Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2026

Summary of Significant Accounting Policies [Abstract]

The accompanying unaudited condensed consolidated financial statements present the Company’s historical financial position, results of operations, changes in stockholders’ equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“U.S. GAAP”) for interim reporting. As such, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes as of and for the fiscal year ended December 31, 2025, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on March 30, 2026 (the “2025 Annual Report”). The condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Company evaluates whether entities in which it holds an ownership or contractual interest should be consolidated. This evaluation requires significant judgment, including determining whether an entity is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary. In determining whether the Company is the primary beneficiary of a VIE, the Company applies a qualitative approach that determines whether the Company has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company continuously reassesses whether the Company is the primary beneficiary of a VIE as changes to existing interest, relationships or future transactions may result in consolidation or deconsolidation of the VIE.

Acquisitions

Assets acquired, liabilities assumed, and noncontrolling interests in a business combination are measured at fair value at the acquisition date. Any excess of the consideration transferred over the estimated fair value of net assets acquired is recorded as goodwill.

The Company accounts for asset acquisitions related to transactions that do not meet the definition of a business. In an asset acquisition, the cost of the transaction, including transaction costs and contingent consideration that is probable and reasonably estimable at the acquisition date, is allocated to the identifiable assets acquired and liabilities assumed on a relative fair value basis. No goodwill is recognized in an asset acquisition. Any excess of the transaction cost over the estimated fair value of net assets acquired is recognized in earnings.

Goodwill and Intangible Assets

Goodwill and other intangible assets result from the Company’s acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. The Company reviews identified intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company also tests intangible assets with indefinite lives and goodwill for impairment at least annually.

Use of Estimates

The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements. Such management estimates include those relating to allocation of consideration for business combinations to identifiable tangible and intangible assets, asset acquisitions, deconsolidation’s and retained interests, revenue recognition, inventory write-downs to reflect net realizable value, fair values of financial instruments and goodwill, assumptions used in the valuation of contingent consideration liabilities, stock-based awards, derivative warrant liabilities, and valuation allowances against deferred tax assets. Actual results could differ from those estimates.

Cash and Cash Equivalents, and Restricted Cash

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash includes cash that is not readily available for use in the Company’s operating activities. At December 31, 2025, $37.6 million of our restricted cash balance relates to funds held in escrow in connection with the acquisition of Sentrycs. The restrictions on the $37.6 million funds held in escrow were released during the six months ended June 30, 2026. The remaining restricted cash balance at June 30, 2026 and December 31, 2025 is attributable to (i) minimum cash reserves required to be maintained to cover bank guarantees issued for new customer orders and operating leases, and (ii) minimum cash reserve requirements for credit cards.

Debt Investments

The Company accounts for its investments in debt securities, including fixed-income securities and certificates of deposit, as available-for-sale. Available-for-sale debt securities are recorded at fair value on the consolidated balance sheets, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss).

The amortized cost of available-for-sale securities includes the purchase price, adjusted for the amortization of premiums and accretion of discounts, which are recognized in interest income using the effective interest method. Interest income earned on investments, including certificates of deposit, is recorded in interest and dividend income in the condensed consolidated statements of operations. Certificates of deposit included in available-for-sale investments are classified based on their contractual maturities and are recorded at fair value, with changes in fair value reflected in accumulated other comprehensive income (loss).

The Company evaluates available-for-sale debt securities, including certificates of deposit, for expected credit losses at each reporting date and records an allowance for credit losses when a decline in fair value below amortized cost is attributable to credit factors. Unrealized losses that are not credit related are recorded in accumulated other comprehensive income (loss). Upon the sale or maturity of an available-for-sale security, realized gains or losses are recognized in earnings and amounts previously recorded in accumulated other comprehensive income (loss) are reclassified into earnings.

Equity Investments

The Company’s investments in equity securities with readily determinable fair values are measured at fair value, with changes in fair value recognized in earnings. Equity securities without readily determinable fair values are recorded at cost, less impairment, and adjusted for observable price changes in orderly transactions for identical or similar equity securities of the same issuer, with such adjustments recognized in earnings. Equity investments over which the Company has significant influence, generally presumed when the Company owns 20% or more of the investee’s voting interests, are accounted for using the equity method of accounting, unless the fair value option is elected. Dividends received from equity securities are recognized in earnings when declared.

Inventory

Inventories, which consist of raw materials, work in process, and finished goods, are stated at the lower of cost (first-in, first-out) or net realizable value, net of reserves for excess and obsolete inventory. We continually analyze our slow-moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. 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. Products that are determined to be obsolete are written down to net realizable value.


(dollars in thousands)	June 30, 2026			December 31, 2025
Raw material	$	35,426		$	14,153
Work in process		8,791			1,470
Finished goods		9,518			7,992
Less inventory reserves		(1,701	)		(1,652	)
Total inventory, net	$	52,034		$	21,963

Impairment of Long-Lived Assets

Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. There was no impairment of long-lived assets for the three and six months ended June 30, 2026 and 2025, respectively.

