NOTE 8 – STOCKHOLDERS’ EQUITY

Common Stock

As of March 31, 2025 and December 31, 2024, the Company had 300,000,000 shares of Common Stock authorized for issuance, of which 127,724,799 and 93,173,191 shares of our Common Stock were issued and outstanding, respectively. On May 12, 2025, stockholders of the Company approved an amendment to the Company’s Amended and Restated Articles of Incorporation to increase the number of authorized shares of Common Stock from 300,000,000 to 400,000,000.

Preferred Stock

As of March 31, 2025 and December 31, 2024, the Company had 10,000,000 shares of preferred stock, par value $0.0001, authorized, of which 5,000,000 shares are designated as Series A Convertible Preferred Stock (“Series A Preferred”) and 5,000,000 shares are non-designated (“blank check,” together with the Series A Preferred, the “Preferred Shares”) shares. As of March 31, 2025 and December 31, 2024, the Company had no preferred stock outstanding.

Form S-3

On February 2, 2024, the Company initially filed with the SEC a new shelf Registration Statement on Form S-3 for up to $175,000,000, which represents $150,000,000 under the Prior Form S-3 and an additional $25,000,000 (the “Form S-3”), for shares of its Common Stock; shares of its preferred stock, which the Company may issue in one or more series or classes; debt securities, which the company may issue in one or more series; warrants to purchase its Common Stock, preferred stock or debt securities; and units. The Form S-3 was declared effective by the SEC on February 15, 2024.

On April 18, 2025, the Company initially filed with the SEC a new shelf Registration Statement on Form S-3 for up to $225,000,000, which represents $175,000,000 under the Prior Form S-3 and an additional $50,000,000 (the “New Form S-3”), for shares of its Common Stock; shares of its preferred stock, which the Company may issue in one or more series or classes; debt securities, which the company may issue in one or more series; warrants to purchase its Common Stock, preferred stock or debt securities; and units. The New Form S-3 was declared effective by the SEC on April 25, 2025.

Stock Issued for Convertible Debt

The Company issued 33,322,397 shares of its Common Stock during the three months ended March 31, 2025 to the lenders in lieu of cash payments for $41,954 of interest and $22,600,000 of outstanding principal on the 2024 Additional Notes (See Note 7 – Notes Payable for further details).

During the three months ended March 31, 2024, there were no shares issued in lieu of cash payments on the 2022 Convertible Exchange Notes.

Sale of Common Stock in Ondas Holdings and Warrants to Purchase Common Stock of OAS

On February 26, 2024, the Company entered into a Securities Purchase Agreement (the “Ondas Agreement”) with certain purchasers named therein (the “Ondas Purchasers”) for the purchase and sale of (i) an aggregate of 3,616,071 shares (the “Holdings Shares”) of Common Stock and (ii) warrants to purchase an aggregate of 3,616,071 shares of OAS’ common stock $0.0001 par value per share, at an exercise price of 80% of the lowest price of Common Shares of OAS issued in a subsequent financing of at least $10,000,000 to the Company, and exercisable commencing ninety days following the date of issuance through the fifth anniversary of the date of issuance (the “OAS Warrants,” and together with the Holdings Shares, the “Ondas Offering Securities”), for gross proceeds of $4,050,000 (the “Ondas Offering”). The purchase price paid by the Ondas Purchasers for the Holdings Shares was $1.12 per share.

The Company engaged a third-party service provider to carry out an appraisal of the OAS Warrants, who ran a Monte Carlo simulation to determine the fair value of the OAS Warrants as of February 26, 2024, which is $1,561,532. The initial valuation was assigned to the Holdings Shares and the OAS Warrants based on their relative fair values, with the initial valuation of the Holdings Shares being $3,095,263 and OAS Warrants being $954,737. As of December 31, 2024, there were 3,616,071 OAS Warrants outstanding, with a weighted average remaining contractual life of 3.91 years.

Sale of Common Stock and Warrants in Ondas Holdings

On August 28, 2024, the Company entered into a Securities Purchase Agreement, (the “Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the Investor an aggregate of 5,333,334 shares of Common Stock (the “Holdings Shares”), together with Series A warrants (“Series A Warrants”) to purchase up to 5,333,334 shares of Common Stock and Series B warrants (“Series B Warrants,” and together with the Series A Warrants, the “Warrants”) to purchase up to 5,333,334 shares of Common Stock. The Series A Warrants have an exercise price of $0.8073 per share and are exercisable at any time from February 28, 2025 through March 1, 2027. The Series B Warrants have an exercise price of $0.8073 per share and are exercisable at any time from February 28, 2025 through February 28, 2030.

