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ParaZero Announces 2023 Financial Results

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ParaZero Technologies (PRZO) reported its financial results for 2023, showcasing key achievements and partnerships. The company announced collaborations with Black Square and KULR Technology Group, achieved regulatory approvals for drone safety systems, and expanded partnerships with Vayu Aerospace Financially, sales increased by 10.8%, reaching $620,508, while net loss and comprehensive loss surged by 128.1% to $3,771,379. The company closed an IPO and private placement, raising approximately $12.9 million in gross proceeds. CEO Boaz Shetzer emphasized the company's commitment to innovation and growth in the drone safety industry.
Positive
  • ParaZero announced key partnerships with Black Square and KULR Technology Group for drone technologies.
  • The company secured regulatory approvals for drone safety systems, enabling operations over populated areas.
  • Sales for 2023 increased by 10.8% to $620,508, driven by OEM integrations and recurring revenues.
  • Net loss and comprehensive loss surged by 128.1% to $3,771,379, impacted by operating expenses and non-cash items.
  • ParaZero closed an IPO and private placement, raising approximately $12.9 million in gross proceeds.
  • CEO Boaz Shetzer highlighted the company's focus on innovation and growth in the drone safety industry.
Negative
  • Cost of sales increased by 41.2%, mainly due to higher sales volume and inventory write-offs.
  • Research and development expenses decreased slightly by 0.6% in 2023.
  • Sales and marketing expenses rose by 84.3%, driven by labor and subcontractor costs.
  • General and administrative expenses surged by 92.1%, attributed to labor and professional services expansion post-IPO.
  • The company's net loss per share increased to $0.77 in 2023 from $0.49 in 2022.

The financial results of ParaZero Technologies Ltd. indicate a mixed performance. On one hand, the 10.8% increase in sales suggests a positive trend in the company's revenue generation capabilities, particularly from the shift towards sales to OEM integrations, which is a strategic move that could promise recurring revenue streams. However, the substantial increase in the cost of sales by 41.2% and the increase in general and administrative expenses by 92.1% are areas of concern as they significantly outpace revenue growth and reflect higher operational costs post-IPO. The net loss widening by 128.1% is particularly alarming for investors, as it suggests that the current business model is becoming less sustainable in the short term. The company's cash position of over $7.4 million provides some cushion, but the increased burn rate could lead to future capital raises, potentially diluting current shareholders.

ParaZero's strategic partnerships and regulatory approvals, such as the LUC in Denmark and the authorization to operate drones over populated areas in Australia using their safety systems, are significant milestones for the company. These developments not only enhance the company's credibility within the aerospace sector but also expand its market potential in the European Union and Australian markets. The collaboration with KULR Technology Group and integration into Vayu Aerospace Corporation's VTOL aircraft design indicate a forward-thinking approach to product development and compliance. These moves could be pivotal in establishing ParaZero as a key player in the drone safety industry. However, the impact of these strategic moves on the company's financial health remains to be seen, as the R&D expenses have not significantly decreased despite these advancements.

The drone industry is experiencing rapid growth and safety is a critical component for its sustainable expansion. ParaZero's advancements and certifications in this space are well-aligned with industry demands. The ASTM-certified parachute recovery systems and the first-ever LUC in Denmark are examples of product and regulatory achievements that could position the company favorably in the eyes of potential clients and partners. However, the modest 10.8% increase in sales juxtaposed with the sharp rise in expenses raises questions about the efficacy of the company's current growth strategy. Investors should consider whether the company's strategic initiatives will translate into significant market share gains and how long it will take for these investments to reflect positively on the bottom line.

TEL AVIV, Israel, March 22, 2024 (GLOBE NEWSWIRE) -- ParaZero Technologies Ltd. (Nasdaq: PRZO) (the "company” or “ParaZero”), an aerospace company focused on drone technologies for commercial drones, defense drones, and urban air mobility aircraft, reported today its financial results for year ended December 31, 2023.

Key Highlights of ParaZero’s Achievements in 2023 & Recent Highlights:

  • ParaZero announced a new development agreement with Colombia-based drone OEM, Black Square, an industrial drone producer leader in the region that focuses on enterprise drone platforms.
  • ParaZero announced the formation of a working partnership with KULR Technology Group, Inc., a global leader in sustainable energy management, to leverage its business network within the defense industry for applying KULR's vibration reduction technology on helicopter and rotorcraft fleets.
  • ParaZero facilitated one of its customers in obtaining the first-ever light uncrewed aircraft system operator certificate (LUC) in Denmark. The LUC is an organizational approval certificate granted by the European Union Aviation Safety Agency (EASA) that allows for cross-border operations throughout the European Union without additional approvals required.
  • The Australian Civil Aviation Safety Agency authorized drones to operate over populated area and near people when using ParaZero’s safety systems, the first such authorization of its kind in Australia.
  • The Human Environment and Transport Inspectorate (issued a precedent-setting approval for the first drone flights over densely populated areas for drones equipped with ParaZero SafeAir ASTM-certified parachute recovery systems.
  • ParaZero announced that it completed a drone safety project with a Fortune 500 leading automotive manufacturer.
  • ParaZero announced that it expanded its collaboration with Vayu Aerospace Corporation, a US-based drone original equipment manufacturer, where ParaZero will customize its SafeAir system to be integrated at the design stage of Vayu’s G-1MKII VTOL aircraft and jointly participate in performance-based regulatory compliance testing and validation.
  • ParaZero closed its IPO on July 31, 2023, issuing 1,950,000 ordinary shares. Gross proceeds for the offering were approximately $7.8 million prior to deducting underwriting discounts and other offering expenses.
  • ParaZero closed a private placement on October 30, 2023, issuing an aggregate of 1,136,364 ordinary shares, 3,500,000 pre-funded warrants, 4,636,364 series A warrants and 140,373 series B warrants. Gross proceeds for the offering were approximately $5.1 million prior to deducting placement agent expenses and other offering expenses.

ParaZero's CEO, Boaz Shetzer, stated, "2023 was a crucial year for ParaZero, as we continued to push the boundaries of innovation in drone safety. We believe that our strategic partnerships, coupled with significant regulatory approvals, position us strongly for continued growth and leadership in the drone safety industry. We remain committed to our mission of enhancing the safety and operational capabilities of drones and eVTOLs worldwide, ensuring safer skies for tomorrow."

Full Year 2023 Financial Highlights:

  • Sales increased by $60,390, or 10.8% to $620,508 for the year ended December 31, 2023, compared to $560,118 for the year ended December 31, 2022. This increase was mainly attributed to that fact, that the company shifted towards sales to OEMs integrations that contributed to a higher volume of sales rather than to the aftermarket segment. This shift is accompanied with recuring revenues.
  • Cost of sales increased by $139,045, or 41.2%, to $476,610 for the year ended December 31, 2023, compared to $337,565 for the year ended December 31, 2022. The increase was mainly due to the increase in and the volume of sales during the year ended December 31, 2023 and an inventory write off increase of approximately $21,000 and partly due to the increase in sales.
  • Research and development expenses decreased by $3,527, or 0.6%, to $636,801 for the year ended December 31, 2023, compared to $640,328 for the year ended December 31, 2022. Research and development expenses mainly consist of labor and subcontractors’ cost.
  • Sales and marketing expenses increased by $223,176, or 84.3%, to $487,904 for the year ended December 31, 2023, compared to $264,728 for the year ended December 31, 2022. The increase resulted mainly from labor and more subcontractors’ costs of $131,000 accompanied an increase in by travel and conferences participation costs of $28,000.
  • General and administrative expenses increased by $706,161, or 92.1%, to $1,472,872 for the year ended December 31, 2023, compared to $766,711 for the year ended December 31, 2022. The increase resulted mainly from expansion in labor and professional services rendered after the IPO and costs associated with becoming a public company, including an increase in D&O insurance and certain filing services.
  • Other finance income, net was $210,675 for the year ended December 31, 2023, compared to finance income, net of $202,958 for the year ended December 31, 2022. Other finance income, net, primarily includes income from interest on deposits and exchange rate differences.
  • Net loss and comprehensive loss increased by $2,118,341, or 128.1%, to $3,771,379 for the year ended December 31, 2023, compared to a net loss of $1,653,038 for the year ended December 31, 2022. The increase was the result of increase with non-cash items such as changes in fair value of convertible note, changes in fair value of derivative warrant liabilities, along with increase in operating expenses, as described above.
  • The loss per share in 2023, was $0.77 compared to net loss per share of $0.49 in 2022.
  • As of December 31, 2023, the company’s cash and cash equivalents was $7,428,405 and the company’s total shareholders' equity was $6,105,058.

About ParaZero Technologies

ParaZero (https://parazero.com/) is a world-leading developer of autonomous parachute safety systems for commercial and defense unmanned systems, drone and urban air mobility (UAM) aircraft. Started in 2014 by a passionate group of aviation professionals and drone industry veterans, ParaZero designs smart, autonomous parachute safety systems designed to enable safe flight operations in advanced use cases, including flight over populated areas and beyond-visual-line-of-sight (BVLOS).

