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spk01: Good day and thank you for standing by. Welcome to the Actelis Network's third quarter 2022 earnings conference call. All participants are in a listen-only mode. As a reminder, this call is being recorded. Joining us today from Actelis are Tuvia Barleth, CEO, and Yoav Efron, CFO. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, including but not limited to statements of expectations, future events, or future financial performance. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties. including those identified in the risk factor section of our final prospectus filed pursuant to Rule 424 with the SEC. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, November 11, 2022. Finally, I would like to remind everyone that this conference call is being webcast, and a recording will be made available for replay on our investor relations website at ir.actelis.com. I will now turn the call over to our CEO, Tuvia Barlev. Tuvia?
spk07: Thank you, operator.
spk06: Welcome, everyone, and thank you for joining us today on our earnings call. Recognizing that some of you might still be new to the Actelis story, I'd like to begin today's discussion with a brief overview of who we are. Then, I'll review our operational updates and financial highlights for the three and nine months ended September 30, 2022, before turning the call over to Aptel's CFO, Yoav Efron, to discuss financial results. After that, I'll share some closing remarks. At Actelis, our mission is to enable rapid deployment of fast, cyber-hardened, cost-effective IoT networking over wide areas such as cities, campuses, industrial plants, airports, military bases, roads, and rail systems. Our networking solutions use a hybrid combination of newly deployed fiber infrastructure and existing copper and coaxial lines in the ground that we are able to enhance to fiber-like performance to significantly cut costs and speed up deployment of secure IoT networks, accelerating IoT projects across the world and making them more affordable and predictable to plan and implement, even in hard-to-reach locations. We achieved that by applying our unique single-processing software package to existing infrastructure lines that are readily available in the billions, and by doing so, making the existing lines deliver fast, secure, and reliable data to IoT devices such as cameras, sensors, parking meters, and other smart IoT devices, eliminating the need for expensive and time-consuming civil works to deploy new fiber to hard-to-reach locations. Using our unique signal processing software package, we're able to operate on such existing copper lines at highly accelerated speeds at much longer distances and reach secure fiber-grade communication quality instantly, and has virtually no spending on civil works. Our software packages also offer smart management of large IoT networks and automation of networking services across wide areas such as cities, industrial parks, airports, and highway systems, which saves our customers much headache and manual labor. Our software package implements our triple-shield end-to-end network security to protect critical IoT data, utilizing a powerful combination of coding and encryption technologies as applicable on both new and existing infrastructure within the hybrid fiber-copper network. Actelis' solutions also provide optionally remote powering to IoT over the same existing copper line to IoT devices without the need to deploy new and extensive powering networks. Our solutions have been tested for performance and security by the U.S. Department of Defense Laboratories, approved for deployment, and already deployed with U.S. federal governments and U.S. defense forces, as well as with various IoT operators across the world for mission-critical applications. Now, let me share some operational updates. Octelix continues to invest in generating more sales, growth, creating company awareness, building strategic channel partnerships, and developing new products and services. We strengthened our marketing team with the hiring of Sean Wren in August to the role of Global Vice President of Marketing and Communications. Sean spent the last 14 years leading the marketing efforts for parking and transit giant Flowbird, formerly known as Parkion, in local government and public transportation across the nation. Sean's impact is already felt and we're leveraging his expertise in those critical target markets. We exhibited in 14 conferences and trade shows during Q3 of 2022 focused on intelligent traffic systems or IPS, federal military and telecommunications, including major conferences such as IPS World Congress and ISE Expo 2022. This compared to a handful of shows in both first two quarters of 2022 combined. We're getting good feedback and a high level of interest in these shows. Actelis also strengthened its sales and marketing team with the hiring of Michael Mercier, director of ITS and local government sales. Michael joined Actelis in August and has over 15 years of experience in technology sales with a focus on government agencies. He previously worked for Panasonic and Havis and is focused on the ITS local government verticals for ourselves. We continue to work on the expansion of channel and distribution coverage in many countries and verticals. Specifically, we have signed resale and distribution contracts with new partners in various countries in Asia, such as Singapore, Vietnam, Malaysia, and India, as well as in the U.S. and Europe, and we have many more underway. we announced our new partnership with Norseman, a U.S.-based federal and military system integrator who now has our product and services portfolio included in the SEWP acquisition contract by all federal and military agencies, including NASA. Kevin Foster has joined our close advisory board, bringing with him more than 30 years of experience in technology architecture innovation in networking technologies and standard development, following his career in British Telecom as well as Chairman and President of the Global Broadband Forum.
