NOTE 11 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

In 2025, we raised $829.52 million of net proceeds from the sale of common stock and warrants, $30.84 million from the exercise of stock options and warrants, $1.16 million from the exercise of warrants in OAS, and $923 thousand from issuance of convertible notes in Ondas Networks (collectively referred to as “the 2025 Offerings”).

Ondas Inc. Convertible Notes Payable

2017 Convertible Promissory Note

On September 14, 2017, the Company and an individual entered into a convertible promissory note with unilateral conversion preferences by the individual (the “2017 Convertible Promissory Note”). On July 11, 2018, the Company’s Board approved certain changes to the 2017 Convertible Promissory Note wherein the conversion feature was changed from unilateral to mutual between the individual and the Company. The note matures on September 14, 2027.

The Company may at any time on or after a qualified public offering convert any unpaid repayment at the IPO conversion price. The conversion price is the lesser of the (i) price per share of Common Stock sold in the Qualified Public Offering, discounted by 20%, and (ii) the price per share of Common Stock based on a pre-money Company valuation of $50 million on a Fully Diluted Basis.

As of December 31, 2025 and 2024, the total outstanding balance of the 2017 Convertible Promissory Note was $300 thousand and is included in Notes payable, less current portion on the Consolidated Balance Sheets. The maturity date of the 2017 Convertible Promissory Note is based on the payment of 0.6% of quarterly gross revenue until 1.5 times the amount of the Note is paid. Accrued interest as of December 31, 2025 and 2024 was $27 thousand and $20 thousand, respectively. Interest expense for both years ended December 31, 2025 and 2024 was $15 thousand.

2022 Convertible Promissory Notes

On October 28, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors pursuant to which we issued convertible notes (“2022 Convertible Promissory Notes”) in the principal amount of $34.5 million, with a debt discount of $4.5 million and issuance costs of $2.3 million, resulting in net proceeds of approximately $27.7 million. The Company used the net proceeds of the 2022 Convertible Promissory Notes for general corporate purposes, including funding capital, expenditures, or the expansion of its business and providing working capital. The 2022 Convertible Promissory Note was amended on January 20, 2023 and July 21, 2023.

The 2022 Convertible Promissory Notes, as amended, bear interest at the rate of 3% per annum and were payable in monthly installments beginning on November 1, 2022, through the maturity date of April 28, 2025 (each such date, an “Installment Date”). On each Installment Date, we were subject to make monthly payments by converting the applicable “Installment Amount”, defined as (i) for all Installment Dates other than the maturity date, the lesser of (x) the Holder Pro Rata Amount of $1,437,500 and (y) the principal amount then outstanding under the Note; and (ii) on the maturity date, the principal amount then outstanding under the Note, into shares of our Common Stock (an “Installment Conversion”), subject to satisfaction of certain equity conditions, including a minimum $1.50 share price, $500,000 minimum daily volume, and maintaining continued Nasdaq listing requirements among other conditions. If these conditions were not met, installments could be requested in cash. At each Installment Date the note holder could defer some or all of the amount due until the subsequent Installment Date. In between Installment Dates, the note holder also had the option to accelerate certain portions of principal due, up to eight times the minimum Installment Amount of $1.4 million. At each Installment Date the price used to exchange outstanding notes into Common Stock was based on the lower of (A) 92% of the lowest VWAP of the respective previous five trading days; and (B) the Floor Price ($0.32 as of December 31, 2024). The maximum conversion price is $1.50 per share.

For the years ended December 31, 2025 and 2024, we issued 8,956,671 and 21,284,556 common shares as a result of Installment Conversions, respectively. As of December 31, 2025, the 2022 Convertible Promissory Notes have been repaid in full, and the remaining unamortized debt discount and issuance costs of $34 thousand was taken to additional paid in capital.

