Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

References in this report to "we," "Actelis," "us," "our," or the "Company" refer to Actelis Networks, Inc. and its wholly owned subsidiary. References to our "management" or our "management team" refer to our officers and directors. You should read the following discussion of our historical performance, financial condition and future prospects in conjunction with the management's discussion and analysis of financial conditions and results of operations and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 24, 2025 (referred to herein as the "Annual Report"). The following discussion and analysis of our financial condition and results of operations should also be read in conjunction with the condensed consolidated financial statements (including the notes thereto) contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risk and uncertainties. For further information on items that could impact our future operating performance or financial condition, see the sections titled "Risk Factors" included in the Annual Report, as updated in Part II, Item 1A below, and the Special Note Regarding Forward Looking Statements above.

Overview

We are a market leader in cyber-hardened, rapid-deployment networking solutions for wide-area internet of things ("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 cyber-protection capabilities, unlocks the hidden value of essential networks, delivering safer 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, secure, and quick-to-deploy network. Our patent protected hybrid fiber 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 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 has distinct advantages in most real-life installations, while providing significant budget savings and accelerating deployment of modern IoT networks, as based on our experience, most IoT projects have challenging, hard to reach with fiber locations which may explode such projects' timeline and budgets. We believe that our solutions can provide connectivity over either fiber or copper 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 software 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, coax, 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 and 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.

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 - need for civil works). By offering the 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 DoD markets, as well as multi-dwelling units, and introduced, in 2024, our cyber-aware networking solutions for IoT markets as well.

Results of Operations

The table below provides our results of operations for the periods indicated.

		Nine months ended September 30								Three months ended September 30
		2025				2024				2025				2024
		(dollars in thousands)								(dollars in thousands)
Revenues			2,305			$	6,698			$	643				2,541
Cost of revenues			1,566				2,792				460				798
Gross profit			739				3,906				183				1,743
Research and development expenses, net			1,947				1,793				591				543
Sales and marketing, net			2,155				2,001				789				727
General and administrative, net			2,224				2,398				805				790
Other Income			(73	)			(163	)			(73	)			-
Operating (loss)			(5,514	)			(2,123	)			(1,929	)			(317	)
Interest expenses			(83	)			(590	)			(27	)			(246	)
Other Financial income (expenses), net			(144	)			138				(24	)			52
Net Comprehensive Loss for the period			(5,741	)		$	(2,575	)		$	(1,980	)			(511	)

Three and Nine Months Ended September 30, 2025, Compared to Three and Nine Months Ended September 30, 2024

Revenues

Our revenues for the three months ended September 30, 2025, amounted to $0.64 million, compared to approximately $2.54 million for the three months ended September 30, 2024. The decline is associated with a software 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 Washington D.C. last year, while 2025's revenues are more backend loaded.

Our revenues for the nine months ended September 30, 2025, amounted to $2.3 million, compared to approximately $6.7 million for the nine months ended September 30, 2024. The decline is associated with a software 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 Washington D.C. last year, while 2025's revenues are more backend loaded.

Cost of Revenues

Our cost of revenues for the three months ended September 30, 2025, amounted to $0.46 million, compared to approximately $0.8 million for the three months ended September 30, 2024. The decrease from the corresponding period was mainly attributable to fixed cost remaining constant and sales reduced.

Our cost of revenues for the nine months ended September 30, 2025, amounted to $1.57 million, compared to approximately $2.8 million for the nine months ended September 30, 2024. The decrease from the corresponding period was mainly attributable to fixed cost remaining constant and sales reduced.

Research and Development Expenses

Our research and development expenses for the three months ended September 30, 2025, amounted to $0.6 million, compared to $0.5 million for the three months ended September 30, 2024. The increase was primarily driven by a rise in the utilization of professional services for our GL900 product line and due to strengthening of the Israeli shekel by an average of 10% against the U.S. dollar the expenditure has increased by approximately $51,000.

Our research and development expenses for the nine months ended September 30, 2025, amounted to $1.95 million, compared to $1.8 million for the nine months ended September 30, 2024. The increase was primarily driven by a rise in the utilization of professional services for our GL900 product line and due to strengthening of the Israeli shekel by an average of 6% against the U.S. dollar the expenditure has increased by approximately $88,000.