spk07: Moving on to financial highlights.
spk06: During the first nine months of 2022, we grew sales delivery to IoT customers by 45% compared to the first nine months of the 2021. fueled by continuous investment in sales and marketing personnel and operations to further promote strong organic growth in our IoT client base. Our backlog of customer open orders continues to be strong at 3.9 million as of September 30, 2022, of which 84% is attributable to IoT customers. Our revenue increased 5% year-over-year to 6.3 million for the first nine months ended September 30, 2022. While we managed to deliver 59% of our December 31st, 2021 backlog of open orders driving this revenue growth, backlog remains high, which will continue to help us going forward. With that, I will turn the call over to our CFO, Yoav Efron, to discuss the financial results in greater detail. Yoav?
spk04: Thank you, Tuvian. Before I provide an overview of our financial performance in the third quarter and the first nine months of 2022, I'd like to provide a brief summary of our balance sheets. The company reported a balance sheet with 16.3 million of total assets compared to 4.7 million as of December 31, 2021, 10.8 million of total liabilities compared to 18.7 million as of December 31, 2021, and 5.5 million of shareholders' equity. compared to a capital deficiency of negative $19.6 million as of December 31, 2021. This was a result of the funding of $15.4 million net proceeds from the IPO after deducting underwriters discounts and commissions, 1.4 million, off of which 14.4 million became available to the company after paying IPO related expenses. And also as a result, of the fact we converted all our convertible loans, convertible preferred shares, and virtually all the outstanding warrants we had. During 2020, 2021, and the first six months of 2022, we incurred significant financial expenses as those loans and warrants appreciated. But since most of our convertible loans and nearly all warrants converted to equity, we do not expect material financial expenses from these loans and warrants in future periods. During Q3, we incurred significant purchase price variance of $164,000 for premium purchases of components that are in interim shortage. We diligently continue to search and find components to fill the current shortages, and in order to get them, we had to incur these costs. Some of these costs will help us achieve deliveries in the fourth quarter of this year and into 2023. Turning now to our financial results for the three and for the nine months ended September 30th, 2022. Revenues for the three months ended September 30th, 2022 amounted to 1.35 million compared to 1.4 million for the three months ended September 30th, 2021. The decrease is primarily driven by logistical delays in customer shipments. Revenues for the nine months ended September 30th, 2022 amounted to 6.3 million compared to 6 million for the nine months ended September 30th, 2021, representing an increase of 5%. The increase from the corresponding period was primarily attributable to an increase of $650,000 of revenue generated from the Europe, the Middle East, and Africa, offset by a decrease of 348,000 in revenues generated from North America and Asia Pacific. Cost of revenues for the three months ended September 30th, 2022 amounted to 0.8 million compared to 0.9 million for the three months ended September 30th, 2021. Cost of revenues for the nine months ended September 30th, 2022 amounted to 3.3 million compared to 3.0 million for the nine months ended September 30th, 2021. The increase from the corresponding period was mainly due to the increase in revenues as well as the change in the product mix and an increase in purchase price variance of the cost of components and manufacturing driven by supply shortages and shipment costs. Gross profits amounted to 0.5 million compared to 0.5 million for the three months ended September 30th, 2021. Gross profit for the nine months ended September 30th, 2022 was 3 million or 48% of revenue compared to 3 million or 50% of revenue for the nine months ended September 30th, 2021. The decrease in gross margin percentage primarily driven by purchase price variance of components and the current inflationary environment driving logistics and other costs up. Research and development expenses for the three months ended September 30th, 2022 amounted to 0.7 million compared to 0.6 million for the three months ended September 30th, 2021. The increase was mainly due to the acceleration of investments, primarily an increase in payroll expense in the amount of 131,000 in research and development. Research and development expenses for the nine months ended September 30th, 2022 amounted to 2.0 million compared to 1.8 million for the nine months ended September 30th, 2021. The increase was mainly due to the acceleration of investments, primarily an increase in payroll expenses in the amount of $230,000. Sales and marketing expenses for the three months ended September 30th, 2022 amounted to 0.8 million compared to 0.6 for the three months ended September 30th, The increase from the corresponding period was mainly associated with increased investments