ASNS 10-K & 10-Q changes, risk factors and insider trading

We have incurred significant losses and negative cash flows from operations and incurred losses of $ 4.4$8.3 million and $6.3$4.4 million for the years ended December 31, 2024 2025 and 2023,2024, respectively. During the years ended December 31, 20242025 and 2023,2024, we had negative cash flows from operations of $6.5 $7.7 million and $6.6$6.5 million, respectively. As of December 31, 2024,2025, our accumulated deficit was $ 44$52 million. We have funded our operations to date through equity and debt financing and have cash on hand (including short term bank deposits and restricted cash equivalents) of $2.3 $4.4 million and long-term restricted cashbank deposits of $30 thousand and cashlong equivalentsterm and restricted bank depositsdeposit of $0.2$91 millionthousand as of December 31, 2024. 2025. We monitor our cash flow projections on a current basis and take active measures to obtain the funding it requires to continue our operations. However, these cash flow projections are subject to various uncertainties concerning their fulfilment such as the ability to increase revenues by attracting and expanding its customer base or reducing cost structure. If we will not succeed in generating sufficient cash flow or completing additional financing, then it will need to execute a cost reduction plan that has been prepared. Our transition to profitable operations is dependent on generating a level of revenue adequate to support our cost structure. We expect to fund operations using cash on hand, through operational cash flows and raising additional proceeds. There are no assurances, however, we will be able to generate the revenue necessary to support our cost structure or that we will be successful in obtaining the level of financing necessary for its operations.

Our financial condition raises substantial doubt as to our ability to continue as a going concern.concern

Our consolidated financial statements have been prepared assuming that we will continue to operate as a going concern. These events and conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on our ability to continue as a going concern. This going concern determination could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further financial statements may include includes an explanatory paragraph with respect to our ability to continue as a going concern. There can be no assurance that we will succeed in generating sufficient revenues from our product sales to continue our operations as a going concern. If funds are not available to us, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products. This may raiseraises substantial doubts about our ability to continue as a going concern.

On August 25, 2023, we received a notification letter from the Listing Qualifications Staff (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with Nasdaq Listing Rule 5550(b)(1) due to our failure to maintain acomply minimumwith of $2,500,000 in shareholders’ equity (the “Minimum Shareholders’ Equity Requirement”) or any alternatives to such requirement. In order to maintain our listing on the Nasdaq Capital Market, we submitted a plan of compliance addressing how we intended to regain compliance. On March 27, 2024, we received a delist determination letter from Nasdaq advising us that the Staff had determined to delist our securities from Nasdaq due to non-compliance with the Minimum Shareholders’ Equity Equity Requirement, unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). We timely requested a hearing before the Panel. On August 27, 2024, we received formal written notice from Nasdaq confirming that we have evidenced compliance with all applicable criteria for continued listing on Nasdaq as set forth in Nasdaq Listing Rule 5550, including the Minimum Shareholders’ Equity Requirement. In accordance with Nasdaq Listing Rule 5815(d)(4)(B), we will remain subject to a panel monitor for equity compliance through August 27, 2025.

AsOn October 28, 2025, we received ofa listing decision from Nasdaq notifying us that the datePanel of this filing, we believedetermined that wethe areCompany inevidenced compliance with the Minimum Shareholders’ Equity Requirement.

We have in the past, and may in the future, be unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our ordinaryshares of sharescommon stock on Nasdaq. If we fail to satisfy the continued listing requirements of Nasdaq, such as minimum stockholders’ equity equity requirements or minimum bid price requirements, Nasdaq may take steps to delist our shares of common stock. Such a delisting would have have a negative effect on the price of our shares of common stock, impair the ability to sell or purchase our shares of common stock when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing refinancing or other transactions on acceptable terms, or at all. Delisting from Nasdaq could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities, as well as a limited amount of news and analyst coverage of us. Delisting could also result in a determination that our shares of common stock are a “penny stock,” which which would require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary market for our shares of common stock. In the event of a delisting, we would attempt to take actions actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our shares of common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent prevent our shares of common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s Nasdaq’s listing requirements.