Sales and Marketing Expenses

Our sales and marketing expenses for the three months ended September 30, 2025, amounted to $0.78 million, compared to $0.7 million for the three months ended September 30, 2024. The increase was primarily due to payroll expenses and engaging consultants to expand market reach in different countries in Europe and Asia.

Our sales and marketing expenses for the nine months ended September 30, 2025, amounted to $2.2 million, compared to $2.0 million for the nine months ended September 30, 2024. The increase was primarily due to payroll expenses and engaging consultants to expand market reach in different countries in Europe and Asia.

General and Administrative Expenses

Our general and administrative expenses for the three months ended September 30, 2025, amounted to $0.8 million, compared to $0.8 million for the three months ended September 30, 2024. Cost-reduction measures contributed to reducing expenses, these benefits were offset by higher costs driven by the strengthening of the Israeli shekel against the U.S. dollar.

Our general and administrative expenses for the nine months ended September 30, 2025, amounted to $2.2 million, compared to $2.4 million for the nine months ended September 30, 2024. The decrease was mainly due to cost-reduction measures; however, this reduction was partially offset by an increase in expenses resulting from the strengthening of the Israeli shekel against the U.S. dollar.

Other Income

Our Other Income for the three and nine months ended September 30, 2025 amounted to $73,000 compared to $163,000 in the three and nine months ended September 30, 2024. It is related to government grant from the State of Israel in connection with Iran war.

Operating (Loss) Income

Our operating loss for the three months ended September 30, 2025, was $1.93 million, compared to $0.3 million for the three months ended September 30, 2024. The increase is due to the decline in sales, while operating expenditure remained consistent. In addition, the Israeli shekel strengthened by an average of 10% against the U.S. dollar, resulting in a minimum increase of approximately $0.1 million in operating expenditure.

Our operating loss for the nine months ended September 30, 2025, was $5.5 million, compared to an operating loss of approximately $2.1 million for the nine months ended September 30, 2024. The increase is due to the decline in sales, while operating expenditure remained consistent. In addition, the Israeli shekel strengthened by an average of 6% against the U.S. dollar, resulting in a minimum increase of approximately $0.2 million in operating expenditure.

Financial Expenses, Net

Our financial income, net for the three months ended September 30, 2025, was $51,000 (including $27,000 interest expenses) compared to financial expense, net of $194,000 (including $246,000 interest expenses) for the three months ended September 30, 2024. The decrease in expenditure is mainly due to repayment of loan leading to reduced interest expense and other bank related charges. However, this decrease was partially offset by higher foreign exchange losses arising from the strengthening of the Israeli shekel against the U.S. dollar.

Our financial expense, net for the nine months ended September 30, 2025, was $227,000 (including $83,000 interest expenses) compared to financial expense, net of $452,000 million (including $590,000 million interest expenses) for the nine months ended September 30, 2024. The decrease in expenditure is mainly due to repayment of loan leading to reduced interest expense and other bank related charges. However, this decrease was partially offset by higher foreign exchange losses arising from the strengthening of the Israeli shekel against the U.S. dollar.

Net Loss

Our net loss for the three months ended September 30, 2025 was $1.98 million, compared to net loss of approximately $0.5 million for the three months ended September 30, 2024. The increase in net loss is due to lower sales, while operating expenditure remained consistent. In addition, the Israeli shekel strengthened by an average of 10% against the U.S. dollar, leading to higher expenditure and contributing to increase in net loss.

Our net loss for the nine months ended September 30, 2025 was $5.7 million, compared to net loss of approximately $2.6 million for the nine months ended September 30, 2024. The increase in net loss is due to lower sales, while operating expenditure remained consistent. In addition, the Israeli shekel strengthened by an average of 6% against the U.S. dollar, leading to higher expenditure and contributing to increase in net loss.