in sales and marketing, specifically in payroll expenses in the amount of $97,000, mainly due to hiring of sales and marketing employees, an increase in travel expense in the amount of $66,000, offset by a decrease in professional services in the amount of $42,000. Sales and marketing expenses for the nine months ended September 30th, 2022 amounted to $2.4 million compared to $1.6 million for the nine months ended September 30th, 2021. The increase in comparison with the corresponding period was mainly associated with increased sales compensation due to higher revenue of $192,000, increased investments in sales and marketing specifically in payroll expenses in the amount of $382,000 due to hiring of sales and marketing employees, increase in other professional services in the amount of 41,000, and increase in travel expenses in the amount of $138,000. General and administrative expenses for the three months ended September 30, 2022 amounted to 1.0 million compared to 0.3 million for the three months ended September 30th, 2021. The increase was mainly due to payroll and professional services expenses attributed to operating as a public company following our IPO completed in May 2022. General and administrative expenses for the nine months ended September 30th, 2022 amounted to 2.7 million compared to 0.9 million for the nine months ended September 30th, 2021. The increase was mainly due to payroll and professional services expenses attributed to the work on the IPO in the amount of $1 million, completed in May 2022, as well as to operating as a public company. Operating loss for the three months ended September 30, 2022, was $2.0 million, compared to an operating income of $0.9 million for the three months ended September 30, 2021. The increase was mainly due to higher expenses associated primarily with investment in sales and marketing and expenses attributed to operating as a public company. Operating loss for the nine months end of September 30th, 2022 was 4.1 million compared to an operating loss of 1.3 million for the nine months end of September 30th, 2021. The increase was mainly due to a delay in supply due to shortages, as well as higher expenses associated primarily with investment in sales and marketing, and expenses attributed to the IPO completed in May 2022, as well as operating as a public company. Financial expense net for the three months ended September 30, 2022, was .2 million compared to .3 million for the three months ended September 30th, 2021. The decrease is attributed mostly to a gain from exchange rate differences. Financial expenses net for the nine months ended September 30th, 2022 was 4.4 million compared to .6 million for the nine months ended September 30th, 2021. During the nine months ended September 30th, 2022, We incurred financial expenses mainly due to increases in fair value of various financial instruments, such as convertible loans, notes, and warrants in the amount of 4.5 million up until the IPO when such instruments converted to equity and had income in the amount of 0.7 million from exchange rate differences. Since all convertible loans and nearly all warrants we had outstanding converted to equity in connection with the IPO, We do not expect additional material financial expenses going forward for these loans and warrants compared to those we incurred in 2020, 2021, and the first two quarters of 2022. Net loss for the three months ended September 30th, 2022 was $2.2 million compared to net loss of $1.2 million for the three months ended September 30th, 2021. The increase was primarily due to the increase in operating expenses, mainly due to investment in sales and marketing, as well as expenses attributed to operating as a public company. Net loss for the nine months ended September 30, 2022, was $8.5 million, compared to net loss of $1.9 million for the nine months ended September 30, 2021. The increase was primarily due to increase in financial expenses resulting from the increases in fair value of various financial instruments, as well as an increase in operating expenses, mainly due to investment in sales and marketing, as well as expenses attributed to our IPO in May 2022, and to operating as a public company. Adjusted EBITDA loss, a non-GAAP measurement of operating performance, reconciled in our press release to net loss for the three months ended September 30th, 2022, was $1.7 million, compared to 0.8 in the comparable year-ago period. This was primarily a result of the increase in our sales and marketing investment, as well as reduction of gross margin due to component, manufacturing, and logistics costs, as well as the cost we incur by operating as a public company. Non-GAAP adjusted EBITDA loss was $2.6 million for the nine months ended September 30, 2022, compared to 0.7 million EBITDA loss in the comparable year-ago period. This was primarily a result of the increase in our sales and marketing investments, as well as a reduction of gross margin due to component manufacturing logistics costs, as well as the cost we incur by operating as a public company. That completes my summary, and I would like to turn the call back over to Tuvia for closing comments. Tuvia?
