Actelis(ASNS) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the interim period Item 1. Condensed Consolidated Interim Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Actelis Networks, Inc., including balance sheets, statements of comprehensive loss, statements of mezzanine and shareholders' equity, and cash flows, along with their accompanying notes, for the periods ended June 30, 2025, and December 31, 2024 (balance sheet) or June 30, 2024 (income/cash flow) Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific points in time | Metric (U.S. dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Assets | | | | Total Current Assets | 4,828 | 6,903 | | Total Non-Current Assets | 1,154 | 1,322 | | Total Assets | 5,982 | 8,225 | | Liabilities | | | | Total Current Liabilities | 4,239 | 4,583 | | Total Non-Current Liabilities | 491 | 657 | | Total Liabilities | 4,730 | 5,240 | | Shareholders' Equity | | | | Total Shareholders' Equity | 1,024 | 2,757 | Unaudited Condensed Consolidated Statements of Comprehensive Loss Details the company's revenues, expenses, and net comprehensive loss over specified interim periods | Metric (U.S. dollars in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Revenues | 1,662 | 4,157 | 941 | 3,431 | | Cost of Revenues | 1,106 | 1,994 | 636 | 1,488 | | Gross Profit | 556 | 2,163 | 305 | 1,943 | | Operating Expenses | 4,141 | 3,968 | 2,078 | 1,877 | | Operating Income (Loss) | (3,585) | (1,805) | (1,773) | 66 | | Net Comprehensive Loss | (3,761) | (2,064) | (1,901) | (78) | | Net loss per share (basic & diluted) | (0.43) | (0.51) | (0.21) | (0.01) | Unaudited Condensed Consolidated Statements of Mezzanine Equity and Shareholders' Equity Outlines the changes in the company's equity components, including additional paid-in capital and accumulated deficit, over interim periods | Metric (U.S. dollars in thousands) | As of January 1, 2025 | As of June 30, 2025 | | :--------------------------------- | :-------------------- | :------------------ | | Additional paid-in capital | 46,818 | 48,846 | | Accumulated deficit | (44,062) | (47,823) | | Total Shareholders' Equity | 2,757 | 1,024 | - The company issued 1,901,299 shares of common stock, net of offering costs, contributing $1,877 thousand to additional paid-in capital during the six months ended June 30, 2025[28] - Net comprehensive loss for the six months ended June 30, 2025, was $3,761 thousand, increasing the accumulated deficit[28] Unaudited Condensed Consolidated Statements of Cash Flows Reports the cash inflows and outflows from operating, investing, and financing activities for interim periods | Cash Flow Activity (U.S. dollars in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (3,218) | (2,343) | | Net cash (used in)/provided by investing activities | (4) | 197 | | Net cash provided by financing activities | 1,643 | 3 | | Decrease in cash, cash equivalents and restricted cash | (1,572) | (2,153) | | Balance at end of period | 695 | 3,362 | Notes to Condensed Consolidated Interim Financial Statements Provides essential additional information and detailed explanations supporting the condensed consolidated interim financial statements - The company incurred significant losses ($3,761 thousand for six months ended June 30, 2025) and negative cash flows from operations ($3,218 thousand for six months ended June 30, 2025), raising substantial doubt about its ability to continue as a going concern[42] - Operations have not been significantly impacted by ongoing conflicts in Israel and the broader region as of August 14, 2025, though two employees were called to reserve duty[44] - The company is not in compliance with Nasdaq's Minimum Shareholders' Equity Requirement and received a notification for not meeting the minimum bid price of $1.00 per share, with deadlines of August 27, 2025, and November 10, 2025, respectively, to regain compliance[45][46][47] | Inventory Category (U.S. dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------------- | :------------ | :---------------- | | Raw materials | 1,580 | 1,521 | | Finished goods | 939 | 915 | | Total Inventories | 2,519 | 2,436 | | Inventory write-downs (six months) | 92 | 25 | - The company has an outstanding Economic Injury Disaster Loan (EIDL Loan) of $150 thousand as of June 30, 2025, maturing in June 2050 with a 3.75% interest rate[69] - As of June 30, 2025, the company had a liability of approximately $731 thousand for royalties related to government R&D grants, having received $14,300 thousand and repaid $10,857 thousand in grants[75] | Warrant Type | Number of Warrants | Exercise Price | Period Left (years) | | :----------------------- | :----------------- | :------------- | :------------------ | | Warrants May 2023 | 66,127 | $4.625 | 3.6 | | Warrants December 2023 | 1,360,170 | $1.18 - $1.47 | 4.2 | | Warrants June 2024 | 1,069,647 | $2 - $3.43 | 4.7 | | Warrants July 2024 | 2,069,317 | $2.5 - $1.75 | 1.45 | | Other | 36,942 | $10.27 - $50 | 1.20 - 2.1 | | Outstanding as of June 30, 2025 | 4,602,203 | | | - During the first six months of 2025, the company issued and sold 1,901,299 shares of common stock through an At-the-Market (ATM) offering for gross proceeds of approximately $2,100 thousand, incurring $223 thousand in offering costs[81][82][36] | Geographic Area | Six months ended June 30, 2025 (U.S. dollars in thousands) | Six months ended June 30, 2024 (U.S. dollars in thousands) | Three months ended June 30, 2025 (U.S. dollars in thousands) | Three months ended June 30, 2024 (U.S. dollars in thousands) | | :------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | North America | 1,100 | 3,463 | 623 | 3,075 | | Europe, the Middle East and Africa | 434 | 667 | 204 | 332 | | Asia Pacific | 128 | 27 | 114 | 25 | | Total Revenues | 1,662 | 4,157 | 941 | 3,431 | - On July 2, 2025, the company completed a private placement offering for gross proceeds of approximately $1.0 million, issuing 1,626,019 shares of common stock and accompanying warrants[98] Item 2. Management's Discussion & Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, discussing key trends, operational results, liquidity, and capital resources for the three and six months ended June 30, 2025, compared to the same periods in 2024. It also includes non-GAAP financial measures and critical accounting policies Results of Operations Analyzes the company's financial performance by comparing revenues, costs, and operating expenses across different reporting periods | Metric (U.S. dollars in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | 1,662 | 4,157 | 941 | 3,431 | | Cost of Revenues | 1,106 | 1,994 | 636 | 1,488 | | Gross Profit | 556 | 2,163 | 305 | 1,943 | | R&D Expenses | 1,356 | 1,250 | 675 | 603 | | Sales & Marketing Expenses | 1,366 | 1,274 | 700 | 647 | | G&A Expenses | 1,419 | 1,607 | 703 | 790 | | Operating (Loss) Income | (3,585) | (1,805) | (1,773) | 66 | | Net Comprehensive Loss | (3,761) | (2,064) | (1,901) | (78) | - Revenues decreased significantly for both the three-month period (from $3.4 million to $0.9 million) and six-month period (from $4.16 million to $1.7 million) ended June 30, 2025, primarily due to a software and services renewal in 2024 and a large deal to Washington D.C. last year, with 2025 revenues being more backend loaded[103][104] - Operating loss increased for both periods, reaching $1.8 million for the three months and $3.6 million for the six months ended June 30, 2025, mainly due to declining sales while operating expenditures remained consistent, coupled with exchange rate fluctuations and increased vacation expenses[112][113] Non-GAAP Financial Measures Presents and reconciles non-GAAP financial metrics, such as Adjusted EBITDA, to provide additional insights into operational performance | Metric (U.S. dollars in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | 1,662 | 4,157 | 941 | 3,431 | | GAAP net loss | (3,761) | (2,064) | (1,901) | (78) | | Non-GAAP Adjusted EBITDA | (3,473) | (1,775) | (1,714) | 11 | | Adjusted EBITDA margin | (208.98)% | (42.70)% | (182.17)% | 0.03% | - Non-GAAP Adjusted EBITDA is used to evaluate ongoing operations by adjusting for financial expenses, stock-based compensation, depreciation, tax expense, and other one-time costs[119][120] Liquidity and Capital Resources Discusses the company's cash position, funding sources, and ability to meet its short-term and long-term financial obligations - The company has historically funded operations through equity sales, debt financing, convertible loans, and royalty-bearing grants from the Israel Innovation Authority[122] - As of June 30, 2025, the company had an accumulated deficit of $48 million and cash on hand (including restricted cash equivalents) of $0.7 million, indicating insufficient resources to meet operating obligations for at least one year and raising substantial doubt about its ability to continue as a going concern[125][126] - On July 2, 2025, the company closed a private placement offering, raising approximately $1 million in gross proceeds by issuing 1,626,019 shares of common stock and accompanying Series A-3 and Series A-4 warrants[127] Cash Flows Provides a detailed analysis of the company's cash generation and utilization across operating, investing, and financing activities | Cash Flow Activity (U.S. dollars in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | (3,211) | (2,343) | | Net cash (used in)/provided by investing activities | (4) | 197 | | Net cash provided by financing activities | 1,643 | 3 | | Net change in cash | (1,572) | (2,149) | - Net cash used in operating activities increased to $3.2 