Non-GAAP Financial Measures

(U.S. dollars in thousands)		Nine months Ended September 30, 2025				Nine months Ended September 30, 2024				Three months Ended September 30, 2025				Three months Ended September 30, 2024
Revenues		$	2,305			$	6,698			$	643			$	2,541
GAAP net loss			(5,741	)			(2,575	)			(1,980	)			(511	)
Interest Expense			83				590				27				246
Other Financial expenses (income), net			144				(138	)			24				(52	)
Tax Expense			(29	)			33				-				1
Fixed asset depreciation expense			14				10				2				3
Stock based compensation			308				259				179				80
Other one-time costs and expenses			(73	)			(189	)			(73	)			-
Non-GAAP Adjusted EBITDA			(5,294	)			(2,010	)			(1,821	)			(233	)
GAAP net loss margin			(249.07	)%			(38.44	)%			(307.93	)%			(20.11	)%
Adjusted EBITDA margin			(229.67	)%			(30.00	)%			(283.2	)%			(9.17	)%

Use of Non-GAAP Financial 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 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.

We utilize the adjusted results to review our ongoing operations without the effect of these adjustments but not for comparison to budgeted operating results. We believe the supplemental adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees and optimizes our business operations on a day-to-day basis. We exclude the costs in calculating adjusted results to allow us and investors to evaluate the performance of the business based upon its expected ongoing operating structure. We believe the adjusted measures, accompanied by the disclosure of the costs of these programs, provides valuable insight to our financial performance. Adjusted results should be considered only in conjunction with results reported according to GAAP.

		For the nine months ended September 30								For the three months ended September 30
(U.S. dollars in thousands)		2025				2024				2025				2024
Revenues		$	2,305				6,698			$	643			$	2,541
Non-GAAP Adjusted EBITDA			(5,294	)			(2,010	)			(1,821	)			(233	)
As a percentage of revenues			(229.67	)%			(30.00	)%			(283.2	)%			(9.17	)%

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through the sale of equity securities, debt financing, convertible loans and royalty-bearing grants that we received from the Israel Innovation Authority. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes.

Our future capital requirements will be affected by many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, increases 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."

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, the war in Israel and the war between Russia and the Ukraine, has 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 $5.7 million and approximately $2.6 million for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025 and 2024, we had negative cash flows from operations of $5.6 million and $4.8 million, respectively.

As of September 30, 2025, we had an accumulated deficit of $50 million, cash on hand (including short term deposits and restricted cash equivalents) of $1.8 million, short term restricted bank deposits of $73,000, long-term restricted bank deposits of $30,000 and long term deposit of $95,000 as of September 30, 2025. 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.

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 condensed consolidated financial statements. These factors raise substantial doubt about the Company's ability to continue as a going concern. These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments that might result from the outcome of this uncertainty.

July 2025 Private Placement

On June 30, 2025, the Company entered into a securities purchase agreement (the "Purchase Agreement") with certain accredited investors (the "Investors"), pursuant to which we agreed to issue and sell to the Investors in a private placement (the "July 2025 Private Placement") (a) 1,626,019 shares of Common Stock, (b) Series A-3 warrants to purchase up to 1,626,019 shares of Common Stock, and (c) Series A-4 Warrants to purchase up to 3,252,038 shares of Common Stock, for a purchase price of $0.615 per share and related Common Warrants, for a total aggregate gross proceeds of approximately $1 million. The July 2025 Private Placement closed on July 2, 2025.

The Series A-3 Warrants have an exercise price of $0.615 per share, are exercisable commencing on the effective date of shareholder approval (the "Shareholder Approval Date") of the issuance of the shares issuable upon exercise of the Common Warrants ("Shareholder Approval") and expire five years following the Shareholder Approval Date. On November 7, 2025, the Shareholder Approval was obtained in a special meeting of our shareholders, resulting in the Shareholder Approval Date being such date.

The Series A-4 Warrants have an exercise price of $0.615 per share, are exercisable commencing on the Shareholder Approval Date and expire eighteen months following the Shareholder Approval Date.

Under the terms of the Common Warrants, the Investors may not exercise the warrants to the extent such exercise would cause the Investor, together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% (or, at such Investor's option upon issuance, 9.99%), of the Company's then outstanding Common Stock following such exercise, excluding for purposes of such determination shares of Common Stock issuable upon exercise of such warrants which have not been exercised.