2023 Additional Notes

On July 24, 2023, pursuant to the terms of the Purchase Agreement, as amended, an Investor elected to purchase 3% Series B-2 Senior Convertible Notes in the aggregate original principal amount of $11.5 million (the “2023 Additional Notes”), which 2023 Additional Notes are convertible into shares of Common Stock under certain conditions more fully described in the 2022 Convertible Promissory Notes discussed above. The 2023 Additional Notes have an original issue discount of approximately thirteen percent (13%) resulting in gross proceeds to the Company of $10.0 million. The Company used the net proceeds for general corporate purposes, which included funding capital expenditures and working capital. The 2023 Additional Notes have a maturity date of July 25, 2025. The 2023 Additional Notes were issued pursuant to the second supplemental indenture, dated as of July 25, 2023, between the Company and the Trustee (the “Second Supplemental Indenture,” and together with the Base Indenture, the “Second Indenture”). The Second Supplemental Indenture supplements the Base Indenture. The Second Indenture has been qualified under the Trust Indenture Act of 1939, and the terms of the Additional Notes include those set forth in the Second Indenture and those made part of the Indenture by reference to the Trust Indenture Act.

The 2023 Additional Notes bear interest at the rate of 3% per annum. The 2023 Additional Notes are payable in monthly installments beginning on August 1, 2023 through the maturity date of July 24, 2025 (each such date, a “2023 Installment Date”). On each 2023 Installment Date, we will make monthly payments by converting the applicable 2023 Installment Amount (as defined above under the 2022 Convertible Promissory Notes) into shares of our Common Stock (a “2023 Installment Conversion”), subject to satisfaction of certain equity conditions, including a minimum $1.50 share price, $500,000 minimum daily volume, and maintaining continued Nasdaq listing requirements among other conditions. If these conditions are not met, installments can be requested in cash. At each 2023 Installment Date the note holder may defer some or all of the amount due until the subsequent 2023 Installment Date. In between 2023 Installment Dates, the note holder also has the option to accelerate certain portions of principal due. At each 2023 Installment Date the price used to exchange outstanding notes into Common Stock is based on the greater of (x) the Floor Price ($0.40 as of December 31, 2024) and (y) 92% of the lowest VWAP of the prospective five trading days. The maximum conversion price is $1.45 per share. For the years ended December 31, 2025 and 2024, we made no cash payments. For the years ended December 31, 2025 and 2024, we issued 15,636,297 and 0 common shares as a result of 2023 Installment Conversions, respectively.

As of December 31, 2025, the 2023 Additional Notes have been repaid in full, and the remaining unamortized debt discount and issuance costs of $174 thousand was taken to additional paid in capital.

2024 Additional Notes

On December 3, 17, and 31, 2024, pursuant to the terms of the Purchase Agreement, as amended, an Investor elected to purchase 3% Series B-2 Senior Convertible Notes in the aggregate original principal amount of $4.1 million, $11.5 million, and $18.9 million, respectively, (the “2024 Additional Notes,” together with the 2022 Convertible Promissory Notes and 2023 Additional Notes, the “Notes”), which 2024 Additional Notes are convertible into shares of Common Stock under certain conditions more fully described in the 2022 Convertible Promissory Notes discussed above. The 2024 Additional Notes have an original issue discount of approximately thirteen percent (13%) resulting in net proceeds to the Company of $30.1 million. The Company used the net proceeds for general corporate purposes and to support the growth of our drone business at OAS. The 2024 Additional Notes have a maturity date of December 3, 17, and 31, 2026, respectively. The 2024 Additional Notes were issued pursuant to an indenture entered into by and between the Company and the Trustee, dated as of December 3, 2024 (the “2024 Base Indenture”). The 2024 Base Indenture was supplemented by three supplemental indentures (the “2024 Indentures”, dated as of December 3, 17 and 31, 2024, between the Company and the Trustee. The 2024 Indentures have been qualified under the Trust Indenture Act of 1939, and the terms of the 2024 Additional Notes include those set forth in the 2024 Indentures and those made part of the 2024 Indentures by reference to the Trust Indenture Act.

