UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
(Mark
One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to
Commission
File Number: 001-41375
Actelis
Networks, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(510)545-1045
(Registrant’s
Telephone Number, Including Area Code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share ASNS The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2024, the last
business day of the registrant’s most recently completed second fiscal quarter, was approximately 11,077,194 based on the closing
sale price on that date of $2.31. Shares of common stock held by each executive officer and director and by each other person who may
be deemed to be an affiliate of the Registrant have been excluded from this computation. The determination of affiliate status for this
purpose is not necessarily a conclusive determination for other purposes.
As
of March 21, 2025, there were 8,513,181 shares of the registrant’s common stock, par value $0.0001 per share, outstanding,
including treasury shares.
ACTELIS
NETWORKS, INC.
FORM
10-K
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2024
TABLE
OF CONTENTS
PART I
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 20
ITEM 1B. UNRESOLVED STAFF COMMENTS 45
ITEM 1C. CYBERSECURITY 46
ITEM 2. PROPERTIES 46
ITEM 3. LEGAL PROCEEDINGS 46
ITEM 4. MINE SAFETY DISCLOSURES 46
PART II
ITEM 6. [RESERVED] 47
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 56
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1
ITEM 9A. CONTROLS AND PROCEDURES 57
ITEM 9B. OTHER INFORMATION 57
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 57
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 58
ITEM 11. EXECUTIVE COMPENSATION 65
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 74
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 75
SIGNATURES 77
i
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K (the “Annual Report”) contains forward-looking statements. The forward-looking statements are
contained principally in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and “Business.” These forward-looking statements involve a number of risks and
uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results
could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of
future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives,
expectations and intentions, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations,
liquidity, cost savings, objectives of management, business strategies, financing, potential growth and market opportunities, products,
and other statements that are not historical facts.
In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“would,” “expect,” “anticipate” “plan,” “anticipate,” “could,”
“intend,” “target,” “project,” “contemplate,” “believe,” “estimate,”
“predict,” “potential” “possible” or “continue” or the negative of these terms or other
similar expressions. Forward-looking statements contained in this Annual Report include, but are not limited to, statements about:
● our ability to protect our intellectual property and continue to innovate;
● our ability to continue as a going concern;
● our public securities’ potential liquidity and trading; and
Forward-looking
statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the
industry in which we operate and our management’s beliefs and assumptions, and are not guarantees of future performance or development
and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all
of our forward-looking statements in this Annual Report may turn out to be inaccurate. Important factors that may cause actual results
to differ materially from current expectations include, among other things, those listed under “Risk Factors,” Use of Discussion
and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this Annual Report. Potential
investors are urged to consider these factors carefully in evaluating the forward-looking statements. You should read thoroughly this
Annual Report and the documents that we refer to with the understanding that our actual future results may be materially different from
and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The
forward-looking statements included in this Annual Report speak only as of the date of this Annual Report. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity,
performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required
by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes
available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time
with the SEC after the date of this Annual Report. See “Where You Can Find More Information.”
On
April 19, 2023, we effected a reverse stock split of our shares of common stock at the ratio of 1-for-10. Unless indicated otherwise
by the context, all common stock, option, warrant and per share amounts as well as share prices appearing this Annual Report on Form
10-K have been adjusted to give retroactive effect to the stock split for all periods presented.
ii
Item
1. Business
Company
Overview
Actelis
Networks, Inc. (“we,” “the Company”, “Actelis”, “us”, “our”) is a market
leader in cyber-hardened, rapid-deployment networking solutions for wide-area IoT applications including federal, state and local government,
intelligent traffic systems (“ITS”), military, utility, rail, telecom (notably in multi-dwelling units) and campus applications.
Additionally, through our “Cyber Aware Networking” initiative, we provide an AI-based cyber monitoring and protection software-based
system for all edge devices, enhancing network security and resilience and operational continuity.
Our
unique portfolio of hybrid fiber, environmentally hardened aggregation switches, high density Ethernet devices, advanced management software
and AI-based cyber-security offering, unlocks the hidden value of essential networks and the devices they connect, delivering a safe
and cyber-aware connectivity for rapid, cost-effective deployment.
Our
networking solutions use a combination of newly deployed fiber infrastructure and existing copper and coaxial lines which our patented
technology can upgrade to Fiber-grade to jointly create what we believe to be a highly cost-effective, secure and quick-to-deploy network.
