ZOOZ Power : 20F FOR 2023

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

• REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023
  OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________

OR

• SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report ___________
  Commission file number 001-42005

ZOOZ Power Ltd.

(Exact name of Registrant as specified in its charter)

Israel

(Jurisdiction of incorporation or organization)

4B Hamelacha St. Lod 7152008 Israel

(Address of principal executive offices)

Boaz Weizer, Telephone: (972) (8) 6805566, Facsimile: (972) (8) 6425032, E-mail: [e-mail]

4B Hamelacha St. Lod 7152008 Israel

(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, nominal value NIS	0.00286 per share		ZOOZ		Nasdaq Capital Market
Warrants to purchase ordinary shares		ZOOZW		Nasdaq Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

5,912,223 ordinary shares, par value NIS 0.00286 per share as of December 31, 2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

• Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

• 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, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

☐ Large Accelerated Filer	☐ Accelerated Filer	☒ Non-Accelerated Filer
		☒ Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒

International Financial Reporting Standards as issued by the International Accounting Standards Board ☐

Other ☐

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 [_] Item 18 [_]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

						TABLE OF CONTENTS
								PAGE
PART I
Item 1.	Identity of Directors, Senior Management and Advisers.	4
Item 2.	Offer Statistics and Expected Timetable.	4
Item 3.	Key Information.	4
Item 4.	Information on the Company.	39
Item 4A.	Unresolved Staff Comments			71
Item 5.	Operating and Financial Review and Prospects.	71
Item 6.	Directors, Senior Management and Employees	86
Item 7.	Major Shareholders and Related Party Transactions.	105
Item 8.	Financial Information.	106
Item 9.	The Offer and Listing.	107
Item 10.	Additional Information.	107
Item 11.	Quantitative andQualitative Disclosures about Market Risk	121
Item 12.	Description of Securities Other than Equity Securities.	122
PART II								122
Item 13.	Defaults, Dividend Arrearages and Delinquencies.	122
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds.	122
Item 15.	Controls and Procedures.	123
Item 16A.	Audit Committee Financial Expert.	124
Item 16B.	Code of Ethics.	124
Item 16C.	Principal Accountant Fees and Services	124
Item 16D.	Exemption From the Listing Standards for Audit Committees	125
Item 16E.	Purchases of Equity Securities By the Issuer and Affiliated Purchasers	125
Item 16F.				125
Change in Registrant's Certifying Accountant
Item 16G.	Corporate Governance	125
Item 16H.	Mine Safety Disclosure	125
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	125
Item 16J.	Insider Trading Policies	125
Item 16K.	Cybersecurity	125
PART III								126
Item 17.	Financial Statements.	126
Item 18.	Financial Statements.	126
Item 19.	Exhibits.	127
	2

INTRODUCTION

Definitions

In this Annual Report, unless the context otherwise requires:

• references to "ZOOZ Power," "ZOOZ", the "Company," "us," "we", "our" and the "Registrant" refer to ZOOZ Power Ltd., an Israeli company, and its subsidiary (unless otherwise indicated);
• references to "ordinary shares," "our shares" and similar expressions refer to the Registrant's ordinary shares, NIS 0.00286 nominal (par) value per share;
• references to "public warrants" refer to the warrants to acquire our shares, listed on the Nasdaq under the symbol "ZOOZW";
• references to "dollars," "U.S. Dollars", "USD" and "$" are to United States Dollars;
• references to "shekels" and "NIS" are to New Israeli Shekels, the Israeli currency;
• references to the "Companies Law" are to the Israeli Companies Law, 5759-1999;
• references to the "Securities Law" are to the Israeli Securities Law, 5728-1968;
• references to the "SEC" are to the United States Securities and Exchange Commission; and
• references to the "Nasdaq Rules" are to rules of the Nasdaq Capital Market.

BASIS OF PRESENTATION

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). We present our consolidated financial statements in U.S. dollars.

Our fiscal year ends on December 31 of each year.

Certain monetary amounts, percentages and other figures included elsewhere in this Annual Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Share and share-based information is presented in this Annual Report after taking into account the Recapitalization, which was performed as part of the Business Combination. For additional details regarding the Business Combination and the Recapitalization, please see "Item 4.B. - Business Overview - Additional Agreements."

