NOTE 1 – DESCRIPTION OF BUSINESS

Ondas, Inc. (together with its subsidiaries, the “Company,” “Ondas,” “we,” “us,” or “our”) is a defense, security, and critical infrastructure technology company organized around two business units: Ondas Autonomous Systems Inc. (“OAS”) and Ondas Capital Inc. (“Ondas Capital”). Through these business units, we develop and commercialize autonomous systems and strategic investment and partnership initiatives that support the scaling and adoption of mission-critical solutions for governments and industrial customers.

OAS focuses on autonomous and unmanned aerial and ground systems and integrated mission solutions for defense, homeland security, public safety, and other critical infrastructure and industrial end markets. Through its product company subsidiaries, OAS develops, commercializes and delivers integrated capabilities across Counter-Unmanned Aerial System (“CUAS”), aerial Intelligence, Surveillance, and Reconnaissance (“ISR”), and Unmanned Ground Vehicle (“UGV”) applications.  Ondas Capital supports our growth strategy through strategic investments, partnerships, and capital formation initiatives intended to accelerate technology development, expand market access, and enhance long-term value creation across the Ondas platform. 

The Company manages these business units as distinct operating platforms aligned to complementary end markets and customer requirements. The Company’s approach is designed to combine advanced autonomy, secure communications, and integrated operating capabilities to help customers improve situational awareness, operational resilience, and safety and security outcomes in complex, regulated, and often contested environments.  

Deconsolidation of subsidiary

At December 31, 2025, Ondas Networks was a separate business unit that was consolidated in the December 31, 2025 financial statements. Ondas Networks provides mission-critical private wireless connectivity solutions for Industrial Internet of Things (IOT) applications, enabling secure, reliable, wide-area communications and edge data transport in demanding critical infrastructure environments. 

On January 16, 2026, Ondas Networks completed a Series B preferred stock financing (the “2026 Networks Offering”) for aggregate gross proceeds of approximately $8.4 million, which included approximately $6.0 million from the Company and $2.0 million from other investors. In connection with the 2026 Networks Offering, Ondas Networks issued shares of Series B-1 and B-2 Preferred Stock. The Series B Preferred Stock accrues dividends at a rate of 8% per annum of the original issue price. Dividends are payable only when, as, and if declared by the board of directors of Ondas Networks and may be paid in cash or additional shares of Ondas Networks preferred stock. Each share of Series B Preferred Stock is convertible at the option of the holder at any time into shares of Ondas Networks common stock at an initial conversion price equal to the original issue price, subject to standard adjustments. The Series B Preferred Stock is redeemable upon the occurrence of specified events, including at the option of the holder after a stated period, at amounts intended to provide a return of capital plus accrued dividends.

During the quarter ended March 31, 2026, the Company determined that it no longer held a controlling financial interest in Ondas Networks as a result of the 2026 Networks Offering. This determination resulted from the 2026 Networks Offering, pursuant to which minority preferred shareholders exercised warrants and acquired additional voting interests in Ondas Networks (refer to Note 17 for additional details). As a result of these warrant exercises, the Company’s ownership and voting interests were diluted such that it no longer possessed the unilateral power to direct the activities that most significantly impact Ondas Networks’ economic performance. Accordingly, the Company deconsolidated Ondas Networks effective January 16, 2026 and no longer includes the assets, liabilities, and results of operations of Ondas Networks in its consolidated financial statements subsequent to that date.

Upon deconsolidation, the Company derecognized all assets and liabilities of Ondas Networks, including the related noncontrolling interest, and remeasured its retained ownership interest to fair value. The Company recognized a gain on deconsolidation of $51.5 million, which is included in other income (expense), net in the condensed consolidated statements of operations for the three months ended March 31, 2026. The most significant carrying amounts of the assets and liabilities that were deconsolidated were inventory of $3.6 million, deposits and other assets of $2.3 million, convertible notes payable of $5.0 million, accrued expenses and other liabilities, current and long-term, of $2.7 million, and notes payable to the Company of $10.4 million.

Following the deconsolidation, the Company retains an approximately 47.5% ownership interest in Ondas Networks and has the ability to exercise significant influence over Ondas Networks’ operating and financial policies. As a result, the retained interest is accounted for as an equity-method investment and is presented as Investment in unconsolidated affiliate within noncurrent assets on the condensed consolidated balance sheets. The Company elected the fair value option for its retained equity investment in Ondas Networks in accordance with ASC 825, Financial Instruments. As a result, the investment is carried at fair value, with changes in fair value recognized in earnings each reporting period and included in other income (expense) in the condensed consolidated statements of operations. There were no changes in the fair value of the retained interest for the period ended March 31, 2026.