Our patent protected hybrid-fiber networking solutions deliver excellent communication over fiber to locations that may be easy to reach
with new fiber. However, for locations that are difficult, or too costly to reach with fiber, we can upgrade existing copper or coax
lines to deliver cyber-hardened, high-speed connectivity without needing to replace the existing infrastructure with new fiber. We believe
that such hybrid fiber networking solutions have distinct advantages in most real-life installations, while providing significant budget
savings and accelerating deployment of modern IoT networks. Based on our experience, most IoT projects have challenging, hard to reach
with fiber locations which may significantly increase such projects’ timeline and budgets. We believe that our solutions can provide
connectivity over either fiber, copper or coax with speeds of up to multi-Gigabit communication, while supporting Fiber-grade reliability
and quality.
A
primary focus of ours is to provide our customers with a cyber-secure network solution. We currently offer Triple-Shield protection of
data delivered with coding, scrambling and encryption of the network traffic. We also provide secure, encrypted access to our network
management software, and are working to further enhance system-level and device-level software protection.
Our
IoT cyber-security software solution implements AI to monitor, identify vulnerabilities and threats, offers or implements automatically
AI generated plans addressing such exposures and constant reporting of all such activities, for the sake of documentation and compliance.
This solution comes with the network itself, and uses the network traffic to become cyber-aware of the risks imminent to the IoT devices
that are connected to that network.
When
high speed, long reach, reliable and secure connectivity is required, network operators usually resort to using wireline communication
over physical communication lines such as fiber, coax and copper, rather than wireless communication that is more limited in performance,
reliability, reach and security. However, new fiber wireline infrastructure is costly to deploy, involves lengthy civil works to install,
and, based on our internal calculations, often accounts for more than 50% of total cost of ownership (ToC) and time to deploy wide-area
IoT projects.
1
Providing
new fiber connectivity to hard-to-reach locations is especially costly and time-consuming, often requiring permits for boring, trenching,
and right-of-way, sometimes done over many miles. Connecting such hard-to-reach locations may cause significant delays and budget overruns
in IoT projects. Our solutions aim to solve these challenges by instantly enhancing performance of such existing copper and coax infrastructure
to fiber-grade performance, through the use of advanced signal processing a unique, patented network architecture, without the need to
run new fiber to hard-to-reach locations; thus, effectively accelerating deployment of many IoT projects, as we estimate, sometimes from
many months to only days. The result for the network owner is a hybrid network that optimizes the use of both new Fiber (where
available) as well as upgraded, fiber-grade copper and coax that is now modernized, digitized and cyber-hardened. This unique hybrid
network approach is making IoT projects often significantly more affordable, fast to deploy and predictable to plan and budget. The same
is correct in multi-dwelling unit buildings where the wiring from the roof (in case of a wireless based connectivity) or from the basement
in case of a wired connectivity to the building. In such cases we utilize existing in-building wiring, preventing the need for brand-new
ones and enables multi-gigabit connectivity to each apartment or suite.
In
addition, our solutions can also provide power over existing copper and coax lines to remotely power up network elements and IoT components
connected to them (like cameras, small cell and Wi-Fi base stations sensors etc.). Connecting power lines to millions of IoT locations
can be costly and very time consuming as well (similar to data connectivity, for the same reason-need for civil works). By offering the
ability to combine power delivery over the same existing copper and coax lines that we use for high-speed data, we believe our solutions
are solving yet another important challenge in connecting hard-to-reach locations. We believe that combining communication and power
over the same existing lines is particularly important to help connect many fifth generation, or 5G, small cells and Wi-Fi base stations,
as high cost of connectivity and power is often slowing their deployment.
Since
our inception, our business was focused on serving telecommunication service providers, also known as Telcos, to provide connectivity
for enterprises and residential customers. Our products and solutions have been deployed with more than 100 telecommunication service
providers worldwide, in enterprise, residential and mobile base station connectivity applications. In recent years, as we have further
developed our technology and introduced additional products, we turned our focus on serving the wide-area IoT, federal and DoD markets,
as well as multi-dwelling units (“MDUs”), and introduced, in 2024, our cyber-aware networking solutions for IoT markets as
well.
Our
operations are focused on our fast-growing IoT, federal and DoD markets, while maintaining our commitment to our existing Telco customers,
and particularly MDUs. In 2024, we introduced new product offering, some of which could serve both the IoT markets and our Telco customers.