CERTAIN INFORMATION

Industry and Market Data

In this Annual Report, we present industry data, information and statistics regarding the markets in which we compete as well as publicly available information, industry and general publications and research and studies conducted by third parties. This information is supplemented where necessary with our own internal estimates, taking into account publicly available information about other industry participants and our management's judgment where information is not publicly available. This information appears in "Management's Discussion and Analysis of Financial Condition and Results of Operation," "Business" and other sections of this Annual Report.

Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this Annual Report. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under "Risk Factors." These and other factors could cause results to differ materially from those expressed in any forecasts or estimates.

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CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F, or the Annual Report, includes "forward-looking statements" within the meaning of the Securities Act of 1933 (the "Securities Act"), as amended, the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, or the Exchange Act, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on our current beliefs, expectations and assumptions. Forward-looking statements can be identified by the use of terminology such as "will," "may," "assume," "expect," "anticipate," "could," "project," "estimate," "possible," "potential," "believe," "suggest," and "intend," and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from those projected in the forward-looking statements include, without limitation, the risk factors set forth under "Item 3. Key Information - D. Risk Factors," the information about us set forth under "Item 4. Information on the Company" and information related to our financial condition under "Item 5. Operating and Financial Review and Prospects." Any forward-looking statements represent our views only as of the date hereof and should not be relied upon as representing its views as of any subsequent date. We do not assume any obligation to update any forward-looking statements unless required by law.

PART I.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

1. [RESERVED]
2. CAPITALIZATION AND INDEBTEDNESS Not applicable.
3. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable.
4. RISK FACTORS

An investment in our ordinary shares and/or public warrants involves a high degree of risk and many factors could affect our results, financial condition, cash flows and results of operations. You should carefully consider the following risk factors, as well as the other information in this Annual Report. If we do not, or cannot, successfully address the risks to which we are subject, we could experience a material adverse effect on our business, results of operations and financial condition, which could include the need to limit or even discontinue our business operations, and accordingly our share price may decline, and you could lose all or part of your investment. We can give no assurance that we will successfully address any of these risks. The principal risks we face are described below. These risks and uncertainties are not the only ones that we face.

Summary Risk Factors

Our business is subject to a number of risks of which you should be aware of before making an investment decision. These risks are discussed more fully under the caption "Item 3. Key Information - D. Risk Factors" section of this Annual Report. These risks include, but are not limited to, the following:

• Our limited operating history and evolving business model make it difficult for you to evaluate our business and future prospects.
• We have identified material weaknesses in our internal control over financial reporting and if we are unable to remediate these material weaknesses, or identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, this may impair our ability to produce timely and accurate financial statements or comply with applicable laws and regulations.

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• Our management has determined that substantial doubt exists about the continued existence of ZOOZ as a "going concern". The report of ZOOZ's independent registered public accounting firm includes a going concern qualification.
• Changes to fuel economy standards or changes to governments' regulations and policies in relation to environment or the success of alternative fuels may negatively impact the electric cars ("EVs" or "electric vehicles") market and thus the demand for our products.
• Delays in deployment of public ultra-fast charging infrastructure may limit the need and urgency for our products.
• Market education regarding the concept and value of power boosters is still in process and may not materialize as anticipated by us, or at all.
• Our market penetration is partially related to government and other public incentive plans supporting charging infrastructure, changes or reductions on those, which are in turn subject to political, economic, and environmental factors which are beyond our control.
• We have gained limited experience in a small number of territories, which include Israel, Germany, the U.K. and the U.S. If we fail to expand our geographic footprint and to build scalable and robust processes, our prospects for growth and profitability could be harmed, and we may never successfully do so or achieve or sustain profitability.
• We face risks related to the growth rate and the global expansion of our business, including worldwide or regional economic conditions, exchange rate fluctuations, adverse changes in EV and/or power booster market conditions and the competitiveness of the market.
• We may experience difficulties in managing our growth and expanding our operations, as we need to continue to improve our operational, financial and management controls, compliance programs and reporting systems, including our compliance programs, privacy, cybersecurity and anti-corruption and financial controls, and we may not be successful in doing so.
• We currently face competition from a number of companies, mainly specialized platform providers for residential or commercial and industrial applications, and expect to face significant competition in the future as the market for the EV high power charging infrastructure further develops.
• We rely on a limited number of suppliers and manufacturers for our products, some of which provide us with custom-designed components and sub-systems. A loss of any of these key suppliers and manufacturers could negatively affect our business.
• Increases in costs, disruption of supply, or shortage of materials, have harmed and could harm our business again in the future.
• Our business is subject to risks associated with permitting, construction, cost overruns and delays, and other contingencies that may arise in the course of completing installations, and such risks may increase in the future.
• Expanding our operations internationally is likely to expose us to additional tax, compliance, market and other risks.
• The EV and energy storage market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs, EV charging stations and flywheel-based storage systems. The reduction, modification, or elimination of such benefits, or any delay in payment could cause reduced demand for our products or delay their purchase or production, which would adversely affect our financial results.
• We are dependent on several key employees; the loss of their services and our failure to hire additional qualified key personnel could harm our business.
• Failures, or perceived failures, to comply with privacy, data protection, and information security requirements in the variety of jurisdictions in which we operate may adversely impact our business, and such legal requirements are evolving, uncertain and may require improvements in, or changes to, our policies and operations.
• We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our technology or products. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating our rights may be costly.