In February 2024, we entered into a new credit line facility from an Israeli bank of up to $1.5 million (the “Credit Line”). The Credit Line is secured by customer invoices and will incur interest at a Federal SOFR rate plus 5.5%. The Credit Line has been extended under until February 1, 2026. The current balance outstanding is approximately $36,000. $574,000.As of the date hereof, the Company has not further extended the credit facility; however, it may do so in the future.

Since our inception, our business was focused on serving Telcos for enterprises and residential customers. Our products and solutions have been deployed with more than 100 telecommunication service providers worldwide, in enterprise, residential and mobile base station connectivity applications. applications. In recent years, as we have further developed our technology and rolled out additional products, we turned our focus on serving the IoT markets. Our operations are focused on our fast-growing IoT business, while maintaining our commitment to our existing Telco customers. A portion of our revenue continues to be derived from our existing Telco customers. For the years ended December 31, 2024 2025 and December 31, 2023,2024, our Telco customers in the aggregate increaseddecreased by 1% from approximately 27%28% of our revenues in the year ended ended December 31, 2023,2024, to 28%27% in the year ended December 31, 2024.2025.

We hold certain patent and trade secret rights relating to various aspects of our technologies, which are of material importance to the Company and its future prospects. Any patents we have obtained or do obtain may be challenged by re-examination or otherwise invalidated or eventually found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt to challenge or invalidate our patents or may be able to design alternative techniques or devices that avoid infringement of our patents or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We maydo not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.

Patents have a limited lifespan. In the United States, if all maintenance fees are paid timely, the natural expiration of a patent is generally 20 years after its first effective nonprovisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such product candidates are commercialized. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic medications. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours. Our patents issued as of March 20, 2025 will expire on dates ranging from September 25, 2025up to October 31, 2038, subject to any patent extensions that may be available for such patents. More specifically, the following patents will expire over the next three years:, US7606315, US7613235, EP1943827, EP3459181, GB2556826, MX279453, US7587042, IDP0030744.

Conditions Geo-Political conditions in the Middle East and in Israel, where our research and development facilities are located, may harm our operations.

Our office where we conduct our research and development, operations, sales outside the Americas, and administration activities, is located in Israel. Many of our employees are residents of Israel. Most of our officers and directors are residents of Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries, and between Israel and the Hamas (an Islamist militiaterror and political group in the Gaza Strip) and, Hezbollah (an Islamist militiaterror and political group in Lebanon)., and Iran, including its accomplices.

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. On January 19, 2025, a temporary ceasefire went into effect. effect,On March 18, 2025 the resultceasefire ended with the resumption of whichthe iswar uncertain.between Israel and Hamas.

In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. In addition, Iran recently launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Additionally, Yemeni rebel group, the Houthis, launched series of attacks on global shipping routes in the Red Sea, causing disruptions of supply chain. Such clashes may escalate in the future into a greater regional conflict. In March 2026, hostilities resumed conflict.along Israel’s northern border with Lebanon, when Hezbollah resumed its attacks as part of a broader regional escalation. In response, Israel resumed military operations against Hezbollah in southern Lebanon.

On February 28, 2026, the United States and Israel launched coordinated military strikes against Iran, including attacks on strategic military infrastructure and leadership targets, with the stated aim of degrading Iran’s capacity to conduct or support hostile operations against them. In response, Iran has fired missiles and drones toward population centers and military installations in Israel, Europe and neighboring countries in the Gulf region, and also launched counter-strikes against U.S. forces and allied bases throughout the Gulf region As of the date of this Annual Report,annual report, we have not been impacted by any absences of personnel at our service providers or counterparties located in Israel. Military service call ups that result in absences of personnel from us for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations. As of the date of this Annualannual Report,report, we currently have 3839 full-time employees, with 33 employees located in Israel and 56 employeeemployees located outside of Israel.

