectively		10,425,650			10,106,895
Notes payable		259,035			-
Total current liabilities		17,953,740			16,060,149

Long-Term Liabilities:
Notes payable, net of current portion		946,977			539,921
Accrued interest		58,501			41,239
Operating lease liabilities, net of current portion		-			52,449
Total long-term liabilities		1,005,478			633,609
Total liabilities		18,959,218			16,693,758

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock - par value $0.0001: 10,000,000 shares authorized		-			-
Common stock - par value $0.0001; 350,000,000 shares authorized; 59,268,085 issued and outstanding in each period		5,927			5,927
Additional paid in capital		41,392,179			39,335,498
Accumulated deficit		(57,799,493	)		(51,771,667	)
Total stockholders’ deficit		(16,401,387	)		(12,430,242	)

Total liabilities and stockholders’ deficit	$	2,557,831		$	4,263,516

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019

Revenues, net	$	1,155,374		$	193,157		$	1,355,572		$	225,451
Cost of goods sold		540,585			50,646			721,677			55,948
Gross profit		614,789			142,511			633,895			169,503

Operating expenses:
General and administration		2,490,257			1,223,443			3,398,844			2,838,173
Sales and marketing		132,370			1,685,241			681,388			3,554,212
Research and development		757,916			1,499,111			1,650,845			3,160,530
Total operating expenses		3,380,543			4,407,795			5,731,077			9,552,915

Operating loss		(2,765,754	)		(4,265,284	)		(5,097,182	)		(9,383,412	)

Other income (expense)
Other income		-			2,727			9,013			4,308
Interest income		66			1,667			158			1,667
Interest expense		(454,853	)		(719,106	)		(939,815	)		(1,276,284	)
Impairment of deferred offering and financing costs associated with canceled financing efforts		-			(120,632	)					(270,632	)
Total other income (expense)		(454,787	)		(835,344	)		(930,644	)		(1,540,941	)

Loss before provision for income taxes		(3,220,541	)		(5,100,628	)		(6,027,826	)		(10,924,353	)

Provision for income taxes		-			-			-			-

Net loss		(3,220,541	)		(5,100,628	)		(6,027,826	)		(10,924,353	)

Foreign currency translation gain		-			9,239			-			13,900

Comprehensive loss	$	(3,220,541	)	$	(5,091,389	)	$	(6,027,826	)	$	(10,910,453	)

Net loss per share - basic and diluted	$	(0.05	)	$	(0.10	)	$	(0.10	)	$	(0.22	)

Weighted average number of common shares outstanding, basic and diluted		59,408,763			50,463,732			59,408,763			50,463,732

										Other
					Additional					Accumulated
	Common Stock				Paid in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Income		Total

Balance, December 31, 2019		59,268,085	$	5,927	$	39,335,498	$	(51,771,667	)	$	-		(12,430,242	)
Stock-based compensation		-		-		25,599		-			-		25,599
Forgiveness of accrued officers’ salary		-		-		150,002		-			-		150,002
Net loss		-		-		-		(2,807,285	)		-		(2,807,285	)

Balance, March 31, 2020		59,268,085		5,927		39,511,099		(54,578,952	)		-		(15,061,926	)
Stock-based compensation		-		-		1,881,080		-			-		1,881,080
Net loss		-		-		-		(3,220,541	)		-		(3,220,541	)

Balance, June 30, 2020		59,268,085	$	5,927	$	41,392,179	$	(57,799,493	)	$	-	$	(16,401,387	)

Balance, December 31, 2018		50,463,732	$	5,046	$	17,491,734	$	(32,381,535	)	$	-		(14,884,755	)
Stock-based compensation		-		-		47,023		-			-		47,023
Foreign currency translation gain		-		-		-		-			4,661		4,661
Net loss		-		-		-		(5,823,725	)		-		(5,823,725	)

Balance, March 31, 2019		50,463,732		5,046		17,538,757		(38,205,260	)		4,661		(20,656,796	)
Stock-based compensation		-		-		25,013		-			-		25,013
Foreign currency translation gain		-		-		-		-			9,239		9,239
Net loss		-		-		-		(5,100,628	)		-		(5,100,628	)

Balance, June 30, 2019		50,463,732	$	5,046	$	17,563,770	$	(43,305,888	)	$	13,900	$	(25,723,172	)

	June 30, 2020		December 31, 2019
Raw Material	$	909,947	$	372,101
Finished Goods		47,075		55,415
TOTAL INVENTORY	$	957,022	$	427,516