Noncontrolling Interests

Noncontrolling interests represent the minority shareholders’ proportionate share of the Company’s majority-owned subsidiaries. The portion of net income (loss) attributable to noncontrolling interests is presented as net loss attributable to noncontrolling interests in the condensed consolidated statements of operations, and the portion of other comprehensive income (loss) of these noncontrolling interests is presented in the condensed consolidated statements of stockholders’ equity.

Derivative Warrant Liabilities

The Company classifies as equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any warrants that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify for the scope exception. The Company assesses classification of its common stock warrants and other freestanding warrant instruments at each reporting date to determine whether a change in classification between assets and liabilities is required.

Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified. Warrants that are determined to require asset or liability classification are measured at fair value upon issuance and are subsequently remeasured to fair value at each balance sheet date with any change in fair value recognized in the condensed consolidated statements of operations.

Other Income (Expense)

The components of other income (expense), net were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2026			2025			2026			2025
Gain on deconsolidation		(2,619	)		-			48,834			-
Change in fair value of warrant liability		15,250			-			404,798			-
Unrealized gain on investments		12,416			-			9,799			-
Interest and dividend income		12,493			250			24,629			451
Loss on acquisition of variable interest entity		-			-			(46,150	)		-
Change in fair value of government grant liability		(182	)		(143	)		(286	)		(267	)
Gain on acquisition consideration		6,182			-			6,182			-
Change in fair value of Networks notes receivable		305			-			305			-
Change in fair value of investment in Networks		(2,487	)		-			(2,487	)		-
Foreign exchange gain (loss), net		808			(30	)		911			(64	)
Realized gain on investments		2,925			-			2,925			-
Other income (expense), net		147			(17	)		283			(18	)
Total other income (expense), net	$	45,238		$	60		$	449,743		$	102

Fair Value of Financial Instruments

Our financial assets measured at fair value on a recurring basis consist primarily of cash equivalents, such as money market funds, investments, including publicly traded equity securities, warrants (including warrants exercisable for publicly traded stock), instruments for which the Company has elected to apply the fair value option, and available-for-sale debt securities. Our financial liabilities measured at fair value on a recurring basis consist primarily of government grant liabilities and warrant liabilities.

Government grant liabilities represent obligations under government-funded arrangements and are measured at fair value using valuation techniques that incorporate significant unobservable inputs. Warrant liabilities arise from warrants issued by the Company that do not meet the criteria for equity classification and are therefore accounted for as liabilities and measured at fair value on a recurring basis, with changes in fair value recognized in earnings.

The carrying amounts of receivables, accounts payable, and accrued expenses approximate fair value due to the short-term maturity of such instruments.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. We recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgment occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision.

Stock-based Compensation

The Company measures stock-based compensation expense for stock option awards (“Stock-based Awards”) based on the estimated grant-date fair value using the Black-Scholes-Merton option pricing model and recognizes the related compensation expense on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur.

The Black-Scholes-Merton option pricing model requires the use of subjective assumptions, including expected stock price volatility, expected term, risk-free interest rate, and dividend yield. The expected term is estimated using the simplified method due to the Company's limited history of option exercises. Under this method, the expected term is determined based on the weighted average of the vesting period and the contractual term of the award. Historically, the Company primarily relied on the historical volatility of comparable public companies due to insufficient Company-specific trading history. As additional trading history has become available, the Company has incorporated the historical volatility of its own common stock into the expected volatility assumption through a blended methodology. Management will continue to reassess the relative weighting of Company-specific and peer-group volatility as the Company’s trading history matures.

The Company recognizes restricted stock unit expense over the period of vesting or the period that services will be provided. For awards with graded vesting schedules that contain only service-based vesting conditions, the Company has elected the straight-line attribution method. The Company periodically evaluates cumulative compensation cost recognized and records any required catch-up adjustment to ensure that cumulative compensation expense recognized is not less than the grant-date fair value of the vested portion of the award. This assessment may result in accelerated recognition of compensation expense in certain periods.

Compensation associated with shares of the Company’s common stock, par value $0.0001 (the “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.

Net income (loss) per Common Share

Net Income (Loss) Per Common Share

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders (the numerator) by the weighted average number of shares of Common Stock outstanding for each period (the denominator).

Basic net income (loss) per share is computed using the two-class method, which is an earnings allocation method that determines income (loss) per share for common stock and participating securities. The participating securities consist of warrants to purchase common stock issued in the October 2025 Offering and the January 2026 Offering. Undistributed earnings are allocated between common stock and participating securities as if all earnings had been distributed during the period. In periods of loss, no allocation is made to the participating securities.

Diluted net income (loss) per share is calculated using the more dilutive of the two-class method or the treasury stock and if-converted methods, as applicable. Potential dilutive shares include stock options, warrants, restricted stock units, contingently issuable shares, and convertible preferred stock. Because the Company reported a net loss for the six months ended June 30, 2025, the effect of potentially dilutive securities would have been anti-dilutive; therefore, diluted net loss per share equals basic net loss per share for that period.