We compute aA significant numberamount of our expenses are presented in Israeli Shekels, both expenses from employees and suppliers. Our customers buy our products priced in US dollars or Euros. The strengthening of the shekel against the dollar and the euro could erode our profitability. For example, the dollar depreciated against the NIS during 2025 by approximately 12.5%. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the dollar. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be adversely affected.

Although as of December 31, 2024,2025, the materialcompany weaknessesreported inthat ourit has effective internal controlcontrols over financial reporting had been remediated,reporting, there can be no assurance that we will not suffer from other material weaknesses or significant deficiencies in the future. If we fail to maintain effective internal controls over financial reporting in the future, such failure could result in a material misstatement of our annual or quarterly financial statements that would not be prevented or detected on a timely basis and which could cause investors and other users to lose confidence in our financial statements, limit our ability to raise capital and have a negative effect on the trading price of our ordinary shares. Additionally, failure to remediate the material weakness or otherwise maintain effective internal controls over financial reporting may also negatively impact our operating results and financial condition, impair our ability to timely file our periodic and other reports with the SEC, subject us to additional litigation and regulatory actions and cause us to incur substantial additional costs in future periods relating to the implementation of remedial measures.

We will beare required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will beis required to assess the effectiveness of these controls annually, beginning with our second annual report on Form 10-K.annually. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404, however they will not be required to do so for so long as we are an emerging growth company. We could be an emerging growth company for up to five years (i.e., until December 31, 2027). An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.

Our amended and restated certificate of incorporation, or the Charter, authorizes us to issue up to 42,803,774 shares consisting of 30,000,000 shares of common stock with a par value of US$0.0001$0.0001 per share, 2,803,774 shares of non-voting common stock with a par value of US$0.0001$0.0001 per share and 10,000,000 shares of preferred stock with a par value of US$0.0001$0.0001 per share. As of December 31, 2024,2025, we havehad 8,513,1818,058,392 outstanding shares of common stock and no outstanding shares of preferred stock.

In addition, as of such date, approximately 98,9323,853 shares of common stock arewere issuable upon the exercise of outstanding stock options and the173,473 shares vesting of restricted stock units. Moreover, as of that date, approximately 99,2986,750 shares of our common stock are available for future grants under our stock incentive plan and for future purchase under our employee stock purchase plan. In addition, as of such date, up to $1.3 million ofnone shares of common stock are issuable pursuant to our ATM Program with HCW.

Actelis Networks, Inc. (“Actelis,” “we,” “us,” “our,” “the Company,” “our company”) is a market leader in cyber-hardened, rapid-deployment networking solutions for wide-area IoT applications including federal, state and local government, intelligent traffic systems (“ITS”), military, utility, rail, telecom and campus applications. Our unique portfolio of hybrid fiber, environmentally hardened aggregation switches, high density Ethernet devices, advanced management software and AI-basedcyber-protection cyber-security offering,capabilities, unlocks the hidden value of essential networks and the devices they connect,networks, delivering a safe and cyber-awaresafer connectivity for rapid, cost-effective deployment.

Our networking solutions use a combination of newly deployed fiber infrastructure and existing copper and coaxial lines which our patented technology can upgrade to Fiber-grade to jointly create what we believe to be a highly cost-effective, securesecure, and quick-to-deploy network. Our patent protected hybrid hybrid-fiberfiber networking solutions deliver excellent communication over fiber to locations that may be easy to reach with new fiber. However, for locations that are difficult, or too costly to reach with fiber, we can upgrade existing copper or coax lines to deliver cyber-hardened, high-speed connectivity without needing to replace the existing copper infrastructure with new fiber. We believe that such hybrid fiber copper networking solution solutions havehas distinct advantages in most real-life installations, while providing significant budget savings and accelerating deployment of modern IoT networks. Based on our experience, most IoT projects have challenging, hard to reach with fiber locations which may significantly increase explode such projects’ timeline and budgets. We believe that our solutions can provide connectivity over either fiber, copperfiber or coaxcopper with speeds of up to multi-Gigabit communication, while supporting Fiber-grade reliability and quality.

