| GENERAL |
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 and the Company’s Common Stock commenced listing on the NASDAQ. On April 10, 2026 the Company’s common stock was delisted from Nasdaq and on the same day started trading on the OTC market, operated by OTC Market Group (“OTC”). Effective April 24, 2026, its common stock commenced trading on the OTCQB Venture Market, operated by OTC. For additional information, see Note 1(d). |
| | b. | The Company has incurred significant losses and negative cash flows from operations. For the Three months ended March 31,2026 and March 31,2025, net loss was $2,456 and $1,860, respectively. During the three months ended March 31, 2026, and March 31, 2025, the Company had negative cash flows from operations of $1,902 and $2,174, respectively. As of March 31, 2026, the Company’s accumulated deficit was $54.8 million. The Company has funded its operations to date through equity and debt financing and has cash on hand (including restricted cash equivalents) of $7.5 million and long-term deposits and restricted bank deposits of $193 as of March 31, 2026. 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. 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 additional cost reduction measures 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 condensed 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 launched a series of attacks on civilian
and military targets in Southern Israel and Central Israel, to which the Israel Defense Forces responded. In addition, Iran, Hezbollah
and the Houthi movement attacked military and civilian targets in Israel, to which Israel responded, including through increased air and/or
ground operations in Lebanon, Syria, Yemen and Iran. Following years of conflict in the region, on October 9, 2025, Israel, Hamas, the
United States and other countries in the region agreed to a framework for a ceasefire in Gaza between Israel and Hamas. On February 28,
2026, the United States and Israel launched joint combat operations in Iran to which Iran and Hezbollah responded with ballistic missile
and drone attacks on Israel as well as other countries and U.S. military bases in the region. On April 8, 2026, the United States and
Iran agreed to a two-week ceasefire. How long and how severe the current conflicts in Gaza, Northern Israel, Lebanon, Iran or the broader
region last and become is unknown at this time and any continued clash among Israel, Hamas, Hezbollah, Iran or other countries or militant
groups in the region may escalate in the future into a greater regional conflict.
Although, one employee has been called to reserve
duty in the Israel Defense Forces in March 2026, currently, the Company’s operations and financial results have not been significantly
impacted.
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 overall geo-political 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
condition.
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| | d. | On February 4, 2026,
the Company received a written notice (the “Notice”) from the Nasdaq Listing Qualifications Department of The Nasdaq Stock
Market LLC (“Nasdaq”) indicating that the Nasdaq staff (the “Staff”) had 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 a minimum bid price of $1.00 per share for 30 consecutive business days, in violation of Nasdaq Listing Rule 5550(a)(2) (the
“Bid Price Rule”). While companies are typically afforded a 180-calendar-day compliance period to comply with the Nasdaq
Listing 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 was subject to immediate delisting. The Company requested an appeal hearing, which stayed the suspension and delisting action. At the appeal hearing, the Company presented to the Nasdaq Hearings Panel its plan to regain compliance with the Bid Price Rule. On April 8, 2026, Nasdaq delivered a letter to
the Company confirming to the Company that it had denied the Company’s request for continued listing and therefore that trading
of the Company’s common stock, par value $0.0001 per share (“Common Stock”), would be suspended at the open of trading
on April 10, 2026. As a result, the Company’s Common Stock began trading on the OTC Market starting April 10, 2026.
On April 24, 2026, the Company announced that it had been approved for and commenced trading on the OTCQB Venture Market operated by OTC, effective at the open of business on April 24, 2026. The Company’s common stock continues to trade under the symbol “ASNS.” In connection with the Company’s Common Stock Purchase Agreement with White Lion as described in note 6b below, the Company failed to maintain its listing on the Nasdaq Capital Market. As a result, the Commitment Fee Amount has been increased pursuant to the terms of the Delisting Penalty Provision of such agreement.
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