spk07: Thank you, Yoav.
spk06: Through our recent investments, we've been gaining strong momentum across all key verticals from a business development perspective as well as a marketing perspective. Actelis is moving fast to increase its market presence and impact in many markets and verticals. Since the beginning of 2022, we nearly doubled our America's sales and marketing team, launched aggressive digital and tangible marketing plans, and added multiple channel partners and resellers. New, powerful products have been launched with faster speeds and better cyber protection capabilities, and much progress has been made on closing the gap in component shortages and backlog delivery catch-up, clear nearly 60% of the backlog from the beginning of the year. For our engagement with existing and new partners and customers, I'm pleased with the strong interest we're gaining. We're excited by the prospects of our company resulting from U.S. federal, state, and local agencies, as well as airports, transportation, and utility companies, increasing their demand for IoT digitization. They are seeking solutions that are rapid to deploy and highly cost-effective. As our offering enables highly efficient use of existing infrastructure, it meets their needs to move rapidly, grow and conserve budgets at the same time. Despite the challenging economic climate, Worldwide investments in our target verticals continue to grow. We are very excited to help our customers extend and do more with their budgets and move faster towards the digital world. I want to thank our dedicated and growing team for their ongoing contributions and our customers' community for their continued partnership. Our goal is to make you successful. I also want to thank our investors for their continued support. Thank you all for joining us today. This is truly an exciting time for Actelis.
spk07: Operator?
spk01: Thank you for joining us today for Actelis Network's fiscal third quarter 2022 earnings conference call. You may now disconnect. Thank you. music music Good day and thank you for standing by. Welcome to the Actelis Network's third quarter 2022 earnings conference call. All participants are in a listen-only mode. As a reminder, this call is being recorded. Joining us today from Actelis are Tuvia Barleth, CEO, and Yoav Efron, CFO. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements. including but not limited to statements of expectations, future events, or future financial performance. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factor section of our final prospectus filed pursuant to Rule 424 with the SEC. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, November 11, 2022. Finally, I would like to remind everyone that this conference call is being webcast, and a recording will be made available for replay on our investor relations website at ir.actelis.com. I will now turn the call over to our CEO, Tuvia Barlev. Tuvia?
spk06: Thank you, operator. Welcome, everyone, and thank you for joining us today on our earnings call. Recognizing that some of you might still be new to the Actelis story, I'd like to begin today's discussion with a brief overview of who we are. Then, I'll review our operational updates and financial highlights for the three and nine months ended September 30, 2022, before turning the call over to Aptel's CFO, Yoav Efron, to discuss financial results. After that, I'll share some closing remarks. At Actelis, our mission is to enable rapid deployment of fast, cyber-hardened, cost-effective IoT networking over wide areas such as cities, campuses, industrial plants, airports, military bases, roads, and rail systems. Our networking solutions use a hybrid combination of newly deployed fiber infrastructure and existing copper and coaxial lines in the ground that we are able to enhance to fiber-like performance to significantly cut costs and speed up deployment of secure IoT networks, accelerating IoT projects across the world and making them more affordable and predictable to plan and implement, even in hard-to-reach locations. We achieved that by applying our unique single-processing software package to existing infrastructure lines that are readily available in the billions, and by doing so, making the existing lines deliver fast, secure, and reliable data to IoT devices such as cameras, sensors, parking meters, and other smart IoT devices, eliminating the need for expensive and time-consuming civil works