NOTE 1 - GENERAL:
|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,
copper networking solutions for IoT and Telecommunication companies. The Company's customers include providers of telecommunication services
and 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 completed its IPO. See note 2 below for further details.
December 2019, a novel coronavirus disease, or COVID-19, was first reported and on March 11,
2020, the World Health Organization characterized COVID-19 as a pandemic. The widespread health crisis is adversely affecting the broader
economies, financial markets and overall demand environment for many of the Company’s products.
The Company’s operations and
the operations of the Company’s suppliers, channel partners and customers were disrupted to varying degrees by a range of external
factors related to the COVID-19 pandemic, some of which are not within the Company’s control. Many governments imposed, and may
yet impose, a wide range of restrictions on the physical movement of people in order to limit the spread of COVID-19. The COVID-19 pandemic
has had, and likely will continue to have, an impact on the attendance and productivity of the Company’s employees, and those of
our suppliers, channel partners or customers, resulting in negative impacts to the Company’s results of operations and overall financial
performance. We suffered delays in realization of certain new orders from customers, delay in testing of some new technologies in customer
premises and difficulty conducting business development activities in an effective way (face-to-face). In addition, we had to increase
credit lines by $2.0 million in 2021 to support the loss of revenue and profit. Additionally, COVID-19 has resulted, and likely will continue
to result, in delays in non-residential construction, non-crisis-related IT purchases, electronic components including chip manufacturing
and project completion schedules in general, all of which can negatively impact results in both current and future periods.
The duration and extent of the impact
from the COVID-19 pandemic or any future epidemic or pandemic depends on future developments that cannot be accurately predicted at this
time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the effects of measures
enacted by policy makers and central banks around the globe, and the impact of these and other factors on the Company’s employees,
customers, channel partners and suppliers. If we are not able to respond to and manage the impact of such events effectively, our business
will be affected.
|The Company has incurred
significant losses and negative cash flows from operations and incurred losses of $3,488 and $10,982 for the six months ended June 30,
2023 and the year ended December 31, 2022, respectively. During the six months ended June 30, 2023 and the year ended December 31, 2022,
the Company had negative cash flows from operations of $2,939 and $7,768, respectively. As of June 30, 2023, the Company’s accumulated
deficit was $36,890. The Company has funded its operations to date through equity financing and has cash on hand (including short term
deposits and restricted bank deposits) of $3,836 and long-term deposits, restricted bank deposits and restricted cash of $4,444 as of
June 30, 2023. 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 increase revenues by attracting and expanding its customer base or reducing cost structure. If the Company is not successful
in generating sufficient cash flow or completing additional financing, then it will need to execute a cost reduction plan that has been
prepared. The Company’s transition to profitable operations is dependent on generating a level of revenue adequate to support its
cost structure. The Company expects to fund operations using cash on hand, through operational cash flows and raising additional proceeds.
There are no assurances, however, that the Company will be able to generate the revenue necessary to support its cost 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 the time in which it has to accomplish them and
has determined that the Company has sufficient resources to meet its operating obligations for at least one year from the issuance date
of these condensed consolidated financial statements.