ACTELIS NETWORKS INC

Item 1A. Risk Factors.

Except as set forth below in this Item 1A and the Risk Factors included in our previous filings made with the SEC, there have been no material changes to our risk factors from those disclosed in Part I. Item 1A. Risk Factors in the Form 10-K filed with the SEC on March 24, 2025.

Conditions in the Middle East and in Israel, where our research and development, manu facturing, sales and administration facilitiilities 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 militia and political group in the Gaza Strip) and , Hezbollah (an Islamist militia and political group in Lebanon), and Iran.

In October 2023, Hamas terrorists infiltrated Israels 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 Israels 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, Israels 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. On March 18, 2025 the ceasefire ended with the resumption of the war between Israel and Hamas.

In addition, since the commencement of these events, there have been continued hostilities along Israels 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 connection with the Israeli security cabinets declaration of war against Hamas and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service.

As of the date of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q, we currently have 38 full-time employees, with 33 employees located in Israel and 5 employee located outside of Israel.

Since the war broke out on October 7, 2023, our operations have not been adversely affected by this situation, and we have not experienced any material disruptions to our operations. We have the ability, if necessary, to shift our manufacturing from Israel to other countries where we have business partners, and we have not had customers in Israel in the last year. However, the intensity and duration of Israels current war is difficult to predict at this stage, as are such wars economic implications on the Companys business and operations and on Israels economy in general. If the ceasefires declared collapse or a new war commences or hostilities expand to other fronts, our operations may be adversely affected.

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Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations. To-date, we have received Israeli government war related support funding of approximately $100,000.

The continued political instability and hostilities between Israel and its neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our operations in Israel and adversely affect the market price of our shares of common stock. In addition, several organizations and countries may restrict doing business with Israel and Israeli companies have been and are today subjected to economic boycotts. The interruption or curtailment of trade between Israel and its present trading partners could adversely affect our business, financial condition and results of operations.

Finally, political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and prior to October 2023, the Israeli government pursued extensive changes to Israels judicial system, which sparked extensive political debate and unrest. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.

Our shares of common stock could be delisted from the Nasdaq Capital Market if we fail to regain compliance with the Nasdaqs stockholders equity continued listing standards. Our ability to publicly or privately sell equity securities and the liquidity of our shares of common stock could be adversely affected if we are delisted from the Nasdaq Capital Market.

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 a minimum 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 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.

As of the date of this filing, we believe that we are not in compliance with the Minimum Shareholders Equity Requirement. We intend to enter into a financing transaction by September 30, 2025, with the goal of bringing us back to compliance with the Minimum Shareholders Equity Requirement. There is no assurance that we will be able to enter into such a financing transaction, or that such transaction would ensure that we will regain, or maintain, compliance the Minimum Shareholders Equity Requirement.

In addition, on May 20, 2024, Nasdaq notified us that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2), which requires our common stock to maintain a minimum bid price of $1.00 per share. On June 20, 2024, we received a letter from Nasdaq that, for the 10 consecutive business days from June 5, 2024 to June 28, 2024, the closing bid price of the Companys common stock had been at $1.00 per share or greater. Accordingly, we have regained compliance with Nasdaq Listing Rule 5550(a)(2) and Nasdaq considers the prior bid price deficiency matter now closed.

In addition, on May 12, 2025, Nasdaq notified us (the Notification Letter) that we were not in compliance with the minimum bid set forth in Nasdaq Listing Rule 5550(a)(2), which requires our common stock to maintain a minimum bid price of $1.00 per share. The Notification Letter has no immediate effect on the listing or trading of our common stock on Nasdaq and, at this time, the common stock will continue to trade on Nasdaq under the symbol ASNS.

The Notification Letter provides that we have 180 calendar days, or until November 10, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. If we do not regain compliance by November 10, 2025, an additional 180 days may be granted to regain compliance, so long as we meet certain listing criteria. If we do not qualify for the second compliance period or fail to regain compliance during the second 180-day period, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have the opportunity to appeal the delisting determination to a Hearings Panel.

