10-Q: Actelis Networks Q1 2026: Revenue Up, Net Loss Widens

Actelis Networks reports a 33% revenue increase in Q1 2026, but net loss widens due to increased financial expenses and a low-margin deal.

Summary

• Actelis Networks reported revenues of $958,000 for the three months ended March 31, 2026, an increase of 33% compared to $721,000 in the same period of 2025.
• The company experienced an operating loss of $1,863,000 for Q1 2026, an increase from $1,812,000 in Q1 2025.
• Net comprehensive loss for Q1 2026 was $2,456,000, a significant increase from $1,860,000 in Q1 2025.
• The company's common stock was delisted from Nasdaq on April 10, 2026, and began trading on the OTCQB Venture Market on April 24, 2026.
• Actelis Networks has substantial doubt regarding its ability to continue as a going concern due to recurring losses and negative cash flows.
• The company entered into a binding term sheet to acquire Exaware Routing Ltd. in an all-stock transaction, reflecting a post-transaction value ratio of approximately 40% for Actelis and 60% for Exaware.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the widening net loss, increased financial expenses, and the substantial doubt regarding the company's ability to continue as a going concern, despite revenue growth and a potential acquisition.

Positives

• Revenue increased by 33% to $958,000 in Q1 2026 compared to $721,000 in Q1 2025, driven by expanded sales footprint and large orders in North America and Asia Pacific.
• The company successfully raised $7.311 million in gross proceeds through its At-the-Market (ATM) offering in Q1 2026.
• Actelis Networks is pursuing an acquisition of Exaware Routing Ltd., which could expand its offerings in routing and switching solutions.

Negatives

• Net comprehensive loss widened to $2,456,000 in Q1 2026 from $1,860,000 in Q1 2025.
• Cost of revenues increased significantly to $723,000 from $470,000, impacted by a low-margin deal in the US and increased indirect costs.
• Other financial expenses, net, surged to $593,000 from $48,000, primarily due to a $625,000 commitment fee related to the equity line of credit and foreign exchange differences.
• The company's common stock was delisted from Nasdaq and is now trading on the OTCQB Venture Market, which may limit liquidity and depress the trading price.
• Management has determined that the company does not have sufficient resources to meet its operating obligations for at least one year, raising substantial doubt about its ability to continue as a going concern.

Risks

• The company's delisting from Nasdaq and subsequent trading on the OTCQB Venture Market could lead to reduced liquidity, a depressed stock price, and loss of institutional investor interest.
• The ongoing geopolitical situation in Israel and the Middle East may adversely affect operations, financial condition, and results of operations.
• The company faces substantial doubt regarding its ability to continue as a going concern due to its history of losses and negative cash flows.
• The acquisition of Exaware is subject to definitive agreement, board approvals, and customary closing conditions, with no assurance of completion.
• The company's ability to regain listing on the Nasdaq Capital Market is uncertain and may require a reverse stock split.
• The company's reliance on a few key customers for a significant portion of its trade receivables and revenues presents a concentration of risk.

Future Outlook

The company expects to fund operations using cash on hand, operational cash flows, and by raising additional equity and debt funds. Management is focused on improving gross margin through a better revenue mix and generating other efficiencies. However, there are no assurances that the company will be able to generate sufficient revenue or obtain necessary financing.

Management Comments

• Management has evaluated the significance of the company's financial conditions and has determined that it does not have sufficient resources to meet its operating obligations for at least one year, raising substantial doubt about its ability to continue as a going concern.
• The company is working to meet all requirements for initial listing in order to be approved to list its Common Stock on the Nasdaq Capital Market in the future and expects that a reverse stock split will be necessary.
• Management believes that the supplemental adjusted results (Non-GAAP Adjusted EBITDA) provide valuable insights into underlying trends and how management oversees and optimizes business operations.

Industry Context

StockSavvy.ai notes that Actelis Networks operates in the competitive telecommunications and IoT networking solutions market. The company's focus on cyber-hardened solutions targets governmental agencies and enterprises, a segment that requires robust security. The recent delisting from Nasdaq and move to OTCQB highlights the challenges smaller, growth-stage technology companies face in maintaining exchange listing requirements amidst financial pressures.

Comparison to Industry Standards

• The company's revenue growth of 33% in Q1 2026 is a positive indicator, but the widening net loss and negative EBITDA suggest challenges in achieving profitability, which is a key industry standard for sustainable businesses.
• The significant increase in financial expenses, particularly the commitment fee related to the equity line of credit, is a notable deviation from typical operational costs and impacts profitability metrics.
• The company's struggle to maintain Nasdaq listing standards is a common challenge for micro-cap and small-cap companies, contrasting with larger, more established players in the networking sector that maintain prime exchange listings.

Legal Proceedings

• To the knowledge of management, there are no legal proceedings currently pending against the company that would have a material effect on its business, financial position, or results of operations, nor are any contemplated or threatened.

Stakeholder Impact

• Shareholders: The delisting from Nasdaq and trading on OTCQB may negatively impact share liquidity and price. The ongoing financial struggles and going concern doubt create significant risk for shareholders.
• Employees: One employee was called to reserve duty in the Israel Defense Forces. Extended absences of personnel due to military service could adversely affect business operations.
• Creditors: The company's ability to meet its operating obligations is in doubt, which could impact creditors if the company cannot continue as a going concern.

Next Steps

• The company intends to apply for its Common Stock to be up-listed back onto the Nasdaq Capital Market.
• Actelis Networks is in ongoing discussions to advance the acquisition of Exaware Routing Ltd. towards a definitive agreement and closing.
• The company will continue to monitor cash flow projections and take active measures to obtain funding.
• The company may need to execute additional cost reduction measures if it is not successful in generating sufficient cash flow or completing additional financing.

Key Dates

Recommendation

The company faces significant financial headwinds, including a widening net loss, negative cash flow from operations, and substantial doubt about its ability to continue as a going concern. The delisting from Nasdaq further exacerbates these concerns by reducing liquidity and investor confidence. While revenue is growing and an acquisition is being pursued, these positives are overshadowed by the severe financial risks.

Keywords

Actelis Networks, 10-Q Filing, Quarterly Report, Financial Results, Revenue Growth, Net Loss, Nasdaq Delisting, OTCQB, Going Concern, Acquisition, Exaware Routing Ltd.