A primary focus of ours is to provide our customers with a cyber-secure network solution. We currently offer Triple-Shield protection of data delivered with coding, scrambling and encryption of the network traffic. We also provide secure, encrypted access to our network management software, and are working to further enhance system-level and device-level software protection. We are also working to introduce additional capabilities for network-wide cyber protection software as an additional SW and license-based services.

When high speed, long reach, reliable and secure connectivity is required, network operators usually resort to using wireline communication over physical communication lines such as fiber, coaxcoax, and copper, rather than wireless communication that is more limited in performance, reliability, reach and security. However, new fiber wireline infrastructure is costly to deploy, involves lengthy civil works to install, and, based on our internal calculations, often accounts for more than 50% of total cost of ownership (ToC) and time to deploy wide-area IoT projects.

Providing new fiber connectivity to hard-to-reach locations is especially costly and time-consuming, often requiring permits for boring, trenching, and right-of-way, sometimes done over many miles. Connecting such hard-to-reach locations may cause significant delays and budget overruns in IoT projects. Our solutions aim to solve these challenges by instantly enhancing performance of such existing copper and coax infrastructure to fiber-grade performance, through the use of advanced signal processing aand unique, patented network architecture, without the need to run new fiber to hard-to-reach locations; thus, effectively accelerating deployment of many IoT projects, as we estimate, sometimes from many months to only days. The result for the network owner is a hybrid network that optimizes the use of both new Fiber (where available) as well as upgraded, fiber-grade copper and coax that is now modernized, digitized and cyber-hardened. This unique hybrid network approach is making IoT projects often significantly more affordable, fast to deploy and predictable to plan and budget. The same is correct in multi-dwelling unit buildings where the wiring from the roof (in case of a wireless based connectivity) or from the basement in case of a wired connectivity to the building. In such cases we utilize existing in-building wiring, preventing the need for brand-new ones and enables multi-gigabit connectivity to each apartment or suite.

In addition, our solutions can also provide power over existing copper and coax lines to remotely power up network elements and IoT components connected to them (like cameras, small cell and Wi-Fi base stations sensors etc.). Connecting power lines to millions of IoT locations can be costly and very time consuming as well (similar to data connectivity, for the same reason-needreason — need for civil works). By offering the ability ability to combine power delivery over the same existing copper and coax lines that we use for high-speed data, we believe our solutions are solving yet another important challenge in connecting hard-to-reach locations. We believe that combining communication and power over the same existing lines is particularly important to help connect many fifth generation, or 5G, small cells and Wi-Fi base stations, as high cost of connectivity and power is often slowing their deployment.

Since our inception, our business was focused on serving telecommunication service providers, also known as Telcos, to provide connectivity for enterprises and residential customers. Our products and solutions have been deployed with more than 100 telecommunication service providers worldwide, in enterprise, residential and mobile base station connectivity applications. In recent years, as we have further developed our technology and introduced additional products, we turned our focus on serving the wide-area IoT, federal and DoDDoW markets, as well as MDUs,multi-dwelling units, and introduced, in 2024, our cyber-aware networking solutions for IoT markets as well.

Our operations are focused on our fast-growing IoT, federal and DoDDoW markets, Intelligent Transportation and MDUs while maintaining our commitment to our existing Telco customers, and particularly MDUs.customers. In 2024, we introduced new product offering, some of which could serve both the IoT markets and our Telco customers.

We derive a majority of our revenues from our existing and new IoT (including federal and DoDDoW) customers. For the years ended December 31, 20242025 and December 31, 2023, 2024, our IoT customers in the aggregate accounted for approximately 72%73% and 73%72% of our revenues, respectively.

In February 2024, we entered into the Credit Line, which increased our operating liquidity while not increasing our total debt, as we will perform an early repayment of our existing debt using our restricted cash in a similar amount.Line. The Credit Line is secured by customer invoices and incurs interest at a Federal SOFR rate plus 5.5%. The Credit Line has beenwas extended underuntil February 1, 2026. As of the date hereof, the Company has not further extended the credit facility; however, it may do so in the future.