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• In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how, which we may not be able to protect.
• Technology failures or cyberattacks on our technology systems or our ineffective response to technology failures or cyberattacks could disrupt our operations and negatively impact our reputation, business, financial condition, or results of operations.
• Interruption, interference with or failure of our information technology and communications systems could hurt our ability to effectively offer our products, which could damage our reputation and harm our operating results.
• We may be exposed to liability if we fail to comply with the provisions of the U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti- corruption, anti-money laundering, privacy, export control, sanctions, and other trade laws and regulations.
• Geo-politicalconditions in the Middle East and in Israel, including the current conflicts in Gaza and in the Northern part of Israel that started in the fourth quarter of 2023, may adversely affect our operations.
• If U.S. securities or industry analysts do not publish or cease publishing research or reports about ZOOZ, its business, or its market, or if they change their recommendations regarding the ZOOZ ordinary shares adversely, then the price and trading volume of the ZOOZ ordinary shares on the Nasdaq could decline.
• The U.S. market price for the ZOOZ ordinary shares may be depressed by the terms of any financing which is likely to result in significant dilution or by our failure to obtain necessary financing.
• The future exercise of registration rights and sale by our shareholders of their ZOOZ ordinary shares, including shares by shareholders subject to lock-ups upon expiration of their lock-ups, may adversely affect the market price of ZOOZ ordinary shares on the Nasdaq.

Risks Related to ZOOZ's Business and Industry

ZOOZ is an early-stage company with a history of losses. ZOOZ's ability to continue as a going concern will depend on its ability to generate sufficient revenue and/or depend on ZOOZ's ability to raise capital that will allow it to continue operating until it generates sufficient revenue.

ZOOZ incurred a net loss of $7.8 million and $11.7 million for the year ended December 31, 2022, and for the year ended December 31, 2023, respectively.

ZOOZ had an accumulated deficit of approximately $35.4 million and $47.2 million as of December 31, 2022 and December 31, 2023, respectively. ZOOZ believes it will continue to incur operating and comprehensive losses for the near-term. ZOOZ does not expect that it will improve its cash flow generation and operating result significantly through 2024 and 2025 as ZOOZ is in the early stage of market penetration and product introduction. ZOOZ's ability to continue as a going concern will depend on its ability to generate sufficient revenue and/or its ability to raise capital.

ZOOZ's potential profitability of the revenue stream from its product ZOOZTER™-100 is particularly dependent upon customer's awareness of product value, its proven readiness reliability and business justification, ZOOZ's ability to build substantial backlog of orders which will allow cost reduction over increased volume of production, and ZOOZ's ability to reduce product manufacturing costs on a timely basis, which may not occur.

The report of ZOOZ's independent registered public accounting firm contains an explanatory paragraph that expresses substantial doubt about ZOOZ's ability to continue as a going concern.