H.C. Wainwright & Co., LLC acted as the Placement Agent for the issuance and sale of the Securities. The Company has agreed to pay up to an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company from the July 2025 Private Placement. The Company also agreed to pay the Placement Agent $35,000 for accountable expenses which include a management fee equal to 1.0% of the gross proceeds raised in the July 2025 Private Placement. The Company also agreed to issue to the Placement Agent, or its designees, Placement Agent Warrants to purchase up to 7.0% of the aggregate number of the shares of Common Stock sold to the Investors (or warrants to purchase up to 113,821 shares of Common Stock) at an exercise price per share of $0.7688 which will be exercisable commencing on the Shareholder Approval Date and a have term of five years after the Shareholder Approval Date (the "July 2025 Placement Agent Warrants," and collectively with the Common Warrants, the "July 2025 Warrants").

September 2025 Warrant Inducement

On September 2, 2025, the Company entered into an inducement agreement (the "Inducement Letter") with a certain holder (the "Holder") of certain of the Company's existing warrants to purchase an aggregate of 4,270,197 shares of the Company's Common Stock, consisting of (i) 1,271,187 warrants issued on December 20, 2023 with an expiration date of June 20, 2029 at an exercise price of $1.18 per share (ii) 999,670 warrants issued on June 6, 2024 with an expiration date of December 6, 2029 at an exercise price of $2.00 per share and (iii) 1,999,340 warrants issued on July 2, 2024 with an expiration date of July 2, 2026 at an exercise price of $1.75 per share (the "Existing Warrants").

Pursuant to the Inducement Letter, the Holder agreed to exercise for cash the Existing Warrants to purchase an aggregate of 4,270,197 shares of the Company's Common Stock at a reduced exercise price of $0.37 per share in consideration of the Company's agreement to issue new Common Stock purchase warrants (the "New Warrants"), as descried below, to purchase up to an aggregate of 6,405,296 shares of the Company's Common Stock (the "New Warrant Shares") at an exercise price of $0.37 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.

Rodman & Renshaw LLC and H.C. Wainwright & Co., LLC ("Wainwright") acted as financial advisors to the Company in connection with the transactions contemplated by the Inducement Letter. Pursuant to an engagement letter with Wainwright, the Company has agreed to pay the financial advisors a cash fee equal to 7.0% of the aggregate gross proceeds received from the Holder's exercise of the Existing Warrants, as well as a management fee equal to 1.0% of the gross proceeds from the exercise of the Existing Warrants. The Company has also agreed to issue to the financial advisors or their designees warrants (the "Inducement Placement Agent Warrants") to purchase up to 298,914 shares of Common Stock (representing 7.0% of the Existing Warrants being exercised), which will have the same terms as the New Warrants having a term of five years of Stockholder Approval (as defined below) except the Inducement Placement Agent Warrants will have an exercise price equal to $0.4625 per share (125% of the exercise price of the Existing Warrants).

The New Warrants have an exercise price equal to $0.37 per share. The New Warrants will be exercisable from the effective date (the "Warrant Stockholder Approval Date") of shareholder approval ("Warrant Stockholder Approval"), until (i) the five-year anniversary of such date for 3,406,286 of the New Warrants (the "Series A-1 Warrants") and (ii) the twenty-four-month anniversary of such date for 2,999,010 of the New Warrants. The exercise price and number of New Warrant Shares issuable upon exercise of the New Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, subsequent rights offerings, pro rata distributions, reorganizations, or similar events affecting the Company's Common Stock and the exercise price. On November 7, 2025, the Warrant Stockholder Approval was obtained in a special meeting of our shareholder, resulting in the Warrant Stockholder Approval Date being such date.

The closing of the transactions contemplated pursuant to the Inducement Letter occurred on September 3, 2025.

White Lion Transaction

Equity Line of Credit Agreement

On September 27, 2025, the Company entered into the ELOC Purchase Agreement, commencing on October 1, 2025 (the "Commencement Date"), provided that the Company did not cancel the ELOC Purchase Agreement prior to the Effective Date, and the White Lion registration rights agreement ("White Lion RRA") with White Lion Capital, LLC ("White Lion"). Pursuant to the ELOC Purchase Agreement, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, up to the Commitment Amount of $30,000,000 in aggregate gross purchase price of newly issued shares of the Company's Common Stock for the 36-month period beginning on the Commencement Date, subject to certain limitations and conditions set forth in the ELOC Purchase Agreement.