The Credit Line balance drawn is examined every month andmonth, adjusted up to every three months, and the repayment of the Credit Line will beis made up to every three months subject subject to the expiration of the financing period for the invoices that were financed. We may refinance newly issued invoices at any time up to the Credit Line limit and subject to the terms of the Credit Line. As of December 31, 2024, we used $0.8 million of the Credit Line, and2025 the current balance outstanding is approximately $529,000. $479,234.

Our revenues for the year ended December 31, 20242025 amounted to $7.8$3.7 million, compared to $5.6$7.8 million for the year ended December 31, 2023. 2024. The increasedecrease was primarily attributable to increasesoftware and services renewal last year for 2 years which will be up for renewal in 2027, as well as a large deal to the City of salesWashington inD.C. Northlast Americayear, region,while it is primarily attributable to an increase of 134% of2025’s revenues generatedare frommore Northbackend America and a decrease of 42% and 61% of revenues generated from Europe, the Middle East and Africa respectively compared to last year.loaded.

Our cost of revenues for the year ended December 31, 2025, amounted to $2.5 million compared to $3.5 million for the year ended December 31, 2024, amounted to $3.5 million compared to $3.7 million for the year ended December 31, 2023.2024. The decrease from the corresponding period was primarily attributable to the change in regional mix of revenue of an increase in North America revenues, which are more profitable, and a decrease in Europe,sales Middlewhich Eastled to a decline in variable costs and Africafixed revenuescost remaining which are less profitable as well as indirect costs not increasing significantly with revenues growing.constant.

Our research and development expenses for the year ended December 31, 2024, 2025, amounted to $2.4$2.6 million compared to $2.7$2.4 million for the year ended December 31, 2023.2024. The decreaseincrease is primarily attributabledue to costthe reductionstrengthening of measuresthe taken.Israeli shekel against the U.S. dollar which led to an increase in expenditure by approximately $151,000.

Our sales and marketing expenses for the year ended December 31, 2024, 2025, amounted to $2.6$2.9 million compared to $3.0$2.6 million for the year ended December 31, 2023.2024. The decreaseincrease was mainlyprimarily dueattributable to costengaging consultants reductionto measuresexpand taken.market reach in primarily the government sector.

Our general and administrative expenses for the year ended December 31, 2024,2025, amounted to $3.2$2.9 million compared to $3.5$3.2 million for the year ended December 31, 2023.2024. The decrease was mainly due to cost reduction measures taken.taken, while these benefits were offset by higher costs driven by the strengthening of the Israeli shekel against the U.S. dollar.

Our OtherWe had no other Income for the year ended December 31, 2025, compared to $163,000 for the year ended December 31, 2024,2024. amountedThe income in 2024 is related to approximately $160,000, compared to none for the year ended December 31,government 2023. The increase is driven by a government grant from the State of Israel associated with the Iron Swords war, received during the second quarter of 2024.war.

Our operating loss for the year ended December 31, 2024,2025, was $3.8$7.2 million, compared to an operating loss of $7.4$3.8 million for the year ended December 31, 2023.2024. The decrease increase was mainly due to the increasedecline in revenues,sales, improvedwhile grossoperating marginexpenditure dueremained to regional revenue mix,consistent and cost reduction measures taken, reducingincreased operating expenses.expenses by $0.3 million driven by the strengthening of the Israeli shekel against the U.S. dollar by approximately 7%.

Our financial expenses, net for the year ended December 31, 2024,2025, was approximately $620,000$1.08 million of interest expense expense, compared to $1.1 million (including approximately $800,000 in interest expenses)$620,000 for the year ended December 31, 20232024 The increase is mainly due to expenditure of $750,000 related to financialthe incomeCommitment Fee under the Common Stock Purchase Agreement payable in thecommon priorshares year from bank deposits, increase due to warrant valuation and exchange rate differences not repeated in current period.issuance.