The 2024 Additional Notes bear interest at the rate of 3% per annum. The 2024 Additional Notes are payable in monthly installments beginning on January 1, 2025, through the maturity date of December 3, 17, and 31, 2026, respectively, (each such date, a “2024 Installment Date”). On each 2024 Installment Date, we will make monthly payments by converting the applicable 2024 Installment Amount (as defined above under the 2022 Convertible Promissory Notes) into shares of our Common Stock (a “2024 Installment Conversion”), subject to satisfaction of certain equity conditions, including a minimum $1.50 share price, $500,000 minimum daily volume, and maintaining continued Nasdaq listing requirements among other conditions. If these conditions are not met, installments can be requested in cash. At each 2024 Installment Date the note holder may defer some or all of the amount due until the subsequent 2024 Installment Date. In between 2024 Installment Dates, the note holder also has the option to accelerate certain portions of principal due. At each 2024 Installment Date the price used to exchange outstanding notes into Common Stock is based on the greater of (x) the Floor Price ($0.17, $0.20, and $0.50, respectively, as of December 31, 2024) and (y) 92% of the lowest VWAP of the prospective five trading days. The maximum conversion price is $0.80, $0.88, and $1.60 per share, respectively. For the years ended December 31, 2025 and 2024, we made no cash payments. For the years ended December 31, 2025 and 2024, we issued 49,264,250 and 0 common shares as a result of 2024 Installment Conversions, respectively.

As of December 31, 2025, the 2024 Additional Notes have been repaid in full, and the remaining unamortized debt discount and issuance costs of $2.79 million was taken to additional paid in capital.

As of December 31, 2024, the total outstanding principal on the 2022 Convertible Promissory Notes, 2023 Additional Notes, and 2024 Additional Notes was $44.6 million, net of unamortized debt discount of $4.8 million and unamortized issuance costs of $1.8 million. Accrued interest as of December 31, 2025 and December 31, 2024 was $0 and $1.6 million, respectively, and is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.  

For the year ended December 31, 2025, we recognized interest expense of $495 thousand and amortization expense of $3.6 million related to the debt discount and issuance costs for the 2022 Convertible Promissory Notes, 2023 Additional Notes, and 2024 Additional Notes. For the year ended December 31, 2024, we recognized interest expense of $933 thousand and amortization expense of $1.9 million related to the debt discount and issuance costs for the 2022 Convertible Promissory Notes, 2023 Additional Notes, and 2024 Additional Notes.

SPO Convertible Capital Notes

In connection with the acquisition of SPO (refer to Note 6), the Company assumed outstanding convertible capital notes issued by SPO (the “SPO Convertible Capital Notes”). Immediately prior to the acquisition, the SPO Convertible Capital Notes were held entirely by the existing shareholders of SPO. Upon acquisition, 51% of the outstanding SPO Convertible Capital Notes, corresponding to the Company’s ownership interest, were considered intercompany balances and therefore eliminated in consolidation. The remaining 49% of the SPO Convertible Capital Notes, held by noncontrolling interest holders, remain outstanding and are reflected in the Company’s Consolidated Balance Sheets.

Concurrent with the acquisition, the SPO Convertible Capital Notes were amended to include the following terms: (i) any repayment of the SPO Convertible Capital Notes is subject to prior written consent of the Company, as the majority shareholder of SPO, (ii) the Company, as the majority shareholder of SPO, has the right, at its sole discretion, to require conversion of any or all SPO Convertible Capital Notes into common shares of SPO after a minimum holding period of five years from the original issuance date of the SPO Convertible Capital Notes, but no earlier than January 1, 2027, at a conversion price reflecting the fair market value of SPO’s common shares as determined by SPO’s board of directors at the relevant time and (iii) each holder of the SPO Convertible Capital Notes may assign all or a portion of its SPO Convertible Capital Notes solely to a transferee of SPO common shares on a pro rata basis, in proportion to the number of shares transferred.