In
August 2024, we announced signing a strategic partnership with an advanced cybersecurity provider to develop and deliver a novel, AI-Powered
SaaS offering, under Actelis’ ‘Cyber Aware Networking’ initiative. This software, designed as an intelligence layer
integrated into Actelis’ networking devices, leverages the network’s power and proximity to IoT devices to monitor and protect
physical assets such as cameras, sensors, and other devices at the edge, enabling corrective actions before issues propagate throughout
the network.
We
derive a majority of our revenues from our existing and new IoT (including federal and DoD) customers. For the years ended December
31, 2024 and December 31, 2023, our IoT customers in the aggregate accounted for approximately 72% and 73% of our revenues, respectively.
We
derive a significant portion of our revenues from a limited number of our customers. For the years ended December 31, 2024
and December 31, 2023, our top ten customers in the aggregate accounted for approximately 74% and 66% of our revenues.
2
We have incurred significant
losses and negative cash flows from operations and as of December 31, 2024, we had an accumulated deficit of $44.0 million. We have
funded our operations to date through equity and debt financing and we had cash on hand (including short term bank deposits and restricted
cash equivalents) of $2.3 million and long-term restricted cash and cash equivalents and restricted bank deposits of $0.2 million as of
December 31, 2024. We continue to invest in sales and marketing resources to fuel our growth.
Our
technology is both powerful and compact and is built as a relatively small set of feature-rich network elements, that serve as building
block in many IoT verticals. These elements include switches, typically enhanced with signal processing SW, concentrators, reach extenders,
data encryption elements, power sources and a smart networking software that allows for remote management and monitoring down to the
single element and line performance, configuration management making complex network topologies easy to deploy, analyze, debug and remote
SW download to help with remote handling of large and small networks.
Our
cyber-security solution is SaaS-based. As such, it provides continuous protection through learning of the network and devices it protects,
and constant alerting and review against external data bases of known threats, creating a repeatable, ever-improving protection cycle.
Rapid
Deployment and Lower Cost of Critical Connectivity for IoT
We aim to become the global
leading provider of cyber-secure, cost-effective and quick-to-deploy hybrid networking for all wide-area IoT applications. Our products
work over all types of wireline media on the global data network, whether owned or operated by telecom service providers or a private
network operated by enterprises or government organizations as well as MDU buildings. Our products are structured as building blocks for
most IoT applications and are feature-rich. This allows for one Actelis platform to often replace multiple other platforms available in
the market, allowing for space-saving installation, energy conservation (which we believe results in a more environmentally sustainable
network, through the avoidance of need to add new physical infrastructure), and making network planning easier for our customers. We aim
at having our products installed and help accelerate deployment of wire-area IoT projects and applications everywhere.
For
example, in one of the projects where our solutions are deployed, we found that 70% of locations are easy-to-reach with new fiber optic
installation. Connectivity for such easy-to-reach locations may, as we believe, average $26,000 per mile for new fiber laid on poles,
and can take between days to weeks to connect. However, the remaining 30% of locations were hard-to-reach with new fiber
optics, and accordingly may require boring or trenching to reach IoT sensors or camera locations. Getting fiber to those 30% of hard-to-reach
would require potentially connecting over obstacles, roads, long distances, and may also require obtaining the right of way and permits
for extensive civil works. We believe this aspect of the deployment of new fiber optics may cost up to $400,000 per mile, which for this
particular project would have impacted thousands of miles of roads, resulting in enormous cost, delay and interruption to traffic.
In
another project, we have been selected to provide networking for a major city that has fiber installed to 15% of its traffic junctions,
however 85% of its junctions are connected to low performance copper lines susceptible for bad actors to tamper with. Upgrading the entire
city’s infrastructure to Fiber would have involved major civil works, permit delays and traffic interruptions for months or years,
with a cost that would greatly exceed city’s budget. Our hybrid fiber network allowed for the city to use its 15% fiber deployment,
upgrade instantly the performance of its existing 85% copper lines to fiber-grade and join the two under a comprehensive management and
security software package from Actelis to create one seamless network, while providing major savings of both time and money.
In
another project, we provided our hybrid networking connectivity solution with remote powering over the data lines to 3G and 4G base stations.