Our net loss for the year ended December 31, 20242025 was $4.4$8.3 million, compared to a net loss of $6.3$4.4 million for the year ended December 31, 2023.2024. This decreaseincrease was primarily attributable to lower sales while operating primarilyexpenditure remained consistent, as well as due to a one-time financial commitment expenditure of $750,000. In addition, the Israeli shekel strengthened by an average of 7% against the U.S. dollar, leading to higher operating expenses and contributing to increase in revenues,net improved gross margin due to regional revenue mix, and cost reduction measures taken, reducing operating expenses, partially offset by financial income in the prior year not repeating itself.loss.

On June 5,September 2024,2, 2025, we entered into anthe inducementInducement agreementLetter with a certain holderHolder of certain of ourthe existingCompany’s warrantsExisting Warrants to purchase upan to an aggregate of 999,670427,020 shares of the Company’s common stock, consisting of our(i) common127,119 stock originallywarrants issued on MayDecember 8,20, 2023,2023 with aan fiveexpiration anddate one-halfof yearJune term,20, 2029 at an exercise price of $2.75$11.8 per share (theii) “May99,967 2023warrants Warrants”issued on June 6, 2024 with an expiration date of December 6, 2029 at an exercise price of $20.00 per share and (iii). 199,934 warrants issued on July 2, 2024 with an expiration date of July 2, 2026 at an exercise price of $17.50 per share.

Pursuant to the inducement letter,Inducement Letter, the holderHolder agreed to exercise for cash itsthe warrantsExisting Warrants to purchase an aggregate of 999,670427,020 shares of ourthe Company’s common stock at ana reduced exercise price of $2.00$3.70 per share,share in consideration of ourthe Company’s agreement to issue new common stock purchase warrants (the “JulyNew Warrants, 2024 Warrants”), as descried below, to purchase up to an aggregate of 1,999,340640,530 sharesNew of our common stock (the “July 2024 Warrant Shares”), at an exercise price of $1.75$3.70 per share. The Company received aggregate gross proceeds of approximately $1.6 million from the exercise of the Existing Warrants by the Holder, before deducting financial advisory fees and other offering expenses payable by the Company.

As of December 31, 2024, 2025, our accumulated deficit was $44$52 million. We have funded our operations to date through equity and debt financing and have cash on hand (including short term bank deposits and restricted cash equivalents) of $2.3$4.4 million and long-term restricted cash and cash equivalents and restricted bank deposits of $0.2$30 millionthousand and long term deposit of $91 thousand as of December 31, 2024.2025. We monitor our cash flow projections on a current basis and take active measures to obtain the funding it requires to continue our operations. However, these cash flow projections are subject to various uncertainties concerning their fulfilment such as the ability to increase revenues by attracting and expanding its customer base or reducing cost structure. If we are not successful in generating sufficient cash flow or completing additional financing, including debt refinancing which shall release restricted cash, then we will need to execute a new cost reduction plan in addition to previous cost reduction plans that were executed so far. Our transition to profitable operations is dependent on generating a level of revenue adequate to support our cost structure. We expect to fund operations using cash on hand, through operational cash flows and raising additional proceeds. There are no assurances, however, that we will be able to generate the revenue necessary to support our cost structure or that we will be successful in obtaining the level of financing necessary for our operations. Management has evaluated the significance of these conditions and has determined that we do not have sufficient resources to meet our operating obligations for at least one year from the issuance date of these consolidated financial statements. These conditions raise substantial doubt as to our ability to continue as a going concern. These consolidated financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Cash used in operating activities (including the effect of exchange rate changes on cash and cash equivalents and restricted cash) amounted to $7.7 million for the year ended December 31, 2025, compared to $6.5 million for the year ended December 31, 2024,2024. comparedThe toincrease $6.3 million forfrom the yearcorresponding ended December 31, 2023. The decrease in cash used in operating activitiesperiod was mainly due to costlower reduction measures taken.sales.

Net cash providedused by investing activities was $197,000$8,000 for the year ended December 31, 2024,2025, compared to cash provided by investing activities of $3.8 million$197,000 for the year ended December 31, 2023.2024. The increasedecrease from the corresponding period was mainly due to the reduction in short-term bank deposits.