The SPO Convertible Capital Notes do not bear interest and do not have a stated maturity date. The SPO Convertible Capital Notes were accounted for as part of the business combination in accordance with ASC 805, Business Combinations, and were initially measured at fair value as of the acquisition date. Because the SPO Convertible Capital Notes are non-interest-bearing and their settlement is contingent upon the timing of future conversion or repayment, the Company recorded the noncontrolling interest portion of the SPO Convertible Capital Notes at a discount to face value.

Subsequent to initial recognition, the outstanding portion of the SPO Convertible Capital Notes is accounted for as a liability and measured at amortized cost. The Company accretes the discount to the SPO Convertible Capital Notes’ face value using the effective interest method, with the resulting accretion recognized as Interest expense in the Company’s Consolidated Statements of Operations.

As of December 31, 2025, the total outstanding balance of the SPO Convertible Capital Notes subject to repayment or conversion by noncontrolling interest holders was $3.5 million. For the year ended December 31, 2025, the Company recognized $329 thousand of accretion, which is included in Interest expense on the Consolidated Statements of Operations.

Ondas Networks Convertible Notes

On July 8, 2024 and July 23, 2024, Charles & Potomac Capital, LLC, (“C&P”), an entity affiliated with Joseph Popolo, a former director of the Company, elected to purchase Convertible Notes in the aggregate original principal amount of $700 thousand and $800 thousand, respectively, (the “July Networks Convertible Notes”). The July Networks Convertible Notes are convertible into common stock of Ondas Networks at $0.00001 par value per share (“Networks Common Stock”) or Preferred Stock under certain conditions. The Company used the net proceeds for general corporate purposes, which includes funding capital expenditures and working capital. The July Networks Convertible Notes bear interest at the rate of 6% per annum.

On November 13, 2024, pursuant to the Securities Purchase Agreement, dated November 13, 2024, by and between Networks and a private investor group (the “November Networks SPA”), multiple investors elected to purchase Convertible Notes in the aggregate original principal amount of $2.1 million (the “November Networks Convertible Notes”), of which $1 million was purchased by C&P. The November Networks Convertible Notes are convertible into shares of Networks Common Stock or preferred stock of Ondas Networks at $0.00001 par value per share (“Networks Preferred Stock”) under certain conditions. The Company used the net proceeds for general corporate purposes, which includes funding capital expenditures and working capital.

On January 15, 2025, pursuant to the Securities Purchase Agreement, dated January 15, 2025, by and between Networks, the Company, and a private investor group(the “January Networks SPA,” together with the November Networks SPA, the “Networks SPA”), multiple investors elected to purchase Convertible Notes in the aggregate original principal amount of $2.9 million (the “January 2025 Networks Convertible Notes,” together with the July Networks Convertible Notes and November Networks Convertible Notes, the “Ondas Networks Convertible Notes”), of which $2 million was from the Company. The November Networks Convertible Notes and January 2025 Networks Convertible Notes will (i) bear an interest rate of 10% per annum, (ii) have an amended maturity date of December 31, 2025, (iii) be secured by all assets of Networks, provided however such secured obligation shall be subordinate to that certain secured note, dated September 3, 2024, by and between Networks and C&P, and (iv) at the option of C&P be convertible into equity securities of Networks upon the closing (a) a Corporate Transaction (as defined in the November Networks Convertible Notes and January 2025 Networks Convertible Notes) or (b) a subsequent offering of securities of Networks. The $2 million in Convertible Notes held by the Company has been eliminated in the consolidated financials.