Looking forward, we believe that a dense grid of 5G small cells would be required to enable global 5G coverage, which, may accelerate
IoT deployment in many smart city projects and other dense areas. We believe that connecting and powering these 5G small cells to the
network cost effectively and rapidly, in both hard-to-reach and easy-to-reach locations is key to successful and timely deployment for
such network.
In
2022, we released our first product family of hardened, hybrid, encrypted fiber product family with 10Gbps switching capacity.
3
In
2023, we introduced the next-generation product families for hybrid-fiber Gigabit grade connectivity under the product family name, “Gigaline”
or GL. Under the Gigaline families of hybrid-fiber networking solutions for fiber, copper and coax environments, we solved new challenges
faced by our IoT and telecom customers and expanded our offerings.
In
2024, we continued to refine and improve our multi-gigabit products, both hybrid-fiber and fiber-only, enabled their service to more
types of use-cases, and launched the MetaShield cyber-aware networking product family.
Cybersecurity
IoT
networks are vulnerable to cyber-attacks as they often carry data related to critical processes and applications, such as provision of
energy, water, gas and transportation services, to large populations. At the same time, they are often found in the wide range, meaning,
in public locations, adding further risks of tampering and break-ins.
In
August 2024, we signed a strategic partnership with a cyber-security development company, which helped us launch our new cyber-aware
networking solution for IoT networks. In December 2024, we launched our all-new MetaShield SaaS product as a cyber-security solution
that comes from the network itself, and is currently being introduced to our existing and new customers.
Our
products all include cyber safety features that we are constantly developing. They currently include network traffic encryption and coding.
We have developed and implemented a multi-layered “Triple Shield” technology that includes (i) information coding for
resilience and security (for copper wires); (ii) multi-line information scrambling for increased resilience and added security (for
copper wires); and (iii) an additional 256-bit hardware-based real-time encryption of data running over fiber, coax or copper — creating
end-to-end protection for the entire hybrid network. Our network management software is also cyber-hardened and helps protect the system.
Our systems have been selected for deployment in sensitive applications with U.S. DoD and other governments and military organizations,
airports, utility companies, oil and gas companies, smart cities, rail and traffic applications globally.
We
successfully completed the certification of our product lines for Federal Intelligence Protocol Standards (FIPS) 140-2, and we are currently
in the final stages of completing the next FIPS certification (140-3). In 2024, we were approved by the DoD’s Joint Interoperability
Test Command (JITC) for interoperability and cybersecurity, allowing our products to be included in several federal approved product
lists (APL).
Market
Verticals We Address
We
execute our vision through a multi-channel, global approach that combines our expertise, with the expertise of our trusted business partners,
system integrators, distributors, and consultants.
We
operate a vertical-based marketing plan where we dedicate efforts and resources to each vertical. The IoT verticals that we have focused
on include: intelligent transportation systems (ITS), rail, federal and military, airports, energy and water, smart city, education campuses,
industrial campuses, and MDU. The MDU vertical involves providing networking solutions for residential buildings with multiple units,
such as apartment complexes and condominiums. Our products are utilized within networks deployed by cities such as the City of Los Angeles,
the District of Columbia the City of Seattle, the City of Munich, Germany, as well as notable entities such as Highways England, the
Federal Aviation Administration, the U.S. military, including the Air Force, Navy and National Guard, as well as Stanford University.
Our
customers benefit from rapidly and cost-effectively enabling their critical IoT functions such as traffic cameras and smart signaling,
security cameras, smart parking meters and ticketing, rail signaling and control, electrical substation management and protection, military
operations, and many more. Recently, Actelis Networks has secured significant orders and launched groundbreaking solutions like MetaShield,
an AI-based cybersecurity solution, driving SaaS growth and edge infrastructure resilience. To date, we have been most successful in
selling to customers in the intelligent transportation systems, rail, federal and military, airports, and MDU markets, primarily in the
US, Canada, Europe, and Japan.
4
Recent
Trends in our Markets
State
of IoT Connectivity Market, including Federal and DoD
IoT
infrastructure connectivity demand is growing rapidly. We believe there is an urgent need to connect tens of millions of locations with
a fast and secure connection. A huge challenge for IoT projects is that implementing connectivity between different IoT points in a network
can consume the majority of a project’s cost and time to implement, including unpredictable and unanticipated challenges that arise
in each individual project.
According
to a report by Facts and Factors (January 2022) Global Internet of Things (IoT) market is expected to grow to $1.8 trillion
by 2028, at a Compounded Average Growth Rate (CAGR) of 24.5%.