ZOOZ management has determined, and the report of ZOOZ's independent registered public accounting firm with respect to ZOOZ's audited consolidated financial statements as of December 31, 2023 indicates, that there is substantial doubt about ZOOZ's ability to continue as a going concern. The report states that, ZOOZ has accumulated net losses in the amount of approximately $47.2 million as well as a negative cash flow from operating activities in the amount of approximately $12.2 million, for a period of 12 months that ended on that date. These factors raise substantial doubt about the continued existence of ZOOZ as a "going concern." Based on the plans of ZOOZ's management, ZOOZ's cash balance as of December 31, 2023, and as of the date of approval of the audited consolidated financial statements, may be insufficient to continue ZOOZ's operations for more than 12 months following the date of approval of the audited consolidated financial statements. In order to continue ZOOZ's operations, ZOOZ is looking to secure financing from various sources, such as additional investment funding. According to the report of ZOOZ's independent registered public accounting firm with respect to ZOOZ's audited consolidated financial statements for the year ended December 31, 2023, the dependency on these planned objectives raises substantial doubt of ZOOZ's ability to continue as a going concern and that ZOOZ may be unable to realize its assets and discharge its liabilities in the normal course of business. These audited consolidated financial statements did not include any adjustments regarding the values of the assets and liabilities and their classification that might be needed if ZOOZ could not continue to operate as a "going concern."

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ZOOZ has identified material weaknesses in its internal control over financial reporting. If ZOOZ is unable to remediate these material weaknesses, or if ZOOZ identifies additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may impair ZOOZ's ability to produce timely and accurate financial statements or comply with applicable laws and regulations.

In connection with the preparation and audit of ZOOZ's audited consolidated financial statements for the years ended December 31, 2023 and 2022, material weaknesses were identified in ZOOZ's internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of ZOOZ's audited consolidated annual financial statements will not be prevented or detected on a timely basis.

The material weaknesses referenced above are described below:

• Segregation of duties has not been sufficiently established across the key business and financial processes. Given the size, nature of the organization, and the current structure of the finance function, a lack of segregation of duties applied to the key business and financial processes across the organization has been identified. A consequence of the lack of segregation of duties is the heightened risk of fraud or material misstatement when no appropriate mitigating controls are in place.
• Lack of personnel with appropriate knowledge and experience relating to U.S. GAAP and SEC reporting requirements to enable the entity to design and maintain an effective financial reporting process. A lack of knowledge and experience in these areas may lead to ZOOZ being in breach of SEC financial reporting and other related requirements, especially given that the current finance function has not been designed to include sufficient accounting and financial reporting personnel with (i) the requisite knowledge and experience in the application of SEC financial reporting rules and regulations; and (ii) the appropriate expertise in the relevant U.S. accounting standards.
  Remediation activities and Plans
• ZOOZ has begun implementation of a plan to remediate these material weaknesses, including implementation of an ERP system, for, among other things, improving its appropriately designed, implemented and documented controls in inventory process, in respect of separation of operation costs from research and development costs.

These remediation measures are ongoing and may include hiring additional accounting and financial reporting personnel and implementing additional policies, procedures and controls.

In order to maintain and improve the effectiveness of ZOOZ's internal control over financial reporting, ZOOZ has expended, and anticipate that it will continue to expend, significant resources, including accounting-related costs and significant management oversight.

ZOOZ cannot assure you the measures it is taking to remediate the material weaknesses will be sufficient or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause the combined company to fail to meet its reporting obligations as a public company listed for trading on the Nasdaq.

ZOOZ's management is not required to report on the effectiveness of its internal control over financial reporting until after ZOOZ is no longer a "newly public company" listed for trading on the Nasdaq (i.e. in connection with the filing of its second annual report following consummation of the business combination between Keyarch and ZOOZ Power Cayman, a Cayman Islands exempted company and a direct, wholly owned subsidiary of ZOOZ (the "Merger Sub") (the "Business Combination")). At such time, to the extent that the above-described material weaknesses continue to exist or new material weaknesses are identified, ZOOZ's management may be unable to conclude that its internal control over financial reporting is operating effectively. In addition, ZOOZ's independent registered public accounting firm is not required to attest to the effectiveness of its internal control over financial reporting until after ZOOZ is no longer an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). At such time, ZOOZ's independent registered public accounting firm may issue a report that is adverse in the event its internal controls over financial reporting do not operate effectively. If ZOOZ is not able to complete its initial assessment of its internal controls and otherwise implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-OxleyAct") in a timely manner or with adequate compliance, its independent registered public accounting firm may not be able to attest to the effectiveness of its internal controls over financial reporting. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that ZOOZ will eventually be required to include in its periodic reports that are filed with the SEC. If ZOOZ is unable to remediate its existing material weaknesses or identifies additional material weaknesses and is unable to comply with the requirements of Section 404 in a timely manner or assert that its internal control over financial reporting is effective, or if the ZOOZ's independent registered public accounting firm is unable to express an opinion as to the effectiveness of ZOOZ's internal control over financial reporting once it is no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of the audited consolidated financial reports and the market price of the ZOOZ ordinary shares could be negatively affected, and it could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.

