| 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 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 1(d) below
for further details. |
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b. |
Following the December 2019 outbreak of Coronavirus (COVID-19) in China and after its spread into a large
number of other countries, economic activity has suffered in many regions of the world, including in all markets of the Company (Americas,
Europe and Asia as well as specifically Israel). Among other things, the pandemic disrupted supply chains, suppressed the volume of global
transportation activity, prompted the Israeli and other governments worldwide to put in place restrictions on movement and employment,
and resulted in a drop in the values of financial assets and commodities on global markets. As a result, the Company suffered and continues
to suffer from delays in realization of new orders from its customers due to continued supply shortages and from price increases of raw
material and other resources. To date, the Company adhered to all state and federal social distancing requirements while prioritizing
health and safety for its employees. |
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c. |
The Company has suffered recurring losses from operations, has an accumulated deficit as of June 30, 2022,
and December 31, 2021 as well as negative cash outflows from operating activities. The Company monitors its cash flow projections on a
current basis. As of the date of issuance of these condensed consolidated financial statements, as a result of the May Initial Public
Offering (“IPO”) transaction discussed in 1(d) below the Company believes it has the ability to fund its planned operations
for at least the next 12 months. However, the Company expects to continue incurring losses and negative cash flows from operations and
working capital until its products reach commercial profitability. Therefore, in order to fund the Company’s operations and working
capital until such time that the Company can generate substantial revenues, the Company may need to use proceeds from raised capital. |
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d.
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Initial Public Offering |
On May 17, 2022,
the Company finalized its IPO offering of an aggregate of 4,212,500 shares of common stock, including the partial exercise by the underwriter
of its option to purchase 462,500 additional shares of common stock, at a price to the public of $4.00 per share.
The net proceeds
from the offering, including the over-allotment, to the Company were approximately $15.4 million, after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company amounting to approximately $1.4 million.
As a result of the
IPO, the Company issued common stock in the transactions described below:
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a. |
Convertible preferred stock - the Company issued 7,731,043 common stock (on a one (1) for
one (1) basis, pursuant to the conversion provisions of the Series A and Series B Preferred Stock agreements). Upon the conversion,
the Company reclassified the Convertible Preferred stock at its carrying amount, from temporary equity, into permanent equity. |
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b. |
Convertible loan agreement (“CLA”) (see Note 5) – the Company issued 1,638,161
shares of common stock. pursuant to the conversion features of the loan agreement, the Company reclassified the Convertible loan’s
carrying amount (which reflected its then current fair value), into shareholders’ equity. |
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c. |
Convertible notes (see Note 4) - The Company issued 900,096 shares of common stock pursuant to the conversion features of the
note agreements issued during December 2021 and April 2022. |
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d. |
Warrants (See Note 6): |
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a. |
The Company issued 617,567 shares of common stock as a result of the exercise provisions of the detachable
warrants granted to Mizrahi-Tefahot Bank as part of the Company’s financing agreement with Bank Mizrahi. |
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b. |
The Company issued 180,000 shares of common stock to Migdalor as a result of the exercise provisions of
the detachable warrants granted to Migdalor as part of the loan agreement with Migdalor. |
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c. |
The Company redeemed 1,783,773 shares of non-voting common stock at their par value, removing the stock
from shareholders’ equity. |
Additionally, concurrently
with the IPO and in connection with the consummation of the IPO, the Company issued common stock warrants to the underwriters. The warrants
are exercisable into 294,875 of the Company’s common shares for an exercise price of $5 per share and can be exercised at any time
during a period of 5 years from the issuance date (i.e. until May 17, 2027). The Warrants are classified as equity based on the guidance
provided under ASC 718-10.
As of the issuance date,
the fair value of the warrants was estimated at $145. The valuation was based on a Black-Scholes option-pricing model, using an expected
volatility of 54%, a risk-free rate of 3.01%, an expected term of 5 years, an expected dividend yield of 0% and a stock price at the issuance
date of $1.95.
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