According
to a report by Grand View Research (December 2022), the smart city market for connectivity infrastructure alone is expected to reach
to $6,965.02 billion by 2030 at a CAGR of 25.8%. Accordingly, we believe that the number of IoT applications requiring our fast,
smart, and secure connectivity is immense and provides us with a great market opportunity to grow our business. From smart transportation
systems (smart cameras, smart lights and signals, Vehicle to Everything, or V2X communication) and smart security (cameras and radars),
to smart parking, smart rail, power station monitoring, and industrial and warehouse automation, we believe that we are uniquely positioned
to address all of these applications in a versatile and flexible manner.
We
believe that there is an unserved segment that is extremely large within that market pertaining to the challenges in protecting the interface
between the physical security and the cybersecurity of campuses, enterprises, industrial IoT (IIoT), government facilities, Smart Cities
and utility plants.
In
addition, we are targeting the multi-dwelling, multi-tenant (MDU, MTU) market, which we believe are in dire need for multi-Gigabit connectivity,
and are extremely limited in their ability to invest significant funds to enable such objective. According to the National Multi Family
Council tabulations of 2023 American Community Survey Market Data, by the U.S. service bureau (updated October 2024), there are approximately
23 million apartment units in the U.S. alone, the majority of which were built before the year 2000, and, therefore, do not have built-in
fiber-to-the-apartment infrastructure.
5G
base stations and small cells need to be deployed in a dense grid of millions of locations and need to be connected to Gigabit speed
communication and power. We are addressing these needs for the rapid connectivity and power, aiming at enabling faster and more cost-effective
deployment of 5G in IoT.
Recent
Developments
June
2024 Warrant Inducement
On
June 5, 2024, we entered into an inducement agreement with a certain holder of certain of our existing warrants to purchase up to an
aggregate of 999,670 shares of our common stock originally issued on May 8, 2023, with a five and one-half year term, at an exercise
price of $2.75 per share (the “May 2023 Warrants”).
Pursuant
to the inducement agreement, the holder agreed to exercise for cash its May 2023 Warrants to purchase an aggregate of 999,670 shares
of our common stock at an exercise price of $2.75 per share, in consideration of our agreement to issue new common stock purchase warrants
(the “June 2024 Warrants”), as described below, to purchase up to an aggregate of 1,999,340 shares of our common stock, at
an exercise price of $2.00 per share.
H.C.
Wainwright & Co., LLC (the “Placement Agent”) acted as our exclusive placement agent in connection with the June 2024
Warrant Inducement. In connection with the June 2024 Warrant Inducement, we issued to certain designees of the Placement Agent warrants
(the “June 2024 Placement Agent Warrants”) to purchase up to 69,977 shares of common stock (representing 7.0% of the Existing
Warrants being exercised), which have the same terms as the June 2024 Warrants, except that the Placement Agent Warrants have an exercise
price equal to $3.4375 per share (125% of the exercise price of the May 2023 Warrants). The June 2024 Warrants were immediately exercisable
from the date of issuance, until five and one-half year anniversary of such date for 999,670 of the June 2024 Warrants, and until twenty
four months anniversary of such date for the remaining 999,670 of the June 2024 Warrants. The Placement Agent Warrants are immediately
exercisable from the date of issuance, until the five and one-half year anniversary of such date.
5
The
closing of the June 2024 Warrant Inducement occurred on June 6, 2024.
July
2024 Warrant Inducement
On
June 30, 2024, we entered into an inducement letter with a holder of our June 2024 Warrants, to purchase up to an aggregate of 999,670
shares of the June 2024 Warrants, originally issued on June 6, 2024, with a twenty-four month term, at an exercise price of $2.00 per
share.
Pursuant
to the inducement letter, the holder agreed to exercise for cash its warrants to purchase an aggregate of 999,670 shares of our common
stock at an exercise price of $2.00 per share, in consideration of our agreement to issue new common stock purchase warrants (the “July
2024 Warrants”), as descried below, to purchase up to an aggregate of 1,999,340 shares of our common stock (the “July 2024
Warrant Shares”), at an exercise price of $1.75 per share.