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act and other securities laws. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements. For example, ParaZero is using forward-looking statements when it discusses its belief that its strategic partnerships, coupled with significant regulatory approvals, position it strongly for continued growth and leadership in the drone safety industry and its mission of enhancing the safety and operational capabilities of drones and eVTOLs worldwide, ensuring safer skies for tomorrow. Forward-looking statements are not historical facts, and are based upon management’s current expectations, beliefs and projections, many of which, by their nature, are inherently uncertain. Such expectations, beliefs and projections are expressed in good faith. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved, and actual results may differ materially from what is expressed in or indicated by the forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the forward-looking statements. For a more detailed description of the risks and uncertainties affecting the Company, reference is made to the Company’s reports filed from time to time with the Securities and Exchange Commission (“SEC”), including, but not limited to, the risks detailed in the Company’s Annual Report on Form 20-F filed with the SEC on March 21, 2024. Forward-looking statements speak only as of the date the statements are made. The Company assumes no obligation to update forward-looking statements to reflect actual results, subsequent events or circumstances, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If the Company does update one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect thereto or with respect to other forward-looking statements. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release. ParaZero is not responsible for the content of third-party websites.

Investor Relations Contact:

Michal Efraty
Investor Relations, Israel
+972-(0)52-3044404
michal@efraty.com

ParaZero Technologies Ltd. | 30 Dov Hoz, Kiryat Ono, Israel 5555626
P: +972-36885252 | E: contact@parazero.com | F: +972-3-688-5246


ParaZero Technologies Ltd.


BALANCE SHEET

(U.S. dollars in thousands, except share data and per share data)

  December 31,
2023
  December 31,
2022
 
ASSETS (audited) 
CURRENT ASSETS:      
Cash and cash equivalents  7,428,405   89,806 
Trade receivables  22,376   184,064 
Other current assets  651,560   179,541 
Deferred prospective initial public offering costs  -   291,133 
Inventories  264,468   304,823 
TOTAL CURRENT ASSETS  8,366,809   1,049,367 
         
NON-CURRENT ASSETS:        
Operating lease right-of-use asset  8,127   56,893 
Property and equipment, net  49,981   41,311 
TOTAL NON-CURRENT ASSETS  58,108   98,204 
         
TOTAL ASSETS  8,424,917   1,147,571 


LIABILITIES AND SHAREHOLDERS' EQUITY

(U.S. dollars in thousands, except share data and per share data)

  December 31,
2023
  December 31,
2022
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) (audited) 
CURRENT LIABILITIES:      
Trade payables  56,682   47,260 
Operating lease liabilities  7,543   45,097 
Other current liabilities  690,861   774,647 
Convertible notes  -   1,514,928 
TOTAL CURRENT LIABILITIES  755,086   2,381,932 
         
NON-CURRENT LIABILITIES:        
Derivative warrant liabilities  1,564,773    
Operating lease liabilities, net of current portion     7,775 
Loan from a related party      399,794 
TOTAL NON-CURRENT LIABILITIES  1,564,773   407,569 
         
COMMITMENTS AND CONTINGENCIES        
SHAREHOLDERS’ EQUITY (DEFICIT):        
Ordinary shares, NIS 0.02 par value: Authorized 25,000,000 as of December 31, 2023 and December 31, 2022; Issued and outstanding 10,073,956 and 3,597,442 shares as of December 31, 2023 and as of December 31, 2022, respectively  56,227   21,456 
Additional paid-in capital  24,471,888   12,988,292 
Accumulated losses  (18,423,057)  (14,651,678)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)  6,105,058   (1,641,930)
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)  8,424,917   1,147,571 


STATEMENTS OF COMPREHENSIVE LOSS

(U.S. dollars in thousands, except share data and per share data)

  Year ended December 31, 
  2023  2022  2021 
   (audited) 
Sales  620,508   560,118   724,391 
Cost of Sales  476,610   337,565   464,715 
Gross profit  143,898   222,553   259,676 
Research and development expenses  636,801   640,328   603,702 
Selling and marketing expenses  487,904   264,728   168,700 
General and administrative expenses  1,472,872   766,711   474,703 
Prospective initial public offering expenses  345,925   389,396   —_ 
Operating loss  2,799,604   1,838,610   987,429 
Change in fair value of convertible notes  504,976       
Change in fair value of derivative warrant liabilities  277,600       
Issuance expenses attributable to derivate warrant liability  247,129       
Interest expenses on related party loan  152,745   17,386    
Other finance income, net  (210,675)  (202,958)  (372,048)
             
Net loss and comprehensive loss  3,771,379   1,653,038   615,381 
             
Net loss per ordinary share, basic and diluted  0.77   0.49   1.71 
Weighted-average number of ordinary shares outstanding, basic and diluted  4,891,071   3,349,071   359,743 


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(U.S. dollars in thousands, except share data and per share data)