Each share of Common Stock and accompanying Series A Warrant and Series B Warrant were sold together at a combined offering price of $0.75, for gross proceeds of $4,000,000 before deducting the placement agent’s fees and related offering expenses, which totaled $555,060. The offering closed on August 30, 2024.

The Company used the Black-Scholes-Merton option model (the “Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company, which is $4,881,775. See the table below for the assumptions used in the Black-Scholes Model. The initial valuation was assigned to the Holdings Shares and the Warrants based on their relative fair values, with the initial valuation of the Holdings Shares being $1,801,442 and Warrants being $2,198,559.

Warrants to Purchase Preferred Stock of Networks

On September 3, 2024 and October 7, 2024, in connection with the Networks Secured Note, pursuant to the Agreement, Networks issued C&P warrants to purchase $1,000,000 and $500,000, respectively, in shares of preferred stock of Networks, $0.00001 par value per share, at an exercise price of $20.65 per share. (See Note 7 – Notes Payable for further details).

On November 13, 2024 and January 15, 2025, in connection with the November Networks Convertible Notes and January 2025 Networks Convertible Notes, Networks issued the investors warrants to purchase $2,069,017 and $2,930,983, respectively, in shares of preferred stock of Networks, $0.00001 par value per share, at an exercise price of $20.65 per share, of which $2,000,000 is to the Company and has been eliminated in consolidation. (See Note 7 – Notes Payable for further details).

As of March 31, 2025, there were 157,339 warrants for shares of preferred stock in Networks outstanding based on a Conversion Price of $41.3104, with a weighted average exercise price of $20.65 and a weighted average remaining contractual life of 4.67 years.

Warrants to Purchase Common Stock of Networks

On June 3, 2024, the Company issued warrants to purchase 15,391 shares of Networks Common Stock, at an exercise price of $2.75 per share, with a fair value of $303,052, in consideration of consulting services for the Company. The warrants vest over a one-year period. The Company engaged a third-party service provider to carry out a valuation of Ondas Networks’ Common Stock to determine its fair value as of May 31, 2024 and has recorded stock-based compensation of $50,762 in General and administrative expense on the unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 based on the valuation.

As of March 31, 2025, there were 15,391 warrants for shares of common stock in Networks outstanding, with a weighted average exercise price of $2.75 and a weighted average remaining contractual life of 4.18 years. As of March 31, 2025, total unrecognized compensation expense related to the non-vested Warrants was $50,761 which is expected to be recognized over a weighted-average period of approximately 0.25 years.

Warrants to Purchase Common Stock of the Company

We use the Black-Scholes-Merton option model (the “Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company. The Black-Scholes Model is an acceptable model in accordance with U.S GAAP. 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 weighted average term of the warrant.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the warrants. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of peer entities whose stock prices were publicly available over a period equal to the expected life of the awards. We used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price.

A summary of our Warrants activity and related information is as follows:

Total stock-based compensation expense for warrants for the three months ended March 31, 2025 and 2024 was $40,158 and $0 and is recorded in General and administrative expense on the unaudited Condensed Consolidated Statements of Operations.

As of March 31, 2025, total unrecognized compensation expense related to non-vested Warrants was $40,158 which is expected to be recognized over a weighted-average period of approximately 0.25 years.

Stock Options to Purchase Common Stock

The Company awards stock options to certain employees, directors, and consultants, which represent the right to purchase common shares on the date of exercise at a stated exercise price. Stock options granted to employees generally vest over a two to four-year period and are contingent on ongoing employment. Compensation expenses related to these awards is recognized straight-line over the applicable vesting period. Stock options granted to consultants are subject to the attainment of pre-established performance conditions. The actual number of shares subject to the award is determined at the end of the performance period and may range from zero to 100% of the target shares granted depending upon the terms of the award. Compensation expenses related to these awards is recognized when the performance conditions are satisfied.