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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 ordinary shares on Nasdaq. If we fail to satisfy the continued listing requirements of Nasdaq, such as minimum stockholders equity requirements or minimum bid price requirements, Nasdaq may take steps to delist our shares of common stock. Such a delisting would 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 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 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 to restore our compliance with Nasdaqs 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 our shares of common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaqs listing requirements.

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ChangOur cryptocurrency strategy faces in international trade policies, tariffshigh risk and uncertainty in light of market volatility and treaties affectan evolving imports regulatory land exports may havscape.

On August 6, 2025, we a material adverse effnnounced that our Board of Direct on our business and operating results.

Changes toors approved a new treasury management strategy that international trade policcludes the strategic allocation of corporate funds to cryptocurrencies and tariffs affecting imports and exports have recently been announced. Geopolitics part of the Companys broader capital allocation framework. Our decision to allow investments in digital tensionsassets - including Bitcoin and trade disputes can disrupt supply chains and increase the cost of our products. Thisother major cryptocurrencies-as a recent addition to our treasury management strategy, poses considerable risks that could cause materially harm our producoperating results to be more expensive for customers, which could reduce the demand for, or attractiveness of, such products or could result in our need and financial condition. The inherent volatility in cryptocurrency markets can lead to rapid and substantial fluctuations in the value of our digital asset holdings; such volatility may force us to increase customer pricing. Aliquidate positions a result, ant unfavorable prices, thereby significant increases in tariffs on goods or materly impairing our liquidity and overall financials or other changes in  stability.

Moreover, our cryptocurrency strade policy could negatitegy is devely affect businessoping amid a continuously changing and operatinguncertain results

Recently, the U.S. has announced its intent to implement a range of new tariffgulatory environment. Evolving cryptocurrency regulations and varying interpretations and increases toenforcement policies of existing import tariffs. In response to the tarifflaws in the United States announced by the U.S., other countries haved internationally may imposed, are new considering imposing, and may in the future impose new or increased tariffs on certain importmpliance burdens, disrupt our planned operations, or necessitate significant modifications to those countries from the United States. There is currently significant uncertainour existing business practices. Any adverse regulatory action or delay in clarity about the future relcould escalate our operationship between the United States and other countries with respect to trade policies, taxeal costs, materially harm the value of our digital asset holdings, restrict our flexibility in managing these assets, government reguland damage our reputations and tariffs. with investors and we cannot predict whecounterparties.

Additionally, ther, and to what extent, current tariffs will unique audit, accounting, and internal continue or trade policiesrol challenges associated will change in the future.

We manufacture our products in Israel and Taiwan. Procth managing digital assets add further complexity. As current financial reporting standards may not fully capturement the nuances of raw material is done directlydigital asset investments, future modifications to these countries. Our products are then imported standards could require us to the United States from oamend in our manufacturaccounting locations in Israel and Taiwan. The tariffs could affect inputs to our policies and internal controls. Our reliance on third-party custodial, trading and transaction platforms for the storage and products,cessing of these as well as equipment, materials, or componentssets also exposes us to increased cybersecurity that we import intoreats, operational disruptions, and risks stemming from the United Stateird-party service providers, each of which could siresult in significantly impact the cost of these items.

The above and other potential tariffs financial inaccuracies, legal liabilities, or reputational damage. Relatedly, digital asset custodial accounts do not benefit from customary regulatory, insurance and tradesafeguard restricgimes available to traditions may causeal brokerage and deposit accounts.

Given the cost of our products, andnascent and rapidly evolving nature of digital as a result, prices of our productset markets, any unfavorable developments in market conditions, to increase, which regulatory frameworks, or technological vulnerabilities could reduce demand for such products, and aseverely undermine our ability to execute our digital asset strategy effectively. Any significant adversely i developments in the digital asset space may have a material negative impact on our revenulong-term performance and financial resultsstrategic goals.