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NOTE 1 - GENERAL:
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a. |
Actelis Networks, Inc.
(hereafter -the Company) was established in 1998, under the laws of the state of Delaware. The Company has a wholly-owned subsidiary
in Israel, Actelis Networks Israel Ltd. (hereafter – the Subsidiary). The Company is engaged in the design, development, manufacturing,
and marketing of cyber hardened, hybrid fiber, networking solutions for IoT and Telecommunication governmental agencies and companies.
The Company’s customers include governmental agencies, providers of telecommunication services, enterprises as well as resellers
of the Company’s products. On May 12, 2022, the Company accepted a notification of effectiveness from the SEC, and on May 17,
2022, completed its IPO. The Company’s Common Stock is listed on the NASDAQ. |
| | b. | The Company has incurred significant losses and negative cash flows from operations, net comprehensive loss was $8,261 and $4,374 for the years ended December 31, 2025, and December 31, 2024, respectively. During the years ended December 31, 2025, and December 31, 2024, the Company had negative cash flows from operations of $7,691 and $6,549 respectively. As of December 31, 2025, the Company’s accumulated deficit was $52 million. The Company has funded its operations to date through equity and debt financing and has cash on hand (including restricted cash equivalents) of $4.4 million, long-term restricted bank deposits of $30 and long term deposit of $91 as of December 31, 2025. Additionally, The Company raised funds in the open market through its existing financing instrument, the At The Market facility (“ATM”) including $7 million since the beginning of 2026 and has additional available capacity for an additional $5 million, and has an open Equity Line of Credit (“ELOC”) for up to $30 million which can be utilized in the future as well. The Company monitors its cash flow projections on a current basis and takes active measures to obtain the funding it requires to continue its operations. Additionally, the Company plans for growth from 2025 to 2026 and has been executing a plan in order to reduce its cost structure. However, these cash flow projections are subject to various uncertainties concerning their fulfilment such as the ability to continue to increase revenues and gross margin and reduce its operating cost and expenses. If the Company is not successful in generating sufficient cash flow or completing additional financing, including debt financing, then it will need to execute a new cost reduction plan in addition to previous cost reduction plans that were executed so far. The Company’s transition to profitable operations is dependent on generating a level of revenues adequate to support its cost and expense structure. The Company expects to fund operations using cash on hand, through operational cash flows and raising additional equity and debt funds as well as improving its gross margin through better revenue mix and generating other efficiencies. There are no assurances, however, that the Company will be able to generate the revenue necessary to support its cost and expense structure or that it will be successful in obtaining the level of financing necessary for its operations. Management has evaluated the significance of these conditions and has determined that the Company does not have sufficient resources to meet its operating obligations for at least one year from the issuance date of these consolidated financial statements. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. |
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| | c. | On October 7, 2023, Hamas terrorists initiated a series of terror attacks targeting both civilian and military sites in Southern and Central Israel, prompting a response from the Israel Defense Forces. Additionally, Hezbollah and the Houthi movement launched attacks on military and civilian locations in Israel, leading to further Israeli responses, including intensified air and ground operations in Lebanon. The Houthi movement also targeted international shipping lanes in the Red Sea. On April 14, 2024, and again on October 1, 2024, Iran carried out drone and missile strikes against Israel, to which Israel responded. |
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On June 13, 2025, Israel launched a preemptive
attack on Iran, to which Iran responded with ballistic missiles and drone attacks. On June 23, 2025, Israel and Iran agreed to a ceasefire,
although there is no assurance that cease fire will continue.
In addition, on October 9, 2025, Gaza Strip (Gaza),
Israel, Hamas, United States and other regional parties agreed to a framework for a cease-fire in Gaza. However, the duration and
intensity of the ongoing conflicts in Gaza, Northern Israel, Lebanon, Iran and the broader region remain uncertain.
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 signing date, our operations and financial
results have not been significantly impacted, though, as of March 12, 2025, two of our employees have been called to reserve duty
in the Israel Defense Forces from time to time, which has not been materially affecting our operation.
We do not anticipate any short-term material
impact on our business performance due to the ongoing conflicts in the Gaza Strip, Lebanon, Iran and the security situation in Israel.
However, as this is an unpredictable event, its continuation or resolution could influence our expectations. We are closely monitoring
political and military developments and assessing their potential impact on our operations, financial performance, and overall business
conditions.