to deploy new fiber to hard-to-reach locations. Using our unique signal processing software package, we're able to operate on such existing copper lines at highly accelerated speeds at much longer distances and reach secure fiber-grade communication quality instantly and has virtually no spending on civil works. Our software packages also offer smart management of large IoT networks and automation of networking services across wide areas such as cities, industrial parks, airports, and highway systems, which saves our customers much headache and manual labor. Our software package implements our triple-shield end-to-end network security to protect critical IoT data, utilizing a powerful combination of coding and encryption technologies as applicable on both new and existing infrastructure within the hybrid fiber-copper network. Actelis' solutions also provide optionally remote powering to IoT over the same existing copper line to IoT devices without the need to deploy new and extensive powering networks. Our solutions have been tested for performance and security by the U.S. Department of Defense laboratories approved for deployment and already deployed with U.S. federal government and U.S. defense forces, as well as with various IoT operators across the world for mission-critical applications. Now, let me share some operational updates. Octelix continues to invest in generating more sales, growth, creating company awareness, building strategic channel partnerships, and developing new products and services. We strengthened our marketing team with the hiring of Sean Wren in August to the role of Global Vice President of Marketing and Communications. Sean spent the last 14 years leading the marketing efforts for parking and transit giant Flowbird, formerly known as Parkion, in local government and public transportation across the nation. Sean's impact is already felt and we're leveraging his expertise in those critical target markets. We exhibited in 14 conferences and trade shows during Q3 of 2022 focused on intelligent traffic systems or IPS, federal military and telecommunications, including major conferences such as IPS World Congress and ISE Expo 2022. This compared to a handful of shows in both first two quarters of 2022 combined. We're getting good feedback and a high level of interest in these shows. Actelis also strengthened its sales and marketing team with the hiring of Michael Mercier, director of ITS and local government sales. Michael joined Actelis in August and has over 15 years of experience in technology sales with a focus on government agencies. He previously worked for Panasonic and Havis and is focused on the ITS local government verticals for Actelis. We continue to work on the expansion of channel and distribution coverage in many countries and verticals. Specifically, we have signed resale and distribution contracts with new partners in various countries in Asia, such as Singapore, Vietnam, Malaysia, and India, as well as in the US and Europe, and we have many more underway. In October, we announced our new partnership with Norseman, a U.S.-based federal and military system integrator who now has our product and services portfolio included in the SEWP acquisition contract by all federal and military agencies, including NASA. Kevin Foster has joined our close advisory board, bringing with him more than 30 years of experience in technology architecture innovation in networking technologies and standard development, following his career in British Telecom as well as Chairman and President of the Global Broadband Forum.
spk07: Moving on to financial highlights.
spk06: During the first nine months of 2022, we grew sales delivery to IoT customers by 45% compared to the first nine months of the 2021. fueled by continuous investment in sales and marketing personnel and operations to further promote strong organic growth in our IoT client base. Our backlog of customer open orders continues to be strong at 3.9 million as of September 30, 2022, of which 84% is attributable to IoT customers. Our revenue increased 5% year-over-year to 6.3 million for the first nine months ended September 30, 2022. While we managed to deliver 59% of our December 31st, 2021 backlog of open orders driving this revenue growth, backlog remains high, which will continue to help us going forward. With that, I will turn the call over to our CFO, Yoav Efron, to discuss the financial results in greater detail. Yoav?