The Company was obligated under the ELOC Purchase Agreement and the White Lion RRA to file a registration statement (the "Resale Registration Statement") with the SEC to register the Common Stock under the Securities Act, for the resale by White Lion of shares of Common Stock that the Company may issue to White Lion under the ELOC Purchase Agreement and to register the Commitment Shares. Such Resale Registration Statement was initially filed on October 7, 2025.

The maximum number of shares issuable under the ELOC Purchase Agreement is subject to the Exchange Cap equal to 19.99% of the Company's outstanding Common Stock as of the Commencement Date.

The Company has agreed to call a special meeting to obtain White Lion Shareholder Approval within 120 days of the Commencement Date. If the Company fails to call the special meeting within this timeframe, it shall pay liquidated damages to White Lion, as more fully described in the ELOC Purchase Agreement. In the event White Lion Shareholder Approval is not obtained at the Special Meeting, the Company is obligated to call an additional special meeting every ninety (90) days thereafter, for a total period of 360 days, until White Lion Shareholder Approval is obtained.

As consideration for White Lion's irrevocable commitment to purchase the Company's Common Stock up to the Commitment Amount, the Company agreed to issue Commitment Shares equal to the Commitment Amount of $750,000 divided by the lowest traded price of the Company's Common Stock during the 30 business days prior to the issuance of the Commitment Shares.

If at any point during the term of the ELOC Purchase Agreement the Company fails to be listed on the Nasdaq Capital Market, the Commitment Fee Amount will increase to $1,000,000 if remedied within six months or less, to $1,250,000 if remedied after six months but before twelve months, and $1,500,000 if not remedied within twelve months pursuant to the Delisting Penalty Provision. The Delisting Penalty Provision shall automatically be waived on the date that is six (6) months after the later of (A) the date on which White Lion Shareholder Approval is obtained and (B) the date on which the Resale Registration Statement has been declared effective by the SEC.

Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the ELOC Purchase Agreement, the Company's right to sell shares to White Lion will commence on the Commencement Date and extend until 36 months through the Commitment Period, unless the Company has exercised its right in full to sell shares to White Lion under the ELOC Purchase Agreement prior to such date. During such term, subject to the terms and conditions of the ELOC Purchase Agreement, the Company shall notify White Lion through a Purchase Notice when the Company exercises its right to sell shares (the effective date of such notice, a "Notice Date"). The Purchase Notice may be a Regular Purchase Notice or a Rapid Purchase Notice, each as described below.

The number of shares sold pursuant to any such notice may not exceed 40% of the Average Daily Trading Volume for the Common Stock traded on Nasdaq immediately preceding receipt of the applicable Purchase Notice, and can be increased at any time at the sole discretion of White Lion.

The ELOC Purchase Agreement prohibits the Company from directing White Lion to purchase any shares if those shares, when aggregated with all other shares then beneficially owned by White Lion (as calculated pursuant to Section 13(d) of the Exchange Act would result in White Lion beneficially owning more than 4.99% of the outstanding Common Stock. The beneficial ownership limitation may be increased or decreased by White Lion to any other percentage not in excess of 9.99% upon notice to the Company.

The Company may terminate the ELOC Purchase Agreement at any time, which shall be effected by written notice being sent by the Company to White Lion. In addition, the ELOC Purchase Agreement shall automatically terminate on the earlier of (i) the end of the Commitment Period or (ii) the date that, pursuant to or within the meaning of any bankruptcy law, the Company commences a voluntary case or any person commences a proceeding against the Company, a custodian is appointed for the Company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors. Certain provisions of the ELOC Purchase Agreement survive termination, as described more fully in the text of the agreement.

Concurrently with the execution of the ELOC Purchase Agreement, the Company entered into the White Lion RRA with White Lion in which the Company has agreed to register the shares of Common Stock purchased by White Lion under the ELOC Purchase Agreement with the SEC for resale within 30 days of the execution date of the White Lion RRA. The White Lion RRA also contains usual and customary damages provisions for failure to have the registration statement declared effective by the SEC within the time periods specified therein.