On January 7, 2025, the Compensation Committee granted Ron Stern stock options to purchase an aggregate of 2,876,944 shares of the Company’s Common Stock in connection with his Directorship Agreement. The options have an exercise price of $2.69, a term of 5 years and are contingent on ongoing employment. 1,918,059 options vest upon the earlier of: (a) on a quarterly basis over a two-year period following the grant date, or (b) the expiration of a 30-day period in which the average price per share of the Company in the applicable stock exchange is five dollars (or more) per share (the “Valuation Milestone”). 958,885 options vest upon the Valuation Milestone. The Company engaged a third-party service provider to carry out an appraisal of the options, who ran a Monte Carlo simulation to determine the fair value and the period over which the related expense shall be recognized as of January 7, 2025, which is $4,125,352, to be recognized straight-line through November 25, 2026. They are included in compensation expenses.

On January 11, 2025, the Compensation Committee granted an aggregate of 2,123,550 stock options to purchase shares of the Company’s Common Stock to certain employees, with an exercise price of $2.24 and a term of 10 years. The stock options vest over a three-year period and are contingent on ongoing employment. They are included in compensation expenses.

On January 23, 2025, the Compensation Committee granted an aggregate of 90,000 stock options to purchase shares of the Company’s Common Stock to certain employees, with an exercise price of $2.37 and a term of 10 years. The stock options vest over a two-year period and are contingent on ongoing employment. They are included in compensation expenses.

The assumptions used in the Monte Carlo simulation and Black-Scholes Model are set forth in the table below.

A summary of our Option activity and related information is as follows:

As of March 31, 2025, total unrecognized compensation expense related to non-vested Options was $8,226,865 which is expected to be recognized over a weighted-average period of 2.15 years.

Total stock-based compensation expense for stock options for the three months ended March 31, 2025 and 2024 is as follows:

Restricted Stock Units  

The Company awards Restricted Stock Units (“RSUs”) to certain employees and directors, which represent a right to receive common stock for each RSU that vests. Compensation expenses related to these awards is recognized straight-line over the applicable vesting period.

On January 11, 2025, the Compensation Committee granted an aggregate of 1,415,700 RSUs to certain employees. The RSUs vest in eight to twelve successive equal quarterly installments on March 16th, May 16th, August 16th and November 16th and are contingent on ongoing employment. They are included in compensation expenses.

On February 21, 2025, the Compensation Committee granted 60,606 fully vested RSUs in consideration of consulting services for the Company. They are included in compensation expenses.

A summary of our RSUs activity and related information is as follows:

As of March 31, 2025 the unrecognized compensation expense for RSUs was $2,861,678.

Total stock-based compensation expense for RSUs for the three months ended March 31, 2025 and 2024 is as follows:

Equity Incentive Plan

In 2018, our stockholders adopted the 2018 Equity Incentive Plan (the “2018 Plan”) pursuant to which 3,333,334 shares of our Common Stock has been reserved for issuance to employees, including officers, directors and consultants. The 2018 Plan shall be administered by the Board, provided however, that the Board may delegate such administration to the compensation committee of the Board of the Company (the “Compensation Committee”). Subject to the provisions of the 2018 Plan, the Board and/or the Compensation Committee shall have authority to grant, in its discretion, incentive stock options, or non-statutory options, stock awards or restricted stock purchase offers (“Equity Awards”). As of March 31, 2025, the balance available to be issued under the 2018 Plan was 1,117,078.

In 2021, our stockholders adopted the Ondas Holdings Inc. 2021 Stock Incentive Plan (the “2021 Plan”). The purpose of the 2021 Plan is to enable the Company to attract, retain, reward, and motivate eligible individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum efforts for the growth and success of the Company, so as to strengthen the mutuality of the interests between the eligible individuals and the shareholders of the Company. The 2021 Plan provides for the issuance of awards including stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards. On November 18, 2024, stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares of the Company’s Common Stock authorized for issuance under the 2021 Plan from 8,000,000 to 11,000,000 shares. As of March 31, 2025, the balance available to be issued under the 2021 Plan was 126,820. On May 12, 2025, stockholders of the Company approved an amendment to the 2021 Plan to increase the number of shares of the Company’s Common Stock authorized for issuance under the 2021 Plan from 11,000,000 to 26,000,000 shares.