spk04: Thank you, Tuvian. Before I provide an overview of our financial performance in the third quarter and the first nine months of 2022, I'd like to provide a brief summary of our balance sheets. The company reported a balance sheet with $16.3 million of total assets compared to $4.7 million as of December 31, 2021, $10.8 million of total liabilities compared to $18.7 million as of December 31, 2021, and $5.5 million of shareholders' equity compared to a capital deficiency of negative $19.6 million as of December 31, 2021. This was a result of the funding of $15.4 million net proceeds from the IPO after deducting underwriters discounts and commissions, $1.4 million, off of which $14.4 million became available to the company after paying IPO-related expenses, and also as a result, or the fact we converted all our convertible loans, convertible preferred shares, and virtually all the outstanding warrants we had. During 2020, 2021, and the first six months of 2022, we incurred significant financial expenses as those loans and warrants appreciated. But since most of our convertible loans and nearly all warrants converted to equity, we do not expect material financial expenses from these loans and warrants in future periods. During Q3, we incurred significant purchase price variance of $164,000 for premium purchases of components that are in interim shortage. We diligently continue to search and find components to fill the current shortages, and in order to get them, we had to incur these costs. Some of these costs will help us achieve deliveries in the fourth quarter of this year and into 2023. Turning now to our financial results for the three and for the nine months ended September 30th, 2022. Revenues for the three months ended September 30th, 2022 amounted to 1.35 million compared to 1.4 million for the three months ended September 30th, 2021. The decrease is primarily driven by logistical delays in customer shipments. Revenues for the nine months ended September 30th, 2022 amounted to 6.3 million compared to 6 million for the nine months ended September 30th, 2021, representing an increase of 5%. The increase from the corresponding period was primarily attributable to an increase of $650,000 of revenue generated from the Europe, the Middle East, and Africa, offset by a decrease of 348,000 in revenues generated from North America and Asia Pacific. Cost of revenues for the 3 months ended September 30, 2022 amounted to 0.8 million compared to 0.9 million for the 3 months ended September 30, 2021. Cost of revenues for the 9 months ended September 30, 2022 amounted to 3.3 million compared to 3.0 million for the 9 months ended September 30, 2021. The increase from the corresponding period was mainly due to the increase in revenues as well as the change in the product mix and an increase in purchase price variance of the cost of components and manufacturing driven by supply shortages and shipment costs. Gross profits amounted to 0.5 million compared to 0.5 million for the three months ended September 30th, 2021. Gross profit for the nine months ended September 30th, 2022 was 3 million or 48% of revenue compared to 3 million or 50% of revenue for the nine months ended September 30th, 2021. The decrease in gross margin percentage primarily driven by purchase price variance of components and the current inflationary environment driving logistics and other costs up. Research and development expenses for the three months ended September 30th, 2022 amounted to 0.7 million compared to 0.6 million for the three months ended September 30th, 2021. The increase was mainly due to the acceleration of investments, primarily an increase in payroll expense in the amount of 131,000 in research and development. Research and development expenses for the nine months ended September 30th, 2022 amounted to 2.0 million compared to 1.8 million for the nine months ended September 30th, 2021. The increase was mainly due to the acceleration of investments, primarily an increase in payroll expenses in the amount of $230,000. Sales and marketing expenses for the three months ended September 30th, 2022 amounted to 0.8 million compared to 0.6 for the three months ended September 30th, The increase from the corresponding period was mainly associated with increased investments in sales and marketing, specifically in payroll expenses in the amount of $97,000, mainly due to hiring of sales and marketing employees, an increase in travel expense in the amount of $66,000, offset by a decrease in professional services in the amount of $42,000. Sales and marketing expenses for the nine months ended September 30th, 2022 amounted to $2.4 million compared to $1.6 million for the nine months ended September 30th, 2021. The increase in comparison with the corresponding period was mainly associated with increased sales compensation due to higher revenue of $192,000, increased investments in sales and marketing specifically in payroll expenses in the amount of $382,000 due to hiring of sales and marketing employees, increase in other professional services in the amount of 41,000, and increase in travel expenses in the amount of $138,000. General and administrative expenses for the three months ended September 30th, 2022 amounted to 1.0 million compared to 0.3 million for the three months ended September 30th, 2021. The increase was mainly due to payroll and professional services expenses attributed to operating as a public company following our IPO completed in May 2022. General and administrative expenses for the nine months ended September 30th, 2022 amounted to 2.7 million compared to 0.9 million for the nine months ended September 30th, 2021. The increase was mainly due to payroll and professional services expenses attributed to the work on