On November 13, 2024 and January 15, 2025, in connection with the November Networks Convertible Notes and January 2025 Networks Convertible Notes, respectively, Networks issued the investors warrants (“Networks Warrants”) to purchase $2.1 million and $2.9 million, respectively, in shares of Networks Preferred Stock at an exercise price of $20.65 per share, of which $2 million is to the Company and has been eliminated in the consolidated financials. The number of warrants exercisable under the Networks SPA is calculated by $5 million divided by the Conversion Price, which is the amount equal to the price per share of the most senior series of Networks Preferred Stock issued to investors in Networks’ next equity financing date, or if none, then $41.3104. The warrants are exercisable commencing November 13, 2024 through November 13, 2029 and January 15, 2025 through January 15, 2030, respectively. The Company engaged a third-party service provider to carry out an appraisal of the warrants, who ran a Black-Scholes Model to determine the fair value of the warrants as of November 13, 2024 and January 15, 2025, which were $1.2 million and $549 thousand, respectively. The initial valuation was assigned to the November Networks Convertible Notes and January 2025 Networks Convertible Notes and the warrants based on their relative fair values, resulting in a total relative fair value of $1.1 million for the warrants, which was recorded as debt discount.

In the event Ondas Networks consummates an additional equity financing prior to the maturity date, the principal balance and unpaid accrued interest on the Ondas Networks Convertible Notes will be convertible at the option of the Investor into conversion shares upon closing of the next round of equity financing.

On July 3, 2025, the Company amended the Ondas Networks Convertible Notes to extend the maturity date to December 31, 2025. The amendment was accounted for as a debt modification under ASC 470-50.

As of December 31, 2025, the total outstanding principal on the Ondas Networks Convertible Notes was $4.5 million. As of December 31, 2024, the total outstanding principal on the July Networks Convertible Notes and November Networks Convertible Notes was $2.9 million, net of an unamortized debt discount of $651 thousand, and unamortized issuance costs of $44 thousand. Accrued interest as of December 31, 2025 and December 31, 2024 was $456 thousand and $41 thousand, respectively, and is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2025, we recognized interest expense of $415 thousand and amortization expense of $1.1 million to debt discount and issuance costs. For the year ended December 31, 2024, we recognized interest expense of $41 thousand and amortization expense of $132 thousand related to debt discount and issuance costs.

On January 16, 2026, Networks consummated an additional equity financing round. Pursuant to the Securities Purchase Agreement, the principal balance and accrued interest on the Ondas Networks Convertible Notes were converted into shares of Networks Preferred Stock. Refer to Note 19, Networks Investment.

OAS Convertible Notes

In October and December 2024, multiple investors (collectively, the “Holders”) elected to purchase Convertible Notes in the aggregate original principal amount of $5.2 million, (the “OAS Convertible Notes”), of which $2 million was purchased by C&P and $1 million was purchased by Privet Ventures LLC, an entity affiliated with Eric Brock, Chairman and Chief Executive Officer of the Company and OAS. The OAS Convertible Notes are convertible into shares of OAS Common Stock, par value per share $0.0001 (the “OAS Common Stock”), or Preferred Stock under certain conditions. The Company used the net proceeds for general corporate purposes, which includes funding capital expenditures and working capital. The OAS Convertible Notes bear interest at the rate of 5% per annum. On September 29, 2025, the Company amended the OAS Convertible Notes to extend the maturity date from September 30, 2025, to January 1, 2026. The amendment was accounted for as a debt modification under ASC 470-50.

On December 17, 2025, the Company and OAS entered into agreements with the Holders of the OAS Convertible Notes to convert the principal and accrued interest outstanding as of November 30, 2025 into OAS Common Stock under the original conversion terms of the OAS Convertible Notes, at a conversion price of $0.7189, which was equal to the quotient resulting from dividing (x) the Valuation Cap of $65 million by (y) the fully diluted shares outstanding as of November 30, 2025.

At each Holder’s election, the Holder could elect to defer the conversion to January 5, 2026, as the Company and the Holder may agree. Seven of the eleven Holders that elected to participate in the Exchange, elected to defer their closing to January 5, 2026, (the “January Converters”). For the year ended December 31, 2025, OAS converted $3.3 million and $173 thousand of principal and accrued interest, respectively, into OAS Common Stock for four of the eleven Holders, including C&P, (the “December Converters”). Immediately following the conversion, the OAS Common Stock was exchanged for Common Stock (Refer to Note 12, OAS Exchange, for further details). OAS made cash payments of $33 thousand to the December Converters, representing accrued interest on the OAS Convertible Notes from December 1 to December 16, 2025.

