Ondas Holdings Inc

Previous wording

Ondas Holdings Inc. (“Ondas Holdings,” “Ondas,” the “Company,” “we” or “our”) 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 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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 System™, a fully autonomous drone platform capable of continuous and multipurpose aerial data capturing and analytics, and the Iron Drone Raider™, a fully autonomous interceptor drone designed to neutralize small hostile drones.

Current wording

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 System™, a fully autonomous drone platform capable of continuous and multipurpose aerial data capturing and analytics, and the Iron Drone Raider™, a fully autonomous interceptor drone designed to neutralize small hostile drones.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

In recent weeks, all of the Company’s workforce in Israel returned to work and inventory production restraints have eased. 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 System™ and to ship them outside of Israel. As of the date of this prospectus, the Company has determined that there have not been any materially adverse effects on its business or 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.

Current wording

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 System™ 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.

Previous wording

Our gross profit increased by $5,272,011 to $6,381,174 for the year ended December 31, 2023 compared to $1,109,163 for the year ended December 31, 2022 based on the changes in revenues and cost of goods sold as discussed above. Gross margin for the years ended December 31, 2023 and 2022 was 41% and 52%, respectively. The decrease in gross margin was primarily a result of the sale of lower margin products at Ondas Networks.

Current wording

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.

Previous wording

Operating expenses for the year ended December 31, 2023 decreased by $24,428,211, or 35%, as a result of the following items:

Current wording

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

Previous wording

The decrease in operating expenses was primarily due to: (i) a decrease of approximately $4,196,000 in human resource costs, of which approximately $6,304,000 relates to reduced headcount and synergies achieved by integrating American Robotics and Airobotics, offset by an increase of approximately $2,108,000 related to an increase in headcount and bonus expense at Ondas Networks; (ii) a decrease of approximately $1,579,000 in professional fees and consulting costs, of which approximately $1,054,000 relates to professional fees in connection with the acquisition of Airobotics and approximately $525,000 is a result of synergies achieved by integrating American Robotics and Airobotics; (iii) an increase of approximately $1,200,000 in depreciation and amortization expenses related to the acquisition of Airobotics and the assets of Iron Drone; (iv) a decrease of approximately $4,822,000 in other research and development costs, excluding human resources and travel and entertainment, of which $5,143,000 relates to synergies achieved by integrating American Robotics and Airobotics, offset by an increase of approximately $321,000 in research and development costs at Ondas Networks as we continue to invest in our technology; and (v) an increase of approximately $784,000 in other sales and marketing costs, excluding human resources and travel and entertainment, of which approximately $884,000 relates to the acquisition of Airobotics, net of synergies achieved by integrating American Robotics and Airobotics, offset by a decrease of approximately $100,000 at Ondas Networks. In 2023, we recognized impairment of $1,500,000 on our long-term equity investment and impairment of approximately $2,511,000 on the American Robotics Waltham Lease right-of-use asset and the associated leasehold improvement and furniture and fixtures. In 2022, we recognized an impairment of goodwill from the American Robotics acquisition of approximately $19,420,000.

Current wording

The decrease in operating expenses was primarily due to:

Previous wording

As a result of the foregoing, our operating loss decreased by $29,700,222, or 43%, to $39,729,300 for the year ended December 31, 2023, compared with $69,429,522 for the year ended December 31, 2022. Operating loss decreased primarily as a result of increased gross profit and a decrease in operating expenses as described above.

Current wording

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.

Previous wording

Other income (expense), net, increased by $1,303,289, to other expense, net of $5,115,572 for the year ended December 31, 2023, compared to other expense, net of $3,812,283 for the year ended December 31, 2022. During the year ended December 31, 2023, we reported (i) an increase in interest expense of approximately $851,000, offset by a decrease in amortization of debt discount and debt issuance costs of approximately $406,000 for the 2022 Convertible Exchange Notes (as defined below) and 2023 Additional Notes (as defined below); (ii) an increase in impairment of deferred offering costs of approximately $71,000 related to the termination of the ATM Agreement; (iii) an increase in loss on foreign exchange of approximately $425,000 at Airobotics; (iv) an increase in other expense of approximately $478,000 due to a change in fair value of government grant liability; and (iv) offset by an increase in interest income of approximately $116,000 at Ondas Networks.