We
engaged the Placement Agent to act as our exclusive placement agent in connection with the July 2024 Warrant Inducement. In connection
with the July 2024 Warrant Inducement, we issued to certain designees of the Placement Agent warrants (the “July 2024 Placement
Agent Warrants”) to purchase up to 69,977 shares of common stock (representing 7.0% of the Existing Warrants being exercised),
which have the same terms as the July 2024 Warrants, except that the Placement Agent Warrants have an exercise price equal to $2.50 per
share (125% of the exercise price of the June 2024 Warrants). The July 2024 Warrants were immediately exercisable from the date of issuance,
until twenty four months anniversary of such date. The July 2024 Placement Agent Warrants are immediately exercisable from the date of
issuance, until the five and one-half year anniversary of such date.
The
closing of the July 2024 Warrant Inducement occurred on July 2, 2024.
September
2024 ATM Agreement
In
September 2024, we entered into the ATM Agreement with H.C. Wainwright & Co., LLC (the “ATM Program”) pursuant to which
we may offer and sell, at our option, up to $3.4 million of our shares of common stock through an at-the-market equity program under
which H.C. Wainwright & Co., LLC agreed to act as sales agent. In March 2025, we increased the at-the-market equity
program by an additional $1.3 million. As of the date of this report, we have sold 2,472,850 of our shares of common stock for total
gross proceeds of approximately $3.4 million under the ATM Program. As of the date of this filing and so long as our public float remains
below $75.0 million, we are subject to limitations pursuant to General Instruction I.B.6 of Form S-3, which limits the amount we can
offer to up to one-third of our public float during any trailing 12-month period.
Nasdaq
Listing Compliance
On
August 25, 2023, we received a notification letter from the Listing Qualifications Staff (the “Staff”) of the Nasdaq Stock
Market LLC (“Nasdaq”) indicating that we are not in compliance with Nasdaq Listing Rule 5550(b)(1) due to our failure to
maintain a minimum of $2,500,000 in shareholders’ equity (the “Minimum Shareholders’ Equity Requirement”) or
any alternatives to such requirement. In order to maintain our listing on the Nasdaq Capital Market, we submitted a plan of compliance
addressing how we intended to regain compliance. On March 27, 2024, we received a delist determination letter from Nasdaq advising us
that the Staff had determined to delist our securities from Nasdaq due to non-compliance with the Minimum Shareholders’ Equity
Requirement, unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). We timely requested a hearing
before the Panel.
On
August 27, 2024, we received formal written notice from Nasdaq confirming that we have evidenced compliance with all applicable criteria
for continued listing on Nasdaq as set forth in Nasdaq Listing Rule 5550, including the Minimum Shareholders’ Equity Requirement.
In accordance with Nasdaq Listing Rule 5815(d)(4)(B), we will remain subject to a panel monitor for equity compliance through August
27, 2025. As of the date of this filing, we are in compliance with the Minimum Shareholders’ Equity Requirement.
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In
addition, on May 20, 2024, Nasdaq notified us that we were not in compliance with the minimum bid price requirements 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. On June 20, 2024, we received
a letter from Nasdaq that, for the 10 consecutive business days from June 5, 2024 to June 28, 2024, the closing bid price of the Company’s
common stock had been at $1.00 per share or greater. Accordingly, we have regained compliance with Nasdaq Listing Rule 5550(a)(2) and
Nasdaq considers the prior bid price deficiency matter now closed.
Our
Solutions
We
have invested nearly $100 million over the years to develop our patented, multi-layered “Triple Shield” technology,
which can serve all connectivity markets. Our Triple Shield technology includes signal processing software that is implementing optimization
of multi-line signal coordination, the elimination of interference to boost connectivity performance, the optimization of coding for
resilience and security, multi-line data scrambling for low latency, increased resilience, and added security. Our solutions also offer
implementation of 256-bit encryption of transmission for data running over fiber or copper for network-wide protection of data. Our technology
is packaged into a small set of compact, hardened, feature-rich network elements (such as switches, concentrators and reach extenders)
— the MetaLIGHT product family — that are used as building blocks addressing the needs of most wide-area IoT
verticals and applications, in a space-and energy-saving fashion. The ability to drive remote powering and synchronization signals to
network ends over existing copper transmission lines provides additional significant cost-and-time benefits to network operators.
In
2023, we introduced the next-generation product families for hybrid-fiber-copper (or in short “hybrid-fiber”) Gigabit grade
connectivity under the product family name, “Gigaline” or GL. Under the Gigaline families of hybrid-fiber networking
solutions for fiber, copper and coax environments, we solved new challenges faced by our IoT and telecom customers and expanded our offerings.