The reconciliation of basic to diluted shares is as follows (in thousands except share and per share data):


	Three Months Ended June 30,						Six Months Ended June 30,
	2026			2025			2026			2025
Calculation of basic income (loss) per share attributable to stockholders
Net income (loss) attributable to stockholders	$	(88,587	)	$	(12,019	)	$	273,073		$	(27,360	)
Net income attributable to participating securities		-			-			(77,508	)		-
Net income (loss) attributable to common stockholders - basic	$	(88,587	)	$	(12,019	)	$	195,565		$	(27,360	)
Weighted-average common shares outstanding - basic		500,708,893			150,652,998			473,052,511			127,955,008
Earnings per share - basic	$	(0.18	)	$	(0.08	)	$	0.41		$	(0.21	)
Calculation of diluted income (loss) per share attributable to stockholders
Net income (loss) attributable to stockholders	$	(88,587	)	$	(12,019	)	$	273,073		$	(27,360	)
Net income attributable to participating securities					-			(77,508	)		-
Change in fair value associated with dilutive shares		(7,360	)		-			(7,478	)		-
Net income (loss) attributable to common stockholders - diluted	$	(95,947	)	$	(12,019	)	$	188,087		$	(27,360	)

Weighted-average common shares outstanding - basic		500,708,893			150,652,998			473,052,511			127,955,008
Common stock warrants		-			-			246,911			-
Common stock options		-			-			9,596,583			-
Restricted stock units		-			-			6,032,313			-
Other		2,884,539			-			2,379,411			-
Weighted-average common shares outstanding - diluted		503,593,432			150,652,998			491,307,729			127,955,008
Net income (loss) per share - diluted	$	(0.19	)	$	(0.08	)	$	0.38		$	(0.21	)

The following potentially dilutive securities for the three and six months ended June 30, 2026 and 2025, have been excluded from the computation of diluted net income (loss) per share because the effect of their inclusion would have been anti-dilutive.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Warrants to purchase common stock		196,256,760		14,028,689		195,527,101		14,028,689
Options to purchase common stock		27,866,387		17,482,554		9,546,650		17,482,554
Contingently issuable shares		116,806,574		-		114,780,665		-
Potential shares issuable under 2024 Additional Notes		-		30,549,398		-		30,549,398
Restricted stock units		33,178,399		3,740,238		-		3,740,238
Total potentially dilutive securities		374,108,120		65,800,879		319,854,416		65,800,879

Concentration of Customers

A significant portion of our revenues are concentrated with a small number of customers. Revenues from each customer that were 10% or greater of total revenues were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2026			2025			2026			2025
Customer A		40	%		19	%		37	%		28	%
Customer B	*				27	%	*				31	%
Customer C	*				50	%	*				30	%

* less than 10%

A significant portion of our accounts receivable are concentrated with a small number of customers. Accounts receivable from each customer that were 10% or greater of total accounts receivable were as follows:


	June 30, 2026			December 31, 2025
Customer A		43	%		73	%

Recently Adopted Accounting Pronouncements

In September 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 updates the accounting for internal-use software by replacing the previous project-stage model with a principles-based recognition threshold, under which an entity capitalizes qualifying internal-use software costs when management authorizes and commits to fund a project and it is probable the project will be completed and the software will be used for its intended purpose. The amendments also bring website development costs into Subtopic 350-40 and require enhanced disclosures, including presentation of capitalized internal-use software within the scope of ASC 360-10.

The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods, with early adoption permitted as of the beginning of an annual reporting period. Ondas elected to early adopt ASU 2025-06 on a prospective basis effective January 1, 2026. Under the prospective method, the Company applies the new capitalization model only to costs incurred on or after January 1, 2026, for new or significantly modified internal-use software projects, while amounts capitalized prior to adoption continue to be amortized under the Company’s historical accounting policies. Prior-period financial statements and opening retained earnings were not adjusted for the adoption of this standard.

The early, prospective adoption of ASU 2025-06 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows as of and for the period ended June 30, 2026. However, the guidance is expected to affect the timing and amount of internal-use software costs capitalized and amortized in future periods, as well as related disclosures.

Reclassification

During the second quarter of 2026, the Company completed its functional classification assessment of amortization of acquired developed technology. Amortization attributable to developed technology used in research and development activities is presented in research and development expense. Accordingly, the Company reclassified $3.1 million of developed technology amortization recognized during the three months ended March 31, 2026 from general and administrative expense to research and development expense in the year to date results for the period ended June 30, 2026.

During the three and six months ended June 30, 2026, the Company updated the presentation of certain non-operating income and expense items by presenting such amounts within a single line item, "Other income (expense), net," in the condensed consolidated statements of operations. Additional disaggregated information regarding the components of other income (expense), net is presented in Note 2. Prior-period amounts have been conformed to the current-period presentation.