Critical judgement and estimates have been used primarily in estimating revenues the fair value of our financial instruments (for example, warrants, notes and stock options), as well as the estimate of future usage of existing inventory to determine the net value value of our inventory (see notes in financial statements).

We also intend to apply to list our Common Stock for up-listing back onto the Nasdaq Capital Market. We do not currently meet all of the requirements for initial listing, and may not meet all of the requirements for uplisting in the future. We hope to list our Common Stock on the Nasdaq Capital Market in the future and expect that a reverse stock split will be necessary for us to meet the minimum bid price and/or minimum closing stock price requirements of Nasdaq. We may not be able to meet the initial listing standards of the Nasdaq Capital Market, even after a reverse stock split, may meet such listing standards without having to affecteffect a reverse stock split, and/or may have our application to Nasdaq rejected.

In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in the region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. In addition, Iran recently launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Additionally, Yemeni rebel group, the Houthis, launched series of attacks on global shipping routes in the Red Sea, causing disruptions of supply chain. Such clashes may escalate in the future into a greater regional conflict. In March 2026, hostilities resumed along Israel’s northern border with Lebanon, when Hezbollah resumed its attacks as part of a broader regional escalation. In response, Israel resumed military operations against Hezbollah in southern Lebanon.

Three and Six Months Ended MarchJune 31,30, 20262026, Compared to Three and Six Months Ended MarchJune 31,30, 2025

Our revenues for the three months ended MarchJune 31,30, 20262026, amounted to $958,000 $1.1 million, compared to $721,000approximately $0.9 million for the three months ended MarchJune 31,30, 2025. The increase was primarily attributable to an expansion of the Company’s sales footprint, including delivery of a renewal order to a large U.S. carrier for software and Asiaservice Pacificas orderswell as to carriers,other federalcarriers andin ITS customers,EMEA, with revenue increases of 25%33% in North America, 27%22% in Europe, the Middle East and Africa, and substantially in the Asia-Pacific region.Africa.

Our cost of revenues for the threesix months ended MarchJune 31,30, 2026, amounted to $723,000$1.3 million, compared to approximately $470,000$1.1 million for the threesix months ended MarchJune 31,30, 2025. The increase was primarily attributable to higher direct costssales drivenvolume byduring deliverythe ofperiod an unusually low margin dealand in the US of approximately $200,000 that is not representative of our normal profitability, and indirect costs increase associatedline with foreignthe exchange rate, inventory and warranty related costs which. The increase in directrevenue costsand wassoftware offsetrevenue by higher revenue.mix.

Our research and development expenses for the three months ended MarchJune 31,30, 20262026, amounted to $689,000$0.7 million, compared to $681,000$0.7 million for the three months ended MarchJune 31,30, 2025. The increaseCompany was primarily attributable to unfavorable foreign exchange movements, increasing expenses by approximately $66,000, and was partially offset byimplemented cost reduction measures implementedduring the period; however the resulting savings were offset by management.the unfavorable impact of foreign exchange rate fluctuations.

Our sales and marketing expenses for the three months ended March 31, 2026 amounted to $675,000 compared to $666,000 for the three months ended MarchJune 31,30, 2025.2026, The increase is relatedamounted to increase$0.8 million, compared to $0.7 million for the three months ended June 30, 2025 driven by investments in new sales resources for the Federal market and marketing, and higher commission payout due to salespersonshigher inrevenues. lineAt withthe increasesame intime, revenues, as well as unfavorable foreign exchange movements, increasing expenses by approximately $30,000. The increase was partially offset bysome cost reduction measures were implemented that were offset by management.the unfavorable impact of foreign exchange rate fluctuations.

Our general and administrative expenses for the three months ended MarchJune 31,30, 20262026, amounted to $734,000$0.7 million, compared to $716,000$0.7 million for the three months ended MarchJune 31,30, 2025. The increase was primarily attributable to unfavorable foreign exchange movements, increasing expenses byremained approximatelyunchanged $29,000.because The increase was partially offset bythe cost reduction measures implemented during the period with the help of AI and other operating measures were offset by the Company.unfavorable impact of public Company expenses and foreign exchange rate fluctuations.