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d. |
On August 25, 2023, the Company received a notification letter from the Nasdaq Staff indicating that we are not in compliance with Nasdaq Listing Rule 5550(b)(1) due to the company’s failure to meet the Minimum Shareholders’ Equity Requirement or any alternatives to such requirement. In order to maintain listing on the Nasdaq Capital Market, the company has submitted a plan of compliance addressing how we intended to regain compliance. The company had until February 21, 2024 to evidence compliance with the Minimum Shareholders’ Equity Requirement. On March 27, 2024, the Company received a delist determination letter (the “Delist Letter”) from the Staff advising the Company that the Staff had determined to delist the Company’s securities from Nasdaq due to its non-compliance with the Equity Rule unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company timely requested a hearing before the Panel. Following the hearing, on June 10, 2024, the Panel granted the Company’s request for continued listing subject to the Company evidencing compliance with the Minimum Shareholders’ Equity Requirement by August 27, 2025. 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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On August 19, 2025, Nasdaq issued a written notice stating that, as of June 30, 2025, the Company was not in compliance with the Minimum Shareholders’ Equity Requirement. Additionally, under Nasdaq Listing Rule 5815(d)(4)(B), the Company remained subject to a mandatory hearing panel monitor through August 27, 2025. As a result, the Company’s securities were subject to delisting unless a timely hearing request was submitted to the Nasdaq Hearing Panel. The Company held its hearing before the Panel on September 30, 2025, during which it presented a plan to demonstrate compliance with the Equity Rule and all other applicable listing criteria. On October 28, 2025, we received a listing decision from Nasdaq notifying us that the Panel determined that the Company evidenced compliance with the Shareholders’ Equity Requirement. The Panel also granted the Company’s request for continued listing on The Nasdaq Capital Market, pursuant to an exception through December 5, 2025, to regain compliance with the bid price requirement set forth in Nasdaq Listing Rule 5550(a)(1). In order to evidence compliance with the bid price requirement, the Company must evidence a closing bid price of at least $1.00 per share for a minimum of 10, but generally not more than 20, consecutive business days. On November 7, 2025, we held a special meeting of shareholders where our shareholders approved, among other things, the Reverse Split. The Reverse Split was effected on November 18, 2025. On December
3, 2025, the Company received formal notice from Nasdaq that the Company has regained compliance with the Bid Price Rule and evidenced
compliance with all other applicable criteria for continued listing on Nasdaq. Accordingly, the previously disclosed listing matter has
been closed. The Company
will remain subject to a one-year “Panel Monitor”, as contemplated by Nasdaq Listing Rule 5815(d)(4)(A), through December
5, 2026. If during that period the Company fails to satisfy any of the criteria for continued listing on Nasdaq, the Staff may not grant
the Company additional time to regain compliance. Rather, Nasdaq will issue a delist determination, which the Company may address by
requesting a new hearing before the Nasdaq Hearings Panel.
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On
February 4, 2026, we received a written notice Nasdaq indicating that the Staff has determined
to delist the Company’s securities from The Nasdaq Capital Market.
As
disclosed in the Notice, the Staff determined that the Company’s common stock failed
to maintain compliance with the Bid Price Rule. While companies are typically afforded a
180-calendar-day compliance period to comply with the Bid Price Rule, the Staff concluded
that the Company is not eligible for the compliance period pursuant to Nasdaq Listing Rule
5810(c)(3)(A)(iv) due to the fact that the Company effected a reverse stock split within
the prior one-year period, specifically a 1-for-10 reverse stock split on November 18, 2025,
and therefore is subject to immediate delisting.
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As further disclosed in the Notice, the Company had the right to request a hearing and that a hearing request would result in a stay of any suspension or delisting action pending the conclusion of the hearings process. Accordingly, on February 11, 2026, the Company requested a hearing before the Panel, which served to stay any further suspension or delisting action through the hearing or any extension the Panel provides following the hearing.
At the hearing, the Company intends to take all reasonable measures available and is going to present a plan to regain compliance with the Bid Price Rule and remain listed on Nasdaq to the Panel. However, there can be no assurance that the Company will be able to regain compliance with the Bid Price Rule or maintain compliance with all other Nasdaq continued listing requirements.
In connection with the Company’s entry into the Common Stock
Purchase Agreement with White Lion as described below, if the Company fails to be listed on the Nasdaq Capital Market, the Commitment
Fee Amount (refer note 11(g)) will increase subject to the terms of the Delisting Penalty Provision in the Common Stock Purchase Agreement.
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e. |
Revision of Prior Period Financial Information
for correction of immaterial misstatement.
The Company revised the classification of certain
placement agent warrants, which had no intrinsic value at issuance, from mezzanine equity to equity. Stockholders’ Equity increased
by $228 as of December 31, 2024. The revision has been reflected in the current and corresponding prior periods. This change resulted
in an increase in shareholders’ equity and had no impact on total assets, total liabilities, or the Company’s results
of operations. The adjustment was determined to be immaterial, and therefore no amendments to previously filed financial statements
were required.
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