One
such product line, the GL800 aims at extending multi-gigabit fiber-grade connectivity to buildings, enterprises, IoT installations, campuses,
and 5G/4G base stations.
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second product line, the GL900, extends Gigabit connectivity from fiber installations outside buildings (“homes passed” by
fiber) into individual offices and apartments within MDUs and MTUs, without the need for landlord investment in re-wiring buildings with
fiber. MDU/MTU market in the US alone is estimated by the company to include more than 18M buildings.
A
third product group, GL5000 and GL6000, that was introduced in 2023 includes over 40 variants of hardened, 10Gbps fiber switches to expand
our fiber offering into the IoT market.
Our
product offering includes our EMS network management software, providing built-in automation to help configure, manage, monitor, safeguard,
install and maintain complex, hybrid networks of thousands of elements remotely. Our EMS management Software was enhanced to support
these new products and strengthened with advanced security features to support better cyber production and meet DoD demands. Our products
are also built for future integration with enhanced security services we may introduce in the future.
A
fourth product group, MetaShield, that was introduced in 2024, is a cyber-security, cyber-aware networking solution, an AI-powered, asset
intelligence and threat management that comes as part of our networking solutions. Its objective is to continuously monitor IoT devices
for cyber-risks, network behaviors, trends and overall health, to detect cyber attacks and operational anomalies, to document such performance
tracking and provide compliance reports, and to automatically-correct the vulnerabilities, anomalies and attacks that it identifies.
It is a cloud-base Software-as-a-service solution, that can be a stand-alone solution that works on any network, or, integrated with
our networking solutions.
We
aim to continue developing our technology to include more system-wide security and further hybridity across all types of infrastructure.
We will also seek to include cutting-edge computing capabilities to serve all connectivity needs for our IoT customers, in an effective
and easily deployable way, while maintaining our commitment to serve our existing Telco customers.
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We
believe that our strong reputation as a provider of high-quality solutions, and the trust we gain from being recognized as a solid solution
provider by prominent customers (such as the U.S. DoD) help us execute our strategy.
Products
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We
also offer support and maintenance services together with the sales of our product. This includes consulting, telephone troubleshooting
and remote support, training, product repairs, and software updates.
Product
Specifications
Our
products use advanced signal processing implemented at the system level, with an approach that treats multiple copper lines as one multi-line
channel, which we believe to achieve the following benefits:
Supporting
any hybrid combination of new Fiber infrastructure and existing copper and coax infrastructure, supporting data security an encryption
protocols, certified for FIPS by US DoD labs; supporting outdoor hardened environmental requirements dense and compact to save space
and allow for flexible location setting.
In
addition to these main benefits, we have focused our efforts and implemented technologies in our products in order to achieve the following:
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● Integration of remote powering and data on the same copper pairs;
● Minimizing transmission delay to support delay-sensitive applications; and
Since
our inception, our business was focused on serving telecommunication service providers (Telecom), also known as Telcos, for enterprises
and residential customers. Our products and solutions have been deployed with more than 100 telecommunication service providers worldwide,
in enterprise, residential and mobile base station connectivity applications. In recent years, as we have further developed our
technology and rolled out additional products, we turned our focus on serving the IoT markets. Our operations are focused on our fast-growing
IoT business while maintaining our commitment to our existing Telecom customers.
Our
Competitive Advantage
We
have invested heavily and over more than 10 years in the development of copper technologies and hybrid-fiber communication systems
to create a solution that enables high-speed communication over real-life networks of mixed media, securely, reliably, and with Gigabit-grade
resilience.
Copper
and coax lines are readily available in billions of locations. They are often buried in the ground, running in the walls of buildings
or hanging from telephone poles, in bundles of tens or hundreds of wires.
Copper
wires were never designed for long-reach, secure, high-speed communication. Attempts to deliver high-speed would encounter many problems,
including signal attenuation, cross-talk interference from other lines in the Bundle and from any external electrical sources, variable
quality and signal interruptions, and variable latency. Such wires are also relatively easy to tap into physically, and the information
is also radiated outside of the cable and may be exposed to security threats.
In
order to correct the issues with providing high speed communications over copper wiring, we developed technologies utilizing a multi-line
approach, encoding, scrambling and processing the signals at system level (rather than at the single lines level), and finally also offering
data encryption, to combat interference, electromagnetic noise, and issues with copper line quality and data security.