million for the six months ended June 30, 2025, from $2.3 million in the prior year, primarily due to lower sales[133] - Net cash provided by financing activities significantly increased to $1.6 million for the six months ended June 30, 2025, compared to $3 thousand in the prior year, mainly driven by proceeds from the sale of common stock through an at-the-market (ATM) offering[135] Off-Balance Sheet Arrangements Discloses any significant contractual obligations or financial arrangements not recognized on the consolidated balance sheets - The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships[136] Critical Accounting Policies and Estimates Highlights the significant accounting policies and management judgments that are crucial to the preparation of the financial statements - The preparation of financial statements requires management to make estimates, assumptions, and judgments, particularly for areas like revenue from contracts with customers, which are critical to financial results[137][139] Item 3. Quantitative and Qualitative Disclosure About Market Risk This item is not required for a smaller reporting company - This disclosure is not required for a smaller reporting company[140] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2025, with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[142] - Management concluded that the internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework[145] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[146] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures relevant to the company's operations Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material effect on its business, financial position, or results of operations - There are no legal proceedings currently pending against the company that are believed to have a material effect on its business, financial position, or results of operations[149] Item 1A. Risk Factors This section updates previously disclosed risk factors, highlighting new or changed risks related to the ongoing conflicts in the Middle East affecting Israeli operations, potential delisting from Nasdaq due to non-compliance with listing standards (shareholders' equity and minimum bid price), and the high risks associated with the company's new cryptocurrency treasury management strategy - Ongoing armed conflicts and political instability in the Middle East, particularly in Israel where the company's R&D and operations are located, may harm operations, though no material impact has been experienced to date[151][154][155] - The company is not in compliance with Nasdaq's Minimum Shareholders' Equity Requirement and faces a delisting risk if it fails to regain compliance by August 27, 2025. Additionally, it received a notification for not meeting the minimum bid price of $1.00 per share, with a deadline of November 10, 2025, to regain compliance[159][160][162][163] - A new treasury management strategy involving cryptocurrency investments poses high risks due to market volatility, an evolving and uncertain regulatory environment, and unique audit, accounting, and internal control challenges[165][166][167][168] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company completed a private placement offering on July 2, 2025, issuing 1,626,019 shares of common stock and accompanying warrants for gross proceeds of approximately $1.0 million, relying on Section 4(a)(2) of the Securities Act for exemption from registration - On July 2, 2025, the company completed a private placement offering for gross proceeds of approximately $1.0 million[169] - The offering involved the issuance of 1,626,019 shares of Common Stock, Series A-3 warrants to purchase up to 1,626,019 shares, and Series A-4 Warrants to purchase up to 3,252,038 shares of Common Stock[169] - The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act[170] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities - None[172] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[173] Item 5. Other information No other information is reported under this item - None[174] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including organizational documents, warrant forms, agreements, and certifications - The exhibits include the Twenty-Fourth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, various forms of Series A-3, A-4, and Placement Agent Warrants, Securities Purchase Agreement, Registration Rights Agreement, and certifications by the Principal Executive and Financial Officers[175] SIGNATURES The report is duly signed on behalf of Actelis Networks, Inc. by its Chief Executive Officer and Chief Financial Officer on August 14, 2025 - The report was signed by Tuvia Barlev, Chief Executive Officer, and Yoav Efron, Chief Financial Officer and Deputy Chief Executive Officer, on August 14, 2025[179]