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In addition, any failure to maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect ZOOZ's business and operating results and could cause a decline in the price of the ZOOZ ordinary shares. These material weaknesses will not be considered remediated until the mitigating controls have operated for the required period of time and until the operating effectiveness of the controls has been validated, through testing, by ZOOZ's management.

Failure to expand ZOOZ's geographic footprint and to build scalable and robust processes could harm ZOOZ's prospects for growth and profitability, and it may never successfully do so or achieve or sustain profitability.

ZOOZ's ability to achieve significant revenue growth and profitability in the future will depend, in large part, on ZOOZ's success in expanding its product portfolio and business both within its existing markets and to additional markets and geographies and building scalable and robust processes to manage its business and operations. As of the date of this Annual Report, ZOOZ has gained limited experience in a small number of territories, which include Israel, Germany, the U.K., and the U.S. and ZOOZ has several deployments in Israel, Germany, the U.K. and the U.S., and expects to complete several additional deployments in these territories in the coming months. If prospective customers and business partners in such existing and new markets and geographies do not perceive ZOOZ's product offerings to be of value to them, or the ZOOZ products are not favorably received by them in such markets, ZOOZ may not be able to attract and retain such customer or business partners and will not be successful in expanding its business and operations in its existing markets and to new markets and geographies.

ZOOZ's supply chain is in early stage of development, and ZOOZ is in the process of outsourcing the manufacturing of the product - failure in this process will not allow ZOOZ to scale-up its manufacturing capacity, which in turn could have an adverse effect on ZOOZ's ability to meet market demand.

In addition, if ZOOZ is not able to build scalable and robust processes and resources to manage its existing business operations and prospective growth and expansion, ZOOZ may fail to satisfy and retain its existing customers and business partners and may not be able to attract new customers and business partners in additional markets and, as a result, ZOOZ's ability to maintain and/or grow the business and achieve or sustain profitability will be adversely affected.

ZOOZ may enter into agreements to operate projects at a financial loss in order to penetrate certain markets.

In order to penetrate certain markets or demonstrate our technological capabilities, and as part of its business strategy, ZOOZ may enter into agreements to operate projects at a financial loss to it. Such agreements may materially affect its business, financial condition, and results of operations.

ZOOZ currently faces competition from a number of companies and expects to face significant competition in the future as the market for the EV high power charger develops.

The EV charging market is relatively new and competition is still developing. There are numerous factors that may affect the competition in the market of power boosters for EV charging, which include product costs, footprint and electrical energy capacity. In the market of power boosters for EV charging, ZOOZ primarily competes with providers of battery-based power boosters and energy storage systems and ZOOZ expects competition by other equipment providers who will offer flywheel-based power boosters, once such products reaching maturity and available to the market.

Competition may include various technologies for energy storage, such as hydrogen-based energy storage, supercapacitors-based energy storage

etc.

Further for EV charging and commercial battery storage system market, ZOOZ's current or potential competitors may be acquired by third parties with greater available resources. As a result, competitors may be able to respond more quickly and effectively than ZOOZ to new or changing opportunities, technologies, standards or customer requirements and may have the ability to initiate or withstand substantial price competition. In addition, competitors may in the future establish cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their solutions in the marketplace. This competition may also materialize in the form of costly intellectual property disputes or litigation.