As of December 31, 2025, the remaining total outstanding principal on the OAS Convertible Notes was $1.9 million. As of December 31, 2024, the total outstanding principal on the OAS Convertible Notes was $5.2 million, net of unamortized issuance costs of $37 thousand. Accrued interest as of December 31, 2025 and 2024 was $110 thousand and $37 thousand, respectively, and is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2025, we recognized interest expense of $279 thousand and amortization expense of $37 thousand related to the issuance costs. For the year ended December 31, 2024, we recognized interest expense of $37 thousand and amortization expense of $7 thousand related to the issuance costs. Interest expense and amortization expense related to issuance costs are included in Interest expense on the Consolidated Statements of Operations.

On January 5, 2026, OAS converted $1.2 million and $100 thousand of principal and accrued interest, respectively, into common shares of OAS for the January Converters, which were immediately exchanged for Ondas Inc. Common Stock. Although the conversion of the OAS Convertible Notes for January Converters was agreed upon prior to December 31, 2025, the debt remained outstanding at year-end, because it had not been legally settled until January 5, 2026.

Ondas Networks Secured Note

On September 3, 2024, Networks entered into a Security Note Agreement (the “Security Agreement”) with C&P, in which, Networks may draw, and C&P shall loan Networks, up to $1.5 million (the “Networks Secured Loan”). Pursuant to the Security Agreement, Networks issued C&P a secured note in the amount of $1.5 million, which amount may be increased or decreased by the mutual written agreement of the parties thereto (the “Networks Secured Note”). The Networks Secured Note (i) bears interest at a rate of 8% per annum, (ii) has an amended maturity date of December 31, 2025, and (iii) is secured by all assets of Networks. As of December 31, 2024, Networks has drawn a total of $1.5 million on the Networks Secured Note.

On September 3, 2024 and October 7, 2024, pursuant to the C&P Security Agreement, Networks issued C&P warrants to purchase $1 million and $500 thousand, respectively, in shares of Networks Preferred Stock, at an exercise price of $20.65 per share. The number of warrants exercisable under the C&P Security Agreement is calculated by $1.5 million divided by the Conversion Price, which is the amount equal to the price per share of the most senior series of Networks Preferred Stock issued to investors in Networks’ next equity financing date, or if none, then $41.3104. The warrants are exercisable commencing September 3, 2024 through September 3, 2029 and October 7, 2024 through October 7, 2029, respectively. The Company engaged a third-party service provider to carry out an appraisal of the warrants, who ran a Black-Scholes Model to determine the fair value of the warrants as of September 3, 2024 and October 7, 2024, which was $590 thousand and $295 thousand, respectively. The initial valuation was allocated to the Networks Secured Note and the warrants based on their relative fair values, resulting in a total relative fair value of $557 thousand for the warrants, which was recorded as debt discount.

As of December 31, 2025, the total outstanding principal on the Networks Secured Note was $1.5 million. As of December 31, 2024, the total outstanding principal on the Networks Secured Note was $1.3 million, net of unamortized debt discount of $201 thousand and unamortized issuance costs of $26 thousand. Accrued interest as of December 31, 2025 and 2024 was $155 thousand and $37 thousand, respectively, and is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2025, we recognized interest expense of $118 thousand and amortization expense of $227 thousand related to the debt discount and issuance costs. For the year ended December 31, 2024, we recognized interest expense of $37 thousand and amortization expense of $407 thousand related to the debt discount and issuance costs. Interest expense and amortization expense related to issuance costs are included in Interest expense on the Consolidated Statements of Operations.

On January 16, 2026, the Networks Secured Note maturity date was amended to December 31, 2027.