the IPO in the amount of 1 million, completed in May 2022, as well as to operating as a public company. Operating loss for the three months ended September 30, 2022, was 2.0 million, compared to an operating income of 0.9 million for the three months ended September 30, 2021. The increase was mainly due to higher expenses associated primarily with investment in sales and marketing and expenses attributed to operating as a public company. Operating loss for the nine months end of September 30th, 2022 was 4.1 million compared to an operating loss of 1.3 million for the nine months end of September 30th, 2021. The increase was mainly due to a delay in supply due to shortages, as well as higher expenses associated primarily with investment in sales and marketing, and expenses attributed to the IPO completed in May 2022, as well as operating as a public company. Financial expense net for the three months ended September 30, 2022, was .2 million compared to .3 million for the three months ended September 30th, 2021. The decrease is attributed mostly to a gain from exchange rate differences. Financial expenses net for the nine months ended September 30th, 2022 was 4.4 million compared to .6 million for the nine months ended September 30th, 2021. During the nine months ended September 30th, 2022, we incurred financial expenses mainly due to increases in fair value of various financial instruments, such as convertible loans, notes, and warrants in the amount of 4.5 million up until the IPO when such instruments converted to equity and had income in the amount of 0.7 million from exchange rate differences. Since all convertible loans and nearly all warrants we had outstanding converted to equity in connection with the IPO, We do not expect additional material financial expenses going forward for these loans and warrants compared to those we incurred in 2020, 2021, and the first two quarters of 2022. Net loss for the three months ended September 30th, 2022 was $2.2 million compared to net loss of $1.2 million for the three months ended September 30th, 2021. The increase was primarily due to the increase in operating expenses, mainly due to investment in sales and marketing, as well as expenses attributed to operating as a public company. Net loss for the nine months ended September 30, 2022, was $8.5 million, compared to net loss of $1.9 million for the nine months ended September 30, 2021. The increase was primarily due to increase in financial expenses resulting from the increases in fair value of various financial instruments, as well as an increase in operating expenses, mainly due to investment in sales and marketing, as well as expenses attributed to our IPO in May 2022 and to operating as a public company. Adjusted EBITDA loss, a non-GAAP measurement of operating performance, reconciled in our press release to net loss, for the three months ended September 30th, 2022, was $1.7 million, compared to 0.8 in the comparable year-ago period. This was primarily a result of the increase in our sales and marketing investment, as well as reduction of gross margin due to component manufacturing and logistics costs, as well as the cost we incur by operating as a public company. Non-GAAP adjusted EBITDA loss was 2.6 million for the nine months ended September 30, 2022, compared to .7 million EBITDA loss in the comparable year-ago period. This was primarily a result of the increase in our sales and marketing investments, as well as a reduction of gross margin due to component manufacturing logistics costs, as well as the cost we incur by operating as a public company. That completes my summary. And I would like to turn the call back over to Tuvia for closing comments. Tuvia?
spk07: Thank you, Yoav.
spk06: Through our recent investments, we've been gaining strong momentum across all key verticals from a business development perspective as well as a marketing perspective. Actelis is moving fast to increase its market presence and impact in many markets and verticals. Since the beginning of 2022, we nearly doubled our America's sales and marketing team, launched aggressive digital and tangible marketing plans, and added multiple channel partners and resellers. New, powerful products have been launched with faster speeds and better cyber-protecting capabilities, and much progress has been made on closing the gap in component shortages and backlog delivery catch-up, clear nearly 60% of the backlog from the beginning of the year. For our engagement with existing and new partners and customers, I'm pleased with the strong interest we're gaining. We're excited by the prospects of our company, resulting from U.S. federal, state, and local agencies, as well as airports, transportation, and utility companies, increasing their demand for IoT digitization. They are seeking solutions that are rapid to deploy and highly cost-effective. As our offering enables highly efficient use of existing infrastructure, it meets their needs to move rapidly, grow and conserve budgets at the same time. Despite the challenging economic climate, worldwide investments in our target verticals continue to grow. We are very excited to help our customers extend and do more with their budgets and move faster towards the digital world. I want to thank our dedicated and growing team for their ongoing contributions and our customers' community for their continued partnership. Our goal is to make you successful. I also want to thank our investors for their continued support. Thank you all for joining us today. This is truly an exciting time for Actelis.
spk07: Operator?
spk01: Thank you for joining us today for Actelis Network's fiscal third quarter 2022 earnings conference call. You may now disconnect.
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