ZOOZ

Business Context and Reporting Period

Company: ZOOZ Power Ltd. (ZOOZ)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: ZOOZ develops and sells flywheel-based kinetic energy storage systems (ZOOZTER™-100) designed to power-boost ultra-fast EV charging infrastructure, overcoming grid limitations without the need for costly grid upgrades. The company operates primarily in Israel, Germany, the U.K., and the U.S.
Corporate Status: ZOOZ is an emerging growth company and a foreign private issuer. It completed a business combination with Keyarch Acquisition Corporation in April 2024, listing on the Nasdaq Capital Market (Ticker: ZOOZ).

Key Financial Metrics (Year Ended Dec 31, 2024)

Debt and Liquidity: As of December 31, 2024, the company held approximately $3.04 million in promissory notes (including related party notes) and $912 thousand in operating lease liabilities. The company entered into a Standby Equity Purchase Agreement (SEPA) in November 2024, providing access to up to $12 million in equity financing.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 36% to $1.04 million, driven by sales of ZOOZTER™-100 systems in Germany and Israel.
• Operating Expenses: Total operating expenses decreased 9% to $10.05 million. Sales and marketing expenses dropped significantly (57%) to $1.32 million due to reduced headcount and the recognition of NYPA grants offsetting expenses. General and administrative expenses increased 29% to $3.66 million, primarily due to costs associated with the Nasdaq listing and D&O insurance following the business combination.
• Financial Expenses: The company recorded $171 thousand in interest expenses and $283 thousand in other finance expenses in 2024, compared to zero interest expense and $456 thousand in finance income in 2023. This shift is attributed to interest on new promissory notes, SEPA setup fees, and foreign exchange losses.
• Capital Structure: Following the April 2024 business combination, the company issued approximately 6.15 million new shares. A reverse stock split (11.437:1) was also implemented in March 2024.

Guidance, Outlook, Risks, and Contingencies

Going Concern Warning: Management and the independent auditors have expressed substantial doubt about ZOOZ's ability to continue as a going concern. The company has an accumulated deficit of $58.2 million and negative cash flows from operations of $9.9 million in 2024. Current cash balances are deemed insufficient to fund operations for at least 12 months without additional financing.

Outlook and Strategy: ZOOZ plans to secure additional funding through the SEPA, equity offerings, or debt financing. The company is focusing on market penetration in the U.S., Europe, and Asia (specifically China), and is working to outsource manufacturing to scale production.

Key Risks:

• Internal Controls: Material weaknesses in internal control over financial reporting were identified and remain unremediated as of December 31, 2024, specifically regarding segregation of duties and lack of personnel with U.S. GAAP expertise.
• Geopolitical: Operations in Israel are subject to risks from the "Swords of Iron" war, including potential mobilization of employees, supply chain disruptions, and regional instability.
• Market Adoption: Success depends on the rapid adoption of EVs and the acceptance of flywheel technology over battery-based solutions. Market education is still in progress.
• Regulatory: The company relies on government grants (IIA, BIRD, NYPA) which impose royalty obligations and restrictions on manufacturing locations and IP transfer.

Important Facts for Investor Verification

• Liquidity Runway: Verify the company's ability to raise capital under the $12 million SEPA or through other means to sustain operations beyond the next 12 months.
• Internal Control Remediation: Monitor progress on remediation plans for material weaknesses in internal controls, which could impact the reliability of future financial reporting.
• Revenue Recognition: Review the specific terms of customer contracts (e.g., Dor-Alon, Osprey) to understand the timing of revenue recognition, as many deployments are currently in pilot or evaluation phases.
• Geopolitical Exposure: Assess the ongoing impact of the conflict in Israel on the company's supply chain, employee availability, and insurance costs.
• Government Grant Obligations: Understand the royalty payment obligations tied to government grants, which could impact future margins as revenue scales.