  Ordinary shares  Additional       
  Number of
shares
  Amount  paid-in
Capital
  Accumulated Losses  Total 
  U.S. dollars 
BALANCE AS OF JANUARY 1,2021  359,743   1,945   6,380,403   (12,383,259)  (6,000,911)
Comprehensive loss           (615,381)  (615,381)
BALANCE AS OF DECEMBER 31,2021  359,743   1,945   6,380,403   (12,998,640)  (6,616,292)
Conversion of Former Parent Company’s debt into ordinary shares and warrants  3,237,699   19,511   6,403,797      6,423,308 
Stock based compensation        91,377      91,377 
Benefit to the Company by an equity holder with respect to funding transactions        112,715      112,715 
Comprehensive and net loss           (1,653,038)  (1,653,038)
BALANCE AS OF DECEMBER 31,2022  3,597,442   21,456   12,988,292   (14,651,678)  (1,641,930)
Stock based compensation          490,015      490,015 
Conversion of convertible note into ordinary shares  504,976   2,734   2,017,170      2,019,904 
Issuance of ordinary shares and warrants upon initial public offering, net of issuance costs  1,950,000   10,561   5,919,064      5,929,625 
Issuance of ordinary shares, pre-funded warrants, and warrants upon private placement, net of issuance costs  4,021,538   21,476   3,045,180      3,066,656 
Benefit to the Company by an equity holder with respect to funding transactions        12,167      12,167 
Comprehensive loss           (3,771,379)  (3,771,379)
BALANCE AS OF DECEMBER 31,2023  10,073,956   56,227   24,471,888   (18,423,057)  6,105,058)


STATEMENTS OFCASH FLOWS

(U.S. dollars in thousands, except share data and per share data)

  Year ended December 31 
  2023  2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES: (audited) 
Net loss  (3,771,379)  (1,653,038)  (615,381)
Adjustments required to reconcile net loss to net cash used in operating activities:            
Depreciation  17,087   18,495   17,627 
Stock based compensation  14,815   52,286    
Interest expenses with respect to funding from related party  112,373   12,509    
Change in fair value of convertible loan  504,976       
Changes in fair value of derivative liabilities  277,600       
Issuance expenses attributable to derivative warrant liabilities  247,129       
Inventory write-down  33,360   12,387    
Foreign currency exchange differences with respect to amount due to a Former Parent Company     (243,948)  (402,365)
Finance expenses  583   4,021   342 
Changes in operating assets and liabilities:            
Trade receivables, net  161,689   (176,863)  28,595 
Other current assets  (472,020)  (96,782)  21,667 
Deferred prospective initial public offering cost     (252,041)   
Inventories  6,995   34,205   6,738 
Operating lease right-of-use asset  48,766   (48,633)  49,020 
Trade payables  9,422   10,145   (35,764)
Operating lease liabilities  (45,911)  (48,975)  50,836 
Other accounts payable  (83,785)  404,597   (107,213)
             
Net cash used in operating activities  (2,938,300)  (1,971,635)  (985,898)
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Purchase of property and equipment  (25,757)  (9,725)  (5,572)
             
Net cash used in investing activities  (25,757)  (9,725)  (5,572)
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
Cost associated with the conversion of the Former Parent Company’s debt     (84,780)   
Proceeds from issuance of convertible notes     1,514,928    
Issuance of ordinary shares in initial public offering, net of issuance costs  6,695,957       
Issuance of ordinary shares, pre-funded warrants and warrants in private placement, net of issuance costs  4,106,699       
Receipt of loan from related party  245,000   500,000    
Repayment of loan from related party  (745,000)      
Receipt of loans from the Former Parent Company     107,994   940,624 
Repayment of bank loan        (30,068)
             
Net cash provided by financing activities  10,302,656   2,038,142   910,556 

FAQ

What were ParaZero's key achievements in 2023?

ParaZero announced collaborations with Black Square and KULR Technology Group, obtained regulatory approvals for drone safety systems, and expanded partnerships with Vayu Aerospace

How much did sales increase in 2023?

Sales increased by 10.8% to $620,508 in 2023, driven by OEM integrations and recurring revenues.

What was the net loss and comprehensive loss for ParaZero in 2023?

The net loss and comprehensive loss surged by 128.1% to $3,771,379 in 2023, impacted by operating expenses and non-cash items.

What fundraising activities did ParaZero undertake in 2023?

ParaZero closed an IPO and private placement, raising approximately $12.9 million in gross proceeds.

Who is the CEO of ParaZero?

Boaz Shetzer is the CEO of ParaZero.

ParaZero Technologies Ltd.

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Electromedical and Electrotherapeutic Apparatus Manufacturing
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Kiryat Ono