Current wording

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.

Previous wording

As a result of the net effects of the foregoing, net loss decreased by $28,396,333, or 39%, to $44,844,872 for the year ended December 31, 2023, compared with $73,241,805 for the year ended December 31, 2022. Net loss per share of common stock, basic and diluted, was $(0.88) for the year ended December 31, 2023, compared with $(1.73) for the year ended December 31, 2022.

Current wording

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.

Previous wording

The decrease in cash flows used in operating activities of approximately $3,944,000 was primarily due to a decrease in net loss of approximately $28,397,000, of which approximately $3,920,000 related to non-cash and credits, including depreciation, amortization of debt discount, amortization of intangibles assets and right of use asset, and stock-based compensation, and approximately $15,408,000 relates to impairment of goodwill and long-term assets, offset by changes in operating assets and liabilities resulting in a cash outflow of approximately $5,125,000. For a summary of our outstanding operating leases, see Note 2 – Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements.

Current wording

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.

Previous wording

The increase in cash flows provided by investing activities of approximately $7,471,000, relates to $1,049,454 cash acquired with the Airobotics acquisition, combined with a decrease of approximately $723,000 in cash paid for asset acquisitions, a decrease of $1,000,000 in cash paid for an investment in Dynam AI, a decrease of $2,000,000 in cash outflow related to notes receivable, and a decrease of approximately $2,699,000 in cash paid for purchase of equipment and patent costs.

Current wording

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.

Previous wording

The decrease in cash provided by financing activities of approximately $15,127,000 was due to a decrease in net proceeds from convertible debt of approximately $18,393,000, exercise of options and warrants of approximately $24,000, and the ATM Offering, which raised approximately $6,090,000 in 2022, combined with approximately $4,355,000 in cash payments on the 2022 Convertible Exchange Notes and approximately $1,147,000 in cash payments for Airobotics related debt. This was partially offset by proceeds of approximately $14,692,000 from the sale of noncontrolling interest in Ondas Networks and $190,000 in proceeds from government grants in Airobotics.

Current wording

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.

Previous wording

We have incurred losses since inception and have funded our operations primarily through debt and the sale of capital stock. On December 31, 2023, we had an accumulated deficit of approximately $198,360,000. On December 31, 2023, we had net long-term borrowings outstanding of approximately $5,368,000 net of debt discount and issuance costs of approximately $392,000 and short-term borrowings outstanding of approximately $26,213,000, net of debt discount and issuance costs of approximately $1,968,000. On December 31, 2023, we had cash and restricted cash of approximately $15,022,000 and a working capital deficit of approximately $12,334,000.

Current wording

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.

Previous wording

In October 2022, the Company entered into a convertible debt agreement, which provided cash proceeds of approximately $27,702,000. Also in 2022, the Company raised approximately $6,090,000 through the ATM Offering. In 2023, we raised approximately $14,692,000 of net proceeds from the sale redeemable preferences shares in Ondas Networks and warrants in Ondas Holdings to third parties, and approximately $9,310,000 from a second convertible debt agreement. In February 2024, we raised gross proceeds of approximately $4,500,000 from issuing additional redeemable preference shares in Ondas Networks and warrants in Ondas Holdings to third parties, and approximately $4,100,000 from issuing common stock in Ondas Holdings and warrants in OAH.

Current wording

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.

Previous wording

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, 2023, proceeds from the 2024 financing activities 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 April 1, 2024, the date the Consolidated Financial Statements were available to be issued.

Current wording

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.

Previous wording

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“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:

Current wording

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:

Previous wording

Share-Based Compensation Expense. We calculate share-based compensation expense for option awards (“Share-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 of the Share-based Award in determining the fair value of Share-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.

Current wording

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.