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New competitors or alliances may emerge in the future that have greater market share, more widely adopted proprietary technologies, greater marketing expertise and greater financial resources, which could put ZOOZ at a competitive disadvantage. Future competitors could also be better positioned to serve certain segments of ZOOZ's current or future target markets, which could create price pressure. In light of these factors, even if ZOOZ's offerings are more effective and higher quality than those of its competitors, current or potential customers may accept ZOOZ's competitors' solutions instead of ZOOZ's solutions. If ZOOZ fails to adapt to changing market conditions or continue to compete successfully with current charging platform providers or new competitors, ZOOZ's growth will be limited which would adversely affect its business and results of operations.

The market for EV high power charging may not develop to be as significant as anticipated.

There are other means for charging EVs, which could affect the level of demand for ultra-fast charging capabilities. For example, wireless charging capabilities as part of the road infrastructure and widespread availability of slow chargers, at home or in public sites, may limit the needs for ultra- fast charging. If the future market trend will be to adopt these solutions widely, this may have an adverse effect on ZOOZ's business.

ZOOZ faces risks related to natural disaster and health pandemics, including the coronavirus ("COVID-19") pandemic, which could have a material adverse effect on its business and results of operations.

Health pandemics such as COVID-19 can impact changes in consumer and business behavior. Pandemic fears and market downturns, and restrictions on business and individual activities, may create significant volatility in the global economy. The spread of COVID-19 has created a disruption in the manufacturing, delivery and overall supply chain of vehicle and photovoltaic manufacturers and suppliers around the world. Any sustained downturn in the demand for EVs or photovoltaic or battery storage system would harm ZOOZ's business.

ZOOZ relies on a limited number of suppliers and manufacturers for its products. Some of ZOOZ's suppliers and manufacturers provide ZOOZ with custom-designed components and sub-systems. A loss of any of these key suppliers and manufacturers could negatively affect ZOOZ's business.

ZOOZ relies on a limited number of suppliers to manufacture its products, including in some cases, only a single supplier for some products and components. Some of ZOOZ's suppliers and manufacturers provide it with custom-designed components and sub-systems. While any of such key suppliers and manufacturers could be replaced, this reliance on a limited number of manufacturers increases its risks, since any change in its key suppliers or manufacturers will lead ZOOZ to incur material additional costs and substantial delays. If ZOOZ experiences a significant increase in demand for its products, or if ZOOZ needs to replace an existing supplier, it may not be possible to supplement or replace them on acceptable terms or expected time, which may undermine ZOOZ's ability to deliver products to customers in a timely manner. For example, it may take a significant amount of time to identify a manufacturer that has the capability and resources to provide ZOOZ with certain custom-designed components or sub-systems. Identifying suitable suppliers and manufacturers could be an extensive process that requires ZOOZ to become satisfied with their product performance, and their quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. In addition, the process of replacing suppliers of certain components and subsystems may require ZOOZ to invest additional resources and time in additional testing, validation and certification processes. Accordingly, a loss of any of ZOOZ's key suppliers or manufacturers could have an adverse effect on its business, financial condition and operating results.

Increases in costs, disruption of supply, or shortage of materials, have harmed and could harm ZOOZ's business again in the future.

ZOOZ has experienced and may in the future experience increases in the cost or a sustained interruption in the supply or shortage of materials necessary for the production of its products. Any such increase in cost, supply interruption, or materials shortage in the future could again adversely impact ZOOZ's business, prospects, financial condition, and operating results. ZOOZ's suppliers use various materials. The prices and supply of these materials may fluctuate, depending on market conditions and global demand for these materials.

ZOOZ is still in the process of product cost reduction. In case ZOOZ will not be successful to reach its cost reduction targets during the next couple of years, this may prejudice ZOOZ's profitability and market penetration.

Substantial increases in the prices for ZOOZ's materials could reduce its margins if ZOOZ cannot recoup the increased costs through increased sale prices on its products. Furthermore, fluctuations in fuel costs, or other economic conditions, may cause ZOOZ to experience significant increases in freight charges and material costs. Moreover, any attempts to increase prices in response to increased material costs could increase the difficulty of selling at attractive prices to customers and lead to losing opportunities and cancellations of customer orders. If ZOOZ is unable to effectively manage its supply chain and respond to disruptions to its supply chain in a cost-efficient manner, ZOOZ may fail to achieve the financial results it expects or that financial analysts and investors expect, and ZOOZ's business, prospects, financial condition, and operating results may be adversely affected.

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