Operating (Loss) Income

Our operating loss for the three months ended MarchJune 31,30, 2026, was approximately$1.6 $1.86 millionmillion, compared to an operating loss of approximately $1.81$1.8 million for the three months ended MarchJune 31,30, 2025. The increasedecrease in loss was primarily drivenattributable byto anincreased increase in the cost of goodsrevenues and unfavorableresulting foreignhigher exchange movements,gross partiallymargin, offsetcoupled by revenue increase andwith cost reduction measures implemented during the period, partially offset by the Company.investment in sales and marketing, and the unfavorable impact of foreign exchange rate fluctuations, amounting to approximately $150,000.

Other Financial expenses,Expenses, netNet and Interest Expenses

Our financial expense, net for the threesix months ended MarchJune 31,30, 2026, was $593,000$404,000 (including $120,000 interest expenses) compared to $48,000financial expense, net of $176,000 (including $56,000 interest expenses) for the threesix months ended MarchJune 31,30, 2025. Our financial expenses net, mainly consisted of interest expenses, exchange rate differences of certain currencies (including NIS against USD). DuringIn the three months ended in March 31, 20262026, we recorded a financial expense of $625,000 as a result of the increase in the commitment fee under the common stock purchase agreement associated with our equity line of credit, payable in common shares issuance. This increase in expense was partially offset by income of $124,000$530,000 resulting from changes in the fair value of pre-funded warrants classified as a liability. Please see Note 6(b) to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for more information.

Non-GAAP Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP financial measures. In addition to reporting financial results in accordance with GAAP, we provide Non-GAAP supplemental operating results adjusted for certain items, including: financial expenses, which are interest, financial instrument fair value adjustments, exchange rate differences of assets and liabilities, stock-basedShare based compensation expenses, depreciation and amortization expense, tax expense, and impact of development expenses ahead of product launch. We adjust for the items listed above and show non-GAAP financial measures in all periods presented, unless the impact is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax profitability.

Our future capital requirements will be affected by many factors, including our revenuerevenues and resulting gross margin growth, the timing and extent of investments to support such growth,growth compared to our resulting increase in revenues and gross margin, the associated expansion of sales and marketing activities, increases or decreases in general and administrative costs, repayment of principal of our existing credit line, working capital to support securing raw material supply and many other factors as described under “Risk Factors.” At the same time, our investments, including in sales and marketing, as well as the cost reduction measures we are taking, are aimed at the goal of reaching the break even point on our P&L and resulting cash flow.

To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, our delisting from the warNasdaq Capital Market to the OTCQB limits our ability to raise equity, which will remain limited if we are unsuccessful in Israelre-listing on Nasdaq. Additionally, the wars in the Middle East and the war between Russia and the Ukraine, hashave resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital.

As discussed in Note 1(b) to the condensed consolidated financial statements appearing elsewhere in this Quarterly report on Form 10-Q, we have incurred significant losses and negative cash flows from operations and incurred losses of approximately $2.5 million and approximately $1.86$3.8 million for the three six months ended MarchJune 31,30, 2026 and 2025, respectively.2025. During the threesix months ended MarchJune 31,30, 2026 and 2025, we had negative cash flows from operations of $1.9$3.6 million and $2.2$3.2 million, respectively.

As of MarchJune 31,30, 2026, we had an accumulated deficit of $54.8$56.2 million, cash on hand (including short term deposits and restricted cash equivalents) of $7.5approximately million, $5.7 million and long-term restricted cash and cash equivalentsdeposits and restricted bank deposits of $0.2$159 million.as of June 30, 2026. We monitor our cash flow projections on a current basis and take active measures to obtain the funding we require to continue our operations. However, these cash flow projections are subject to various uncertainties concerning their fulfillment, such as the ability to increase revenues due to lack of customers or decrease cost structure. Our transition to profitable operations is dependent on generating a level of revenue adequate to support our cost structure through growth of existing and new customers.