The ELOC Purchase Agreement and the White Lion RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

Private Placement

On September 27, 2025, the Company entered into the PIPE Purchase Agreement with White Lion, pursuant to which the Company agreed to issue and sell to White Lion in a private placement (the "White Lion Private Placement") (i) 871,766 shares of Common Stock, and (ii) Pre-Funded Warrants to purchase up to 3,128,234 shares of Common Stock for a purchase price of $0.2125 per share of Common Stock and $0.2124 per Pre-Funded Warrant, for a total aggregate gross proceeds of approximately $850,000. The White Lion Private Placement closed on September 29, 2025. The Company had a right to redeem 488,263 of the shares of Common Stock at a redemption price of $0.0001 per share. The Company and White Lion have agreed that, in lieu of such redemption, on October 20, 2025, the Company reduced the number shares issuable pursuant upon exercise of the Pre-Funded Warrants by 488,263 shares, to 2,639,971.

The Pre-Funded Warrants are immediately exercisable at an exercise price of $0.0001 per share of Common Stock and will not expire until exercised in full. However, the Company may not issue a number of shares of Common Stock pursuant to exercise of the Pre-Funded Warrants in an amount that will not exceed the Exchange Cap when combined with the number of Shares issued in the White Lion Private Placement, before shareholder approval for further issuance beyond the Exchange Cap is obtained. The Company intends to obtain such shareholder approval concurrently with the White Lion Shareholder Approval required for the issuance of shares of Common Stock under the ELOC Purchase Agreement beyond the Exchange Cap.

The Company may not effect any exercise of the Pre-Funded Warrants, and White Lion does not have the right to exercise any portion of the Pre-Funded Warrants, if such exercise, aggregated with all other shares then beneficially owned by White Lion (as calculated pursuant to Section 13(d) of the Exchange Act) would result in White Lion beneficially owning more than 4.99% of the outstanding Common Stock. The beneficial ownership limitation may be increased or decreased by White Lion to any other percentage not in excess of 9.99% upon notice to the Company.

The Resale Registration Statement described above also covered the registration of the shares of Common Stock and shares underlying the Pre-Funded Warrants issued pursuant to the PIPE Purchase Agreement.

Cash Flows

The table below, for the periods indicated, provides selected cash flow information:

(U.S. dollars in thousands)		Nine months ended September 30, 2025				Nine months ended September 30, 2024
Net cash used in operating activities (including the effect of exchange rate changes on cash and cash equivalents and restricted cash)		$	(5,626	)		$	(4,795	)
Net cash (used in)/provided by investing activities			(4	)			197
Net cash provided by financing activities			5,121				1,624
Net change in cash		$	(509	)		$	(2,974	)

As of September 30, 2025, we had cash, cash equivalents, and restricted cash and cash equivalents of approximately $1.8 million compared to approximately $2.5 million of cash, cash equivalents and restricted cash as of September 30, 2024.

Cash used in operating activities amounted to $5.6 million for the nine months ended September 30, 2025, compared to approximately $4.78 million for the nine months ended September 30, 2024. The increase from the corresponding period was mainly due to lower sales.

Net cash used in investing activities was $4,000 for the nine months ended September 30, 2025, compared to net cash provided by investing activities of $197,000 for the nine months ended September 30, 2024. The decrease from the corresponding period was mainly due to the absence of short-term bank deposits in nine months ended September 2025 which had been present in the same period of 2024.

Net cash provided by financing activities was $5.1 million for the nine months ended September 30, 2025, compared to net cash provided by financing activities of $1.6 million for the nine months ended September 30, 2024. The increase from the corresponding period was mainly driven by proceeds from sales of common stocks at the market (ATM) offering, proceeds from private placements occurred in July and September and proceeds from Warrants Inducement.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change the results from those reported.

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies include revenue from contracts with customers which is more fully described in the notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and our annual financial statements for the year ended December 31, 2024, including the footnotes, for a description of our significant accounting policies. We believe that these accounting policies discussed are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management's estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.