The
next step was to integrate our existing technologies into hybrid-fiber building blocks, that provide seamless communication over mixed,
real-life fiber-copper-coax networks, and many other advantages.
We
believe our products offer a unique solution on the market in terms of value, by providing the following:
● High performance hybrid-fiber communication system
● Speeds from 10Mbps to 10Gbps
● Reach of up to 100Km (speed declines over long distances in copper)
Rapid
installation in hours vs. weeks or months if new infrastructure is needed
● Cyber-protection on several levels, including Triple Shield Protection:
● Multi-line data scrambling and coding (copper)
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● 256-bit system-wide encryption
Military — grade,
DoD certified FIPS cyber protection
● Advanced switching functions supporting complex network topologies
● Power feeding for cameras and other IoT devices with the data cable
● Routing functions
We
believe that the combination of these advantages provides our customers with a highly cost-effective solution to quickly obtain IoT connectivity
anywhere in their network.
We
believe that our hybrid-fiber solutions have a significant competitive advantage in several layers: (a) copper performance (speed,
reach, link stability and data security); (b) seamless fiber-copper-coax integration and end-to-end data encryption; (c) overall
system cyber-hardened design; (d) versatile, compact and feature-dense products with a good fit to the vast majority of applications;
(e) very high product and transmission reliability; automatic configuration tools and advanced management of every element in the
field; and (f) highly cost-effective when compared to alternatives. We believe that these advantages lead to very good value for
our customers for both rapid deployment to all locations, regardless of whether these locations are hard to reach. We also believe that
these characteristics provide us with a competitive advantage against many, if not all, companies in our space, such as Cisco, Rad, Nokia,
Siemens, Belden and others.
We
have hundreds of large, medium and small network operators as end users of our products, including municipalities, railway, airports,
electricity, water infrastructure companies as well as other governmental agencies and military customers. We believe that we enjoy a
strong reputation for offering reliable, high-performance and high-end products. We expect that the acceptance process for our new products
for existing customers will become simpler due to customers positive accumulated experience working with us. We also have many non-exclusive
third-party distributors, resellers and system integrators and partners around the world, located in the U.S., Canada, Philippines, Germany,
Italy, Spain, Scandinavian countries, Greece, Netherlands, Japan and India. These non-exclusive third-party distributors are used to
selling our products, and we believe that they appreciate the reliability of our products and the quality of service and support that
we provide. All of these advantages constitute an entry barrier, which we believe may make it more difficult for a competitor to reach
a similar status.
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We
believe that over the past years, we have built a reputation for providing, according to our customers, reliable, high-quality communication
solutions with better copper and hybrid fiber performance than other alternatives on the market. A competitor who wants to enter the
market will have to compete with our reputation, which has been acquired over a long period by providing long-term quality service to
hundreds of network operators and hundreds of thousands of end customers and IoT elements.
Our
Sales and Marketing Strategy
We
operate through two regions — Americas and International (consisting of EMEA, or Europe, Middle East and Africa, and
APAC, or Asia Pacific) in a matrix with a vertical structure that is described below. Our sales and support teams are currently located
in the United States, Mexico, Germany, Israel, and India. We also execute our sales and marketing plan through a multi-channel by
vertical global approach that combines our expertise with the expertise of our trusted business partners. Our current business partners,
as well as the partners we will seek in the future, are system integrators, distributors, contractors, resellers, and consultants. Our
business partners are currently located in North America, Central America, Europe, India, Singapore, China, Australia, Vietnam and Japan.
Once we identify a relevant business opportunity in a new territory, we seek to partner with local business partners or agents. We believe
our strong brand name of high-quality communication solutions, as well as the credibility we gain with esteemed customers such as the
U.S. DoD, enhances our ability to provide our products and services. For example, we achieved UL laboratories compliance with FIPS 140-2
cybersecurity standard required by the United States Department of Defense (the “DoD”) and the Joint Interoperability
Test Command (JITC) labs approval of the Company’s products for cybersecurity and interoperability, putting the products in the
DoD Approved Products List (APL).
We
operate a vertical-based marketing plan where we dedicate tailored solutions and individual resources to each specific vertical. Our
verticals include Intelligent Traffic Systems (ITS), rail, smart city, Telecom, utilities, federal and military.
ITS